David Appleyard, conference director at Renewable Energy World Europe (REWE) examines the transformation of renewables from niche interest to major driver in the global energy arena highlighting some of the key industry issues that will be addressed at this year's conference.

Renewable sources of energy (renewables) such as hydro, wind, solar and biomass have been at the forefront of the European energy industry in recent years. Climate change has moved up the policy agenda for the majority of governments worldwide as they look to cut green house gas (GHG) emissions, reduce energy consumption and ensure security of supply in the face of increasing demand from both consumers and industry.

According to EIA (the US Energy Information Administration), total world consumption of marketed energy will increase by 49 % between 2007 to 2035, with renewables expected to be the fastest-growing source of world energy [see Figure 1]. EIA forecasts that renewables consumption will increase by 2.6 % per year, driven by factors such as projected oil prices, concern about the environmental impact of fossil fuels, and government incentives for increasing the use of renewable energy.

Climate change initiatives have been a considerable factor driving growth in the renewable market. The Kyoto Protocol, agreed in 1997 under the auspices of the UN Framework Convention on Climate Change (UNFCCC), set out specific commitments by individual developed countries to reduce emissions by an average of 5.2% below 1990 levels between 2008 and 2012. Meanwhile, the binding EU-wide target to source 20% of Europe’s energy needs from renewables by 2020 has played a major role in elevating the importance and development of renewable energy.

However, the growing use of renewables in the energy mix poses new challenges in terms of security of supply because they often generate intermittent power. As a result, balancing demand and supply on the grid becomes more complex, which has driven interest in the smart grid concept but has yet to see widespread adoption, with cost being a major hurdle (amongst others). Financing generally remains a major challenge for the renewable sector and other clean energy projects.

These key factors are to be addressed in-depth by prominent industry figures at the upcoming REWE conference taking place in Milan from 7-9 June. 

Renewable evolution

Unsurprisingly, the political context outlined above has contributed to the significant growth witnessed by the renewable industry in recent years, with both new and traditional renewable technologies making inroads into the energy mix.

 

 

REMIPEG (Renewable Electricity Market, Installed Power and Annual Electricity Generation) – Lahmeyer International's renewable energy data bank – suggests that renewable capacity and power generation continues to be dominated by hydropower, of which approximately 997 GW has been installed. However, although hydropower technology is relatively mature, a number of major European projects are underway,  including:

  • Germany – efforts are continuing to develop and build additional pump storage capacity to compensate for fluctuating electricity from wind energy in the grid.
  • Switzerland – overall reconditioning of hydropower plants in the Swiss Alps by Kraftwerke Hinterrhein has seen the three plants, Ferrera, Bärenburg and Sils, reach a total installed capacity of 650 MW

But it is not just hydropower that is experiencing growth. According to BTM Consult ApS, wind power capacity is expected to grow to 447 Gigawatts (GW) within 5 years and to nearly 1,000 GW over 10 years, to meet 8.4% of the world’s electricity demand. This is a forecast that looks credible given the latest Global Wind Energy Council (GWEC) figures, which reveal global wind power installations increased by 35.8 GW in 2010. This brings total installed wind energy capacity up to 194.4 GW, a 22.5% increase on the 158.7 GW installed at the end of 2009.  

Although the whole wind energy market is still heavily dominated by onshore projects, in 2010, Europe experienced a 50% growth in the offshore wind market, with most of the planned development being installed in the Baltic and North Sea regions. The European Wind Energy Association (EWEA) predicts that by the end of 2020, there will be circa 40 GW of installed offshore wind energy in Europe. Indeed, countries surrounding the North Sea have agreed to cooperate on developing a North Sea grid, known as the North Sea Transnational Grid (NSTG) project, it aims to investigate the best ways of integrating large scale offshore wind power by the construction of a transnational transmission grid in the North Sea, in order to integrate about 60 GW of offshore wind power between several countries.

Today wind power has rapidly expanded beyond the ‘rich country’ markets and GWEC sees this as a clear sign of its growing competitiveness.

The grid integration challenge

With the legislation Europe has put in place to promote renewable energies, one of the biggest challenges the industry now faces is how to integrate the increasing amounts of intermittent power sources like solar and wind into the electricity grid. Major development of the European grid infrastructure is thus considered critical to maintaining reliable power supplies and bringing renewable energy from production sites to consumers. The challenges of grid integration will be discussed in depth at this year’s REWE conference by, among others, Peter Johnson vice president of Alcatel Lucent, and representatives from ABB and the Delft University of Technology.

