RENEWABLE ENERGIES Issues and Challenges

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RENEWABLE ENERGIESIssues and Challenges
Denmark, March 18, 2003

• Jean-Marie Bourdaire
• Director, Studies Programme
• World Energy Council

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CONTENTS
Denmark, March 18, 2003

• Renewable energies
• Part I. Definitions generalities
• Part II. WEC 2003 Statement
• Part III. Issues in Denmark

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RENEWABLE ENERGIESPart I. Definitions
Generalities
Denmark, March 18, 2003
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DEFINITION - 1

• According to the WEC handbook on renewable
  energy projects
• Renewable is a term used for forms of energy
  which are not exhausted by use over time.

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DEFINITION 2WEC Survey of Energy Resources

• Hydropower
• Biomass
• Wind
• Peat
• Wood
• Solar

• Geothermal
• Tidal
• Wave
• OTEC
• Marine Current

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DEFINITION 3The significance of numbers
Denmark, March 18, 2003

• Ambiguous definition that gathers traditional
  fuels (combustible renewables and wastes), large
  hydro plants, and new modern renewable energies
  (wind, solar, geothermal, tide..)
• Flawed IEA conventions (1 unit of electricity
  output is worth 3 units of nuclear or fossil fuel
  input but 1 unit of hydro, wind, solar, or tide
  input and 10 units of geothermal input).

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WORLD TPER 2000wind/tide/solar 0.2geothermal
0.1
Denmark, March 18, 2003
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RENEWABLE ENERGIESGrowth over the last 30 years
Denmark, March 18, 2003

• TPER growth 2.1, of which
• - CRW 1.8/y with 2000 market share of 10.3
• Hydro 2.7/y with 2000 market share of 6.5
• New 10/y with 2000 market share of 0.3
• Growth of the new modern renewables
• geothermal and tide 10, solar 30, wind 50

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RECENT WIND GROWTH
Denmark, March 18, 2003
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RENEWABLE ENERGIESElectricity share
perspectives
Denmark, March 18, 2003

• Renewable electricity share in 2000, 19 of
  which
• Hydro 92 i.e. 17.5 of total electricity
• CRW 5 i.e. 0.9 of total electricity
• New 3 i.e. 0.6 of total electricity
• High growth / tiny share of new modern
  renewables
• - 4 to 6 annual growth will only double/triple
  market share in 2030 according to IEA scenarios

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RENEWABLE ENERGIESPart II. WEC 2003 Statement
Denmark, March 18, 2003
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THE WSSD FRAMEWORK
Denmark, March 18, 2003

• WSSD endorses all clean technologies
• The main world issue is poverty eradication
• Renewables are a small part of the solution
• Distributed generation of grid interconnection?
• Modern new energies are mostly in OECD

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WEC STATEMENT - 1
Denmark, March 18, 2003

• WEC believes that the focus should be on
  sustainability, i.e. acceptability
  accessibility
• WEC does not support compulsory targets for any
  energy sources, since they inevitably lead to
  market distortions.
• When it comes to indicative targets, while WEC
  does not support a global structure because of
  its inflexible nature, national or regional
  energy targets may help reach certain strategic
  goals

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WEC STATEMENT - 2
Denmark, March 18, 2003

• Operational aspects to be taken into account
• Intermittent nature of leading renewable
  sources,
• Related problems of full integration with the
  grid,
• Low capacity factors and need for back-up power.
• Other questions to be taken into account
• Do other options exist to reduce GHG less
  costly?
• Are costs GHG emissions of back-up included?
• Are subsidies transparent favouring lower
  costs?

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WEC STATEMENT - 3

• Benefits to be taken into account
• - Local, domestic occurrence (no geopolitics)
• - Diversification of energy portfolio
• - Low operating costs
• - Short construction times (simple modular
  design)
• - Generally accepted as environmentally
  friendly
• Question to be kept in mind
• - Is accessibility for the poor improved?

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WEC STATEMENT - 4
Denmark, March 18, 2003

• A competitive electricity market makes no sense
  if
• it heavily distorted in the name of environment
• Example of Germany where gt50 of the electricity
  market is subjected to some government
  intervention
• Renewables CHP supports cost targets 2.5
  G/y,
• Coal lignite subsidies 3.0 G/y,
• Electricity tax 5.0 G/y.

