Could renewables supplant 100% of traditional electricity generation?

As I first wrote here, managing intermittency of renewable energy through geographic diversification could be a key driver of large, utility-scale adoption of renewable power beyond the 10%-15% threshold typically assumed. It also featured in my predictions for 2008.

Now, the Combined Power Plant in Germany is putting all of the theory into practice. (via The Sietch Blog, h/t Gristmill)

In an pilot experiment featuring 36 renewable energy power sources (11 wind, 4 biogas CHP units, 20 solar systems and a pumped storage power plant) all linked by a central control unit, the Combined Power Plant project demonstrates that most, if not all energy demand can be met exclusively by renewable energy. From the background paper:

Wind turbines and solar modules help generate electricity in accordance with how much wind and sun is available. Biogas and hydropower are used to make up the difference: they are converted into electricity as needed in order to balance out short-term fluctuations, or are temporarily stored….

…Cutting edge technology is already able to forecast energy yields reliably. The Combined Renewable Energy Power Plant makes use of this technology and regulates electricity needs just as securely as conventional, largescale power stations…

...These power plants are intended to meet one ten-thousandth of Germany’s electricity needs – roughly equal to the electricity requirements of a small town with 12,000 households (such as Stade in Germany). The Combined Power Plant therefore shows in miniature what is also possible on a large scale: 100 per cent provision with renewable energy sources at all times.

The Technical Summary has more.

I recommend first starting with the 7 minute video which does a wonderful job explaining the program and underlying reasoning.

Certainly, a national roll-out of this project would require the development of several enabling and ancillary technologies, including the build-out of an extensive high voltage power transmission infrastructure, and sophisticated demand response technology and networks. But coupled with improved energy efficiency and individual power management initiatives, this could potentially represent a quantum leap in a renewable energy powered future.

Thoughts on 2008 - caution and optimism

Below is a collection of my own predictions for 2008 in cleantech and sustainable business, along with links to writing I've done in the past covering these topics. My post on the predictions from other bloggers, writers and experts is here.

1) Weak US and global economic conditions will have some negative impact on the “green movement” in the short term.

The weakening U.S. and global economies will dampen investor enthusiasm in all things green and cause national politicians to temporarily back off their environmental pledges. The frigid housing market will negatively impact PV solar installation in the US and the poor economic environment will cause some cleantech companies to fail or post poor results. These won’t be representative indicators, but the mainstream media, in a downcast mood, will jump on these outcomes anyway as signs the “green” boom is ending.

Due to this, many undecided Americans will take a step back to pause and reflect on the “green movement” (a term I dislike, but use to encompass “clean energy investment”, “corporate sustainability”, “climate change solutions”, etc). I think there are still many more skeptics than optimists regarding the potential future success of renewable energy and green business. These developments will give the skeptics ammunition to re-emerge and question if the hype is justified. While I think this backlash would have occurred naturally, the 2008 conditions described above will exacerbate it.

2) However existing concerns (energy prices, climate change etc.) will remain, lessening the impact of the developments described above, and allowing for the future long-term development of the “green movement”.

The pause in interest in all things green will be short-term. No more than a year. High energy prices, energy security concerns, increasing scientific certainty around anthropogenic climate change and new weather phenomena (climate change-induced or not) will mitigate some of the media (and the public’s) skepticism and ensure continued interest in all things green. Climate change will not be a large campaign issue (too much issue clutter), but it will be discussed, especially if McCain gets the Republican nomination.

Longer-term, the steps taken to boost the economy (lower interest rates, tax cuts/credits, housing industry bailout) will have a beneficial longer-term impact on the “green movement” spurring consumer and business interest and institutional investment. U.S. politicians and business leaders will recognize the value (and currently wasted opportunity) in developing the variety of industries under the “green/clean” banner. But that will be a 2009-2010 development.

3) One new trend will capture public imagination, while solar will experience a backlash.

