Risø National Laboratory November 2006




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Risø Energy Report 5
Edited by Hans Larsen and Leif Sønderberg Petersen, Risø National Laboratory, Denmark


Reviewed by
D...
Risø Energy Report 5

      Renewable energy
for power and transport


Edited by Hans Larsen and Leif Sønderberg Petersen
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    1       PREfACE                                                          3


    2       SUMMARY, CONCLUSIONS AND RE...
Risø Energy Report 5                                            Preface                                                  
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Risø Energy Report 5                                          Summary, conclusions and recommendations                  5
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Risø Energy Report 5                                                                              Global drivers for trans...
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Risø Energy Report 5                                                    Renewable energy outlook for selected regions     ...
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Risø Energy Report 5                                                                Innovation in energy technologies     ...
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"Renewable energy for Power and Transport"

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Risoe Energy Report 5

  1. 1. Risø National Laboratory November 2006 Risø National Laboratory Risø Energy Report 5 Renewable energy for power and transport Edited by Hans Larsen and Leif Sønderberg Petersen, Risø Energy Report 5 Risø-R-1557(EN) ISBN 87-550-3515-9 ISBN 87-550-3517-5 (Internet) ISSN 0106-2840
  2. 2. Risø Energy Report 5 Edited by Hans Larsen and Leif Sønderberg Petersen, Risø National Laboratory, Denmark Reviewed by Dr. Göran A. Persson, IVA, Sweden Univ.-Prof. Dr. Christoph Weber, Universität Duisburg-Essen, Germany Professor Ralph Sims, Centre for Energy Research, Massey University, New Zealand Consultant Science Journalist Charles Butcher Design: Kühl+co A/S · 4229 Printing: Schultz Grafisk Copyright: Risø National Laboratory Risø-R-1557(EN) ISBN 87-550-3515-9 ISBN 87-550-3517-5 (Internet) ISSN 0106-2840
  3. 3. Risø Energy Report 5 Renewable energy for power and transport Edited by Hans Larsen and Leif Sønderberg Petersen Reviewed by Dr. Göran A. Persson, IVA, Sweden Univ.-Prof. Dr. Christoph Weber, Universität Duisburg-Essen, Germany Professor Ralph Sims, Centre for Energy Research, Massey University, New Zealand Consultant Science Journalist Charles Butcher Risø-R-1557(EN) ISBN 87-550-3515-9 ISBN 87-550-3517-5 (Internet) ISSN 0106-2840
  4. 4. 1 1 PREfACE 3 2 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 5 3 GLOBAL DRIVERS fOR TRANSfORMATION Of ENERGY SYSTEMS 7 4 RENEWABLE ENERGY OUTLOOk fOR SELECTED REGIONS 13 5 INNOVATION IN ENERGY TECHNOLOGIES 21 6.1 WIND 29 6.2 BIOMASS 33 6.3.1 PHOTOVOLTAICS 37 6.3.2 SOLAR THERMAL 41 6.4 HYDRO, OCEAN AND GEOTHERMAL 43 7 RENEWABLE-BASED fUELS fOR TRANSPORT 47 8 NEW AND EMERGING TECHNOLOGIES fOR RENEWABLE ENERGY IN THE TRANSPORT SECTOR 51 9 TECHNICAL CHALLENGES TO ENERGY SYSTEMS’ OPERATION AND MARkETS 55 INDEx 61 REfERENCES 63 RISø ENERGY REPORT SERIES 67
  5. 5. Risø Energy Report 5 Preface 1 Preface The global energy policy scene today is dominated Individual chapters of the report have been written by by three concerns, namely security of supply, climate Risø staff members and leading Danish and internatio- change and energy for development and poverty alle- nal experts. The report is based on internationally recog- viation. This is the starting point for Risø Energy Report nised scientific material, and is fully referenced and ref- 5 that addresses status and trends in renewable energy, ereed by an international panel of independent experts. and gives an overview of global driving forces for trans- Information on current developments is taken from the formation of the energy systems in the light of security most up-to-date and authoritative sources available. of supply, climate change and economic growth. More Our target groups are colleagues, collaborating partners, specifically status and trends in renewable energy tech- customers, funding organisations, the Danish govern- nologies, for broader applications in off grid power pro- ment and international organisations including the Eu- duction (and heat) will be discussed. Furthermore the ropean Union, the International Energy Agency and the report will address wider introduction of renewable en- United Nations. ergy in the transport sector, for example renewable based fuels, hybrid vehicles, electric vehicles and fuel cell driv- Hans Larsen and Leif Sønderberg Petersen, Risø National en vehicles. Laboratory, Denmark The report is volume 5 in a series of reports covering en- ergy issues at global, regional and national levels.
