Renewables: Steam Engine of the Third Industrial Revolution Dr. Tao Wang Sussex Energy Group and Tyn

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Renewables Steam Engine of the Third
Industrial Revolution? Dr. Tao WangSussex
Energy Group andTyndall Centre for Climate
Change Researchtao.wang_at_sussex.ac.uk Athens,
25th July 2008
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Evolution of Renewables Energy Biomass
photo by Stephen Codrington
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Evolution of Renewables Energy Wind
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Evolution of Renewables Energy Solar
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Renewable Energy Sources
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Solar
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Wind
Source Greenpeace Energy Revolution (2008)
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Benefits of Renewables - oil-GDP relationship

• Higher oil prices and their volatility stifle
  economic activity and cause risk of recession
• The 1973 oil price increases estimated to cost
  the US economy 350 billion
• Doubling in oil prices may reduces GDP by around
  5 - however very different for individual
  countries
• RE help reduce exposure to oil-GDP losses
• Provide a form of national insurance (Lind and
  Arrow, 1982) in that prices move against the
  value of other financial assets

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Avoided GDP losses for 10 RES-E addition
Avoided GDP losses would offset 32 - 38 of
investment in renewable energy in the EU
Source Awerbuch and Sauter (2006), Energy Policy
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Benefits of Renewables - energy security

• Well structured energy portfolio diversity with
  renewables helps foster energy security
• helping to reduce energy dependency
• helping to ease the geopolitical tension and
  conflict
• European Commission estimated that every 20 oil
  price rise increase Europes gas costs by 15bn
• low operational cost, 1/10th in Greenpeace
  scenario
• contributing to an optimised generation portfolio
  and mitigating risk of electricity price exposure
  to fossil fuel price volatility
• in the long term correcting distorting energy
  subsidy

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Benefits of Renewables - mitigating climate
change

• The World need to halve emission from 1990s level
  by 2050 to stay reasonably safe below 2ºC global
  temperature rise
• Greenpeace Energy Revolution report estimates
  70 electricity and 65 heat will be provided by
  renewables including large hydro, 7 folds
  increase of todays capacity
• IEA ETP (2008) 46 power come from renewables
  and another 25 from nuclear, reducing 13Gt CO2
  emission every year, more than twice of US total
  emission
• Global benefits are invaluable

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Benefits of Renewables - industrial development
in low carbon economy

• export of technology/equipment
• There are more than140 renewable energy companies
  worldwide have larger than 40m market
  capitalisation in 2007, nearly doubled from 2005
• World leader Germany 22bn turnover and 8bn
  export in 2006, with more than 210 thousand jobs
  created
• Big IPOs in 2005-2006 (including three with
  market capitalization greater than 5 billion)
  Suntech (China), Suzlon (India), REC (Norway),
  and Q-cells (Germany).
• Industries in developing countries are catching
  up quickly (Suzlon, Goldwind, Suntech), but still
  lag behind market demand
• Benefits to agriculture sector and rural
  development

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Benefits of Renewables - export of energy

• The energy received each year by 1 km² of desert
  1.5 Million barrel oil,
• we do have the technologies to convert (at
  least) 11 of it into electricity
• (TREC 2006)

Source TREC-UK
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Benefits of Renewables - export of energy via
EU-MENA grid

• Power production costs of 4-6 c/kWh, power
  transmission costs of 1-2 c/kWh if constructed
  in large numbers
• Investment per MW less than new nuclear built and
  IGCC in Europe
• Grid cost about 50bn for 100 GW
• Could be implemented together with wind and
  seawater desalination, solar assistant cooling
  also demonstrated
• Export nearly 20 of electricity demand of EU by
  2050
• Possibility of hydrogen to store energy in the
  future, so cover more sectors and regions

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Renewable Power Capacities in 2006
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World Leaders in Renewables Energy
Source REN21 Renewables 2007 Global Status Report
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EU Renewables Targets by 2020
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Renewable Share of Global Final Energy
Consumption in 2006
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A Global Boom of RE

