Renewable energy development is concerned with the use of renewable energy sources by humans. Modern interest in renewable energy development is linked to concerns about exhaustion of fossil fuels and environmental, social and political risks of extensive use of fossil fuels and nuclear energy.
Please see the articles on specific renewable energy sources for more on their individual development.
History
Renewable energy as an issue was virtually unheard-of before the middle of the twentieth century. There were experimentations with passive solar energy, including daylighting, in the early part of the twentieth century, but little beyond what had actually been practiced as a matter of course in some locales for hundreds of years. The renewable energy movement gained awareness, credence and strength with the great burgeoning of interest in environmental affairs in the mid-1900s, which in turn was largely due to Rachel Carson's 'Silent Spring'.
The first US politician to focus significantly on solar energy was Jimmy Carter, in response to the long term consequences of the 1973 energy crisis.
Controversy
While the concept of renewable energy is not generally thought to be a bad idea, the practical methods of extracting that energy have sparked some controversy. Many people believe that the methods are slow, insightly, expensive and often not ecologically sound.
Please see the sections on controversy in the article on renewable energy.
Renewable energy today
Around 80% of energy requirements in western industrial societies are focused around heating or cooling buildings and powering the vehicles that ensure mobility (cars, trains, airplanes). However, most uses of renewable power focus on electricity generation.
Some, such as geothermal heat pumps (also called ground-source heat pumps) focus specifically on heating and cooling. Heat pumps move heat around from one place to another
Renewable energy utilisation by nation
Iceland is a world leader in renewable energy due to its abundant hydro- and geothermal energy sources. Over 99% of the country's electricity is from renewable sources and most of its urban household heating is geothermal.
Denmark was the initial leader in wind energy generation and remains the nation which produces the highest per capita levels of electricity production from wind.
Germany began to build up its wind capacity in earnest from the mid 1990's with the application of generous subsidies and cheap loans and now has over one third of all the wind generation capacity in the world.
Spain was also a latecomer to wind energy generation, but in 2002 overtook the US to become the nation with the second highest level of installed wind energy capacity. In 2004, 6% of U.S. energy comes from renewable sources.
Israel notably heats much of its household hot water through solar means.
These countries' successes are at least partly based on their geographical advantages, though it is worth noting that Germany does not have particularly good wind resources (much worse for example than the UK, where policies have led to much less success) and other factors have thus played an important part in its commitment to wind and other renewables.
Existing and future electricity production in the EC
according to the European Commission of 1997
| | 1995 | 2010
|
| Type of energy | TWh | % of total | TWh | % of total
|
| Wind power | 4,00 | 0,20 | 80,00 | 2.80
|
| Hydropower | 307,00 | 13,00 | 355,00 | 12.40
|
| Solar energy | 0,03 | - | 3,00 | 0.10
|
| Biomatter energy | 22,50 | 0,95 | 230,00 | 8.00
|
| Geothermal energy | 3,50 | 0,15 | 7,00 | 0.20
|
| Renewable total | 337,00 | 14,30 | 675,00 | 23.50
|
| Total | 2.366,00 | - | - | 2,870.00
|
|
Renewable energy support mechanisms
Currently, creating (renewable) energy is more expensive than combusting fossil fuels, which compactly contain energy. Realising that the incentive for generating renewable energy is minimal in the short term, many nations and territories have employed a range of different mechanisms to encourage increases in renewable energy capacity within their borders. These have applied across a range of different technologies. Their remains considerable discussion amongst politicians, academics and others as to the most appropriate mechanism - or combination of mechanisms - for achieving renewable energy policy goals.
Some people claim that renewable energy is not cost effective, as it often needs government incentives in order to be viable. It should be noted that the effort involved in extracting oil from ever deeper reservoirs is increasing.
Conceivably, the cost of renewable energy will drop below fossil fuel costs.
Quota mechanisms
A quota mechanism, sometimes known as a Renewable Portfolio Standard (RPS), sees a government place an obligation on either an electricity supply company or on consumers (albeit usually manifested through their supply company) to source a specified fraction of their electricity from renewable energy sources. Companies which fail to meet the obligation are required to pay a penalty price for every unit of electricity by which they fall short of their obligation. The mechanism acts to create a market for electricity, allowing competition amongst renewable generators to meet the needs of that market. The underlying theory is that competition in this market place will drive down the costs of supplying renewable electricity and thus minimize the costs to the consumer of meeting renewable energy targets.
The market allows a government to set the capacity that is required, and allows the market place to set the cost. The level at which the penalty price is set allows the government to place an upper limit on the total costs to the consumer.
The mechanism is in place in a number of US states as well as the United Kingdom, Italy and Belgium amongst other European countries. In the US, quota mechanisms applied at the State level are often assisted by the intermittent application of a federally mandated production tax credit.
Advantages
- Competition: Technologies must compete for contracts, and thus there is pressure to drive down costs within a mechanism that can pass these costs on to the consumer. Theoretically, this means that the costs to the consumer are minimized.
Disadvantages
- Increased risk: In practice, generators are vulnerable to considerable risks, including risk relating to
- volume (there being no guarantee that they will be able to sell all of their peak electricity),
- price (as this depends on the market for both electricity and tradeable certificates),
- balancing cost (a function of generator intermittency) and
- regulation (i.e. the withdrawal of political support effectively ends the market completely). The effect of this is to raise the cost of capital and thus the overall cost of generation, resulting in an increase in the cost to the consumer.