  6. 6. Risø Energy Report 5 Summary, conclusions and recommendations 5 2 Summary, conclusions and recommendations HANs LARsEN AND LEIF søNDERbERg PETERsEN, RIsø NATIONAL LAbORATORy, DENMARk The global energy policy scene today is dominated by the OECD points out that innovation in energy technol- three concerns: ogies has widespread implications not only for member countries’ energy policies but also for their economies • Security of supply: the recent dramatic increase in oil in general. and gas prices has given rise to concern about security In Denmark it is generally acknowledged that the use of of supply; energy innovation policies was very successful when the • Climate change: the energy sector is the main contribu- Danish wind power industry evolved during the 1980s tor to global greenhouse gas emissions; and 1990s. This reasoning is used to support similar poli- • Energy for development and poverty alleviation: in 2002, cies for the development of biofuels, photovoltaics, fuel almost 1.6 billion people in developing countries did cells and hydrogen. not have access to electricity in their homes. Conclusions The International Energy Agency (IEA) predicts that by securing a global energy development path, especially 2030, if governments stick to their current energy poli- one that will be compatible with climate change con- cies, global energy demand will be more than 50% higher cerns, is clearly a major challenge that requires coor- than at present. This will present significant challenges, dinated action from all countries. The EU has shown in terms of both energy security and climate change, to leadership in tackling climate change, and with its new every region of the world. energy strategy is also taking a proactive approach to the The European Commission recently launched a new other areas of concern. strategy for “sustainable, competitive and secure energy” New renewables are expanding rapidly, with annual that sets out some visions for Europe’s energy develop- growth rates of more than 25% for technologies such as ment priorities in the coming decades. One of its main PV and wind power—though they still account for less objectives is the development of renewable energy, par- than 1% of the world’s energy supply today. The increas- ticularly biomass, wind power and other low-net-carbon ing efficiency and reliability of renewable technologies, energy sources, and especially for alternative transport alongside high oil and natural gas prices, are paving the fuels. Curbing energy demand and giving Europe a lead- way for further development. ing role in the global climate change effort are other key stimulating the deployment of renewable energy dem- points of the strategy. onstration projects is important for the pioneer and in- Among the East Asian nations, China stands out. In line troduction phases of new energy technologies. As well as with the country’s rapid economic growth, Chinese en- providing real-world tests, it is obvious that demonstra- ergy consumption is increasing dramatically. Renewable tion projects are fundamental to gaining public accept- energy resources already have an important strategic role ance of new technologies. in maintaining the balance between energy supply and Innovation in energy technologies is high on the po- demand in China. litical agenda in many countries. During the innovation In North America, the UsA has several times taken the process it is important to keep in mind that the role of lead in early development, especially for wind power and research is always significant, but that it changes over photovoltaics (PV). Us manufacturing industry, how- the product lifecycle. It is also important to provide op- ever, has not been able to keep up with developments timum conditions for private investment capital in the abroad—leaving the country with low global market energy technology market. shares despite significant domestic demand. To a certain Wind energy has developed rapidly over the past 20 years. extent this can be explained by the government’s “stop some players have stayed in the market throughout this and go” approach to supporting renewable energy. period, but many new very large companies have entered In Denmark, wind is already a major contributor to po- more recently. Wind energy has proven itself as a viable and wer supply, and the aim is to increase the share of wind increasingly economic means of generating electricity. power in the years to come. Transport is singled out as The growth of the PV industry has also been rapid: more a special challenge, not least because energy use in this than 30% annually over the past decade. New technolo- sector is increasing steadily, compared with stabilization gies are now emerging which speed up the production of or even decrease in other sectors. solar cells and reduce the costs. This could transform PV In line with the need for change in the global energy into a winning energy source within a short time, from supply, innovation in energy technologies is high on the its current position of being suitable only for niche ap- political agenda in many countries. A recent report from plications.
