Renewable Energy Foundation

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Can Renewables be Economically Competitive?

If we have learned anything over the last ten years of arbitrary targets and policy mandated income support to renewables, it is that the sector has failed to reduce its costs significantly, and, far from learning to stand on its own feet, is content to be a long-term subsidy dependent. This won't be acceptable to the consumer in the medium let alone the longer term, and it fails to provide an economically compelling low carbon example to the developing world.

Clearly, something has to change, and will change. If renewables are to have a role in that new dispensation they will have to improve dramatically. But how? What are the major problems that have to be solved before they are fundamentally economic and can make their way in the world without special and unsustainable commercial favours?

Some will wonder why it is necessary to even ask this question, since it was expected that once renewables had a significant market presence, their supposed natural advantage, a zero cost fuel, would allow them to sweep the field. But this was based on a misunderstanding. In the talk that John Constable of REF gave last week to the All Party Parliamentary Group on Rebalancing the Economy, he observed:

It is simply facile to say, as the industry often does, that “the wind is free”. Coal and gas are free in the ground; but we have to extract, convert, and deliver the usable energy to a consumer, all of which have costs. Exactly the same is true of wind power, and for renewables the extraction, conversion, and delivery costs remain extremely high compared to fossil fuels.

Another way of approaching this problem is to remind ourselves that, building on the insights of Wrigley in his superb Energy and the English Industrial Revolution (CUP: London, 2010), that industrial growth, such as that in England in the 19th Century, could not have been sustained on the basis of an organic economy. That is, on an economy employing energy inputs derived from an organic cycle, because the energy density of such inputs is poor and the source is in any case a 'flow' not a 'store'. Fossil fuels, and coal in this instance, were and remain a high density store of energy, or, as Wrigley puts it, a second kind of "capital stock" (p. 235).

These problems remain today. The energy density of renewable energy flows is modest, and thus the capital plant needed to gather them is large and costly in relation to the quantity of energy produced, resulting in high costs per kWh generated. Furthermore, renewable energy flows are cyclical and are poorly correlated with human need, a point that hardly needs emphasising in relation to wind power or indeed solar, implying high delivery costs to the consumer.

Thus, if renewables are to be inherently competitive, the low energy density of renewable sources must be offset by very low capital costs; and the natural renewable energy flow needs to be transformed into a store. (Attempts to make human needs fit the available flow via demand control are not likely to be attractive on the macro scale, and may disadvantage economies that make this attempt in comparison to economies that used stored energy.)

We can summarise this:

Renewable Energy Research Requirements

  1. The capital cost of renewable energy conversion devices must fall dramatically to offset the low energy density of the sources.
  2. Renewable energy flows must be (cheaply) converted into energy stores to reduce the cost of delivery to consumers.

This is unlikely to be a simple matter, and the sooner effort is focused on these matters, rather than on deployment of existing and unsatisfactory technologies the better.

 

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