PES takes a look at the current state of renewable energy rollout, considers wind energy’s increasing role, and discovers what’s in store for the next few years.
Since 2010, more than a quarter of a trillion dollars have been invested annually in renewable energy, energy efficiency and supporting technologies. Global investment in clean energy was USD 254 bn (EUR 183 bn) last year, USD 286.2 bn (EUR 206 bn) in 2012 and a record USD 317.9 bn (EUR 229 bn) of 2011 (BNEF, 20148). Additionally in an increasing number of markets renewables are becoming competitive with new-build coal, and in a number of markets with new-build gas power plants.
Rising risks to global infrastructure
The global conventional energy sector is a major focus of efforts to slow the growth of greenhouse gas emissions and to lower the carbon footprint of human development activities. The energy sector itself will be severely affected by unavoidable consequences from the already induced warming of the atmosphere.
Energy services and resources, as well as seasonal demand, will be increasingly affected by changing climate trends: increasing variability, greater extremes
and large inter-annual variations in climate, and particularly changes in the hydrological cycle.
All evidence suggests that climate change is not a minor variable but a long-term business risk. In one example, in March 2014 a report by the US Department of Energy details how the US’s ageing interconnected infrastructure network is under greater threat from climate change.
The US Government Accountability Office (GAO) – a federal watchdog agency – finds that the US’s energy infrastructure is increasingly vulnerable to a range of climate change impacts, especially in areas prone to severe weather and water shortages. It states that the damage from such events can impose large costs on the energy industry, as well as impact the local and national economies.
The GAO also did a series on the Water-Energy-Nexus, which shows how water and energy are “inextricably linked and mutually dependent”. Water shortages will impact energy supply, by both slowing down extraction of raw fuels and production of electricity, not only for hydro power plants, but also at the thermal, natural gas, and nuclear power plants that require significant amounts of water, as do coal mining and hydrocarbon extraction.
Costs
The development of renewable electricity generation over the past 20 years has been characterised by considerable growth rates, and sometimes dramatic cost reductions. Geographically, renewables are no longer limited to the OECD markets. In the last five years non-OECD markets emerged strongly, especially in Asia and Latin America.
During the 2008-11 recession this geographical diversification helped mitigate the risk of over exposure to a single region or a handful of markets for some companies.
In addition to providing new, indigenous, cost-competitive and clean power supply, RE has also had an impact on the market prices itself.
An increased penetration of renewables for example wind and solar in the EU have led to lower wholesale spot prices. This phenomenon is known as the ‘Merit Order Effect’. However, as many countries regulate consumer-prices and use electricity bills to levy taxes that are not directly related to power production, low energy costs do not always pass through to end consumers.
The cost of support mechanisms for renewable-energy was over EUR 30 bn in 2012 across the EU, of which EUR 2.2 bn was for wind energy. On the other hand in 2012 EU’s fossil-fuel imports – a key driver of energy bills – was as high as EUR 421 bn, over 3% of the EU’s GDP.
The way forward
Renewable energy faces stiff opposition from conventional power sector players and utilities as the zero marginal cost of solar and wind is upsetting the old and established business models. This fight is casting a shadow on the political debate in several markets.
In some EU member countries, electricity prices have become a political football and renewables are incorrectly blamed for rising prices; but this is making consensus around the 2030 RE targets for the EU difficult. However, the ongoing drama in Ukraine brings home the point that the path to safeguarding Europe’s energy security concerns will be easier with renewables based supply.
At an event in February 2014 in Indonesia, the US Secretary of State John Kerry said “climate change ranks among the world’s most serious problems”, such as disease outbreaks, poverty, terrorism and the proliferation of weapons of mass destruction and called on all nations to respond to “the greatest challenge of our generation”.
Two weeks later in March 2014 the Chinese Premier at the annual opening session of the country’s Parliament said, “We will resolutely declare war against pollution as we declared war against poverty”.
These strong statements made by senior representatives of the world’s largest polluter historically (US) and the world’s largest current emitter (China) is indicative of a change in political sentiment and gives at least some hope for action under the UN for the post 2020 climate agreement. In the meantime, a political strategy for a transition to a renewables future will have to be developed in steps.
The first step would be to transition to 100% RE based electricity generation, as the EU’s current 2050 climate strategy nearly does. 100% RE heating and cooling and a zero emissions transport sector are achievable too; but not as long as governments continue to subsidize CO2 emissions to the tune of USD 110/tonne (EUR 79.5).
