The Reality of Renewables

In the 1970s they were called “new and renewable energies” a grouping that allowed energy planners to lump nuclear energy (relatively new) in with hydro, solar, wind and biomass. A WBCSD Learning by Sharing session at our October meeting in Brussels focused on new and renewable energies in Europe and some of the barriers to realizing the high official hopes for them there.

The very name renewable has great appeal, as it promises unlimited sources of relatively clean energy daily, such as sunlight or a breeze. But today, when we need them to greatly reduce greenhouse gas (GHG) emissions, they are not ready because they were never able to overcome the marketplace muscle of cheap coal and oil. This market strength makes targets for renewable energy use, such as the 20% mandatory target set by the European Union, either overly ambitious or overly naïve. Participants in the Brussels session heard that the share of traditional renewables, especially hydro, in the overall mix of energy sources has declined and is lower than it was 30 years ago. Hydro will still be in first position among all renewables in 2050, approaching 50% of total renewables production.

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Biomass accounts for 10-11% of all primary energy, but this is mostly the cooking fires of the developing world, with their devastating effects on health through indoor air pollution.

Wind is the largest second-generation technology available today, with 25% growth in 2006 and a global market value of 8 billion Euros and costing 4-8 Euro cents per kWh for onshore production. Key issues surrounding it are wind variability and forecasting. Solar is the next largest second generation technology It has huge potential, but at 12-20 Euro cents per kWh it also has huge costs. Installed capacity is increasing 40% per year, while costs are decreasing by 18-20% for every doubling of installed capacity. Solar is more effective in areas with lots of sun, and it requires state-of-the-art batteries to store the electricity. It is good for off-grid solutions, but as more people move into cities, there are fewer in the countryside who need such solutions.

In order to make the picture a bit rosier for renewables, some European companies are calling for harmonized government certificates for CO2 emissions, rather than the 30-some different support systems currently in place. For example, the UK’s Renewables Obligation Certificate (ROC) is issued to an accredited generator for eligible renewable electricity generated within the UK and supplied to customers within the country by a licensed electricity provider. It places an obligation on UK electricity suppliers to source an increasing proportion of their electricity from renewable sources.

Harmonizing these certificate programs throughout Europe would put governments and business in a win-win situation, lowering emissions and growing the marketplace for renewables. Business would also like to see the removal of national feed-in tariff systems (a regulated rate paid by the utility to a private electricity producer) that arguably stymie innovation in that the regulators pick the technology and set the price.

A common market would be more efficient, making the transport and sharing of resources (such as biomass) easier. It would create a European arena for innovation where technology is crucial and can benefit from active research, common development policies and public support.

However, the relatively low historic price of fossil fuels has slowed innovation in renewables, and participants felt that the price of oil would have to stay well over US$ 60 per barrel to encourage companies and governments to embrace renewables.

Politicians who want to see more use of renewables will have to subsidize more. The average price of electricity will need to go up in order meet the EU’s 2020 target, an increase that would have to be covered by subsidies, carbon taxes and green certificates.

Nuclear energy works well in many parts of the world but has enjoyed high government subsidies and legal protection. Nuclear is currently a lot cheaper than renewables, at 4 Euro cents per kWh as opposed to 6 on average for renewables, because of those subsidies.

The discussion concluded that getting anywhere close to Europe’s goals will require a clever patchwork of solutions to overcome present technological, economic and policy barriers.

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