A European ‘supergrid’ is increasingly seen as a fundamental component to enabling the region to achieve its renewable energy policy goals.

National incentive schemes to accelerate the grid integration of renewables have already been put in place across many European countries. The installation of smart meters is being taken up by an increasing number of organisations as a tangible way to monitor and manage consumption, with access to flexible tariffs and better visibility on where savings can be made. Smart grids are expected to transform today’s power distribution systems, into flexible, interactive, bidirectional systems that distribute electricity more efficiently.

In addition, through the installation of smart meters, organisations are able to become renewable energy producers by selling energy generated by renewable technologies back to the grid. Smart grids help avoid congestion and organisations, recognising that even small fluctuations in the price of energy can have a huge impact on their profit margins, are taking a longer-term strategic view in their energy procurement policy.

That is not to say that more could not be done by grid operators to make a level playing field for renewables. Existing transmission capacity could be used much more effectively in maximising energy production through, for example, transmission capacity auctions or a system of grid access based on carbon or other sustainability criteria. In the longer term, both the industry and regulators will need to work closely together to match the specific needs of countries so they can attract much needed capital to the sector to underpin the large amount of investment needed to build out Europe’s proposed supergrid.

A focus on finance

Investment in renewable technologies grew significantly in 2010 to $243 billion, a 30 % increase from the previous year, according to a report from The Pew Charitable Trusts. The report found that:

  • Regionally, Europe remained the leading recipient, attracting $94.4 billion, lead by Germany ($41.2 billion) and Italy ($13.9 billion).
  • Investments in small-scale, residential solar grew by 100 % to $56.4 billion in the G-20. Germany accounts for nearly half the total, followed by Japan, France, Italy and the United States.
  • Installed generating capacity increased to 388 GW from wind, small-hydro, biomass, solar, geothermal and marine, with China accounting for more than 25% of the global total.
  • Excluding research and development funding ($35 billion), investment totalled $198 billion.

Financing renewable technologies will be the focus of a core session, given by Arnaud Bouillé, Director, Ernst & Young LLP, UK, at the upcoming REWE conference as this will undoubtedly play a key part in creating a sustainable future for renewables – from funding new projects to ensuring long-term commercial viability.

Throughout Europe, investment in new renewable resources represents a growing sector of activity for lenders. As track record and experience increases, lenders can be expected to commit an increasing share of their balance sheets to financing renewable projects and willing to expand on the range of technologies they finance.

Gaining end user acceptance

The adoption of renewables by both businesses and consumers is clearly gathering momentum, driven largely by financial incentives in the form of government-backed schemes such as Feed-in tariffs (FiTs) which guarantee a minimum payment for all electricity generated by a ‘microgeneration’ system as well as a separate payment for the electricity exported to the grid.

FiTs have been introduced in the UK, Spain, Italy, Germany and elsewhere, and are proving to be extremely successful in promoting adoption of renewable technologies such as small scale wind and solar photovoltaic (PV). In Italy, 1,850 MW of new solar PV systems were installed in 2010, substantially exceeding industry estimates. This rapid development has largely attributed to its system of feed-in tariffs ‘Conto Energia’ that pays for every kilowatt-hour generated by solar panels whether owned by homeowners, small businesses, or even the Vatican.

Ironically, in Germany, the solar PV industry appears to have become a victim of its own success, where the popularity of solar PV FiTs has lead to the government reducing the FiTs rate. As a result of the schemes generous support causing a proliferation of solar installations that were becoming less affordable as the German economy entered recession – a scenario that looks likely to play out in the UK too.

Nevertheless, the success of FiTs demonstrates how renewables can offer a commercially viable solution not just for industry, but for end users too.

Renewable Energy World Europe

The topics outlined in this article will be addressed in detail during a comprehensive conference programme at Renewable Energy World Europe 2011 which is being held at Fiera Milano City in Milan, from 7-9 June., The conference will also cover a wide range of additional industry issues and provide participants with a deeper understanding of the renewable energy sector. Visitors to the event will also have access to Europe’s leading energy exhibitions, POWER-GEN Europe 2011, and Nuclear Power Europe 2011. For more information please visit: www.renewableenergyworld-europe.com