There are obvious solutions that involve managing different combinations of energy efficiency, energy sector reforms, RE penetration, and phasing out fossil fuel subsidies. The individual solution-set for each city, state or region will be different, and would need to be backed by long-term stable policy. There are a number of global mitigation/energy scenarios including those reviewed by the IPCC18, the IEA (450 Scenario), Greenpeace and WWF/Ecofys available in the public domain for reference. Some of these institutions have modelled pure renewables-based electricity systems including Greenpeace and WWF/Ecofys.
Others have modelled high-efficiency diversified energy systems with high penetration of RE based generation. In either case, the impediments are non-technical and the solution will need at least two things to happen: unlocking steady and higher levels of investment and ensuring stable policy regime backed by long-term targets.
According to the IEA’s Energy Technology Perspectives report from 2012, achieving the 2∞C scenario would require USD 36 trillion (EUR 25.8 tn) more in capital investments between 2013 and 2050 than under a scenario in which reducing carbon emissions was not a priority. The first step to unlocking some of this investment would be to introduce a price on carbon emissions. Unless a fair price of carbon is set and fossil fuel subsidies (producer and consumer) are eliminated in the near future, the RE sector may do well, but we’re not going to reach our climate goals.
Conclusion
The transformation of the global energy system has begun. More money has been invested in new renewables-based generation capacity than on non-renewables-based generation capacity. Investments in renewable energy are first and foremost investments in long-term ecological and economic stability.
The switch to a 100% RE based electricity system is well underway in some countries, and we have the technology to do it economically. Heating, cooling and transport provide other challenges, but they are (mostly) not technological We have a very short window in which can act before climate impacts go from bad to catastrophic, and before the decisions are effectively taken out the hands of democratically elected governments and put first in the hands of the emergency services, and ultimately, the military.
The higher capital costs of investing in a renewable future now will be more than paid back by fuel savings down the line, not to mention all the other savings from reduced expenditure on mitigating and adapting to climate. However, the real question is not whether or not we can afford it. We very clearly can’t afford NOT to.
Cities & countries moving towards 100% RE in electricity systems
Iceland (OECD)
Produces 100% of its electricity from hydropower and geothermal energy.
Cook Islands (Small Island State)
Ensure the policy and regulatory environment is aligned with the 50%
by 2015 and 100% by 2020 renewable energy goal.
Costa Rica (Central America)
In 2013, Costa Rica proposed a climate change law that aims to establish the country’s goal of carbon neutrality. Costa Rica publicly launched efforts to reduce deforestation and it has a 95% renewables goal for 2014, mostly from indigenous hydro resources.
Denmark (OECD)
Denmark proposes to meet more than 50% of its electricity supply with renewables by 2020, 100% of electricity and heat by 2035, and 100 per cent in transport by 2050.
Maldives (Small Island State)
In 2009, Maldives pledged to go completely carbon neutral by 2020. This entailed embracing an almost 100% renewables based energy system. However political upheavals since 2012 have slowed down the political push.
Scotland (OECD)
Scotland has a mandate to achieve 100% renewable power supply by 2020.
Tokelau (Small Island State)
Tokelau has a target of producing a 100% of its electricity from renewable energy. In 2012, the Tokelau Renewable Energy Project installed solar arrays on each atoll and Tokelau now already produces over 10% of its electricity from solar energy.
Tuvalu (Small Island State)
In 2012, Tuvalu set a goal to generate a 100% of its electricity from renewable energy by 2020 and to increase energy efficiency on Funafuti by 30%.
Tasmania (Australian Territory)
Tasmanian Government has beaten mainland Australia by launching a new climate action plan that will commit the state to 100% renewables by 2020 and a 35% reduction in emissions.
Sydney (Australia)
Sydney’s renewable energy master plan outlines measure for procuring 100% of the City’s electricity, heating and cooling from RE sources, such as solar, wind and energy from waste, by 2030.
Malmo (Sweden)
The City of Malmo is expected to be climate neutral by 2020 and all its municipal operations will run on 100% RE by 2030.
Greensburg, Kansas (US).
On May 4, 2007, a tornado damaged 95% of the town’s homes and businesses. The town thereafter developed a green master plan with help from the NREL and the US Department of Energy. It set itself a goal of 100% renewable electricity besides energy efficiency and LEED certified buildings. Today the town sources a 100% of electricity from a 12.5 MW wind farm.
San Francisco, California (US)
The city through San Francisco Public Utilities Commission under CleanPowerSF – the program will provide San Francisco with 100% electricity generation from renewable sources.
PES would like to thank the GWEC. This is extracted from the Global Wind Report. To read the full report, visit: www.gwec.net
