Renewable energy development covers the advancement, capacity growth, and use of renewable energy sources. Modern interest in renewable energy development is linked to concerns about exhaustion and greenhouse gases of fossil fuels and environmental, social and political risks of extensive use of fossil fuels and nuclear energy. It is a form of energy development with a focus on renewable energy, including all energy from renewable sources.
What is now thought of as renewable energy has been used by man since prehistory. The burning of biomass for heat and light has been practiced throughout recorded history. Windmills and watermills have converted the potential energy of water for centuries, to a power source for small-scale agricultural and industrial processes.
The modern technologies which now comprise renewables have different and varied histories. The beginning of the development of wind technology can be dated back to the late 19th Century and experiments in Denmark and elsewhere. Interest in the technology peaked in Denmark during both World Wars due to limited access to fossil fuels. From the 1950s onwards, photovoltaic (solar) cells saw investment as a result of their usefulness in space craft, with resulting improvements in the technology and knowledge of materials, along with reductions in price to levels acceptable to some consumers. The main motivation for the expansion of renewable energies came with the oil crises of 1973 and 1979-80. Concern by political leaders in a host of countries saw increases in support for research and development of new technologies (Jimmy Carter was the first US politician to focus significantly on solar energy use, in response to the 1973 crisis). Wind, wave and solar energy technologies all benefited from this investment with an increase in the range of their application.
Elsewhere, there have been experimentations with passive solar energy, including daylighting, which continues a tradition of orienting house-building to benefit from natural resources. Alongside the industrial development of renewable energies, many societies simply continue to practice as a matter of course what has happened for hundreds of years.
Non-technical barriers to acceptance
In September 2006, the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy did a review of recent literature discussing the "non-technical barriers" to renewable energy use, specially solar. These are marketing, institutional, and policy impediments which are holding back the acceptance of renewable energy technologies. These key barriers are listed here, from most frequently cited to least, and "must be addressed as part of the technology acceptance efforts":
- Lack of government policy support. This includes the lack of policies and regulations supporting development of renewable energy technologies and the presence of policies and regulations hindering renewable energy development and supporting conventional energy development. Examples include fossil-fuel subsidies, insufficient consumer-based renewable energy incentives, government underwriting for nuclear plant accidents, and difficult zoning and permitting processes for renewable energy.
- Lack of information dissemination and consumer awareness.
- High capital cost of renewable energy technologies compared with conventional energy.
- Difficulty overcoming established energy systems. This includes difficulty introducing innovative energy systems, particularly for distributed generation such as photovoltaics, because of technological lock-in, electricity markets designed for centralized power plants, and market control by established generators.
- Inadequate financing options for renewable energy projects.
- Failure to account for all costs and benefits of energy choices. This includes failure to internalize all costs of conventional energy (e.g., effects of air pollution, risk of supply disruption) and failure to internalize all benefits of renewable energy (e.g., cleaner air, energy security).
- Inadequate workforce skills and training. This includes lack in the workforce of adequate scientific, technical, and manufacturing skills required for renewable energy development; lack of reliable installation, maintenance, and inspection services; and failure of the educational system to provide adequate training in new technologies.
- Lack of adequate codes, standards, and interconnection and net-metering guidelines.
- Poor perception by public of renewable energy system aesthetics.
- Lack of stakeholder/community participation in energy choices and renewable energy projects.
Renewable energy support mechanisms
Because of the above non-technical barriers, creating/harvesting (renewable) energy may be more difficult and expensive than combusting fossil fuels. Technology for using fossil fuels, such as mines and power plants, is already well established whereas much renewable technology is new. There 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. This may be because fossil fuel prices do not include the true costs of global ecological change now and in the future; an argument of ecological economists. It should also be noted that the effort involved in extracting oil from ever deeper reservoirs is increasing and that the costs of renewable energy technology have been shown to fall with increased investment and expansion of capacity. Conceivably, the cost of renewable energy will drop below fossil fuel costs.
Much of renewable energy policy concerns the stimulation of markets and thus demand for the various technologies with the aim of improving efficiency and reducing costs. A number of policy mechanisms have been applied to this end, the mechanisms which have been applied widely are the quota (or RPS) mechanism, the fixed tariff mechanism, contract bidding mechanisms and the application of tax credits. Growing levels of experience in the application of these has enabled more critical assessments of their usefulness in addressing the multiple goals of renewable energy policy.
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 U.S. 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.
- Competition: Technologies must compete for contracts, and thus there is pressure to drive down costs and in theory, this means that the costs to the consumer are minimized. there is growing evidence however that this does not always work in practice.
- Static Efficiency: It has been suggested that quota mechanisms are more efficient in achieving specific goals for renewable energy capacity.
- 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 each of these is to raise the cost of capital and thus the overall cost of generation, resulting in an increase in the cost to the consumer. There is evidence that the risk and the related additional costs associated with a quota mechanism are sufficient to outdo any benefits from competition inherent to the system.
- 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.
- 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.
- 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 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.
In a Feed-in 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.
- 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 Europe, and have enjoyed particular success in Germany, Denmark and Spain. Their employment has led to significant increases in renewable electricity generating capacity, particularly of wind energy.