This stems from a conversation I had a few months back. To borrow from my own writing, it certainly seems as though the last few years, one specific technology has captured the imagination of the media, the business community and the public. There’s a love affair for about a year, followed by the inevitable falling out of love period, as various individuals question the economic, environmental and political realities underlying each technology. 2004 was the year of the hybrid (Prius); 2005 - wind; 2006 - biofuels; 2007 - solar. I see no reason why this pattern won't repeat itself. As to what 2008 would be, I think I'll stick with energy efficiency (although I'd broaden it to include #5 and #7 below).

4) Coal power plant cancellations will grow, sparking interest in a variety of energy alternatives

As I blogged here, I believe the pace of coal plant cancellations or postponements will quicken. I last counted 22 cancellations in the past 12 months. There’s a reason why a lead Citigroup analyst (and others) downgraded coal stocks in July. There are a number of financial ramifications as a result of this, but more importantly, that lost capacity must be made up somewhere. Utilities and power generators (and city and state governments) will need to choose between natural gas, lobbying for nuclear, or looking at other alternative technologies.

5) Some smart people will begin applying the lessons of the most recent technological revolution to the consumption of energy.

As I also blogged here, the concept of empowering and engaging the consumer, so that they are actively involved in the generation and consumption of their own power will be a dynamic trend in the coming year. Demand response technology, smart and net metering, last-mile smart grid efforts, incentivizing energy efficiency – each can and will play a role. Although as my caveat above stated, we should only be witnessing the start of this long-term trend, and maybe even just the first outliers.

6) Reducing the energy intensity of transportation will be the primary focus, but the solution is still to be determined.

Whether one considers the new Energy Act, the build-out of high speed trains, the focus on ethanol and infrastructure from “field to fuel pump”, or electric vehicles and battery storage, the bottom line is this. We need to get people from point A to point B using less energy, and with less environmental damage. I didn’t post as much on this topic as I would've liked this year, but it is one that will continue to hold the attention of investors, policy makers, corporate executives and individual consumers. 2008 will see a variety of solutions proposed, and while I don’t see one gaining more favor than any others, I do believe those solutions that keep #5 in mind may do well.

7) “Design” and aesthetic appeal will be a growing consideration and differentiator among renewable energy and other clean technologies.

My significant other has long appreciated the idea and concepts underlying renewable energy, but disliked the outwardly unappealing and awkward appearance of solar panels, wind turbines, CFLs, etc. I think it’s a valid criticism. Key to the resurgence of a number of companies (Apple, Mini Cooper) and has been the focus and integrating of style and design with technology. Everything from green buildings to urban environments to distributed generation could benefit from a similar philosophy and I think they will in 2008.

8) Labor shortages will be as big a constraint to the energy industry (traditional and alternative) as polysilicon and turbines are to solar and wind respectively.

Clean Break (linked above) has a good reference on this (although he has a different take), and I’ve posted about jobs in the green industry here and here. The US was already suffering from a dearth of engineers and scientists in most fields, but the shortage appears especially acute in energy. The lack of qualified technicians and installers for distributed generation mirrors a similar shortage (for different positions) in traditional oil, gas and power. While some “green jobs” legislation was included in the Energy Act, ultimately, much more support is necessary to meet the growing need for labor in this space.

9) People will focus on “managing intermittency” through diversification and other energy portfolio strategies, as well as a variety of energy storage solutions.

I’ve covered the geographic diversification and intermittency issue here for solar and wind in detail. Outside of cost per watt, this is the biggest challenge and drawback for renewable energy. It’s not a bold prediction to state the people will be working on ways to store energy where intermittency is a factor, but I do think more project financers, investors, energy executives and policy makers will focus on the potential value in diversification across regions for wind and blending solar (Thermal, CSP and PV) with other renewable and traditional energies.

****

So that’s it – my predictions for 2008. Before writing this post, I didn't expect that I would leave out predictions on carbon legislation and carbon markets, emission measurement technologies and global climate change policy. I could be wrong, but ultimately, given the economic challenges and US elections in 2008, I don’t think much will be happening in those areas.

I was somewhat surprised also by my pessimism, but as I worked through this post, I started to realize what had been bothering me about so many of the predictions and forecasts I had read. Many (especially the optimists) seemed to be looking to cram at least 5 years of development and success into 2008.

