System Cost and Performance
1. Recent progress in Renewable Energy System Cost and Performance
As previously described there has been significant progress in cost reduction made by wind and
PV systems, while biomass, geothermal, and solar thermal technologies are also experiencing
cost reductions, and these are forecast to continue. Figure 8 presents forecasts made by the U.S.
DOE for the capital costs of these technologies, from 1997 to 2030.
PV systems, while biomass, geothermal, and solar thermal technologies are also experiencing
cost reductions, and these are forecast to continue. Figure 8 presents forecasts made by the U.S.
DOE for the capital costs of these technologies, from 1997 to 2030.
2. Lessons Learned in Developing Countries
In developing nations, renewable energy technologies are increasingly used to address energy
shortages and to expand the range of services in both rural and urban areas. In Kenya over
80,000 small (20 - 100 Wp) solar PV systems have been commercially financed and installed in
homes, battery charging stations, and other small enterprises. Meanwhile, a government program
in Mexico has disseminated over 40,000 such systems. In the Inner Mongolian autonomous
region of China over 130,000 portable windmills provide electricity to about one-third of the
non-grid-connected households in this region.
These case studies demonstrate that the combination of sound national and international policies
and genuinely competitive markets – the so-called ‘level playing field’ -- can be used to generate
sustainable markets for clean energy systems. They also demonstrate that renewable energy
systems can penetrate markets in the developing world, even where resources are scarce, and that
growth in the renewables sector need not be limited to applications in the developed world. Just
as some developing countries are bypassing construction of telephone wires by leaping directly
to cellular-based systems, so too might they avoid building large, centralized power plants and
instead develop decentralized systems. In addition, to help mitigating the environmental costs of
electrification, this strategy can also reduce the need for the construction of large power grids.
Despite their limited recent success, renewable energy sources have historically had a difficult
time breaking into markets that have been dominated by traditional, large-scale, fossil fuel-based
systems. This is partly because renewable and other new energy technologies are only now being
mass produced, and have previously had high capital costs relative to more conventional
systems, but also because coal, oil, and gas-powered systems have benefited from a range of
subtle subsidies over the years. These include military expenditures to protect oil exploration and
production interests overseas, the costs of railway construction that have enabled economical
delivery of coal to power plants, and a wide range of smaller subsidies.
However, another limitation has been the intermittent nature of some renewable energy sources,
such as wind and solar. One solution to this last problem is to develop diversified systems that
maximize the contribution of renewable energy sources but that also uses clean natural gas
and/or biomass-based power generation to provide base-load power when the sun is not shining
and the wind is not blowing. Using a range of different renewable energy technologies to provide
energy for a region can also help to mitigate the intermittent nature that some of them exhibit.
Even when there is no wind blowing there may be strong solar insolation, and vice versa.
In essence, however, renewable energy technologies face a similar situation confronting any new
technology that attempts to dislodge an entrenched technology. For many years, we have been
“locked-in” to a suite of fossil fuel and nuclear-based technologies, and many of our secondary
systems and networks have been designed and constructed to accommodate these. Just as
electric-drive vehicles face an uphill battle to dislodge gasoline-fueled, internal combustion
engine vehicles, so too do solar, wind, and biomass technologies face a difficult time upstaging
modern coal, oil, and natural gas power plants. This “technological lock-in” situation has several
important implications. First, various types of feedstock and fuel delivery infrastructure have
been developed over the years to support conventional energy sources, and in some cases these
would require modifications to support renewable energy technologies. This would entail
additional cost, tipping the table away from the new challengers. Second, the characteristics of
conventional energy systems have come to define how we believe these systems should perform,
and new renewable energy technologies that offer performance differences compared to
conventional technologies (such as intermittent operation) may raise doubts among potential
system purchasers. Third, to the extent that new technologies are adopted, early adoptions will
lead to improvements and cost reductions in the technologies that will benefit later users, but
there is no market mechanism for early adopters to be compensated for their experimentation that
later provides benefits to others. Since there is no compensatory mechanism, few are likely to be
willing to gamble on producing and purchasing new technologies, and the market is likely to
under-supply experimentation as a result.
