4.3.3 Renewable energy
Renewable energy accounted for over 15% of world primary energy supply in 2004, including traditional biomass (7–8%), large hydro-electricity (5.3%, being 16% of electricity generated), and other ‘new’ renewables (2.5%) (Table 4.2). Under the business-as-usual case of continued growing energy demand, renewables are not expected to greatly increase their market share over the next few decades without continued and sustained policy intervention. For example, IEA (2006b) projected in the Reference scenario that renewables will have dropped to a 13.7 % share of global primary energy (20.8 % of electricity) in 2030, or under the Alternative Policy scenario will have risen to 16.2 % (25.3 % of electricity).
Renewable-energy systems can contribute to the security of energy supply and protection of the environment. These and other benefits of renewable energy systems were defined in a declaration by 154 nations at the Renewables 2004 conference held in Bonn (Renewables, 2004). Renewable-energy technologies can be broadly classified into four categories:
1) technologically mature with established markets in at least several countries:– large and small hydro, woody biomass combustion, geothermal, landfill gas, crystalline silicon PV solar water heating, onshore wind, bioethanol from sugars and starch (mainly Brazil and US);
2) technologically mature but with relatively new and immature markets in a small number of countries:– municipal solid waste-to-energy, anaerobic digestion, biodiesel, co-firing of biomass, concentrating solar dishes and troughs, solar-assisted air conditioning, mini- and micro-hydro and offshore wind;
3) under technological development with demonstrations or small-scale commercial application, but approaching wider market introduction:– thin-film PV, concentrating PV, tidal range and currents, wave power, biomass gasification and pyrolysis, bioethanol from ligno-cellulose and solar thermal towers; and
4) still in technology research stages:– organic and inorganic nanotechnology solar cells, artificial photosynthesis, biological hydrogen production involving biomass, algae and bacteria, biorefineries, ocean thermal and saline gradients, and ocean currents.
The most mature renewable technologies (large hydro, biomass combustion, and geothermal) have, for the most part, been able to compete in today’s energy markets without policy support. Solar water heating, solar PV in remote areas, wind farms on exceptional sites, bioethanol from sugar cane, and forest residues for combined heat and power (CHP) are also competitive today in the best locations. In countries with the most mature markets, several forms of ‘new’ renewable energy can compete with conventional energy sources on an average-cost basis, especially where environmental externalities and fossil fuel price risks are taken into account. In countries where market deployment is slow due to less than optimal resources, higher costs (relative to conventional fuels) and/or a variety of market and social barriers, these technologies still require government support (IEA, 2006e). Typical construction costs for new renewable energy power plants are high, between 1000 and 2500 US$/kW, but on the best sites they can generate power for around 30–40 US$/MWh thanks to low operation, maintenance and fuel costs (Martinot, 2005; NREL, 2005). Costs are very variable, however, due to the diversity of resources on specific sites (Table 4.7). In areas where the industry is growing, many sites with good wind, geothermal, biomass and hydro resources have already been utilized. The less mature technologies are not yet competitive but costs continue to decline due to increased learning experience as exemplified by wind, solar and bioethanol (Figure 4.11).
Figure 4.11: Investment costs and penetration rates for PV, wind and bioethanol systems showing cost reductions of 20% due to technological development and learning experience for every doubling of capacity once the technology has matured.
Many renewable energy sources are variable over hourly, daily and/or seasonal time frames. Energy-storage technologies may be needed, particularly for wind, wave and solar, though stored hydro reserves, geothermal and bioenergy systems can all be used as dispatchable back-up sources as can thermal power plants. Studies on intermittency and interconnection issues with the grid are ongoing (e.g., Gul and Stenzel, 2005; UKERC, 2006; Outhred and MacGill, 2006).
A wide range of policies and measures exist to enhance the deployment of renewable energy (IEA, 2004c; Martinot et al., 2005; Section 4.5). Over 49 nations, including all EU countries along with a number of developing countries such as Brazil, China, Colombia, Egypt, India, Malaysia, Mali, Mexico, Philippines, South Africa and Thailand, and many individual states/provinces of the USA, Canada and Australia have set renewable energy targets. Some targets focus on electricity, while others include renewable heating and cooling and/or biofuels. By 2004, at least 30 states/provinces and two countries had mandates in place for blending bioethanol or biodiesel with petroleum fuels.
Since the TAR, several large international companies such as General Electric, Siemens, Shell and BP have invested further in renewable energy along with a wide range of public and private sources. Commercial banks such as Fortis, ANZ Bank and Royal Bank of Canada are financing a growing number of projects; commodity traders and financial investment firms such as Fimat, Goldman Sachs and Morgan Stanley are acquiring renewable energy companies; traditional utilities are developing their own renewable energy projects; commercial reinsurance companies such as Swiss Re and Munich Re are offering insurance products targeting renewable energy, and venture capital investors are observing market projections for wind and PV. New CDM-supported and carbon-finance projects for renewables are emerging and the OECD has improved the terms for Export Credit Arrangements for renewable energy by extending repayment terms (Martinot et al., 2005).
There has also been increasing support for renewable energy deployment in developing countries, not only from international development and aid agencies, but also from large and small local financiers with support from donor governments and market facilitators to reduce their risks. As one example, total donor funding pledges or requirements in the Bonn Renewables 2004 Action Programme amounted to around 50 billion US$ (Renewables, 2004). Total investment in new renewable energy capacity in 2005 was 38 billion US$, excluding large hydropower, which itself was another 15–20 billion US$ (Martinot et al., 2006).
Numerous detailed and comprehensive reports, websites, and conference proceedings on renewable energy resources, conversion technologies, industry trends and government support policies have been produced since the TAR (e.g., Renewables, 2004; BIREC, 2005; Martinot et al, 2005; IEA, 2004d; IEA, 2005d; IEA 2006a; IEA 2006c; WEC, 2004c; ISES, 2005; WREC, 2006; WREA, 2005). The following sections address only the key points relating to progress in each major renewable energy source.