A flawed approach to renewables

Overly ambitious renewable energy targets could have the unintended effect of providing lawmakers with a multitude of reasons to favour a diversified energy mix with fossil fuels, nuclear and efficiency.

(Reuters) - Ambitious targets for renewable electricity in the medium-term are likely unfeasible, given they demand forced, early write-offs of fossil fuel power plants and may downplay rival shale gas and the unpredictability of wind and solar power.

The European Commission on Thursday unveiled its "Energy Roadmap 2050," laying out options for making sweeping carbon emissions cuts through a combination of efficiency and renewable energy and other low-carbon technology.

At present renewable energy (mostly hydropower) accounts for about a fifth of both global and European Union power generation.

Estimates for its share in the next decades hinge on two questions:

1. How much new electricity generating capacity is needed?

This depends on stock retirement (how much of the present generating capacity is shut down) and new demand (how far energy demand rises above present levels);

2. How much of that new power generation is from renewable sources?

This depends on price competitiveness; public and political appetite for low-carbon technologies; the level of fossil fuel back-up needed for wind and solar power; and trends in development of unconventional gas.


Forecasts by the International Energy Agency (IEA), McKinsey and Greenpeace offer recent scenarios for meeting more ambitious, according to current and more ambitious carbon emissions targets. The EU's 2050 Roadmap on Thursday also saw different combinations of technologies.

The IEA presented two scenarios in its World Energy Outlook (WEO) in November: renewable energy technologies would account for nearly a third or a half of global power generation in 2035climate targets respectively.

McKinsey also sees renewable power providing nearly half of global electricity generation in 2030, in its more ambitious, "climate response" case.

Greenpeace looks further ahead and with a more ambitious scenario, which rules out nuclear power in the medium-term and where renewable energy accounts for 95 per cent of global power production by 2050.

The European Commission in its Roadmap also looked to 2050, and assumed action to stay within similar, safer global warming limits. It saw renewables accounting for 64-97 per cent of power consumption in the European Union.


The International Energy Agency (IEA) estimates that nearly 40 per cent of the world's present power generation will reach the end of its natural life by 2035, while electricity demand would also rise, requiring additional new capacity.

But its more ambitious climate response scenario would also need premature retirement of fossil fuel power, without a political urgency at present nowhere in sight where global carbon emissions would have to start falling before 2020.

Greenpeace looks further out to 2050, when more fossil fuel power plants have reached their natural end of life.

Its scenario also demanded premature closure of coal-fired power plants, however, including some of the 400GW of coal capacity that China has built in the past decade, and coal-fired power which the country continues to build from now on.

While these are long timescales and are hard to predict, it's difficult to see Beijing writing off fully depreciated, perfectly functioning assets just to take care of global carbon emissions except in the most catastrophic climate change scenario.

The EU's 2050 Roadmap included a scenario of huge investment in energy efficiency which would cut the required deployment of renewable energy.


Besides forcing expensive closure of valuable assets, other possible pinch points for high renewable energy deployment include: price competitiveness (for example with shale gas); intermittency; and transmission costs.

The good news for renewable energy is price/cost: greater demand for fossil fuels will likely increase costs, as this is a limited resource.

The opposite is true for renewable energy where faster deployment will accelerate equipment price falls due to economies of scale and a technology learning curve, while by definition the fuel is free.

A doubling of installed capacity leads to unit cost reductions of around 20 per cent for solar photovoltaic (PV) and around 10 per cent for onshore and offshore wind, as cited in the recent McKinsey review, "Resource Revolution: Meeting the world's energy, materials, food and water needs".

However, shale gas will jostle with renewable energy for new capacity: falling gas prices have undercut wind power projects in the United States.

Consultants Wood Mackenzie forecast rapidly expanding production of unconventional gas in North America, to 800 billion cubic metres by 2025 from about 450 bcm now, and a much more gradual ramping up in Europe and Asia.

Contrast that with McKinsey's high-renewables case, which sees the share of gas actually falling from today's 22 percent of global power generation to 21 per cent in 2030 – the contradiction is clear.

Finally, transmission costs, storage and fossil fuel back-up are multiple sides of the same problem: wind and solar power are intermittent.

To some degree they can be backed up by other, baseload (constant) sources of renewable power (hydro, biomass and in the future tidal), while costly grid interconnectors would also help by shuffling renewable electricity across borders according to variable supply and demand.

But such large infrastructure projects push the timing of costs towards the nearer term (and don't forget the planning permission required), adding more reasons for lawmakers to prefer a diversified energy mix with fossil fuels, nuclear and efficiency.

As the EU Roadmap finds: "The high energy efficiency scenario and also the diversified supply technology scenario have the lowest electricity prices."

"Gas will be critical for the transformation of the energy system," it adds, contradicting its own "high renewables" scenario.

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