February 4, 2008
You are invited to provide input to this workshop at the European Business Summit, for which some facts and figures about renewable energy may serve as an introduction:
- According to the International Energy Agency (IEA-2007), renewables accounted for 13.1% of the world’s total primary energy supply in 2004. Biomass and hydro make up the biggest part of renewable energy production (79,4% and 16.7%), “new” renewables like solar, wind and tide make up less than 0.1% of total primary energy supply.
- But renewables are the third largest contributor to global electricity production (18%), behind coal (40%) and natural gas (20%) but ahead of nuclear (16%) and oil (7%). Most of renewable production for electricity comes from hydro; geothermal, solar and wind account for 4.5% of electricity generation.
- In its Alternative Policy scenario (World Energy Outlook 2006), the IEA predicts that by 2030 renewables will remain at around 14% of global energy consumption, but its share of the electricity mix will increase from 18 to 25%.
- The EU is world leader in renewable energy. The EU’s renewable sector has a turnover of 30 billion € and provides 350.000 jobs.
- Today, 8.5% of EU energy consumption comes from renewable sources.
- The market leaders in renewable energy in 2004 were Brazil in biofuels, China in solar hot water, Germany in solar electricity, and Spain in wind power.
- China currently obtains 8 percent of its energy from renewables. China has set a target of 15% renewables by 2015 and 30% by 2050. In a few years time, China is expected to leapfrog all industrialized countries as main producer of renewable energy.
- Government support for renewable energy is growing rapidly as a result of policymakers’ worries about climate change and energy security. No less than 48 countries have policies in place to promote renewables.
- Investments in renewable energy have increased exponentially in the last five years. The International Energy Agency predicts $1 trillion will be invested in renewable-energy sources, excluding hydroelectric dams, by 2030, and many banks are developing clean-technology strategies. Some, such as Citigroup Inc., have formed investment-banking units to meet a surge in companies coming to market or seeking buyout opportunities.
- Globally, renewable-energy companies are on course to raise $13.7 billion on the public markets this year, 32% more than last year, according to New Energy Finance.
EU renewable energy policies
- In 1997, the EU decided to double the share of renewable in its energy consumption by 2010, from 6 to 12% but has only made limited progress (only 8.5% by 2007)
- Since 2007, EU has set itself the following new targets:
- A binding target of 20% share of renewable energy sources in EU energy consumption by 2020;
- A binding 10% minimum target for biofuels in transport to be achieved by each member state.
- On 23 January 2008, the Commission presented a new Directive on the promotion of the use of energy from renewable sources. This new draft Directive, if accepted by Parliament and Council, will replace the two existing directives in the area of renewable energy for electricity and biofuels.
- Main elements of the new Renewables Directive:
- Three sectors now covered: heating and cooling, electricity and transport;
- It sets individual targets for each member state (5,5% growth of renewable compared to 2005) plus additional part based on GDP
- Allows trading of green energy certificates between member states via a system of “guarantees of origin”
- Biofuels to respect sustainability criteria
- The directive will come into effect from 2010.
Issues and challenges
- The biggest constraint for renewables has been cost-effectiveness. The average a cost of renewable energy is not competitive with wholesale electricity and fossil fuel prices. But big technological advances have made some renewable solutions more competitive in the last ten years. Third-generation renewable technologies (concentrating solar power, ocean energy, enhanced geothermal) are ready to be brought to the market at interesting prices.
- Two other well-known issues of renewable energy are intermittency (the sun does not always shine, wind does not constantly blow) and geographical distribution (some countries and regions have more sun and wind than others)
- Maybe the most important problem with renewable energy as an alternative to our fossil-fuel economy is the massive scale of the shift needed (see Smil, 2007). To replace 50% of fossil fuels with renewables during the coming decades, we would have to displace coal and hydrocarbons flows of about 6 TW (currently renewable energy – including big hydro – represents about 1 TW).
- Developing renewable energy at a scale comparable to fossil fuels would also take up a lot of land as the power density (the rate of energy production per unit of the earth’s area and is usually expressed in watts per square meter) of renewable is considerably less than the power density of oil, gas or coal.
- Other more regulatory-related barriers to the development of renewable energy exist in the EU: diverse authorization procedures, different support schemes (feed-in tariffs, certificates), and lack of access to the grid.
- A majority of EU member states use feed-in tariffs, only five countries use quota systems based on certificates.
Possible questions for the thematic session
- Although there is no doubt that renewables are key to future energy security, questions can be asked on the current potential of renewable energy to quickly replace fossil fuels. What about environmental and social implications of a rapid deployment of renewables (see e.g. the controversial debate on biofuels in terms of competition with food and land use/biodiversity)
- Why is it that those sectors in society which are usually very bullish on technology progress, do not seem to have that same attitude when it comes to renewable energy technologies? Is this just a question of vested interests?
- Does industry have the same skeptical attitude towards renewable energy as environmentalists have against nuclear?
- Will the EU’s proposal for trade in green energy certificates endanger the national support schemes?
- Why has the commission set national renewable targets based on GDP and not on renewable potential?
- EU policy documents:
- Proposal for a Directive on the promotion of the use of energy from renewable sources, 23 Jan 2008
- Impact assessment for the climate/renewable energy package of 23 Jan 2008
- EurActiv: EU states handed ambitious renewable energy targets (24 Jan 2008)
- United Nations Environment Programme (UNEP): Global Trends in Sustainable Energy Investment 2007
- REN21 (Renewable Energy Policy Network): Renewables 2007 Global Status Report
- REN21: Renewable Energy Policy Network website
- IEA: Global Renewable Energy. Policies and measures (special website)
- Greenpeace-EREC: Energy [R]Evolution report (Jan. 2007)
- Vaclav Smil: 21st century energy: Some sobering thoughts (OECD Observer Jan. 2007
- Fraunhofer Institute: Effectiveness and efficiency of present RES-E support policies in EU Member States (June 2007)