Poised for take-off? PDF Print E-mail
Thursday, 27 August 2009 07:27
solar_panel_optDespite many financial hurdles, the time is ripe for a renewable energy revolution

A global consensus is emerging that the world needs to undergo a rapid transition to a renewable energy regime. The first motivation is the need to reduce carbon emissions in order to have a chance of stabilising the global climate and preventing a catastrophe for humanity. 

The second is a desire to enhance energy security in a world facing the depletion of conventional fossil fuels, with remaining reserves increasingly concentrated under the control of national oil companies and often in geopolitically risky regions. Given these strong drivers, are we poised for an energy revolution, or are there pitfalls and obstacles to be overcome?
Renewables are a diverse suite of energy sources including solar, wind, hydro, ocean, geothermal and biomass. They share some general characteristics – both advantages and with limitations – but also differ in important ways.

Pros and cons

Renewable energy sources have several strong advantages. By definition, renewables are self-replenishing, so harnessing the energy need not diminish its future availability (although biomass can be exhausted if consumed at unsustainable rates). In some cases – e.g. solar, wind and ocean energy – the resource is abundant if not limitless.

The challenges are rather about creating the infrastructure to capture the energy, and are thus of a technical and economic nature.

Compared with fossil fuels, renewables are environmentally friendly in terms of their emissions of greenhouse gases and other pollutants.

Nonetheless, each source should be assessed from a life-cycle perspective that includes the embodied materials, wastes and emissions from the manufacturing, transport and installation of the infrastructure. Currently, all renewables rely to some degree or other on the fossil fuel based system for manufacture and transport.

Another potential advantage is that the exploitation of domestic renewable energy resources can mean reduced dependence on energy imports and thus greater energy security. However, not all countries are well endowed with renewable energy resources and may yet depend on other nations.

One example may be European reliance on solar energy from the Sahara Desert.

A final plus factor is that renewables do not carry the burden of risks associated with nuclear power, such as toxic waste disposal, radioactive spills and weapons proliferation.

On the other hand, renewables also have some significant disadvantages when compared to fossil fuels and nuclear power.

For one thing, renewable installations to date produce power on a much smaller scale than conventional power plants. This is partly because renewable energy sources are often found in relatively low concentrations – for instance, there is only so much sunlight falling on a given area of land.

Secondly, some of the renewable sources – particularly solar and wind – provide only variable power, while our society has become accustomed to 24/7 energy supply.

To function effectively, a variety of renewable sources needs to feed into large and efficient electric grids in order to stabilise power supply; the diversity of renewables needs to be exploited fully.

Thirdly, with the exception of liquid biofuels and biogas, renewables generate electricity and thus cannot directly substitute for 95% of the world’s current transport infrastructure that relies on petroleum fuels.

However, the land-based transport system can over time be phased over to electric vehicles and trains (ships and aircraft present a greater challenge).

Perhaps the greatest limitation of renewables thus far has been the technical challenges of boosting the efficiency of energy capture, and related to that the relatively high unit costs of renewable energy compared with fossil fuels – an issue discussed in more detail below.

A diverse group

Each individual renewable energy source presents its own particular opportunities and challenges.

Wind power has a comparatively long and proven track record, with some wind farms dating back to the 1970s. Since then, the efficiency and size of turbines has been improving steadily such that one- to two-megawatt (MW) turbines are now standard and newer models are capable of up to 5MW. Wind power is now commercially competitive with fossil fuel based electricity in some areas.

Both onshore and increasingly offshore wind farms are springing up in many countries, with the fastest growth in the United States, Europe and China. A recent innovation saw the world’s first large-scale floating offshore turbine launched off the coast of Norway.

Solar energy can be utilised directly for space heating and light, as well as indirectly to make electricity. The efficiency of photovoltaic (PV) cells has grown substantially over the past few decades, but there is much scope for improvement.

Innovations in this area are happening apace, including spray-on alloys for use on varied surfaces including buildings, and the use of flexible, organic materials (polymers).

For larger scale electricity generation, an increasingly promising option is concentrated solar power (CSP), which uses arrays of mirrors to focus the sun’s rays sufficiently to convert water to steam and drive a turbine. The heat energy can also be stored for a number of hours in molten salt.

The first commercial CSP plant was launched in Spain in 2007 and total world capacity is now 430MW. In South Africa, Eskom is investigating the feasibility of a 100MW CSP project in the sun-abundant Northern Cape.

A recent study by Greenpeace and industry groups claims that CSP plants located in desert regions could potentially generate up to 25% of the world’s electricity demand by 2050.

At a micro scale, solar energy can also be harnessed for space and water heating, thereby reducing the consumption of electricity from the grid by households and businesses.

