This is the second of the two articles from the 1990s mentioned in the previous blog post. It was published in the November-December 1997 issue of Asia Pacific Economic Review.
Why We Must Move Toward Renewable Energy
by Allan R. Hoffman
Rapid economic growth in the Asia-Pacific region has been and will continue to be mirrored by a rapid increase in energy demand. Between 1970 and 1995 primary energy demand in the region increased from 19 to 70 Quads (quadrillion BTUs). This figure is expected to increase to 135 Quads in 2010 and to 159 Quads in 2015 (Source: Energy Information Administration International Energy Outlook, 1997). The World Bank has estimated that developing countries alone will require 5 million megawatts of new electrical capacity over the next four decades to meet the needs of their expanding economies. The world’s current total installed capacity is just under 3 million megawatts. Thus, even if the World Bank’s estimate is too optimistic, installed world generation capacity will essentially have to double during the next 40 years. This much new capacity will require trillions of dollars of new investment.
What does this mean for renewable electric technologies – I.e., electricity generated from solar, biomass, wind, geothermal and hydropower resources? Fossil fuels are likely to remain the dominant energy source through the middle of the next century, while renewables can anticipate capturing only a fraction of that market. Every one percent of the emerging market in developing countries represents $50-100 billion of investment. If renewables can capture several percent of that market, the potential exists for several hundred billion dollars of renewable technology sales worldwide over the next four decades. Why are renewables important? They are the most environmentally responsible technologies available for power generation. Most renewable technologies have proven effective and reliable. Efforts are underway to further improve their technological performance, which may be the easiest problem to solve.
Providing Access to Renewables for Developing Countries
The more difficult problems are how to get renewable technologies into people’s hands, how to pay for them, and how to set up the non-technological infrastructure needed for widespread deployment of renewables. In many applications, renewables are the least cost energy option. Thinking on energy costs is distorted in the United States because of relatively low energy prices. Outside the US the story is very different. Average electricity prices in Germany and Japan approach or exceed 20 cents per kilowatt-hour. Even in remote parts of the US, such as Alaska, electricity prices range from 40 to 60 cents per kilowatt-hour. In many parts of the world, including remote areas of the Asia-Pacific region, it is hard to put a price on electricity because there is no access to it. The current world population is 5.8 billion people. It is estimated that more than 2 billion of those people have no access to electricity. In China alone that number is 120 million. At least another half billion people around the world have such limited or unreliable access to electricity, that for all intents and purposes they have no electricity. If we are to make a difference in these people’s lives, we have to make available to them free-standing power sources suitable for off- grid applications – i.e., renewable electric technologies. When people have no access to electricity, even a 35 watt photovoltaic panel or a small wind machine can make a very large difference in their lives. Where the alternative is to extend expensive electrical transmission and distribution systems, use of these technologies can be cost effective.
What is the status of renewable technologies today? Costs for photovoltaics, the use of semiconductor materials to convert sunlight directly into electricity, have come down from approximately $1 per kWh in 1980 to 20-30 cents per kWh today. With increasing scales of manufacturing and increasing emphasis on thin-film devices, electricity costs from photovoltaics are expected to fall below 10 cents per kilowatt-hour early in the next decade. Current annual world production has just exceeded 100 megawatts, and is growing at more than 20 percent per year. This corresponds to a doubling time of less than 4 years. Current US. production capacity (40 megawatts per year) is fully subscribed, and half a dozen new or expanded manufacturing plants are scheduled for operation within the next 18 months. Roughly 70 percent of US. production is currently exported.
The “3- Flavors” of Solar Thermal
Another form of solar energy, solar thermal technology, concentrates sunlight to create heat that can then be used to generate stearn and/or electricity. This technology comes in 3 “flavors”: troughs that con centrate sunlight along the axis of parabolic collectors; power towers that surround a central receiver with a field of concentrating mirrors called heliostats; and dish-engine systems that use radar-type dishes to focus sunlight on heat-driven engines such as the Sterling engine. Electricity costs from the parabolic trough units are in the 10 to 12 cents per kilowatt-hour range, but can be reduced. Costs of electricity from the other two solar thermal technologies are expected to be even lower than those of the parabolic trough systems, and could reach 4 to 6 cents per kilowatt-hour when manufactured in commercial quantities.
