Well Defined Resources and Technologies

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The need to introduce a new policy for renewables assumes that the existing market conditions will be unable or too slow to deliver a certain set of technologies. However, for the policy to do its job properly, the targeted technology set must be defined in some way. So what do we mean by renewable energy?

The technology sets can either be defined by resource/technology or by outcome, notionally referred to as 'technology specific' or 'technology neutral' respectively. For example, the Japanese may have deemed special support for solar photovoltaics (PV) to be desirable because of its potential to open up a major new market for their electronics industries. On the other hand, portfolio market-based schemes (as described in this book in Chapter 6 on UK policy) are designed around generic industry development of a renewable sector with least cost being a guiding principle.

However, the net for technology neutrality can be cast a long way. We cannot always assume that the policies within which renewables function will exclude non-renewables. The questions and answers discussed in the following sections explore the consequences and risks associated with deferent definitions of eligibility.

Box 3.2 What is new renewable energy?

According to the International Energy Agency (IEA, 2002):

Renewable Energy is energy that is derived from natural processes that are replenished constantly. In its various forms, it derives directly or indirectly from the sun, or from heat generated deep within the earth. Included in the definition is energy generated from solar, wind, biomass, geothermal, hydropower and ocean resources, and bio-fuels and hydrogen derived from renewable resources.

The phrase 'new renewable energy' as opposed to the more general 'renewable energy' has started to emerge in some policy circles. This has occurred for several reasons. First, it identifies the latest wave of renewable technologies, such as leading-edge silicon technology and advances in fluid mechanics and composites. Second, it distinguishes the set of renewable technologies and sources that are environmentally safe and sustainable.

In practice this is intended to isolate technologies such as large hydroelectric dams, which have major local environmental impacts and which can also result in significant greenhouse gas emissions.3 The vexed nature of the dams debate is captured by the 2000 report by the World Commission on Dams (WCD, 2000):

While the immediate benefits were widely believed sufficient to justify the enormous investments made - total investment in large dams worldwide is estimated at more than $2 trillion - secondary and tertiary benefits were also often cited. These included food security considerations, local employment and skills development, rural electrification and the expansion of physical and social infrastructure such as roads and schools. The benefits were regarded as self-evident, while the construction and operational costs tended to be limited to economic and financial considerations that justified dams as a highly competitive option.

As experience accumulated and better information on the performance and consequences of dams became available, the full cost of large dams began to emerge as a serious public concern. Driven by information on the impacts of dams on people, river basins and ecosystems, as well as their economic performance, opposition began to grow. Debate and controversy initially focused on specific dams and their local impacts. Gradually these locally driven conflicts evolved into a global debate about the costs and benefits of dams. Global estimates of the magnitude of impacts include some 40-80 million people displaced by dams while 60 per cent of the world's rivers have been affected by dams and diversions. The nature and magnitude of the impacts of dams on affected communities and on the environment have now become established as key issues in the debate.

However, assuming any technology to be without side effects is simplistic and needs to be treated with caution lest we establish expectations that are too high. Further debate regarding large hydroelectric development is practically beyond the scope of this book, since it is not a technology that needs to be leveraged into the market any more but is a well-established 'conventional' power source.

While no formal definition would suit all commentators, a modern list of new renewable technologies might include wind power, solar photovoltaics, solar thermal electric, small hydroelectric plant, sustainable biomass, wave, tidal and ocean current systems, and geothermal sources.

Do the policies avoid putting industries which are extremely different in size and maturity into direct competition?

Pitching any small embryonic technology or industry against a large established industry is unlikely to succeed. Unless the David has some remarkable attributes, the Goliath usually wins. (A quick look at computer software tells us that market power is a mighty beast.) A revolution in renewable energy pricing is underway today, but it would not have happened nor will it continue unless renewables are provided with specifically defined support and permitted to access markets with which to increase production and thus drive down the costs.

This book's goal is not to win arguments about why renewables are better than nuclear power, coal plants, geosequestration or large hydroelectric stations. Rather it is intended as an examination of renewable energy specifically. However, allowing larger industries access to the development mechanisms of the renewable energy industry is fraught with risk to the new renewable providers. Although diversity may be a choice policy-makers intend, there are clearly unseen consequences inherent in large, market-dominant technologies accessing resources which are set aside for developing industries.