Hydro power – using the kinetic energy in rivers – is tried and tested and currently contributes the vast majority of renewable electricity worldwide.

The possibilities for large-scale hydro-electric plants have been exploited fully in most parts of the world, with the notable exception of the Congo River basin, which could potentially provide a significant portion of Africa’s power needs if the political and financial obstacles can be overcome.

Unfortunately, many hydro plants in various parts of the world are already suffering from the effects of climate change as river flows become lower or more variable.

There is considerable scope for expansion of small-scale and micro-hydro turbines, which can be very efficient, but this would be mainly for rural areas.

The technologies for tapping the energy of the oceans – through tidal fluctuations, waves or currents – are still in their infancy.

Tidal power is restricted to specific locations such as estuaries and bays with large tidal ranges.

Wave power has recently reached commercialisation with a farm operating in Portugal.

Geothermal energy can be used either for heating or for electricity generation. The theoretical potential for geothermal energy is immense, but as can be expected, there are technical difficulties in harnessing it.

Many of the more conventional geothermal sites utilising hot springs are already exploited, and in some cases the subterranean water can be depleted.

Geothermal energy can also be utilised on a small scale for heating buildings, simply by exploiting the convection of air through pipes reaching a few metres underground where the temperature is moderate and stable.

Biomass – i.e. plant matter – can be burned to produce heat or electricity, or converted into liquid fuels or gases. Biomass is by far the largest source of renewable energy today, but some of it (e.g. wood) is being utilised at unsustainable rates.

Biofuels – including biodiesel and ethanol – boomed in popularity earlier this decade as the oil price climbed and climate change concerns grew.

However, biofuels have become highly contentious, as problems such as deforestation and a negative impact on food security have come to the fore.

Some see cellulosic ethanol – derived from inedible plant matter – as the future of biofuels. June saw the first sale of cellulosic ethanol (derived from wheat straw) blended with petrol at a Shell service station in Canada – albeit produced by a small demonstration plant.

But in nature there is no free lunch: soil fertility will degrade if too much biomass is burned as fuel.

Biogas (mostly methane) can be captured from municipal landfills, farm waste and even household organic waste.

Growth from a small base

Since the early 1970s, renewable energy has grown by about 2.3% per annum, marginally faster than world total primary energy supply (TPES).

Wind power has in recent years been the fastest growing renewable energy source, averaging close to 30% growth per year this decade (see Figure 1 on previous page).

The World Wind Energy Association anticipates that over 30 000MW of new wind generation capacity will be installed worldwide this year. The US now boasts the largest installed wind capacity of any nation, surpassing Germany last year.

Solar PV capacity has also grown exponentially (see Figure 2 on previous page), but off a very low base.

Despite this growth, the current share of renewables in world TPES remains very small. According to the International Energy Agency’s data, as of 2006 solar, wind and geothermal power accounted for just 0.6% of TPES, hydroelectricity for 2.2% and combustible renewables and waste (which includes wood) for 10.1%. Fossil fuels provided over 80%. Figure 3 (left) depicts a detailed breakdown of the relative contributions.

Aside from hydro, the share of electricity provided by renewables is also negligible, while coal’s share is more than one-third (see Figure 4 on previous page). In fact, coal has been the fastest growing energy source since 2003 (when measured in energy units), mainly thanks to the Chinese and Indian economies’ voracious appetites for power.

Economic crisis: from crunch to stimulus?

Investment in the renewables sector has grown impressively in recent years to an estimated US$120 billion in 2008 (see Figure 5 below).

However, this trend has been knocked by the credit crunch, as finance for new energy projects has become much more difficult to obtain and more expensive – particularly for smaller companies.

At the same time, the sharp drop in oil and gas prices since mid-2008 has eroded the competitiveness of renewables and the price volatility creates uncertainty about future prospects.

Also, with the world economy in recession and industrial production in particular slumping severely, the demand for electricity has declined markedly around the globe.

Even China’s electricity consumption is reportedly dropping by up to 6% compared with last year.

On the other hand, the financial meltdown has presented a rare opportunity for large-scale renewable investment in the form of government-funded economic stimulus packages.

In the US, part of the Obama administration’s $800-billion package has been earmarked for renewables and energy efficiency to combat climate change and create jobs.

China’s initial $580-billion spending plan included a modest amount (estimated at less than 10%) for renewables, but Beijing is reportedly preparing a second stimulus package of anything from US$200bn to US$600bn that will apparently be focused more specifically on renewables and energy efficiency.

The EU continues to support renewables, led by Germany (which is investigating solar potential in North Africa), and Spain (which is aggressively expanding domestic solar and wind projects in a bid to improve energy security).

However, the IEA’s executive director Nobuo Tanaka recently said that the stimulus packages were an “important step”, but “insufficient to get us over the line to a cleaner more sustainable energy future.”