The world has large resources of organic material, called biomass, which occurs in a variety of forms (wood, grasses, crops and crop residues). Biomass can be converted into energy in a number of ways. As wood-burning fuel, it has been used extensively in developing parts of the world, often resulting in widespread deforestation, soil loss, declining farm productivity, and increasing likelihood of seasonal flooding. In future, the most effective way to use biomass is likely to be gasification, where the resulting gas can either be used as fuel for high efficiency combustion turbines, or as synthesis material for producing liquid fuels. The US Department of Energy (DOE) has a series of projects underway to determine how to most effectively use biomass for energy production. DOE is experimenting with biomass-coal co-firing in New York state, biogasification with bagasse (the residue from sugar cane) in Hawaii, with wood in Vermont, with switchgrass in Iowa, and with alfalfa in Minnesota. Biomass-based electricity has the advantage of being a baseload technology (i.e., it can be operated 24 hours a day) and is carbon dioxide neutral – i.e., the carbon dioxide released during its use is recaptured by the biomass during its growth. The revenue derived from the sale of biomass resources can be an important component in rural economic development. Costs for biomass-generated electricity are expected to be competitive as long as biomass resource costs remain reasonable.
Europe “Blows with the Wind”
Many locations offer wind resources. Wind is the fastest growing energy technology in the world today. Most ofthe 17,000 wind turbines in the United States are located in California, but a dozen U.S. states (from the Dakotas south to Texas) have greater wind potential. Today’s highly reliable machines (typically available 95-98% of the time) provide electricity at 5 cents per kilowatt-hour at moderate wind sites. The next generation of turbines, currently under development, should provide electricity at half that cost. Use of wind energy is expanding rapidly in many parts of the world, with Europe’s installed capacity now exceeding that of the United States (4,000 megawatts compared to 1,700 megawatts). India ranks third with 800 megawatts of wind generated capacity. Large wind generation projects are also being planned for China and other parts of the developing world. Geothermal resources – i.e. hot water or steam derived from reservoirs below the surface of the earth – were first used to generate electricity in Italy in 1904. Today, more than 6,000 megawatts of geothermal power are installed world wide, with about half of that in the United States. Rapid expansion of geothermal power is taking place in several places around the world, most notably in Indonesia, the Philippines, Mexico and Central America. Geothermal power is a baseload technology. It can be a low cost option if the hot water or steam re source is at a high temperature. One California geothermal project produces electricity at 3.5 cents per kilowatt-hour.
Limit to Fossil Fuels?
Given the world energy situation, one can not project today’s energy system into the long-term future. Fossil fuels will continue to be the primary fuel source for years to come. As history has shown, the transition to a different energy system is likely to take 50 to 100 years. The world cannot continue to be dependent on fossil fuels. Transportation issues are a good example of this misplaced reliance. If a reasonable fraction of the large and growing populations of China and India start driving cars as people in the developed world do, demand and prices for petroleum resources will grow rapidly, causing serious international supply problems and political ten sion; unacceptable environmental consequences will affect us all. There is a limit to the Earth’s fossil fuel reserves. Whether it takes 50 years, 100 years or longer, these reserves will run out. The head of Shell UK, Ltd., a highly respected oil industry planning organization, has said: “There is clearly a limit to fossil fuels. Fossil fuel resources and supplies are likely to peak at around 2030, before declining slowly. Far more important will be the contribution of alternative renewable energy supply.” For many reasons, financial and otherwise, nuclear power is not likely to meet the energy needs of developing countries. Hydro power is the most mature form of renewable energy and already provides a significant share of the world’s electricity. Though potential exists for further hydropower developement in many parts of the developing world, significant hydropower expansion in developed countries is unlikely to occur because of environmental concerns. With limited choices, the world is entering the early stages of an inevitable transition to a sustainable world energy system dependent on renewable energy resources.
Dr. Allan R. Hoffman is Deputy Assistant Secretary of the Office of Utility Technologies, Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy in Washington, D.C.