A portfolio of renewables can supply India’s demand for electricity

The big energy challenge of the future will be supplying enough low-carbon power to meet the emerging economies’ growing demands.  Although renewable capacity continues to grow, as this blog has noted in the past, notwithstanding depressed financing, waning popular interest, disappearing subsidies, and slower technological progress, there is growing concern that renewables cannot be an important part of the supply solution.  A couple of recent papers have debunked this myth at least for India.

In a simple but rigorous and illuminating analysis, Professor S. P. Sukhatme shows that India’s annual demand for electricity in 2070 — when the country’s population is projected to be 1.7 billion — can be met to a large extent by a portfolio of renewable energy technologies, as shown in the figure below.  Further, this is a conservative estimate since contributions from a number of other renewables, e.g., geothermal, offshore wind, tidal, etc., have not been estimated.  Finally, the role of technology and innovation in improving both yield and economics have not been factored.  Even so, the traditional challenges with renewables, in particular intermittency, need to be overcome to ensure reliably supply.

Renewable energy is growing and spreading but still challenging

Popular and media interest in renewable energy has waned in recent months but two reports issued this month show that the industry is growing in capacity and investment, spreading geographically, and delivering energy at increasingly cheaper prices.  REN21’s Global Status Report is a mammoth, 170-page document but is written and produced well making it easy to review.  The second is a short document produced by NRDC to benchmark various countries on their renewable energy footprints.

Even so, the industry faces a number of challenges.  Technology is developing slowly, subsidies continue to be important, and grid integration poses a number of challenges.  This was seen in an interesting layout of articles in the Wall Street Journal yesterday.  In two side-by-side pieces, the Journal first reported on how Japan’s new feed-in tariffs may not be sufficient for material supply of renewable power, while a second article just across talked about how the country was restarting a nuclear plant to meet electricity demand.

Advancing the next generation of geothermal energy technologies

Geothermal energy doesn’t quite have the glamor of wind, solar, or biomass and thus receives little media or popular interest. Even so, the resource has a number of advantages, including the reliability of base load power, low operating costs, and virtually no greenhouse gas emissions. More importantly, geothermal energy is immensely promising if new technologies can be developed, demonstrated, and deployed widely. For example, drilling to depths beyond 3,000 meters — the limit of conventional hydrothermal technology which accounts for all of the ~11 gigawatts (GW) of geothermal capacity globally — and creating hot, “engineered” reservoirs could lead to as much as 100 GW of capacity over the next few decades, according to an MIT study released several years ago.

ADI Analytics brings extensive technical, market, and economic expertise in geothermal energy through its work for the U.S. Department of Energy. Among other accomplishments, our work so far has explored the cost structure of EGS, evaluated the impact of new technology, and benchmarked innovation and policy needs through sophisticated patent analytics. Further, we have identified and analyzed cost impacts of key risks, which, however, can be best understood through pilot or demonstration projects.

A number of start-ups and companies have been piloting and demonstrating core elements of EGS technology in the past few years. For example, Potter Drilling has recently completed a series of field tests of its spallation drilling technology. Ormat Technologies, AltaRock Energy, and Calpine are all piloting different reservoir stimulation techniques. Finally, companies such as GeoTek Energy, GE, Baker Hughes, and Schlumberger are developing tools and equipment to improve asset performance, operations at high-temperatures, and heat transfer and power plant efficiencies. At a recent meeting organized by the U.S. Department of Energy, these and several others provided updates highlighting how new energy technology development is difficult, slow, and often seemingly incremental and yet promising given how much progress has been made.

No energy is expensive than no energy

Homi Bhabha, the architect of India’s nuclear industry, reportedly once declared that no form of energy was more expensive than having no energy.  Consumers in the developing world without (or at the margins of) access to electricity can empathize with that sentiment.  Renewable power technologies are becoming cheaper but several developing world consumers are “ignoring” economics in their quest for energy.  More in this piece by the New York Times, as part of an interesting series called “Beyond Fossil Fuels.”

China is the New Energy Dragon

It’s official.  China is the world’s largest consumer of energy.

This happened a lot sooner — at least five years — than projected thanks to the disproportionate impact of the Great Recession on the U.S. relative to China.  More significantly, this is an inexorable phenomenon as the IEA announcement notes:

Since 2000, China’s energy demand has doubled, yet on a per capita basis it is still only around one-third of the OECD average.  Prospects for further growth are very strong considering the country’s low per-capita consumption level and the fact that China is the most populous nation on the planet, with more than 1.3 billion people.