• Investment in renewables are growing at an
  unprecedented rate since 2004, reach the
  milestone of 100bn in 2007
• Germany (gt 14 billion), China (12 billion), and
  the United States (10 billion) were the
  investment leaders in 2007
• Emerging market are capturing increasing share
  particularly in Brazil, China and India
• Over 70 countries have wind power and more than
  50million households use solar water heater, gt90
  Israeli households
• Renewables related jobs are more than 2.4m, 1.1m
  in biofuels

Data from REN21 Renewables 2007 Global Status
Report
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Renewable Electricity

• Renewable electricity generation capacity
  increases more than 50 since 2004, now accounts
  for 6 global capacity and 3.4 of world total
  power generation
• Wind represents the largest source of increase,
  nearly 30 increase in 2007 and more than
  100,000MW now, 1.5 UK
• Wind power now dominates new capacity investment
  (47 share), with solar PV second (30) and
  solar hot water (9).

Data from REN21 Renewables 2007 Global Status
Report
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Global Wind Power in 2007
The Middle East/North Africa region increased its
wind power installations by 42, reaching 538 MW
at the end of 2007. New capacity was added in
Egypt, Morocco and Iran.
Source GWEC 2008
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Average Annual Growth Rates of Renewable Energy
Capacity, 20022006
more cautions needed
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Barriers to Renewables - technological
barriers

• Status of renewable technology
• different stages and different strategies needed
• public and private support in RDDD
• Risk of intermittency
• smarter grid and energy storage technologies
• backup by fossil or other sources
• Premium cost
• some already competitive with fossil fuels
• government support according to different
  development stages
• learning by doing

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Cost and learning curves of RE
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Barriers to Renewables - capital barriers

• High upfront investment
• Lack of large scale private investment
• National fiscal support
• International fund/loan
• Clean technology fund WB
• CDM
• Public Private Partnership (PPP)

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Barriers to Renewables - technology access

• Technology transfer, acquisition and cooperation
• Lack of absorptive capacity
• Transfer of only second best, out-dated
  technology
• IPR issue and competitiveness concern
• Different strategy of technology acquisition in
  firms
• Case of Suzlon (India) and Goldwind (China)

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Suzlon and Goldwind
(Lewis, 2007)
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Barriers to Renewables - institutional
barriers

• Energy market distortion
• internalise externality (carbon price)
• gradually remove fossil fuels subsidy
• Unfair and discriminated grid access and
  transmission
• compulsory and priority of grid access (very
  important)
• fair and transparent network pricing
• Uncertainty of investment
• supporting mechanism (fix price system and quota
  system)
• Germany and UK the huge contrast
• User routine
• Government regulation to promote renewables e.g.
  Israel national mandate on solar hot water and
  Spain national ordinance

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Conclusion and Recommendations

• Prospects of Renewables
• Renewable energy sources are growing at
  unprecedented rate
• Share of RE in current energy system is still low
  Investment grows quickly but still cannot match
  the demand
• Widely existing barriers still prevent RE from
  larger and quicker growth
• Large potential of benefits in energy security,
  climate change and low carbon economy, but need
  significant policy support
• Different development stages so different support
  mechanisms
• A race to embrace new technology revolution

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Conclusion and Recommendations

• What to be done?
• Clear and concrete renewables targets
• More investment and support to facilitate RDDD
  (CDM,PPP)
• Removing energy market distortion and create the
  market for renewables, internalise externality
  (-/)
• Removing institutional barriers (fair grid
  access, infrastructure development, enable
  informed choices)
• Mitigating investment risk through support
  mechanisms for renewables (fixed price system and
  quota system)

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No Perfect One-Off Solution
Barriers (technological, economic, institutional,
infrastructure, etc)
Solutions (Feed-in Tariff, CDM, PPP, carbon
price, renewables regulation..)
Adequacy Evaluation (How far does it removal the
barriers?)
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• Thank You !