  7. 7. Risø Energy Report 5 Summary, conclusions and recommendations 2 Denmark has been active in developing wave power tech- nology, and could also contribute to the development of geothermal heating technology. For all renewable energy • before fuels based on renewable sources can play a sig- nificant role, existing second-generation technologies need to be scaled up; technologies, there should be ample opportunities for • hydrogen produced from renewables should be pur- Danish industry and consulting firms to contribute to sued as a long-term option. Clean Development Mechanism (CDM) projects around the world. A prerequisite to expanding the use of renewables in biofuels can help reduce greenhouse gas emissions from the energy system is the development of more flexible the transport sector, increase the security of energy sup- ways of operating power systems that are characterised ply, and encourage innovation and development within by high proportions of distributed, intermittent energy the agricultural sector and associated industries. There sources. This is true of the overall Danish energy grid, seems to be global political interest in making biomass a including electricity, natural gas, heat and, in the long significant energy resource within the next 10–20 years. run, hydrogen. The introduction and use of renewable energy sources in • The methods used to increase the share of renewable transport need more attention. In the short term it will energy should not compromise the security and reli- be more expensive to fuel the transport sector with re- ability of the system. newables than with traditional fossil fuels. In the longer • These methods should also aim to reduce energy pro- view the picture may be just the reverse, as fossil fuel duction costs, and the overall pollution created by the prices are expected to rise further. RD investment in energy system. new biofuel technologies could generate large paybacks in the long run, and hybrid and electric vehicles will be- To promote renewable energy it is important to better come common. understand how research and policymaking can create Major technical challenges to the operation of energy technological innovation. systems and markets are mainly linked with how to • To move down the learning curve requires markets to maintain a stable and reliable power system in which a learn from. governments can promote these markets, large proportion of renewable energy replaces conven- initially through demonstration programmes. tional power plants. • sometimes market stimulation programmes are more efficient policy instruments than research pro- Recommendations grammes. To address the three main concerns listed in the Pref- • Energy RD programmes and other government policy ace—security of supply, climate change, and energy for instruments should put more emphasis on application development and poverty alleviation—renewables must and business development. contribute significantly to global energy supply in the long run. This requires action to be taken now, including To stimulate progress towards a substantial percentage of RD, demonstration projects and deployment measures. renewables in the energy system it is necessary to estab- Denmark should take the opportunity to consolidate its lish partnerships and consortia that bring together soci- good position with a world leading role in this develop- ety, research and industry. such partnerships can form ment. the basis for developing and introducing new energy Denmark was one of the early movers in renewable en- technologies, which will always be initially more expen- ergy technologies, and still has a leading role in their de- sive than established technologies. velopment. but to maintain this role, the country needs Partnerships are also natural platforms for renewable to intensify its RD in new renewable technologies: energy demonstration projects, which are important • Denmark should preserve its world leadership in wind during the pioneer and introduction phases of new power; energy technologies. It is obvious that demonstration • a similar position can be gained in the developing field projects are fundamental in gaining public acceptance of wave power technology; of new energy technologies, and will lead to more rapid • polymer solar cells could easily find substantial niche deployment than might otherwise be the case. markets around the world in the short term and en- ter the electrical power production market in the long term;
  8. 8. Risø Energy Report 5 Global drivers for transformation of energy systems 3 Global drivers for transformation of energy systems JOHN M. CHRIsTENsEN, RIsø NATIONAL LAbORATORy, DENMARk; MARk RADkA, UNEP, FRANCE THE sECTION ON gLObAL IssUEs HAs bENEFITED FROM CONsULTATIONs WITH DR. FATIH bIROL, IEA, FRANCE Major global driving forces for energy The three areas are in several ways interlinked, and every development energy policy or programme should ideally promote Energy policies and the development of the energy sector them all—or at least not have negative effects in any have in recent years returned to the forefront of national area. In practice, however, many national policy land- and international political priorities. After the oil price scapes have been dominated by just one of these factors. shocks of the 1970s and early 1980s, when interest in This section of the report analyses how the three drivers energy increased rapidly, falling oil prices and increasing are addressed at the levels of global, regional (EU) and reliance on natural gas and coal, combined with stable Danish energy policy. market conditions in the 1980s and much of the 1990s, The subsequent technical sections of this report do have led to significantly reduced political attention. not discuss these drivers directly, but their focus is on sector development in the 1980s and 1990s focused to renewable energy technologies that have the potential a large extent on reforms of institutions and markets to make positive contributions to addressing all of the and on increased involvement of the private sector, es- three concerns. This is not solely the domain of renew- pecially in the power sector. Concerns about security of able technologies, of course; energy efficiency, nuclear supply decreased as a consequence of stable and expand- and clean fossil technologies all have a role to play, not ing markets, and the focus shifted towards economic ef- withstanding that this role may vary depending on na- ficiency and environmental concerns. tional circumstances. With climate change gradually emerging as a major The driving forces have been summarised in [1] as: global environmental concern, illustrated by the estab- (a) security of energy supply: Oil and gas importers are lishment of the UN Framework Convention on Climate becoming ever more dependent on imports. Rising Change (UNFCCC) and later the negotiation of the kyoto demand for oil in particular heightens concerns over Protocol (kP)—the role of the energy sector as the main whether additions to reserves are keeping pace with emitter of greenhouse gases has brought a new political rising production. The recent dramatic increase of oil rationale for the development of more climate-friendly and gas prices compounds worries about security of energy supply and increased efficiency. supply. Not least, it has caused financial problems in The last couple of years have seen the increasing impor- many oil-importing developing countries and coun- tance in the global energy market of rapidly-expanding tries with economies in transition, where rising bills national economies, notably China and India. Together for imported energy affect the poor in particular. In with other geopolitical developments such as political terms of security of supply, countries and individual changes in some of the major oil producing regions, this consumers face the same challenge: ensuring conti- has produced strong political concerns about future se- nued access to affordable quantities of energy; curity of supply. This has been compounded by simulta- (b) energy for development: In 2002, almost 1.6 billion neous dramatic increases in oil and gas prices. people in developing countries, representing about The role of energy supply as a key facilitator for economic one-quarter of the world’s population, did not have development in the poorer regions of the world has been access to electricity in their homes. An additional 800 increasingly recognised over the last decade. Developing million rely on traditional biomass for cooking and countries are devoting more attention to securing their heating purposes. It is unlikely that the internatio- future energy supplies for a variety of uses: industry, and nally agreed goals of the United Nations Millennium urban uses and for the poorer communities in both rural Declaration for poverty reduction will be achieved and peri-urban areas communities. unless access to modern forms of energy is dramati- global energy policy is therefore dominated by three cally increased in the developing world. Doing so, overriding concerns making them drivers for future en- however, is a great challenge; ergy development activities: (c) climate change: The energy sector is the main con- tributor to global greenhouse emissions. In order • security of supply; to meet the aims of the United Nations Framework • climate change; Convention on Climate Change it is necessary to • energy for development and poverty alleviation. reduce dramatically the carbon intensity of energy production and use. For countries with obligations
  9. 9. Risø Energy Report 5 Global drivers for transformation of energy systems 3 Mtoe 18.000 The IEA concludes that the “business as usual” scenario is not sustainable in terms of neither energy security nor climate change. The IEA’s 2005 World Energy Outlook Oil 16.000 [2] therefore includes an alternative policy scenario in 14.000 which current new considerations are fully implemented 12.000 Gas and energy-efficient technologies are more rapidly de- 10.000 ployed in non-OECD countries. Under this scenario, de- 6.000 Coal mand growth would be reduced by at least 10%, with 4.000 Other corresponding reductions in greenhouse gas emissions 2.000 renewables and reduced pressure on oil and gas supplies. Nuclear 0 Hydro The alternative scenario also shows that the cost of the 1971 1980 1990 2000 2010 2020 2030 required energy efficiency measures and renewable en- Oil, gas and coal together account for 83% of the growth in energy ergy technology would be more than offset by savings in demand between now and 2030 in the Reference Scenario fossil fuel consumption. since this alternative scenario is not anticipating new specific policies aimed at reduc- figure 1. World primary energy demand till 2030: the ”business as usu- ing greenhouse gas emissions, or other more ambitious al” scenario. efforts in security or development, it can be argued that further cuts in both fuel demand and greenhouse gas under the kyoto Protocol this process has already