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.

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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.