- Dynamic efficiency: The mechanism tends to support only those technologies which are close to market when it is introduced. Technologies outside the mechanism are likely to become less and less competitive, and thus never be developed. Thinking out-of-the-box is effectively penalised. One solution is to provide additional support outside the mechanism, however, this has the disadvantage of raising the overall costs of supporting renewables.
Contract bidding mechanisms
Governments place an obligation on supply companies to accept electricity from renewable energy generating technologies which have been awarded contracts by government. Generators win these contracts by taking part in a competitive bidding process organized by the government or a specified agent of the government. Historically, competition has usually taken place within technology 'bands', that is, such that competing bids are only compared between generators employing the same technology. For example, wind generator against wind generator. Essentially, this means there are usually different competitions going on at the same time for each technology. Generally, the lowest bids are awarded contracts, provided they meet any criteria set down by the government as part of the competitive process. Examples of such a mechanism in practice include the UK's Non-Fossil Fuel Obligation (NFFO), Ireland's Alternative Energy Requirement (AER) and the French EOLE.
Advantages
- Competition: The mechanism encourages competition, acting to reduce subsidy costs to consumers. Because the governments can limit the number of contracts awarded, they can also control the maximum public spending linked to the scheme.
- Stable pricing: The fixed price attached to successful contracts also mean that project developers have less worries over variations in pricing caused by fluctuations in the electricity market. However, this can also be a problem in fitting the mechanism in with a market-led electricity supply industry.
Disadvantages
- In practice, many contracts awarded under these mechanisms have failed to lead to actual development. There are a number of possible explanations for this. One possibility is that companies make bids against future cost reductions, taking advantage of the preparation period that the mechanisms usually allow before the payment period begins. If the economics of development are not sufficiently attractive towards the end of the this period then the project does not go ahead.
- Another possibility is that some companies actually make bids they know will never become economic and will never be developed purely to deny the opportunity for a successful bid to their competitors. The introduction of a penalty for those failing to make good on contracts might act to discourage these problems.
Tariff mechanisms
In a tariff mechanism, the government fixes a price for every unit of electricity produced from any technology which it classifies as renewable. Because fossil fuels are relatively cheap, this price is typically greater than the market price for electricity available in that territory and thus tariffs enable generators to operate economically. Different tariff levels may be set for different technologies. A government may provide the subsidy from its own funds or may compel utility companies to purchase the electricity thus produced, passing the costs on to its consumers. Network supply companies are compelled to accept all electricity from specified technologies.
Advantages
- Risk reduction for investors: Generators receive a fixed price for a fixed period, thus reducing volume and price risk to investors. Generators are also not subject to balancing risk as network companies are compelled to take all electricity. There is also reduced regulatory risk in comparison with other mechanisms in that once a plant is operational it is effectively guaranteed a price for a fixed period into the future.
- Dynamic efficiency: Different technologies develop at different rates. If a government wishes to support a new technology it can provide a tariff specific to that technology and thus encourage it to move closer to market. The balance of evidence suggests that this provides long term benefits in terms of developing more competitive technologies.
- Proven capability: Tariff mechanisms have been widely applied in Germany, Denmark and Spain. Their employment has led to significant increases in renewable electricity generating capacity, particularly of wind energy.
Disadvantages
- Expensive: The fixed price over time means that it is difficult to pass on the benefits of increased technological efficiency to consumers. Instead benefits accrue at the level of the generating plant owner, who may be able to access high rates of return. One possible solution is through degression, that is, lowering the tariff rate over time. Reductions in the tariff must be transparent to ensure investor uncertainty is minimized. There is no guarantee that reductions will match the actual improvements in the technology.
- Unpredictable: Whilst tariff mechanisms fix the price available to renewable energy generators, the level of capacity is subject to the market, that is, there is no way of predicting how many investors will be attracted to generation by the price available. This means it is not possible to predict the overall costs of the mechanism in either the short or long term. This can be unattractive to government and consumers/taxpayers.
- Network Balancing: Distribution network operators are compelled to accept all electricity from renewable generators, regardless of the demand for electricity at the time of generation. This can lead to network balancing issues, and these tend to increase with the level of intermittent generation on the network. This leads to increasing potential for technological problems and for increased costs to the network operator.
- Market Prioritization: Compelling network operators to accept all renewable generation means that electricity from renewables is always the first to be bought. This effectively interferes with any open market for general electricity generation, and impacts on the ability of 'traditional' generators to compete in the electricity sector. This can be problematic where Governments are committed to maximizing competition in markets.
Production tax credits
Production tax credits support the introduction of renewables by allowing companies which invest in renewables to write off this investment against other investments they make. A PTC can be used as the central mechanism for the support of renewables as part of a national or regional mechanism, or it can be used in support of another mechanisms, such as a quota mechanism. Production tax credits have been supplied at the federal level in the US; they have tended to be most effective in States which also provide some other form of support, most notably a quota mechanism.
Advantages
- Stability: Have proven to stimulate capacity alongside quota mechanisms. They may provide a useful way to bring stability to generators when used in this way, reducing uncertainty and thus capital costs.
Disadvantages
- In practice, tax credits tend to be vulnerable to political conflict regarding their maintenance in the long term.
- Tax credits also tend to restrict investment in renewables to large companies with significant portfolios against which they can write off the tax credits they earn.
See also
Sources
External links
References
- Boyle, G. (ed.), Renewable Energy: Power for a Sustainable Future. Open University, UK, 1996.