emissions could be achieved if the political will were been initiated—although at a different pace in differ- present. ent countries. This notwithstanding, even aggressive geopolitical drivers notwithstanding, development in emission reduction policies do not obviate the need the coming decades will face a major challenge in find- for increased impetus for adaptation measures, mainly ing enough investment capital to meet the anticipated through technology support and international coopera- growth in demand—whether under “business as usual” tion. or an alternative path. Many developing countries, es- pecially the rapidly-growing economies of China, India Global energy development and priorities and parts of south-east Asia, will need to invest heavily The following section will briefly assess how these three in new energy supply, at the same time as many Euro- concerns manifest themselves at the global level. pean countries and North America will be replacing their The International Energy Agency (IEA) in its World En- aging energy infrastructure. This will in itself represent ergy Outlook for 2005 [2] predicts that if governments a significant challenge to the national and internatio- stick to current policies in the energy sector over the nal investment institutions. A much smaller but no less coming decades, global energy demand will be more challenging task will be to ensure that capital is available than 50% higher by 2030 (Figure 1). This will evidently for energy investment in the poorer parts of the world, clearly present significant challenges in terms of both especially sub-saharan Africa. energy security and climate change. key investment figures from the IEA World Energy In- The increase in demand will be combined with a marked vestment Outlook 2003 [3] are: shift in the relative importance of the different country groupings: the OECD countries are predicted to decrease • Us$16 trillion needed over the next 30 years for energy their share of global energy demand by around 10%, sector investment; while developing countries will increase their share by • Us$10 trillion (60% of the total) needed for electricity almost the same amount, overtaking the OECD coun- investment; tries in terms of share of global demand. This primarily • approximately Us$5 trillion needed for developing reflects the rapid growth expected in countries like bra- countries and transition economies (CEITs), where zil, China and India, but it should be stressed that OECD risks are perceived as high and private investment is per-capita energy consumption will remain significantly currently declining. higher than that of the developing countries. The IEA expects that the increase in consumption will in- In this brief section it is not possible to present details of creasingly be met by fossil resources located outside the alternative development paths at the global level, but it OECD countries. Most will come from the Middle East, is clear that every country and region will need to play its North Africa and Russia, plus a few other countries. part in changing the current energy development path. Meeting the projected demand growth mainly from fos- some of the general issues affecting energy are outlined sil resources will inevitably lead to a significant increase by the World business Council on sustainable Develop- in greenhouse gas emissions: up to 50% by 2030. This ment (WbCsD) in its analysis Pathways to 2050 [4]. This would accelerate existing climate change, and create an study identifies five “mega-trends” which highlight the energy infrastructure that would be unable to deal with main areas where action is required to achieve long-term the climate issue even in the long term. sustainable development:
  10. 10. Risø Energy Report 5 Global drivers for transformation of energy systems 3 1. Electricity generation: All predictions forecast that electricity will increasingly act as the final energy car- rier; above, plus efforts to secure long-term stable energy supplies and increase the robustness of energy sys- tems to cope with emergencies. 2. Industry and manufacturing: Together with electri- city generation, the manufacturing sector presents Figure 2 and Figure 3 clearly show the challenges facing the main challenge in carbon emission reductions for the EU countries. the short and medium term; Figure 2 shows clearly that without dedicated policy ac- 3. Mobility: The need for transport and mobility is in- tion over the coming decades, EU dependence on energy creasing all around the world. To address this, there is imports would increase significantly, especially for natu- an urgent need to develop new transport and engine ral gas and solid fuels, while the import ratio for oil is technologies and to find ways of stimulating changes already very high and increasing. This is in view of the in needs and preferences related to mobility; increasing prices and recent events with external supply 4. buildings: Existing technologies for energy-efficient disturbances not considered sustainable. buildings need to be used on a much larger scale. Ap- Figure 3 shows that at the current rate of progress, Europe pliances must be made more energy-efficient. A major is a long way from meeting its agreed targets for green- challenge will be to cope with rapid urbanization in house gas emission reductions, and certainly not putting Asia and Africa; in place a trend which would comply with the necessary 5. Consumer choices: Changes in consumer behaviour strengthened commitments that will