Of course, this is no surprise to energy industry observers.  In the recent past, energy growth in China has been the subject of numerous anecdotal tales.  More importantly, it has cast a long shadow on energy dynamics in the developed world.

For example, higher power prices in the first half of this decade were attributed to the 10% annual growth rate of coal consumption in China.  Two years ago, the high diesel-gasoline price differential was because of China’s dramatic spurt in diesel imports to fuel marginal power generation capacity in the wake of  an unusually harsh winter.  In the past year, energy circles have been abuzz with China’s green energy plans.  The “Green Giant,” as it has been dubbed, built 12 gigawatts of wind capacity in 2009, has retired or plans to retire up to 35 gigawatts of small and relatively inefficient coal-fired power plants, build 20 nuclear reactors, and has committed to reduce its energy intensity by almost half.

In addition, it is implementing an aggressive outreach program to access energy assets globally.  Recovering from a failed bid to acquire Unocal in 2005, China has purchased oil and gas fields in Central Asia, South America, Africa, and the Gulf of Mexico.  It has supplemented asset acquisitions with a concerted diplomatic effort.  As a result, it now attracts more barrels of Saudi crude oil than the U.S. and gas from places such as Australia, Malaysia, and Qatar, and even coal from the U.S.  In similar vein, it continues to invest in critical energy infrastructure.  For example, it has just completed a 1,100-mile pipeline to import gas from Central Asia and is amplifying its R&D and technology development capabilities in energy.

Interestingly, China has disputed IEA’s conclusion “highlighting the lack of clarity in China’s energy sector as well as the country’s unease at its growing global impact.”  The IEA and China have been at loggerheads regarding data quality and access.  Even so, China’s official estimate of energy consumption is a measly 1% lower than that of the U.S., a difference that would be most likely met in 2010.

While energy consumption per capita is much lower, China’s energy consumption per GDP is much higher than that of the U.S.  Further, its energy mix is heavily dependent on coal, which contributes 66% of total demand in comparison to 22% in the U.S.  Collectively, these two pieces of data show the intense draw of energy by the Chinese manufacturing sector.

Altering this energy mix will be very expensive but far more doable than suggested by some observers.  This is because China’s energy infrastructure is not at a steady state and the large investments it will need to support higher energy demand per capita can be directed far more easily (given its political economy) to renewable energy sources.  Indeed, the country’s on-going investments in green energy and its commitment to reduce emissions intensity reflect this thinking while responding to global pressure around climate change.

China as the New Energy Dragon is just the beginning of a fascinating story in the future of energy.

If China is the “green giant,” how far behind can India be?

If China is the “green giant,” how far behind can India be?  A recent story documents how companies are trying to develop technologies, plants, and businesses that convert rice husk into power, recycle electronic waste, commission green data centers, consolidate wind and solar power, and mass produce electric cars.

Unlike China where its government is carefully orchestrating the new green revolution, India’s cleantech story is being fueled by entrepreneurs and venture capital.  Although India’s government is increasingly supporting the cleantech industry with policy, regulatory, investment, and tax incentives, its deeply democratic institutions ensure that it will be a slow albeit sure story.

Renewables M&A gets down to earth

KPMG has published an interesting survey of mergers and acquisitions in the renewable energy industry.  Major conclusions include:

1. Deal volume has, of course, fallen from nearly $26 billion in 2007 to a little over $18 billion in 2008 …
2. … With the billion-dollar transactions of 2008 being replaced by smaller-sized deals in the $300-500 million range and …
3. … Focused on currently operating assets in contrast to acquiring promising but undeveloped capacity
4. Investors are also using the depressed valuations to focus, consolidate, and grow positions
5. Government regulations and support drive renewable investments and, in recognition, nearly 16% of worldwide stimulus funds totaling almost $3 trillion have been allocated to “green” energy

Will renewable energy benefit from R&D investments?

In a presentation, Rice University’s Baker Institute scholars have looked at patenting activity over the past few decades, government funding in R&D, and potential impacts on renewable energy.  Their conclusion is surprising: Lower government funding in renewable energy reflects R&D’s declining productivity (based on patents) rather than lack of support.

While more details are necessary for a full evaluation, we are skeptical of their preliminary conclusion for several reasons including:

1. Patents are not the best indicator of R&D productivity (as the authors also acknowledge)
2. Patenting frequency has fallen significantly over the years due to prosecution times and costs
3. Government funding decisions are typically not sophisticated enough to reflect patenting activity

Thoughts?