I personally believe the industries that are growing around cleantech, renewable energy and green business are strong enough to withstand a pause, and in fact could benefit from one. That’s not to say that I wouldn’t love to see growth that far exceeds the $117 billion invested this year and in fact I’m sure just that in 2008. But the rush to invest and overwhelming interest in all things clean and green is, yes, beginning to look a little frenzy-ish and bubble-ish. And I’d rather smooth that out of the system now, than go through a dot-com cycle lasting five years.

Links

Given time constraints, only passing on a few stories and links I've enjoyed recently:

Who has the oil? Picture = 1000 words

The success of solar depends on storage. Will the technology underlying various energy storage solutions become the new "latest, greatest" technology in 2008?

There are innumerable barriers preventing the large-scale implementation and adoption of renewable energy technology. Certainly the past few years have knocked down the obvious easy barriers, such as "no one will invest in unproven renewables", "grid parity of renewables will never match traditional energy", "supporting green policy is political suicide". [and by 'knocked down', I don't mean to imply discussion has ended. Just that the impossible has been made possible]

Now the more complicated barriers are next. One, the challenge of overcoming "intermittency", could become a bigger topic of debate in 2008. I covered it partially here, but developing efficient and cost-effective storage solutions is going to be a key. Which is a horrendously long-winded way of describing the relevancy of this article.

Questions about biofuels, for the records. Pay attention to #1 and #7.

Power revolution. Good overview of some key renewable technologies. You'll be seeing a lot of discussion and writing around each of these in 2008 and 2009.

UPDATE: Corrected a few typos and a sentence that was really bothering me.

Diversification in renewable energy

Most individuals operating in the renewable energy sector are aware of the challenge of “intermittency” found in wind, solar, and other renewable sources - i.e. wind/solar electricity output is variable by nature and thus cannot serve as a guaranteed, baseload power source.

Below, I discuss some of the concerns that scientists have raised regarding PV solar intermittency specifically, and then cover new studies indicating the broad potential of wind power to mitigate these concerns.

One issue with distributed photovoltaic solar involves the “waste” of solar PV-generated electricity, which theoretically occurs if PV reaches large US penetration levels. According to two studies from Paul Denholm and Robert Margolis out of NREL (unfortunately only one is available publicly):

The intermittency of solar PV...presents a set of critical challenges with respect to integrating PV on a very large scale into the electricity grid. Ultimately, this intermittency may limit the potential contribution of PV to the electricity sector.

Once PV provides 10%-15% of the overall electricity portfolio of a traditionally structured grid, the inflexibility of the current baseload system ensures that any additional PV generation will mostly be wasted.

This is due to the nature of the current U.S. electricity grid system and the difficulty for PV solar to match volatile demand due to its intermittency. Large baseload plants are limited in how far and fast they can drop or boost capacity to match demand (due to various costs, efficiency and timing reasons) According to these studies, past a certain level of penetration (10%-15%) PV solar can only augment existing capacity, and not replace it. On moderate or low demand days, PV electricity would be wasted in order to avoid interfering with baseload plant operations.

The two researchers found that under high penetration levels and existing grid-operation procedures and rules, the [utility] system had excess PV generation during certain periods of the year that increased PV costs—that is, the PV electricity had to be dumped. The limited flexibility of baseload generators, which cannot respond to rapid changes in load, produces more unusable PV generation when PV provides more than approximately 10%-20% of a system’s energy. [source]

However, two wonderful posts at The Energy Blog pointed me to new studies that may challenge this conventional wisdom.

The first study, out of Stanford, makes the claim that connecting multiple wind farms with some amount of geographic diversity creates a large and diversified wind power resource with enough reliability to serve as a baseload power source.

Interconnecting wind farms with a transmission grid reduces the power swings caused by wind variability and makes a significant portion of it just as consistent a power source as a coal power plant. This study implies that, if interconnected wind is used on a large scale, a third or more of its energy can be used for reliable electric power….

…The researchers used hourly wind data, collected and quality-controlled by the National Weather Service, for the entire year of 2000 from the 19 sites. They found that an average of 33 percent and a maximum of 47 percent of yearly-averaged wind power from interconnected farms can be used as reliable baseload electric power. These percentages would hold true for any array of 10 or more wind farms, provided it met the minimum wind speed and turbine height criteria used in the study.