Hence, particularly in the absence of policy intervention (discussed below), we may remain
locked-in to existing technologies, even if the benefits of technology switching overwhelm the
costs. There are numerous examples, however, of an entrenched or locked-in technology being
first challenged and ultimately replaced by a competing technology. This process is generally
enabled by a new wave of technology, and it is sometimes achieved through a process of
hybridization of the old and the new. Technological "leapfrogging" is another possibility, but this
seems to occur relatively rarely. A prime example of the hybridization concept is in the case of
the competition between gas and steam powered generators, which dates back to the beginning
of the century. From about 1910 to 1980, the success of steam turbines led to a case of
technological lock-in, and to the virtual abandonment of gas turbine research and development.
However, partly with the aid of "spillover" effects from the use of gas turbines in aviation, the
gas turbine was able to escape the lock-in to steam turbine technology. First, gas turbines were
used as auxiliary devices to improve steam turbine performance, and then they slowly became
the main component of a hybridized, "combined-cycle" system. In recent years, orders for
thermal power stations based primarily on gas turbines have increased to more than 50 percent of
the world market, up from just 15-18 percent in 1985.
Furthermore, increasing returns to adoption, or "positive feedbacks," can be critical to
determining the outcomes of technological competitions in situations where increasing returns
occur. These increasing returns can take various forms, including the following: industrial
learning (e.g., learning-by-doing in manufacturing, along with economies of scale, leads to
production cost declines); network related externalities (e.g., networks of complementary
products, once developed, encourage future users); returns on information (e.g. information
about product quality and reliability decreases uncertainty and reduces risk to future adopters);
and/or better compatibility with other technologically interdependent systems. Where increasing
returns are important, as in most technology markets, the success with which a challenger
technology can capture these effects and enter the virtuous cycle of positive feedbacks may, in
conjunction with chance historical events, determine whether or not the technology is ultimately
successful.
Thus, just as the hybridization between gas and steam turbines gave gas turbines a new foothold
in the market, so might hybridization between gas and biomass-fueled power plants allow
biomass to eventually become a more prominent energy source. Hybridization of intermittent
solar and wind power with other clean “baseload” systems could help to allow solar and wind
technologies to proliferate, and perhaps with advances in energy storage systems they could
ultimately become dominant. Once they are able to enter the market, through whatever means,
these technologies can reap the benefits of the virtuous cycle brought on by increasing returns to
adoption, and clearly this is already beginning to happen with several new types of renewable
energy technologies.
shortages and to expand the range of services in both rural and urban areas. In Kenya over
80,000 small (20 - 100 Wp) solar PV systems have been commercially financed and installed in
homes, battery charging stations, and other small enterprises. Meanwhile, a government program
in Mexico has disseminated over 40,000 such systems. In the Inner Mongolian autonomous
region of China over 130,000 portable windmills provide electricity to about one-third of the
non-grid-connected households in this region.
These case studies demonstrate that the combination of sound national and international policies
and genuinely competitive markets – the so-called ‘level playing field’ -- can be used to generate
sustainable markets for clean energy systems. They also demonstrate that renewable energy
systems can penetrate markets in the developing world, even where resources are scarce, and that
growth in the renewables sector need not be limited to applications in the developed world. Just
as some developing countries are bypassing construction of telephone wires by leaping directly
to cellular-based systems, so too might they avoid building large, centralized power plants and
instead develop decentralized systems. In addition, to help mitigating the environmental costs of
electrification, this strategy can also reduce the need for the construction of large power grids.
Despite their limited recent success, renewable energy sources have historically had a difficult
time breaking into markets that have been dominated by traditional, large-scale, fossil fuel-based
systems. This is partly because renewable and other new energy technologies are only now being
mass produced, and have previously had high capital costs relative to more conventional
systems, but also because coal, oil, and gas-powered systems have benefited from a range of
subtle subsidies over the years. These include military expenditures to protect oil exploration and
production interests overseas, the costs of railway construction that have enabled economical
delivery of coal to power plants, and a wide range of smaller subsidies.
