Memorandum by Professor Peter F Smith,
University of Nottingham
The International Energy Agency has estimated
that global energy demand will grow by 50% by 2030, despite improvements
in energy efficiency. This would create a world market of ~$$8
trillion for electricity by that time. This means there is a vital
debate going on as to the future energy model and the technologies
in which to invest. In another report the IEA states that the
world will have to invest $45 trillion in energy in the coming
decades to achieve massive cut-back in fossil fuels and the rapid
expansion of renewable technologies and carbon capture and storage.
Only this way will greenhouse gases be halved by 2050. This model
assumes an average global economic growth of 3.3% between 2010
and 2050. (CNN Money June 2008)
A start has been made with renewable energy
technologies having grown into a global industry with its viability
improving with every rising notch in the scale of uncertainty
over supplies and reserves of oil and gas.
Many countries have responded by improving the
market situation for renewables, most notably through the introduction
of feed-in tariffs (FiTs) which offer subsidies above the market
price for conventional energy.
EXAMPLES OF
FIT MODELS
In the EU, 18 members operate a FiT regime,
and world-wide, 46 nations and federal states have adopted the
system. In the EU, Italy Sweden and the UK are the main absentees
from the list.
GERMANY
Designed to be revenue neutral supported by
~3% added to each electricity bill.
The tariff for PVs is 59—62.4 eurocents/kWh
depending on system size. The tariff for PVs reduces by ~5% per
year to compensate for the increasing benefits from economy of
scale and the fact that the cost effectiveness penalty compared
with fossil fuels is decreasing as prices for the latter rise.
One purpose was to develop the renewables industries, especially
photovoltaics (PVs).
The result is that Germany has 200 times the
solar capacity of the UK.
In 2006 it installed 950MWp. In total it has
installed over 4GWp of solar capacity, the equivalent of 1.6 million
domestic installations.
Recently a German lecturer described the FiT
as their "pension scheme": 10 years to pay off the low
interest loan and 15 years pension contribution.
Industry impact
The German energy companies took the government
to court over FiTs and were defeated. However, they have come
to realise they can gain, for example, by building large wind
farms which are eligible for the FiT.
Now the German renewables industry employs 250,000,
expected to rise to 400,000 by 2020.
In the UK the figure is about 7,000.
SPAIN
The Real Decreto 661/2007 guarantees an 8% return
on investment in PVs which translates to:
PV <100kW: 40 eurocents/kWh or 575% of the
regulated tariff
PV >100kW: 21 eurocents/kWh or 300% of the
regulated tariff
Spain's installed PV capacity is ~255 MWp.
It currently holds the record for the largest
PV farm at 23MWp in Murcia, southern Spain.
Renewable energy accounts for 7% of the country's
primary energy, and expected to reach 10% by 2010. Spain will
reach its 20% target for 2020 according to the Spanish Minister
for Industry.
Industry impact
The Spanish Labour Union Comisiones Obreras
claims that 190,000 jobs have been created by the renewables industry
in Spain of which 90,000 are direct and 100,000 indirect.
PORTUGAL
Long term guarantees on price has meant that
companies are expected to invest Euro10 billion in renewables
by 2012 and up to Euro100 billion by 2020.
In under three years it has quadrupled its wind
generating capacity and is investing in its first wave farm using
the Pelamis system developed in Edinburgh. Currently it is constructing
the world's largest PV installation comprising 2520 tracker panels
set at 45 degrees. It is near the town of Moura and, when finished,
is expected to generate 45MWp.
GLOBAL INDUSTRY
IMPACT
Studies have estimated that the renewables industry
now employs over 2.2 million (Renewable Energy World May June
08 p156). The industry optimism has been boosted by the new EU
Renewables Directive Proposal which stipulates that 20% of all
energy must come from renewables by 2020. For electricity generation
this translates to ~40% of capacity.
