NS4960
Spring Term 2017
Prospects for Renewable Energy
Overview
• Oxford Analytica: Prospects for Renewable Energy,
November 21, 2016
•
• The U.S. and China, world’s two largest economies as
well as carbon emitters announced their ratification of the
Paris Agreement in September 2016
• Earlier in 2016 prices for renewable energy in select
regions set historic lows below fossil-fired plants
• Renewable energy seems to have passed the tipping
point toward gradual adoption as the primary source of
electric power
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Strategic Summary I
• Continued improvements in technologies and economies
of scale are helping unsubsidized renewable energy
prices compete with fossil fuels
• Improvements in power storage technologies and smart
grids will soon mean countries are able to rely on wind
and solar for baseload power
• The global interest rate environment is favorable – and is
expected to tighten only slowly, keeping projects
financially viable
• Renewable energy is no longer being driven simply by
concerns about global climate change
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Strategic Summary II
• While environmental concerns were key in boosting
industry in the past, green energy now also has favorable
economies on its side.
• In the U.S. it would take time to roll back the Clean Power Plan
(CPP) and
• Federal tax credits cannot be removed – providing time for
renewables to increase competitiveness
• The profitability of the renewable sector hinges on the
development and proliferation of different technologies
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Power Generation I
• Wind and Solar main renewable energies
• Traditional power has high variable costs as it requires
• Commodity inputs that are bought in distant markets
• Shipped and subject to significant price volatility
• Also subject to great political risks as
• Resources are often controlled directly by governments (or nonstate armed groups) and
• Pass through transit countries
• Renewables face significant upfront fixed costs but
variable costs are low as the inputs are free
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Power Generation II
• Once established solar irradiation and wind are free of
government interference
• Economies of scale and technological improvements are
reducing the costs of photovoltaic cells (PVCs) and wind
turbines relative to their output.
• May 2, 2016 Dubai Electricity and Power Authority
Received a record bid of 2.00 cents per kilowatt hour for
supplying electricity from its solar park
• This subsidy free price is cheaper than coal-fired power in this
domestic market
• The price was achieved partially due to the availability of low
cost debt financing to the winning consortium
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Power Generation III
• Average wind-generated energy prices have also come
down to under 5 cents per kilowatt hour worldwide
• This is a lower price than building new fossil burning
plants
• In Australia, Chile, California, Italy and Jordan there are
projects underway that will make renewables cheaper
than traditional energy
• Deutsche Bank anticipates that solar power will be
cheaper than fossil fuels in 80% of the world within a few
years.
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Energy Storage I
• Wind and solar are somewhat complementary as wind
speeds are higher at night.
• Efficient power storage is needed for these sources to be
relied on for baseload electricity
• A competing trend in large batteries is “energy” versus
“power”
• “Energy” batteries are ones with long durations and
cycle times
• They store electricity at times of abundant inputs and
discharge on demand
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Energy Storage II
• “Power” batteries refer mostly to lithium-ion units that
provide fast ramp-up for discharges lasting a couple of
hours
• Firms like Tesla have focused on “power” applications,
but “energy” is likely to have a longer run impact as it
provides greater scale.
• Also lithium-ion batteries could become expensive given
the amount of lithium expected to be consumed by
electric vehicles and uncertainty of supply for the metal
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Smart Grids I
• One certainty in renewables revolution – the energy
infrastructure will become more complex.
• The unidirectional system where utilities alone produce
and sell electricity is no longer tenable
• Solar energy results in democratization of energy
whereby households and small businesses can generate
their own power and sell their surplus
• A electricity network with a multitude of producers,
energy storage systems and accounts that both consume
and supply is highly dynamic
• Smart grids using modern communication and
computing technologies along with real-time data
gathering and analysis will bring more efficiencies to
energy networks
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Smart Grids II
• Demand Response
• Demand Response uses this technology to match
demand better with available supply, introducing market
mechanisms into energy consumption
• Demand response can reduce peak loads, thus lowering
power failure risks and resulting in savings for the
consumer and less wasted energy
• Utilities benefit by not having to maintain expensive idle
capacity
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Smart Grids III
• Microgrids
• Utilities are overhauling their entire networks, but some
also see an opportunity to create their own microgrids –
localized grids that can
• Generate
• Transmit and
• Store
• Energy, relying on the central grid only for emergencies
• Microgrids make sense in their
• Pooling of resources to achieve efficiencies and economies of
scale
• Increasing communities bargaining power
• Improving overall energy efficiency and reduce the amount of
energy lost in transmission
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Outlook
• Global power is undergoing a transformation akin to what
happened to telecommunications in the 1990s.
• Costs will plummet
• Consumers will become energy independent
• While a shakeup among incumbent energy players, whether
commercial or state, will be inevitable
• Government initiatives and shifts in capital allocations will result
in renewable energy prices gradually reaching competitiveness
against fossil fuels
• Oil producing countries and traditional energy companies
will join the energy revolution rather than fight it.
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