I’m reminded of both diversification theories in finance, and aspects of the Central Limit Theorem, in looking at these explanation. Is there a statistical theory involving variance in systems, and being able to mitigate that variance with diversification of inputs? If so, could one of my much smarter readers please fill me in?

The Stanford study also discusses the concept of interconnecting wind farms to a common point, which improves efficiency and cost. Essentially, this strategy recreates the centralized power generation and distribution model which comprises much of the current U.S. electricity system. Those seeking to rebuild American electricity grid infrastructure around distributed power models may be disappointed. But power generators, utilities, and the various government entities that oversee/collaborate with these groups, may be more comfortable with centralized energy concepts. Equating a portfolio of interconnected wind farms to a large 1GW coal plant (in terms of T&D issues, etc.) could improve understanding and acceptance in these circles.

However, I was even more fascinated by a recent study from the Cambridge-MIT Institute (again h/t The Energy Blog), which focused on the potential outcomes for strategic energy security from developing a diversified electricity production system. This highly readable study posited some insightful results:

• in order to explore the potential for geographic diversity, the study reviewed the correlation between wind speed and distance, and found that “sites far apart exhibit very low cross-correlation”. At 600km distance, correlation (r) was about 0.30, while at 800km, it dropped to 0.20.

• in exploring “the percentage of UK sites that have simultaneously experienced calm conditions for one hour” from 1982-2000, it found that “there has not been a single hour in the last 15-20 years when conditions of total calm were experienced right across the UK”. Meanwhile, calm conditions lasting one day, “affect less than 2% of the UK with the remaining 98% of the UK experiencing wind at these times.”

Thus:

By taking a planned approach to the development of wind power, the impact of distance on correlated output can be fully exploited within the UK, improving the reliability of wind power and minimising the additional backup capacity required due to the presence of wind power on the network. The additional backup required to support 20% electricity generation from wind is estimated at around 4GW.

However, perhaps most interesting to me was the attempt by the study to model the impact of various climate policy scenarios on electricity diversity.

Where no emissions target is imposed, there is a decline in diversity in all three scenarios. This decline is driven by an increase in the proportion of generation accounted for by natural gas. The implication of this fall in diversity is an increase in insecurity, as the electricity system becomes more exposed to one fuel source. By contrast, under an emission target of 60% there is a substantial increase in diversity under all three scenarios as the dominance of natural gas goes into decline.

These basic results prompt two observations. First, low carbon scenarios appear to be associated with higher diversity. Second, these results are largely driven by changes in the share of generation accounted for by gas.

Ensuring smart and strategic policy, and incentivizing markets appropriately can aid in the pursuit of energy independence and large levels of penetration for renewable energy.

Denholm and Margolis’ solutions for the PV solar penetration challenge include increasing the “flexibility” of the conventional system, meaning that base load plants can cycle down to lower levels, “dispatching” load more efficiently with smarter appliances or developing more effective energy storage system.

The Cambridge/MIT study suggests a “concentration charge” which could either “levy a surcharge on [energy supply companies] in proportion to the diversity index of their overall portfolio” or levy the charge “source by source to reflect the concentration of each source to the system.

So is the intermittency issue no longer a problem if you diversify your renewable energy “portfolio” across a geographically broad enough environment? Great news if so...

Solar news and notes

I've been tracking the PV solar sector for a while, and have a report coming out on it sometime in the near future (the date keeps getting pushed back). After decades of false promises and missed opportunities, we are definitely witnessing a re-emergence of distributed solar technology, with astounding growth rates in demand and production capacity, innovative R&D, billions in capital investment, sizable annual cost reductions, and a changed political landscape.

I find it interesting that until this year, much of this progress appeared to be occurring under the radar. Now of course, you can't stop reading about solar (too many articles to link), or how to make money investing in it and the inevitable backlash has already begun.