The IEA estimates that of the US$2.6 trillion spending announced by the G20 countries, only US$20bn will be directed to renewable energy.

This figure also pales in comparison with the profits and reinvestments of the big international oil and gas companies, both privately and nationally owned, many of which rake in tens of billions of dollars annually.

To make matters worse, some of the oil majors (e.g. Shell) have recently announced that they are scaling down plans for investment in renewables, citing better prospects in their core businesses.

Shifting economics

The relatively high cost of most renewables remains a major stumbling block. Are the economics of renewables inherently poor, or is this merely a temporary situation?

A crucial variable underlying the competitiveness of renewables is the ‘energy return on energy invested’ (EROEI) ratio that they deliver.

This ratio (closely linked to ‘net energy’) recognises that energy has to be consumed in order to produce energy that is available for use – e.g. energy is used to manufacture and erect solar panels and wind turbines.

Although the EROEI for most renewables has until recently been much lower than that for fossil fuels, the scales are tilting and already some renewables, such as tidal, hydro, and wind power are becoming competitive (see Figure 6 on the right).

This shift occurs because the EROEI of many renewables increases over time as the technology improves, while that for fossil fuels steadily declines as the best quality deposits are depleted earlier.

In the long term, the demand for renewable energy can only increase.

Fossil fuel prices are set to continue increasing over the long term, whether as a result of depletion or carbon restrictions, or both.

Once oil production enters its decline phase, possibly at a rate of around 3% a year, substitutes will have to be found for around 1% of current world primary energy supply each year – more than double the total current capacity of solar, wind and geothermal power.

Moreover, new energy sources will be needed to replace retiring coal-fired and nuclear power stations.

Added to this will be rising demand for electricity for transport. Many automobile manufacturers seem to see the writing on the wall that the internal combustion engine is on its way out and the future lies with electric vehicles.

Renewables could become a new growth engine, whereby production economies of scale are reaped leading to lower prices and higher demand in a virtuous cycle.

Economic history shows that it typically takes at least two decades for a new invention to be scaled up to the point at which it reaches wide market penetration (examples include personal computers and cellular phones).

Overcoming hurdles

For the next few years, the rate of private – and to some extent public – investment in renewables will depend to a significant extent on whether the financial system can be resuscitated without causing a government debt crisis and run-away inflation.

In any event, few of the poorer developing countries will have the wherewithal to afford investments in renewables and will likely have to rely on technology transfers, aid and development finance from richer countries and international lenders.

In some instances this could occur through joint projects that provide energy for export as well as domestic consumption, such as Saharan solar and Congolese hydro.

Government support can also be decisive for the development and diffusion of renewable technologies. More and more governments are announcing specific targets for renewable energy generation.

Europe has long been the leader with its sights set on 20% renewable energy by 2020. China is now confident of exceeding its target of 15% of energy from renewables by 2020 (although this target apparently includes nuclear power).

Targets are one thing, but ultimately money counts more than words. Shifting subsidies from fossil fuels and related sectors to renewables is a direct way to boost their growth.

A carbon tax on fossil fuels to account for their environmental and social costs would help to level the playing fields. Renewables can also benefit from institutional and financial support for research & development, for example tax breaks or competitive credit.

In renewable energy leaders such as Germany, experience has shown that feed-in tariffs (i.e. revenue derived from feeding renewable power into the grid) can be highly effective for incentivising the uptake of renewables by households and firms.

An additional instrument is greater regulation of monolithic energy utility companies that maintain a monopoly stranglehold on power generation and distribution.

Public acceptance and advocacy of renewables can also make a difference.

In some countries, attitudes are changing along with the climate – catalysed by extreme weather events such as droughts and floods.

Recent years have seen growing public opposition in the US to coal to the extent that an increasing number of states have placed moratoriums on the construction of new coal-fired power plants and are favouring renewables instead.

But ultimately, for many individuals the personal decision on whether to invest in renewable energy home systems depends on economic costs, which is why appropriate incentive schemes are so important.

Bright future?

Whatever the balance of pros and cons for renewable energy at the moment, for the foreseeable future there seems to be no other alternative to replace fossil fuels. Even a miraculous breakthrough in nuclear fusion technology would likely take decades to be scaled up, while fossil fuel depletion and climate change require decisive action now.

Because of their geographical specificity and temporal variability, the diverse potential of all renewables needs to be harnessed. Renewable energy technology needs to be developed rapidly to raise its technical efficiency and massively scaled up to improve affordability.

Experience has shown that government policy support – particularly when backed by public acceptance – can make a critical difference to the fortunes of renewables in their nascent stage.

The time is ripe for a renewable energy revolution, but it requires conscious choices to be made.

Jeremy Wakeford
 

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