Renewable energy in the world has
seen rapid growth in recent years. In 2013 renewable energy projects made up
around 43% of the new installed capacity for electricity worldwide increasing
its share to 8.5% of total electricity generation.[1]
This record number of installed capacity came at total investment of $214
billion, which was 14% reduction in total investment made in 2012.[2]
One of the main reasons for low investment was due the rapid decrease in the
cost of PV. The price of solar PV and wind energy is energy is decreasing
rapidly making cost competitive with some of the fossil fuel generation. While
the renewable energy market have seem to stagnate in the US and Europe,
developing countries especially China and India have picked up the slack. The
investment in US decreased by 10% in 2013 to $36 billion, while China
investment $56 billion, which is greater than the total investment in Europe. A
report by the City Bank noted that the decrease in costs would continue to fuel
renewable energy boom leading to new age of renewable energy.[3]
These all provide formidable signs that renewable energy market has now
successfully established itself and it will continue to grow in the future.
Solar
PV: Solar PV essentially
works by converting the solar light that hits the panel into electricity. This
technology was developed in the 60’s and was widely used to power space
satellites. There are two major Solar PV technologies- Crystalline Silicon and
Thin Film. Crystalline Silicone are considered more efficient (20%) and
expensive of the two. The leading companies that manufacture Silicon PV are
SunPower, Sharp and TrinaSolar. Compared to Silicon PV, Thin Film PV are more
affordable and less efficient (13%). FirstSolar and HeiloVolt are two of the leading
companies manufacturing thin-film solar.
Solar
PV industry is changing the perspective that the renewables are expensive.
According to SEIA and GTM research, the cost of solar power in the US has decreased
around 60% compared to 2011.[4]
The cost of solar has come down to $3.05/ W making it an attractive investment
for many residential customers. Thanks to the economics of scale and
technological innovations, the price of solar PV is expected keep decrease by
11% every year. Although the growth in the solar industry in the US has been
driven by utility solar market, different companies such as Solar City and
SunPower have developing the residential solar PV market to make it attractive
investment. Different programs such as Solar leasing, Group metering, EV-Solar
PV combo sales have accelerated the penetration of solar PV in the residential
market. The generous Federal 30% tax credit (ITC) and different state
incentives has played a substantial role in the development of Solar PV in the
US. For states with different RPS mandates, the market for Solar RECs provide
additional revenue stream for solar projects. Solar RECs which are considered
high quality Class I REC sell for as high as $540/MWh.
One of the
significant challenges for solar PV is its high cost during permitting,
marketing and installation process. These ‘soft costs’ add upto more than 60%
of the total cost of the project. Solar companies and policymakers could target
this aspect of the cost to make solar more affordable. DOE funded “SunShot”
project is an example of a program that is developing means to bring the cost
down. Another challenge in the market for solar PV has been the anticompetitive
government policies of China. China has been accused of dumping its solar PV in
the international market thus artificially depressing the price.[5]
This has allegedly resulted in large economic losses to many international
solar manufactures.
The subsidies to
solar PV has provided tremendous boost for its development. As the efficiencies
in supply chain, technology continues to improve, the final turning point for
solar can soon be expected when the price drops enough that it can continue
without any governmental subsidies.
Wind: Wind turbines harness the kinetic energy in the wind to convert it
into electrical energy. As the wind spins the turbine, it rotates the inner
shaft that is connected to the alternator which produces electricity. The
technological development in the wind has been mainly focused on making the
turbines taller and larger. Modern wind turbines can have capacity as big as
8MW with 80m blades.[6]
Vestas, GE Energy, Siemens are some of the leading wind turbine developers in the
market.
Similar
to Solar PV, wind has seen dramatic growth in recent years. In 2013, total of
$80 billion investment was made in the wind industry in the world.[7] In
the US the total investment for wind energy amounted to $25 billion in 2012. In
2013 total of 4.8% of the electricity in US was produced from wind energy. The
total installed capacity of wind in the US amount to 61GW. The wind power is
the most cost competitive of the renewable electricity. The average levelized
price of wind cost is estimated to be $80/MWh. In comparison the levelized cost
of Coal is $95/MWh.[8]
The price of wind has gone so low that there has been occasions in the
wholesale market where the wind has offered operate at negative price (or pay
to produce) at certain periods. In the wind resource rich states in the
Mid-West such as Iowa and South Dakota, wind now produces more than 25% of the
state’s electricity.[9]
Since 2005, wind energy saw sustained investment driven by the Production Tax
Credit (PTC). Wind investment grew at record amount in 2013 to build facilities
before the PTC expired on 2013. Even without the PTC, investment in wind holds
strong value proposition for investment. Wind resource rich areas in the US including
Wyoming, New Mexico, Montana and Wyoming offer attractive places for wind
development. It can be expected that wind will continue to develop and
challenge the status quo of coal and nuclear plants.
Geothermal: Geothermal energy is based on using the
heat that is inherent in the Earth’s core. As Earth’s temperature increases
with depth, this energy can be harnessed through drilling a hole to use it as
heat pump. Depending on the resource availability and temperature needs, wells
can be drilled ranging form 200-3000 meters to access the inner heat of the Earth.[10]
Electric generation from geothermal is based on three types – Dry steam, Flash
stem and Binary Cycle.[11]
Geothermal plant usually has high capacity factor of 90% making it suitable for
baseload generation.
Total installed
geothermal capacity in the world account for 11.2 GW. In 2012 the US had 78
Geothermal plants on operation with the total capacity of 3.2 GW.[12]
The cost of geothermal plants are highly depended on the location and
technology involved which can range from $1150-$3000 per KW. US has identified
resources of additional 9.1GW and estimated potential of 30GW.[13]
Most of the resources are located in the western part of the US namely
California, New Mexico and surrounding regions. Compared to wind and solar PV,
geothermal energy has lacked significant market growth. Even though geothermal
enjoy the same federal subsidies at Wind and Solar, other factors such as high
capital costs, permitting challenges, policy uncertainty are some of the
reasons that the development of geothermal has not gained much ground.[14]
The biggest
investments in renewable energy came from public market equity which invested
$11 billion, drawn primarily due to the investors increasing yields of
portfolios of renewable energy projects. Although the investments in renewables
have been primarily driven by the government subsidies, technology and market
development has continued to lead to reduction in costs. The turning out point
in renewable shall occur when renewable generation can out-compete fossil fuel
without any need for government subsides. If the current trend is any
indication of future then that day should be expected soon.
[1]
Global Trends in Renewable Energy Investment 2014 (Frankfurt School- UNEP
Center/BNEF 2014)
[2] Id.
[3] http://www.businessinsider.com/citi-the-age-of-renewables-is-beginning--2014-3
[4] http://www.pv-magazine.com/news/details/beitrag/us-solar-power-costs-fall-60-in-just-18-months_100012797/#axzz363JeEPeD
[5] http://www.bloomberg.com/news/2012-10-10/u-s-sets-anti-dumping-duties-on-china-solar-imports.html
[6] http://www.windpowermonthly.com/article/1211056/close---vestas-v164-80-nacelle-hub
[7]
Global Trends in Renewable Energy Investment 2014 (Frankturt School and UNEP)
[8] http://www.eia.gov/forecasts/aeo/electricity_generation.cfm
[9] http://www.awea.org/Advocacy/Content.aspx?ItemNumber=797
[10]
Geothermal for Electric Power REPP Issue
Brief
[11] Id.
[12]
B. Speer, Geothermal Brief: Market and Policy Impact Update, NREL 2012
[13] Id.
[14] Id.
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