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WEC STATEMENT - 5
Denmark, March 18, 2003

• No single way to implement renewable energy
  targets.
• Different circumstances call for different
  solutions.
• Examples of regulatory techniques
• Renewable Energy Portfolio Standard (RPS)
• Green certificates,
• Green tariffs,
• Embedded generation strategies,
• RDD incentives.

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RENEWABLE ENERGIESPart III. Technical/political
challenges
Denmark, March 18, 2003
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NORDIC RENEWABLES
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WIND IN EUROPE
Denmark, March 18, 2003

• THREE CHAMPIONS Germany 12,0 GW
• 
  Spain 4,8 GW
• 
  Denmark 2,9 GW
• BUT
• Average cost 1000 per installed kW (onshore)
• Average running time 20-30 of the year
• Average direct subsidy 0.06 /kWh or more
• Indirect subsidies back-up, transmission
• And the problem of renewables footprint

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WHAT COMPETITIVENESSFrench 2000 figures (source
DGEMP)
Denmark, March 18, 2003
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SUPPORT OF RENEWABLESNo single regulatory model
Denmark, March 18, 2003

• Renewables can be supported in monopolised or in
  competitive markets
• The question is the kind/ degree/ transparency/
  of support with what sunset clauses
• To answer this question, one needs to make clear
  what the policy objectives are

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WHAT KIND OF SUPPORT?
Denmark, March 18, 2003

• Competition, a friend for efficient renewables
• First generic approach Prices are set, e.g. by
  call for tenders, and market shares adjust.
• Second generic approach Market share(s) is
  (are) set by quotas, and prices adjust.
• Hybrid approach combine both, e.g. set quotas
  but impose price floors and ceilings.
• In all cases, efficiency gains should be
  passed to the consumers thanks to lowered prices

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WHAT DEGREE OF SUPPORT?
Denmark, March 18, 2003

• Subsidies need to be targeted and temporary,
• But their total amount is a political decision.
• Very strong support as in Denmark may create a
  worldwide competitive industry (VESTAS
  NEG-MICON with 2/3 MW turbines).
• Yet the counterpart is a very high cost for the
  end-users (Danish electricity tariffs are second
  highest behind Japan among IEA countries).

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WHAT TRANSPARENCY?
Denmark, March 18, 2003

• Full cost accounting is needed and costs should
  be revealed to all end-users.
• 28/01/2003 directive 2003/4/EC of the European
  Parliament and of the Council on public access to
  environmental information and repealing Council
  Directive 90/313/EEC.
• Should end-users know about the real costs and
  CO2 values as compared to other, e.g. CDM,
  projects, would they accept such policies?

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CONCLUSIONThank you
Denmark, March 18, 2003

• There are many unanswered questions and this
  reminds me of the story of a Jesuit.
• He was once asked Why do Jesuits always answer
  questions by other questions?
• He answered Why not?

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RENEWABLES FOCUS

• Visit the Renewables Focus section on the
  World Energy Councils Global Energy Information
  System (GEIS)
• www.worldenergy.org

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CHAUNCEY STARR, FIRST CHAIRMAN OF EPRI
Denmark, March 18, 2003

• Unfortunately all renewables face practical
  barriers
• - Hydro is obviously limited and has ecological
  constraints.
• - Biomass involves transportation costs that
  limit its value to about a 25-mile collection
  radius around the power plant.
• - Solar and wind diurnal intermittency (about
  15-30 per cent in the temperate zone) limits
  their contribution.
• - Adding storage for a continuous base load
  supply multiplies their capital investment by a
  rough factor of ten or more, making them
  impractical for such use

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DAN REICHTER, US ASSISTANT OF ENERGY
Denmark, March 18, 2003

• US subsidies in power generation have amounted
  to
• - 25/50 G for civil nuclear over the last 50
  years (electricity output share of about 20 ),
• - 50 G (current dollars) for hydro over the
  century (for a present share of power output of
  about 10),
• - 13 G for new renewables over the last 15 years
  (electricity output share of less than 0.5 ).

Presentation at ENERGEX/GLOBEX, Las Vegas
25/07/2000
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WHAT KIND OF SUPPORT?
Denmark, March 18, 2003

• The proposed Danish TGC is an hybrid
• It calls for tradable green certificates that
  will reflect the highest cost of GE subject to
• a ceiling to cap the subsidy and a floor to
  guarantee a minimum subsidy over time.
• The advantage is that producers will receive a
  spot price reflecting the intermittency or not.
• The possible drawbacks are the accounting
  complexity and the possible lack of incentives
  for incumbent green generators.