For example, a policy-maker may indeed wish to support nuclear power, large dams or geosequestration. However, the question is, are adapted or technology-neutral renewable energy policies the best way to do this? For example, a single nuclear power station uses up the equivalent energy market share of 30 or more renewable power plants. This uses up both electrical load and financial support.

As well as nuclear power, there is significant pressure in some circles for coal plant carbon capture and storage to be considered zero emission or even 'renewable'. As another example, there are (and indeed it would be impossible to proceed if there were not) various other funds available to get a demonstration geosequestration plant up and running and, as such, the plant would also not be competing on a level basis with renewables. While the policy focus may well be on the sequestration side, the coal plant would be of a size that could monopolize resources capable of providing several years of renewable energy development.

Myriad inequalities exist between large established industries and embryonic ones. These must be considered when expecting them to compete and indeed when comparing their performance. Experience indicates that the best outcomes are always achieved when large established industries are not mixed in the same schemes as new renewable energy industries.

Are the policies focused on renewable energy free of contradictory goals?

We have established that there is a need for very clear objectives, and so it is important these are not lost in the interests of simplified policy-making when it comes to defining eligible technologies or resources.

The question 'Why have a renewable energy policy at all?' is often raised by politicians, with the proposal that there are other more market-friendly alternatives to achieve the same goals. For example, a market scheme for climate-friendly technologies might have a mix of renewables, gas plants, nuclear power, energy efficiency and carbon sequestration with tree planting. Such a so-called flexible scheme clearly comes under the heading of carbon trading and assumes some carbon taxation or capping.

However, as we have noted before, many energy efficiency measures are cost effective in their own right and so would trade at a low or zero price with regard to carbon trading. Other schemes such as tree planting are cheap (and sometimes have questionable effectiveness — for example, who is liable for the carbon that is no longer sequestered if the plantation's trees burn in a forest fire?). Under such conditions, renewable energy plants would not be competitive and so would not be built, and therefore clearly this would not be an effective renewable energy development scheme.

In practice it is quite possible to have clean energy legislation that creates various markets for carbon and sees money change hands, but does little or nothing to change business as usual on the generation side. Therefore such legislation does nothing to prevent release of mineral carbon into the atmosphere and biosphere. In the long term, the 'low-hanging fruit' of tree planting and other low-cost, non-energy-related greenhouse mitigation will be used up and the more costly renewables will become competitive in due course. In the meantime, however, renewables are effectively put on hold and any intended development objectives of the renewable energy industry are not delivered.

Therefore, the more specific a policy is about the technologies eligible for support under a scheme, the more certain will be the delivery of those technologies into the market, and the more rapid the delivery of the associated benefits/objectives. The crucial element is to ensure that renewables sit at the centre of the policy if they are indeed the goal.

Are technologies treated differently if necessary? And how?

There is probably no such thing as technology neutrality because technology choices are inherent in strategic decision-making about energy. Nevertheless a potentially appropriate level of neutrality may be created by identifying technology groups with defining characteristics that render them suitable for specific policy targets.

Renewable energy can be assigned to vastly different groups. Yet the more specific the definition of the group, the more targeted can be the policies. Energy can be defined from the point of view of emissions, for example high emissions (such as coal), low emissions (gas) and zero emissions (renewables).

100

90

80

70

60

50

S5-

40

<

30

20

10

COST OF COAL

Source: International Energy Agency

Figure 3.1 The convergence process: Wind undercuts coal prices in Australia with carbon prices at AU$30 and then AU$10/tonne of CO2 emitted

Technologies can also be defined from the point of view of economics (with or without factoring in the price of carbon). For example, we can classify energy technologies as low-cost commercial, high-cost commercial, non-commercial but with declining prices, and non-commercial without declining prices. Obviously, energy technologies can also be defined by resource, for example, fossil fuel, nuclear, solar based, wind based, biomass based, or sea/ocean based. Finally, they can be defined by the technology itself, such as wind onshore, wind offshore, PV solar thermal electric, and solar thermal hot water, to name just a few.

Policy-makers reading this book may not be in a position to make decisions about the introduction of carbon taxes or emissions caps. However, they may be aware that in 10 or 20 years international carbon constraints look likely. Therefore they can make strategic decisions about the relative importance of renewable energy portfolios and other technology groups, and how the relative costs are likely to evolve.

Australia has some of the cheapest energy in the world, yet in Figure 3.1 we see how renewables such as wind, which are commercially maturing but still expensive today, would become cheaper than coal generation under carbon caps. We also see that coal has upward price pressures whereas wind will still experience the significant price decline linked to industry growth.