According to the European Commission there is
abundant evidence that FiTs have fostered significant growth of
renewables: " |.well adapted feed-in tariff regimes are generally
the most efficient support schemes for promoting renewable electricity",
(Commission Staff Working Document: "The support of electricity
from renewable sources", Jan 2008).
With such compelling evidence of their success
in promoting the installation of renewables and in generating
a new industry, it raises the question as to why the UK government
has been reluctant even to discuss FiTs until recently. According
to one source, "It has not happened in the UK because of
the powerful lobby of large energy companies and their very close
relationship with government."
Even this relationship has not prevented Royal
Dutch Shell from withdrawing its support for the London Array
of wind turbines. It is diverting its funding to onshore windfarms
in the USA because of "government incentives to deliver what
we believe are competitive returns". (extract from a report
by Eurwen Thomas for Shell, Renewable Energy World May/June 2008
p 9)
Rather than offer subsidies, the UK government
operates the mechanism of the Renewables Obligation which requires
energy companies to generate increasing proportions of their energy
from renewables: 10% by 2010 and 15% by 2015 with an aspiration
of 20% by 2020. This ignores domestic micro-renewables and community
mini-systems which the government's own experts conclude could
provide up to 40% of UK capacity.
BASE LOAD
TECHNOLOGIES
The UK policy is to concentrate on wind power
to meet most of its 2020 40% renewable electricity commitment
under the Directive. Wind is deemed to be the renewable technology
closest to cost effective against fossil fuels.
The ultimate UK government target is for ~30
GW to be provided by wind power. Hugh Sharman is a wind energy
consultant based in Denmark. He warns that "experience in
Denmark and Germany shows that the UK will find it impracticable
to manage much over 10 GW of unpredictable wind power without
major new storage schemes or interconnectors." ("Why
UK wind power should not exceed 10 GW", Hugh Sharman, Civil
Engineering journal 156 Nov 2005, page 161)
Windpower is a technology that carries particular
financial risks due to its unpredictability (stochastic intermittence).
West Denmark has a high proportion of that country's wind generators.
Most of that wind power "coincides with large power flows
from the system. In other words, it is exported". Figure
1. According to Sharman, it is able to support 24% of consumption
because it has interconnectors with surrounding countries that
can absorb its excess power and provide balancing power when necessary.
However, this is often to its market disadvantage.
Figure 1
WIND POWER AND NET EXCHANGE IN WEST DENMARK
IN JANUARY 2004. (DATA SOURCE ELTRA)
There is concern that excessive claims are made
for wind power because they are based on peak output denoted by
the nominal rating of machines. The load factor can appreciably
change the economics of the technology. According to Sharman,
"Typical load factors for UK wind farms are in the range
25%-35%. (op cit p 164) The latter relates to offshore installations.
(Load factor is the percentage of the peak output
per year which is delivered to the grid).
MARINE ENERGY
The systems that are vulnerable to the vagaries
of the market are mostly high capital cost, long life technologies
which do not offer quick returns on the investment. It is these
that are most sensitive to discount rates. This applies especially
to marine based systems.
In a market-driven economy this is a major problem
which was highlighted nearly two decades ago by Professor Michael
Grubb in his book Energy Policies and the Greenhouse Effect (Volume
One: Policy Appraisal, RIIA/Dartmouth 1990, p 79). He drew attention
to the effect of discount rate in 1990, pointing out that the
Severn Barrage "Assessed at a 2% discount rate would be a
bargain; at a market rate, it is hopelessly uneconomic".
He goes on to say that "the environment is clearly a limited
and deteriorating resource|in environmental terms, our descendants
will be considerably poorer than we are today. That being so,
we should consider a negative discount rate (my italics) at least
for valuing endangered environmental assets". Since this
was written the perceived consequences of climate change have
grown by orders of magnitude. What this means today is that a
public private partnership with a subsidized discount rate is
the only chance for gigawatt scale tidal energy.
There is also anxiety that an ambitious nuclear
programme will undermine the chances for marine energy. Defence
issues might well skew the cost-benefit analysis.
