Why aren't you using renewable energy?

Jan. 7, 2013
Peter Garforth wonders how low must alternative energy go before we use it.

The installation of generation from solar photovoltaic and wind is growing rapidly in the United States. In the past few months, the total of new renewable capacity outstripped conventional fossil fuel capacity. At first sight, this would appear to indicate that renewable power has reached a tipping point and irreversibly entered the mainstream. To some extent this is true, but like all sound bites about energy, this needs a second look.

It is important to put this in scale, both locally and globally. A few numbers will help for context. By 2011, 69 GW of solar power was installed globally, of which 4 GW, or 17%, was in the United States. In 2011 itself, the world added 22 GW, of which 2 GW was American. The picture for wind is similar. Of the 238 GW installed globally by 2011, 47 GW, or 19%, are in the United States. During 2011, the world added 40 GW of wind, of which America represented 7 GW. As a regional comparison, the EU is home to more than 70% of solar capacity, and about 40% of wind. China installed three times the wind as the United States in 2011.

The global market is accelerating, driven by a combination of major events, falling costs, environmental legislation, and policy. Understanding how renewable markets will develop is important for any industry looking to reduce risks, environmental impact, and costs. It is fair to say, that much of industry still views renewables as expensive, too small scale for practical use, and only valuable for experimentation or publicity purposes. Is it time to revisit these assumptions?

The cost evolution has been dramatic, accompanied by significant gains in technology. Modern wind units are more efficient in lower wind speeds. I recently visited some units that are now viable in the wind of northeastern Ohio, a very different picture from five years ago. Market volume has driven down initial costs, improved reliability, and cut operations and maintenance costs. Generating costs are falling to the $0.04-$0.08/kWh range, an increasingly competitive level.

Solar is experiencing similar dramatic changes. Larger scale PV is below $3/W installation costs with most industry observers predicting less than $1/W soon. In parallel, the technology is improving in terms of generating efficiency.

Despite all this evolution, the uptake of renewable energy in the United States is relatively slow and haltering for both utilities and larger industrial consumers. Why this is so is multifaceted, but some clear lines emerge.

Peter Garforth heads a specialist consultancy based in Toledo, Ohio and Brussels, Belgium. He advises major companies, cities, communities, property developers and policy makers on developing competitive approaches that reduce the economic and environmental impact of energy use. Peter has long been interested in energy productivity as a profitable business opportunity and has a considerable track record establishing successful businesses and programs in the US, Canada, Western and Eastern Europe, Indonesia, India, Brazil and China. Peter is a published author, has been a traveling professor at the University of Indiana at Purdue, and is well connected in the energy productivity business sector and regulatory community around the world. He can be reached at [email protected].
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The most obvious is that potential consumers are not current on the state of play of this fast-moving market. I never fail to be surprised by the dated understanding of current costs, complexity, and technology of alternative energy. The first, most obvious comment is to get the homework done before jumping to conclusions.

Consumers frequently view clean and renewable supplies individually, rather than as a part of a total site energy strategy. Wind and solar are unpredictable but can be back-filled with conventional on-site CHP and the grid itself. Solar generates most when cooling demand is highest, which increasingly is when utilities are charging premium prices, creating a natural incentive. Efficiency measures greatly enhance the value of any clean and renewable supply. Without “joined-up thinking,” the combined value is missed. The onus must be on the end user to do sensible integrated site energy planning.

This lack of joined-up thinking is just as prevalent when it comes to public policy and incentives. Traditionally fuelled, cleaner, supply options like CHP are rarely treated as a complement to renewables. Taxes, grants, and other incentives that apply to renewables frequently do not apply to CHP, though some states are grudgingly beginning to change this.

On this disjointed theme, I have yet to see layered incentives, where benefits would be even greater for combinations of different renewables and CHP. As just one small example, I am right in the middle of a specific project where net metering applies to renewables, but not to CHP. This is despite the fact that the bundled solution exceeds the state’s environmental and other goals far better than the renewable elements alone.

Decisions that could change the way a factory sources electricity for decades need stable investment conditions. The responsibility of public authorities is to recognize that the worst enemy of investment is unpredictable policy frameworks. These include tax incentives, grants, carbon costs, technical interconnection, site-permitting and lifetime benefits such as feed-in tariffs or net metering. This is also important for employers making, installing, and maintaining the renewable equipment. Currently we are stumbling from year to year, as exemplified by the current uncertainty of wind energy tax credits.

The global clean and renewable industry is delivering lower cost, more efficient, reliable solutions. To be blunt, this has been largely driven by more coherent long-term policies elsewhere in the world. Now is probably time to step up to the plate and begin to put these in place here.