However, another limitation has been the intermittent nature of some renewable energy sources,
such as wind and solar. One solution to this last problem is to develop diversified systems that
maximize the contribution of renewable energy sources but that also uses clean natural gas
and/or biomass-based power generation to provide base-load power when the sun is not shining
and the wind is not blowing. Using a range of different renewable energy technologies to provide
energy for a region can also help to mitigate the intermittent nature that some of them exhibit.
Even when there is no wind blowing there may be strong solar insolation, and vice versa.
In essence, however, renewable energy technologies face a similar situation confronting any new
technology that attempts to dislodge an entrenched technology. For many years, we have been
“locked-in” to a suite of fossil fuel and nuclear-based technologies, and many of our secondary
systems and networks have been designed and constructed to accommodate these. Just as
electric-drive vehicles face an uphill battle to dislodge gasoline-fueled, internal combustion
engine vehicles, so too do solar, wind, and biomass technologies face a difficult time upstaging
modern coal, oil, and natural gas power plants. This “technological lock-in” situation has several
important implications. First, various types of feedstock and fuel delivery infrastructure have
been developed over the years to support conventional energy sources, and in some cases these
would require modifications to support renewable energy technologies. This would entail
additional cost, tipping the table away from the new challengers. Second, the characteristics of
conventional energy systems have come to define how we believe these systems should perform,
and new renewable energy technologies that offer performance differences compared to
conventional technologies (such as intermittent operation) may raise doubts among potential
system purchasers. Third, to the extent that new technologies are adopted, early adoptions will
lead to improvements and cost reductions in the technologies that will benefit later users, but
there is no market mechanism for early adopters to be compensated for their experimentation that
later provides benefits to others. Since there is no compensatory mechanism, few are likely to be
willing to gamble on producing and purchasing new technologies, and the market is likely to
under-supply experimentation as a result.
Hence, particularly in the absence of policy intervention (discussed below), we may remain
locked-in to existing technologies, even if the benefits of technology switching overwhelm the
costs. There are numerous examples, however, of an entrenched or locked-in technology being
first challenged and ultimately replaced by a competing technology. This process is generally
enabled by a new wave of technology, and it is sometimes achieved through a process of
hybridization of the old and the new. Technological "leapfrogging" is another possibility, but this
seems to occur relatively rarely. A prime example of the hybridization concept is in the case of
the competition between gas and steam powered generators, which dates back to the beginning
of the century. From about 1910 to 1980, the success of steam turbines led to a case of
technological lock-in, and to the virtual abandonment of gas turbine research and development.
However, partly with the aid of "spillover" effects from the use of gas turbines in aviation, the
gas turbine was able to escape the lock-in to steam turbine technology. First, gas turbines were
used as auxiliary devices to improve steam turbine performance, and then they slowly became
the main component of a hybridized, "combined-cycle" system. In recent years, orders for
thermal power stations based primarily on gas turbines have increased to more than 50 percent of
the world market, up from just 15-18 percent in 1985.
Furthermore, increasing returns to adoption, or "positive feedbacks," can be critical to
determining the outcomes of technological competitions in situations where increasing returns
occur. These increasing returns can take various forms, including the following: industrial
learning (e.g., learning-by-doing in manufacturing, along with economies of scale, leads to
production cost declines); network related externalities (e.g., networks of complementary
products, once developed, encourage future users); returns on information (e.g. information
about product quality and reliability decreases uncertainty and reduces risk to future adopters);
and/or better compatibility with other technologically interdependent systems. Where increasing
returns are important, as in most technology markets, the success with which a challenger
technology can capture these effects and enter the virtuous cycle of positive feedbacks may, in
conjunction with chance historical events, determine whether or not the technology is ultimately
successful.