"Why" this is happening is a complicated tale. Too much for this post. The recent McKinsey report had some very interesting things to say on the potential future for PV solar:

By 2030 the US could have somewhere between 28 gigawatts (low-range case) and 148 gigawatts (high-range case) of solar PV capacity [ed. note: this is actual capacity, not peak] depending largely on the degree of cost compression and learning rates achieved from production and installation. Solar PV could achieve growth akin to that of the semiconductor industry, if conditions are favorable.

And ultimately how does that happen according to McK? Grid parity - ie solar cost per watt being equivalent to traditional gas and coal generating sources without subsidies. I'll be writing a lot more on this, but for now, I just wanted to highlight some recent stories I've come across, which highlight some of the key themes in the solar space: policy, investment, and market economics.

• Solar Showdown in Congress: Green Wombat highlights something I'd discussed a few days ago, the fear that vital renewable energy tax credits won't be extended by Congress. This would severely damage the near-term prospects for solar - both on the large utility-scale segment, and in the residential market. Long-term extensions of these incentives would help to create stability in investment and manufacturing, moving away from the damaging volatility of past years. Everyone expects the subsidies to end at some point in the future, but their presence is vital now while the solar industry builds capacity, improves technology and reduces costs. On average, manufacturing costs come down 20% for each doubling of capacity. As highlighted above, eventually you reach the important level of grid parity. This article is a week(ish) old, so extension of these credits has been included in the House energy bill. But it is uncertain if they will remain in the final version of the bill sent to the President (if one gets sent at all).

• First Solar Buys Ted Turner's Green Energy Company: One issue I highlight in my to-be published report is the value and importance of marketplace consolidation horizontally and vertical integration up and down the supply chain. This is an example of the latter. It will be interesting to watch if the pace of this activity increases. Also, Ted Turner exited this investment after 10 months. I wonder if it was the return multiple or the industry itself.
  

• Chinese Solar May Trade Margins for Market Share: Two years ago, analysts and experts began forecasting that silicon pricing would return to normal in a few years. Recently, the timeline for this "decrease in price" continues to get extended. Over the past year, I've seen it move from 2007 to 2008 to 2009, and now some say silicon prices won't drop until 2010. Too much demand, too little supply, coupled with poor policy and manufacturing planning decisions. As this article states, nothing has changed to date with silicon prices and they continue to stay high. Those solar panel manufacturers best positioned are the ones signing long-term contracts. More importantly, you can expect consolidation among those companies least able to weather the shrinking margins. More on the silicon shortage here.
  

• German Subsidies Could Decline 9% in 2009: The boom in German solar interest caught everyone by surprise (manufacturers, politicians, investors, etc.). But I sometimes wonder what people expected, after giving feed-in tariffs for solar that were 55 eurocents per kilowatt hour generated - this was ten times the level of other renewable subsidies. The German proposal still needs to be voted into law, but given past statements from environmental ministers and politicians, I expect this to occur. Meanwhile, California is now contemplating a feed-in tariff. Feed-in tariffs concern me somewhat - they are wonderful at spurring demand, but can cause severe market disruptions, if they push demand too high too quickly. Germany is a prime example of this phenomenon.
  

• 2008 Cleantech Predictions: Solar. Interesting predictions from a solar VC: I think he's too aggressive in his forecast for the alleviation of the poly-silicon supply crunch (he says late 2008, I see this going well into 2009...excluding the possibility of a global recession of course). Completely agree and welcome his prediction that entrepreneurs will move outside cell and module production into various downstream aspects of distribution, installation, financing, etc. Squeezing costs out of distribution and installation could drop overall solar costs 20% and more. Compare Japanese costs to California for evidence. (about $6/watt versus $9/watt, with most of the difference coming on the distribution and installation side). Also, I understand his interest in focusing on China and India, but as the solar sector grew 500% in Spain in 2006, and Italy and Greece are making a lot of noise, I wouldn't stray too far from Europe (or the U.S.) next year.

UPDATE: One other article I forgot to add which I thought tied together several of the themes from above:

Solar Installers: Cutting Costs to Compete: As per the CEO of SunPower - 50% of the cost of solar is in its installation. This sounds high, but I'm not the CEO of a large solar power installer. So go with him on this one. Couple good insights from the panelists this article references, especially that solar installation on the residential level is just like any other consumer product: a lot of it comes down to trust and marketing.