It is mystifying that the government still relies
on wind power to head its policy on renewable energy when its
estuaries and surrounding coasts have the highest electricity
generating potential in Europe. Apart from wave power, tidal currents
and tidal estuaries provide predictable power. Varying peak tide
times around the coasts reduce the peaks and troughs of intermittent
supply.
A variety of technologies for estuary tidal
power are available apart from the traditional barrage. More economical
modular systems constructed onshore are now possible either for
a barrage system or for the tidal energy bridge or "fence"
incorporating vertical axis rotors (Blue Energy Canada).
Studies into the feasibility of a barrage across
the Severn go back to 1925. The recent studies by the Sustainable
Development Commission (October 2007) and the Royal Town Planning
Institute's briefing paper November 2007 offer authoritative conclusions
which should be helpful to the Committee.
The Institution of Civil Engineers is forthright
in its views. It recommends that Wales should commit to large-scale
energy projects such as the Severn Barrage. "We have all
the studies we could ever need on the prospect of a barrage but
we need political commitment to act. This is a great chance for
the Assembly to demonstrate its maturity by leading on that commitment."
The ICE Wales emphasizes that the time for action is now and that
civil engineers have a role to play in designing and delivering
solutions. (Agenda for Post-Election Wales, January 2007)
THE THAMES
ESTUARY—A
SPECIAL CASE
Sir David King has estimated the cost of a tidal
surge over-topping the Thames barrage at £30 billion. (Ninth
Zuckerman Lecture). DEFRA and the Met Office have identified the
Thames estuary as having the highest risk of storm surge inundation
in the whole of NW Europe. The £30 billion should be set
against the cost of an estuary barrage as an avoided cost. It
would be partly offset by the gigawatt scale electricity that
the barrage could generate with both bulb and wind turbines. It
would also create a transport link between Essex and Kent. A further
justification is that the existing barrage will soon become obsolete.
Tidal pounds
A feasibility study has been conducted along
the North Wales coast into tidal pounds connected to the shore.
(Ecostar 2006) These are distinct from tidal lagoons which are
some distance offshore. Shore-connected tidal pounds are considered
to be more cost effective than lagoons. As the price of fossil
fuels continues to rise, tidal pound technology could soon break
through the cost effectiveness barrier.
Tidal streams
The potential of tidal stream energy has been
put at 58 TWh/y (ETSU 1993). It was then dismissed as uneconomic,
mainly due to imposed discount rates. Since then the Marine Foresight
Panel set up by the OST has supported the technology.
Probably the most cost effective technology
has been developed by OpenHydro based in Dublin.
It consists of giant fans with blades connected
to a rotor which spins inside the structure as water flows through.
Electricity is generated as the rotor turns past a magnet generator
on the outer rim of the structure. They are completely under water
and therefore no hazard to shipping. A demonstration project numbering
several 1MW units is being trialed in the Channel Island of Alderney
and due to be completed in two years. If successful a full-scale
project could generate 3GW from the Island's extraordinary tidal
race. It will mostly be for export. Guernsey will soon follow
suit.
ELECTRICITY STORAGE
The economics of intermittent renewable energy
systems could be transformed by developments in electricity storage
technology. One of the most promising is the multi-megawatt Redox
Flow Battery which is basically a regenerative fuel cell that
converts chemical energy into electrical energy and vice versa.
A commercial version, the Vanadium Flow Battery, has been produced
by VRB Power Systems of Canada.
Fuel cell technology also has a high development
priority. Marine systems could maximize market opportunities by
producing hydrogen to enable fuel cells to feed the grid at peak
times, either at slack tidal periods or to supplement capacity
at peak tides when the market is opportune.
CONCLUSION
Most of the arguments supporting a rapid expansion
of renewable energy have focused on global warming and climate
change. It is more than possible that the depletion of oil reserves
and problems over access to gas will overtake climate change in
persuading the UK vigorously to exploit its extensive range of
renewable energy opportunities.
12 June 2008
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