Thus, just as the hybridization between gas and steam turbines gave gas turbines a new foothold
in the market, so might hybridization between gas and biomass-fueled power plants allow
biomass to eventually become a more prominent energy source. Hybridization of intermittent
solar and wind power with other clean “baseload” systems could help to allow solar and wind
technologies to proliferate, and perhaps with advances in energy storage systems they could
ultimately become dominant. Once they are able to enter the market, through whatever means,
these technologies can reap the benefits of the virtuous cycle brought on by increasing returns to
adoption, and clearly this is already beginning to happen with several new types of renewable
energy technologies.
3. Leveling the Playing Field
As shown in Figure 7.3, above, renewable energy technologies tend to be characterized by
relatively low environmental costs. In an ideal world, this would aid them in competing with
conventional technologies, but of course many of these environmental costs are “externalities”
that are not priced in the market. Only in certain areas and for certain pollutants do these
environmental costs enter the picture, and clearly further internalizing these costs would benefit
the spread of renewables. The international effort to limit the growth of greenhouse emissions
through the Kyoto Protocol may lead to some form of carbon-based tax, and this could prove to
be an enormous boon to renewable energy industries. However, support for the Kyoto Protocol
among industrialized countries remains relatively weak, particularly in the U.S., and any
proposed carbon-based taxation scheme will surely face stiff opposition.
Perhaps more likely, concern about particulate matter emission and formation from fossil-fuel
power plants will lead to expensive mitigation efforts, and this would help to tip the balance
toward cleaner renewable systems. In a relatively controversial move, the U.S. Environmental
Protection Agency (EPA) has recently proposed new ozone and particulate matter (PM)
standards that are even more stringent than the current standards that remain unattained in some
U.S. urban areas. The EPA has justified these new regulations with analysis that shows that new
standards are necessary to provide increased protection against a wide range of potential health
impacts. For example, the EPA estimates that even if Los Angeles County were to meet the
existing PM standards, 400 to 1,000 deaths per year would still occur as a result of exposure to
very fine PM (under 2.5 microns in diameter) that presently is not regulated. The combination of
increased pressure to attain ozone and PM standards will further complicate siting of new fossilfueled
power plants in some areas of the U.S., particularly where they are now required to find
“offsets” for their pollution impacts. This will indirectly but surely benefit renewable energy
technologies, which do not typically face these difficulties in obtaining siting permits.
relatively low environmental costs. In an ideal world, this would aid them in competing with
conventional technologies, but of course many of these environmental costs are “externalities”
that are not priced in the market. Only in certain areas and for certain pollutants do these
environmental costs enter the picture, and clearly further internalizing these costs would benefit
the spread of renewables. The international effort to limit the growth of greenhouse emissions
through the Kyoto Protocol may lead to some form of carbon-based tax, and this could prove to
be an enormous boon to renewable energy industries. However, support for the Kyoto Protocol
among industrialized countries remains relatively weak, particularly in the U.S., and any
proposed carbon-based taxation scheme will surely face stiff opposition.
Perhaps more likely, concern about particulate matter emission and formation from fossil-fuel
power plants will lead to expensive mitigation efforts, and this would help to tip the balance
toward cleaner renewable systems. In a relatively controversial move, the U.S. Environmental
Protection Agency (EPA) has recently proposed new ozone and particulate matter (PM)
standards that are even more stringent than the current standards that remain unattained in some
U.S. urban areas. The EPA has justified these new regulations with analysis that shows that new
standards are necessary to provide increased protection against a wide range of potential health
impacts. For example, the EPA estimates that even if Los Angeles County were to meet the
existing PM standards, 400 to 1,000 deaths per year would still occur as a result of exposure to
very fine PM (under 2.5 microns in diameter) that presently is not regulated. The combination of
increased pressure to attain ozone and PM standards will further complicate siting of new fossilfueled
power plants in some areas of the U.S., particularly where they are now required to find
“offsets” for their pollution impacts. This will indirectly but surely benefit renewable energy
technologies, which do not typically face these difficulties in obtaining siting permits.
0 comments:
Post a Comment