- Excessive margins for developers: 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 digression, 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 other 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.
- 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.
- 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.
Scenarios and blueprints
Many governments and environmental organisations have published reports outlining a future renewables fuel mix, or position papers on future commitments.
- Greenpeace has published the report " Energy [R]-evolution", details how to halve the world's CO2 emissions by 2050, using existing technology and still providing affordable energy and economic growth. The report attempts a scenario which would phase out unsustainable energy, and decouple economic growth from fossil fuel use.
Trends favouring Renewables
The renewable market will boom when cost efficiency attains parity with other competing energy sources. The following trends are a few examples by which the renewables market is being helped to attain critical mass so that it becomes competitive enough vs fossil fuels:
Other than market forces, renewable industry often needs government sponsorship to help generate enough momentum in the market. Many countries and states have implemented incentives — like government tax subsidies, partial copayment schemes and various rebates over purchase of renewables — to encourage consumers to shift to renewable energy sources. Government grants fund for research in renewable technology to make the production cheaper and generation more efficient.
Development of loan programs that stimulate renewable favoring market forces with attractive return rates, buffer initial deployment costs and entice consumers to consider and purchase renewable technology. A famous example is the solar loan program sponsored by UNEP helping 100000 people finance solar power systems in India. Success in India's solar program has led to similar projects in other parts of developing world like Tunisia, Morocco, Indonesia and Mexico.
Imposition of high fossil fuel consumption / carbon taxes, and channel the revenue earned towards renewable energy development.
Many think-tanks are warning that the world needs an urgency driven concerted effort to create a competitive renewable energy infrastructure and market. The developed world can make more research investments to find better cost efficient technologies, and manufacturing could be transferred to developing countries in order to use low labor costs. The renewable energy market could increase fast enough to replace and initiate the decline of fossil fuel dominance and the world could then avert the looming climate and peak oil crises.
Most importantly, renewables is gaining credence among private investors as having the potential to grow into the next big industry. Many companies and venture capitalists are investing in photovoltaic development and manufacturing. This trend is particularly visible in Silicon valley, California, Europe, Japan.
All electricity from renewable sources (AERS)
Al Gore, challenged the United States to commit to producing all electricity from renewable sources (AERS) like solar and wind power in 10 years .
Center for Resource Solutions supports Al Gore's AERS goal.
Scientists from the University of Kassel have been busy proving that Germany can power itself entirely by renewable energy .
Some autonomous regions in Spain lead Europe in the use of renewable energy technology, and plan to reach 100% renewable energy generation in a few years (AERS goal). Castile and León and Galicia are especially near this goal, producing in 2006 70% of their total electricity demand from renewable energy sources, and 5 communities produces more than 50% from renewables.
The Oregon Institute of Technology announced that it was going to be the world’s first university to be powered entirely by geothermal energy and the University of Oklahoma has picked up the use-only-renewable-energy gauntlet and has announced that the school’s main campus will be entirely powered by wind by 2013 .
Venture capital and private equity investments in clean energy companies increased by 167 percent in 2006, according to investment analysts at New Energy Finance Limited .
These clean energy investments increased from $2.7 billion in 2005 to $7.1 billion in 2006, driven mainly by a surge of investments in biofuels in the United States. Investments in biofuels more than quadrupled, increasing from $647 million in 2005 to $2.8 billion in 2006.
In addition, investments in solar energy more than tripled, while wind power investments more than doubled. Investments in other clean energy technologies—including energy efficiency, fuel cells, hydrogen, smart power distribution, and carbon markets—grew by 74 percent.
New investment into the sector jumped US$148 billion in 2007, up 60 per cent over 2006, noted a report by the Sustainable Energy Finance Initiative (SEFI). Wind energy attracted one-third of the new capital and solar one-fifth. But interest in solar is growing rapidly on the back of major technological advances which saw solar investment increase 254 per cent .
The IEA predicts US$20 trillion will be invested into alternative energy projects over the next 22 years .
Statutory definitions of renewable energy
definition of renewable energy may differ from a scientific
definition, reflecting the legislators' other concerns, such as environmental damage and political sustainability. Contentious cases are, but not limited to: impure biomass or waste materials (such as painted wood), large hydroelectric power plants, and nuclear power. Regarding nuclear energy there is an ongoing public discussion, whether it can or cannot be included in any definition of renewable energy; in any case, there is a demand for a name for the energies that does not includes fossil fuels and nuclear power. (see: Renewable energy
Though International Energy Agency is not a legislative body, the definition used by this specialised organisation of OECD is representative and influential (... denotes ellipsis
from original text):
"Renewables include the following categories:
Combustible Renewables and Waste* (CRW):
- Solid Biomass: Wood, Wood Waste, Other Solid Waste: Covers purpose-grown energy crops (poplar, willow etc.), a multitude of woody materials generated by an industrial process (wood/paper industry in particular) or provided directly by forestry and agriculture (firewood, wood chips, bark, sawdust, shavings, chips, black liquor etc.) as well as wastes such as straw, rice husks, nut shells, poultry litter, crushed grape dregs etc.
