Guest Post: 2012 – The Year Renewables Became a Problem

Looking back on the energy news from 2012 there are a couple of over-riding trends. On a positive note, with significant taxpayer and/or ratepayer financial support through direct subsidies and Feed-In-Tariffs (FITs) renewable electrical generation is starting to have a major impact in several jurisdictions.

On May 25 Germany set a new record for solar energy with production of 22 GW, providing approximately 50% of electrical demand for a few hours on that day. On September 14 Germany’s Solar and Wind Generating facilities combined produced 31 GW of power for several hours, again approaching or exceeding 50% of demand.

In Hawaii, aggressive FIT support for residential and commercial photo-voltaic (PV) installations has resulted in some areas producing more than 10% of electrical demand for some hours during the day.

Clearly, renewables are proving that they can be the foundation for a sustainable energy future.

The financial impact of renewables is complicated and multi-faceted. Various subsidies and grants as well as FITs are problematic when most governments are running deficits. In many jurisdictions the taxpayer and ratepayer financial support mechanisms are designed to be decreased as the renewable industry “matures”. However, it is clear from the reaction of solar installation companies in Europe and Wind Energy developers in the US (who are facing the elimination of a significant FIT at the end of 2012) that a reduction in financial support will result in a dramatic decrease in activity and consequently significant job losses.

The messages are clear.

1) Renewables can thrive but not without taxpayer/ratepayer financial support.

2) Once renewables make up a significant fraction of total generation capacity the reliability and variability issues start to become problematic.

In my opinion the financial support issue is not a serious problem. The cost of renewables is coming down quite rapidly. For example, the cost of installed PV has dropped by 50% in the past ten years. Wind turbine costs have been more erratic but the long term trend is down as well. Finally, any realistic assessment of the negative impacts of consuming non-renewable resources to generate electricity should result in a willingness to pay some short-term financial penalty in order to achieve a truly sustainable energy environment in the long term.

The more serious concern is the disruption to the electrical generation environment that comes with the introduction of significant amounts of renewable energy. This disruption takes two forms;

The situation with wind is much worse. Large scale weather patterns can result in maximum wind energy output when it is not needed (for example, in the middle of the night) and zero energy output when electrical demand peaks.

The inability to “dispatch” solar and wind energy when it is needed requires that essentially all existing thermal generation assets (coal-fired and natural-gas fired plants) be kept in some sort of standby state as “spinning reserves”. As a result, although the introduction of renewables significantly reduces the overall consumption of hydro-carbon resources and consequently the production of CO2, it does not allow for the decommissioning of thermal generation assets. In fact, by marginalizing thermal assets that are designed to provide 7×24 base load generation, the efficiency of these plants is compromised resulting in proportionately more CO2 production/MW-Hour as well as a significant degradation in the economic performance of these assets.

The introduction of “smart grids” will provide some relief but will take many years to fully implement. The real solution is utility scale energy storage, which will be the focus of my first blog in 2013.

A large cloud moving over a photo-voltaic array can reduce output by as much as 60% in a few minutes. Similarly, the passage of a weather front can cause a wind farm to go from maximum to zero output in a matter of minutes. These types of very rapid, short-term variations pose a different kind of challenge to grid operators. Thermal assets cannot be ramped up or down quickly enough to deal with these variations effectively.

A combination of smart grids, on-demand storage, and responsive demand will be required to address the variability of renewables. All of these technologies will require years of further research & development and optimization before they can be deployed effectively. In summary, during 2012 the problems associated with large-scale implementation of renewables have been exposed. There is a significant danger that 2013 will be the year that these problems reach crisis proportions.

If there are significant disruptions to electricity supplies, up to and including extended blackouts, in either Germany or Hawaii the global impacts on the renewables industry would be enormous.

Governments would immediately review commitments to renewables, financial support through subsidies and FITs would almost certainly be curtailed, and the renewables industry would face a very sudden drop in activity. The financial losses that would result would have a chilling effect on investments in renewables. The result could well be a fairly dramatic turn away from renewables for an extended period of time.

A coordinated, multi-national effort is required starting right now to address the dual issues of dispatchability and variability that are associated with renewable energy resources. If we don’t work together to address these issues we risk losing a lot of the momentum that has been building over the past decade and our aspirations for a sustainable energy future will be put on hold for years to come.