The technical myth The price of renewable energy will be reduced by technical breakthrough

The first myth of energy is that some great idea will come along and revolutionize its production, making energy cheap and clean, allowing man to live in peace, enriching the poor and healing the lame. We have heard this about nuclear power, fusion reactors, solar power and many other technologies. For example, several times a year a claim rings out about a new technology that will make solar power affordable to everyone. But as we hear from KPMG, the only thing required to make solar affordable is market size:

Even in a relatively small, cloudy and rainy country such as the Netherlands, there is an enormous market potential for solar panels. If this entire potential were utilized, solar energy could provide three-quarters of the Netherlands' electricity needs.

The size of the current market for solar panels stands in stark contrast to the potential of solar energy. Up to the present only a fraction of the possibilities have been utilized. The most significant reason for this is the fact that the price of solar energy is much higher than the price of conventional energy. In the Netherlands the price difference is up to a factor of four to five. The predominant reason for this is that the demand for solar energy and solar panels is small and the associated prices are high. It comes down to a classic chicken/egg problem: as long as demand is small, production of solar energy will remain smallscale and expensive, and as long as the production is small-scale and expensive, the price will remain high and the demand small: catch 22. (KPMG, 1999)

Of course continued innovation will ensue, but it is market growth that will drive and deliver that innovation, not the other way round.

In fact, most renewable energy sources have had their big breakthroughs, and are now on the path of development trod by every other technological breakthrough. Once the initial technology is proven, the commodity price is driven by the size of the market. The typical behaviour is one in which a doubling in installed capacity has an accompanying 20 per cent decline in the commodity's price.

Source: Transition Institute (2004) Note: CF = capacity factor

Figure 2.1 The forecast cost decline of wind-generated energy in Australia

Waiting for further technical breakthroughs puts the cart before the horse, and in so doing distracts policy-makers from addressing market development issues that actually underpin the technical evolution and commodity price.

However, these myths have an excellent pedigree; they do not emerge from out of the blue. The industrial revolution was driven by a technical breakthrough, which was the steam engine used to harness an energy-intensive fuel source — coal. In a similar way, the internal combustion engine was a new technology applied to a 'new' highly concentrated fuel source — oil. Nuclear power was another technical breakthrough which unlocked the new fuel source of uranium.

Thus, since the industrial revolution, our view of progress has been tied to the idea of a breakthrough. However, with all but a few exceptions, most progress comes from combinations of steps which, when taken as a whole, appear as a breakthrough. A modern Mercedes Benz that does 300kph is not the result of the internal combustion engine breakthrough. It is the result of a century of steam engine design progress, then the combustion engine breakthrough, followed by a century of incremental development which has been paid for by ever-expanding car sales.

Consider that the photovoltaic (PV) effect was discovered by Edmond Becquerel in 1839. It took 120 years for Bell laboratory scientists to come up with the material that would unlock sunlight as a small source of electricity. It was possibly the first example of generating electricity without requiring physical movement — a truly remarkable invention! Yet so ferociously expensive was it that only the space industry, pushed by their need for power on satellites, could afford to use it.

Yet one niche opens up another. PV for satellites led to land-based remote power supplies. When demand goes up, the price comes down. The grand industry for land-based power production using solar panels can be credited to people such as David Katz in the US, who began hooking up solar panels to Russian submarine batteries to deliver basic energy services to off-beat, off-grid communities in the Californian hills. From these quirky beginnings we now have major industries in Japan and Germany manufacturing thousands of rooftop PV power stations.

Notwithstanding some surprises that may yet come, we already know the main primary renewable energy sources. We can also measure the amount of raw energy available to be harnessed from these sources. For example, we know the physics of the wind and how much energy is contained in a given catchment area. Similarly we know the energy available in each photon (particle) of light and how much sunlight the sun sheds on the Earth each day. We know how much energy is in a wave, a tide, a river's flow or a kilogram of organic matter.

We have developed technology that can harness the energy of many of these sources with varying efficiencies. Some of these technologies are on cost trajectories to commercial viability compared to 'conventional' energy, so these are the technologies that we might consider to have 'broken through'. This list includes wind, solar hot water, solar PV, biomass and derivatives, small hydro and geother-mal. For others we currently lack the technology that will definitely do the job at a commercial scale and be capable of deployment in large numbers, so these sources can be said to be still working on a breakthrough. Here we might include

Figure 2.2 Solar photovoltaic market growth

Source: EPIA (2003)

Figure 2.2 Solar photovoltaic market growth wave, tidal, ocean thermal and ocean current sources and a wide array of solar thermal electric technologies (no pun intended). Yet even for those sources that cannot yet be harnessed commercially, we at least know what volumes of energy to expect if successfully harnessed. So we can anticipate fewer surprises from renewable sources than we might be led to believe.

Some renewable technologies have even evolved beyond the dominating drives for efficiency and low cost. For instance wind turbine manufacturers elect to use slightly less efficient three-bladed machines instead of two-bladed machines because they have a better visual aesthetic (some say because they look more like flowers!) and also tend to optimize for minimum noise rather than maximum power.

To summarize, the recognition of both commercial and pre-commercial renewables clearly implies the need for two very different policy types. And the myth that all renewables are waiting for a breakthrough to become cheap is damaging and counter-productive. For commercial renewables, persisting with research and development (R&D) funding instead of market development is akin to trying to put nappies on a teenager.

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