Thus a decision-maker may see merit in building up some industry groups or technologies, putting others into R&D or commercialization programmes and choosing to leave alone others which have less long-term viability.

Within a given group even more specificity may be desired, for example along the lines of the type of resources being harnessed or even the type of harnessing.

Table 3.1 The NFFO technology mix (see Chapter 6 on the UK)

Technology

Contracted Projects

Landfill gas

Wind

Hydro

Municipal industrial waste

Biomass

Sewage gas

Wave

329 302 146 90 32 31 3

Source: UK Department of Trade and Industry

The technology breakdown used in the Non-Fossil Fuel Obligation (NFFO) (see Table 3.1) was one of the first examples of this degree of specificity. Its intention was to maximize the industry development of each area, rather than having one technology stall as another took the lion's share of resources.

Is the intended technology or mix of technologies properly articulated?

With policies geared specifically towards renewable project implementation, a spectrum of desired outcomes may be possible. At one end of the spectrum there may be a single technology policy, for example, to support solar hot water heating, while at the other end of the spectrum there may be a mix of possible technologies. In any case, the range of technologies to which the policy applies must be clearly defined in some way.

The advantage of being technology specific is that it becomes possible to get what is wanted in terms of technology and industry development, and can focus resources accordingly. However, the general criticism of such specificity is that it is not as financially optimal as a policy under which technologies and projects compete on equal footing.

The portfolio approach provides for a set of pre-defined technologies to compete for resources or subdivided market share, either on an equal basis or with some level of weighting applied to provide more targeted incentives.

The most common technology-neutral approach is to avoid specifying the technology at all, and instead to define eligibility criteria. In this model one might expect criteria such as 'zero-emission standards' or 'non-fossil fuels'. In principle these have an appeal of elegance and simplicity and thus let every flower bloom or allow the fittest to survive.

We have discussed the flaws in a wide-open technology-neutral approach, but limited neutral definitions are also open to interpretation. For example, the UK Non-Fossil Fuel Obligation was actually set up to support nuclear power rather

Table 3.2 The range of outcomes possible with single, mixed and neutral approaches to technology selection

Single technology

Technology mix

Technology neutral

Sustainability objectives

YES

YES

YES

Energy policy reform

Depends on the technology

YES

YES

Greenhouse gas mitigation

Depends on the technology

YES

YES

Energy-cost and least-cost planning (internalization)

NO

NO

YES

Energy security

NO

YES

YES

New industry/manufacturing

YES

YES

NO

New intellectual property

YES

YES

NO

Job creation

YES

YES

NO

Rural investment

Depends on the technology

YES

YES

Nuclear phase-out

Depends on the technology

YES

YES

than renewable energy. Increasingly we are seeing pressure for carbon geoseques-tration to be considered renewable or zero emission. So we must note here that definitions of neutrality must be made with full knowledge of the technologies they will actually end up supporting.

Even if we identify renewables as a specific group, we must still choose between the three approaches of single, portfolio or neutral. For example, identifying a specific technology and providing a targeted push is likely to pay dividends in industry development, job creation and exports as it has done in Denmark with regard to wind power, Japan with PV and Israel with solar hot water heating. However, it will not provide a broad base of energy production, nor will it rapidly provide the most energy for the least cost. Alternatively a technology-neutral approach is likely to provide the greatest renewable energy production for the least cost, but it may not encourage manufacturing or diversity. In between is a mixed approach, the performance of which will depend on the nature and extent of the mix and measures (see Table 3.2).

Are the consequences of including any environmentally unsustainable technologies fully understood?

Finally, experience indicates that the inclusion of environmentally unsustainable technology or resources under a renewable energy policy can lead to large social and therefore political problems.

The most prominent areas of concern are new, large hydroelectric projects and unsustainable biomass. The former is risky because of impacts caused by flooding and river-flow disruption, the latter if biomass acquisition leads to environmental damage and/or a loss of biodiversity.

There is a risk that a policy framework may fall victim to a civic backlash if it has sustainability as one of its key motivations but is seen to be exploited for outcomes that are non-sustainable or result in a net loss for the environment.

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Getting Started With Solar

Getting Started With Solar

Do we really want the one thing that gives us its resources unconditionally to suffer even more than it is suffering now? Nature, is a part of our being from the earliest human days. We respect Nature and it gives us its bounty, but in the recent past greedy money hungry corporations have made us all so destructive, so wasteful.

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