- Charcoal: Covers the solid residue of the destructive distillation and pyrolysis of wood and other vegetal material.
- Biogas:: Gases composed principally of methane and carbon dioxide produced by anaerobic digestion of biomass and combusted to produce heat and/or power.
- Liquid Biofuels: Bio-based liquid fuel from biomass transformation, ...
- Municipal Waste (renewables): Municipal waste energy comprises wastes produced by the residential, commercial and public services sectors and incinerated in specific installations to produce heat and/or power. The renewable energy portion is defined by the energy value of combusted biodegradable material. :Footnote for this item: Some of the waste (the non-biodegradable part of the waste) is not considered renewables as such. However, proper breakdown between renewables and nonrenewables is not always available.
: Potential and kinetic energy of water converted into electricity
in hydroelectric plants. It includes large as well as small hydro, regardless of the
size of the plants.
: Energy available as heat emitted from within the earth’s
crust, usually in the form of hot water or steam. ...
: Solar radiation exploited for hot water production and electricity
generation. Does not account for passive solar energy for the direct heating,
cooling and lighting of dwellings or other.
: Kinetic energy of wind exploited for electricity generation in wind
: Mechanical energy derived from tidal movement,
wave motion or ocean current and exploited for electricity generation."
EU Directive 2001/77/EC
Definition of renewable energy sources used by EU
legislators coincides with the IEA definition, above. Bio-waste is limited to biodegradable fraction.
Article 2. of the EU Directive
2001/77/EC provides the following definition of renewable energy sources:
- (2)(a) ‘renewable energy sources’ shall mean renewable non-fossil energy sources (wind, solar, geothermal, wave, tidal, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases);
further specifying biomass:
- (2)(b) ‘biomass’ shall mean the biodegradable fraction of products, waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste;
Australia, federal legislation
In Australia, the federal Renewable Energy (Electricity) Act 2000
takes a broad approach and defines certain energy sources that are eligible renewable energy sources (Act s 17). These include (a) hydro; (b) wave; (c) tide; (d) ocean; e) wind; f) solar; g) geothermal aquifer; h) hot dry rock; (i) energy crops; j) wood waste; k) agricultural waste; l) waste from processing of agricultural products; m) food waste; n) food processing waste; o) bagasse; (p) black liquor; q) biomass based components of municipal solid waste; r) landfill gas; s) sewage gas and biomass based components of sewage; t) any other energy source prescribed by the regulations. Further detail of definitions is found in the Regulations. The Act states s.17(2) that fossil fuels; and materials or waste products derived from fossil fuels are not eligible renewable energy sources. Although the Australian federal legislation does not directly rule out nuclear power as an eligible source, it is not included in the list of eligible sources.
Queensland Government, 2006
The definition of renewable energy, as defined by the Queensland Government
in its electricity supply contract tenders, contradicts generally accepted Australian renewable energy
scheme protocols. The Total Environment Centre (TEC), a critic of this policy, contends that a global agreement and accreditation scheme is needed to ensure there is no misleading conduct surrounding the purchase of renewable energy and its environmental benefits.
In November 2006, the TEC raised concerns that the Queensland Government's tender for green electricity, worth millions of dollars, could be selling out the environment. "TEC is concerned that unless the Government buys from approved sources and requires suppliers to surrender their mandatory Renewable Energy Certificates (RECs), the purchase will do little to boost renewable energy and reduce greenhouse emissions," said Jeff Angel, Executive Director. "Trying to do greenhouse on the cheap is no substitute for action. Unless the Government buys the whole output of renewable generators and prevents Renewable Energy Certificates from being double counted, it can be rightly accused of 'greenwash'."
TEC has sighted a tender document for the supply of electricity to the Department of Main Roads Spring Hill Complex that clarifies the Queensland Government’s approach to the purchase of renewable energy. TEC is concerned that the purchases may not contribute to any new renewable generation being established in Queensland or elsewhere. The more such generation is established the cheaper it gets and this will benefit consumers and the environment. "The approach appears to be a change in policy, hidden in Addendum 3 of the tender document. Why is the Queensland Government changing its policy? If it's about cost-cutting by the new department charged with purchasing renewable energy, the Department of Public Works, then it's cost-cutting at the expense of our climate." "The Queensland Government should be up front with the public. If it wants to make a difference to current greenhouse gas emissions through its purchasing power, then it should make sure that when it buys green electricity it is new generation and is not double counted. Otherwise it is selling the environment and renewable energy short." "This is no drop in the ocean. Over $3 million is up for grabs and it could really help the renewable energy industry – or be wasted with phony procurement for public relations." The tender document states that the "... request for renewable energy for Main Roads is identical to the type of renewable energy being sourced in the Queensland Government's whole-of-Government contract" and that the renewable energy "... does not need to be supported by RECs, this element can be retained/traded by the retailer." This means is that when the REC is re-sold, the environmental benefits will travel with the REC and the Government’s purchase loses its environmental benefit.
Environment groups recently released an audit of GreenPower products and assessed which products genuinely made a contribution to reducing spiralling greenhouse emissions.
- Boyle, G. (ed.), Renewable Energy: Power for a Sustainable Future. Open University, UK, 1996.