be needed after the need to be part of future energy strategies, although first kyoto commitment period ends in 2012. this does not have to imply restrictions on energy The new strategy is therefore a direct response to the glo- services. This area is politically sensitive and has re- bal challenges as seen from an EU perspective. Its policy ceived limited attention to date. focus will be on: • improving energy efficiency and increasing the use of EU strategic approach renewable energy sources, using a broad span of policy The following sections will briefly discuss how the global tools including national targets, standards, and mar- energy challenges manifest themselves at regional level, ket incentives such as emissions trading. The existing in the European Union, and especially in Denmark, as short-term target for the share of renewable energy in an example of actions relevant to individual countries. overall energy use (10% by 2010) and in electricity pro- The European Commission recently launched a new duction (22% by 2010) will need to be revised in the “strategy for sustainable, competitive and secure energy” longer term along with potential mandatory measure [5] that sets out strategic visions for European energy de- in the efficiency area; velopment in the coming decades. • creating a more competitive market for electricity and The EU strategy reflects the global concerns referred to gas in the EU member states is seen as an important above: energy security, climate change and the need for way to increase the overall efficiency of the system, major infrastructure investment. In addition the full and is expected to reduce consumer prices. This is cur- implementation of an open and competitive internal rently constrained by inadequate interconnections and European energy market is seen as an important tool by member states’ desire to maintain supply security at in achieving these long-term objectives. A practical re- the national level; striction, however, is the reluctance of many countries to treat energy security as a regional, and not purely na- tional, issue. The strategy also recognises that the EU should help de- 100% veloping countries make the best use of energy for devel- 80% opment and access. The strategy identifies three main objectives for energy 60% policy in European countries: 40% 1. sustainability: Developing renewable energy and other low-carbon energy sources, particularly alterna- 20% tive transport fuels; curbing demand; and playing a 0% leading role in the global climate change effort; Total Oil Natural gas Solids 2. Competitiveness: Creating an integrated electricity 2000 2010 and gas market, supplemented by policies to stimu- 2020 2030 late investment in new clean supply technologies and energy efficiency, and being a technology leader in general; figure 2. Projections of the fractions of energy from different sources that 3. security of supply: Reducing Europe’s increasing the EU 25 will need to import if no significant policy changes are made import dependency through the actions referred to over the next 25 years. [5]
  11. 11. 10 Risø Energy Report 5 Global drivers for transformation of energy systems 3 GHG emissions (base year = 100) 100 98.3 98.4 90 94.5 93.2 80 92.0 1990 1995 2000 2005 2010 EU-15 trends EU-15 target (Kyoto) EU-15 with existing measures projections EU-15 target incl. Kyoto mechanisms EU-15 with additional measures projections Target path 2010 figure 3. Greenhouse gas emissions projections and kyoto targets. • strengthening supply security through political dia- priority in its new development cooperation agreement, logue and partnerships with major oil and gas produc- which will provide much larger and better-sustained ing countries, and by re-examining the role of nuclear support for energy and development needs. power. The latter is an area with significant divergence among the member states, so it has no common EU National strategies: Denmark policy. In 2005 the Danish government presented a new “En- ergy strategy 2025” [6] outlining the country’s major en- The challenge of energy for development is addressed ergy challenges over the next two decades, and possible separately through new EU instruments. The first of ways of meeting them. these will be a new Energy Facility with three priorities: since Denmark is part of the EU and has been one of the active countries in the articulation of the EU strategy • delivery of energy services: The largest financial con- discussed above, it is not surprising that the main chal- tribution from the Facility will be spent on improv- lenges are similar to those of the EU as a whole, though ing rural people’s access to modern energy services, naturally with a national perspective: particularly in Africa. Priority will be given to people in areas that do not yet have electricity or gas. Pro- • security of supply; posals should ensure that investment is economically, • climate change; socially and environmentally sustainable; • economic growth and competitiveness. • creating an enabling environment: Where appropriate governance conditions are not in place for delivery-ori- The strategies used to address these challenges are simi- ented intervention in the field, up to 20% of the Facility lar to those of the EU as a whole, again with some spe- will support the development of an enabling environ- cific Danish angles. ment for the energy sector based on good governance Renewable energy, especially wind, is already a major principles. The Facility will promote the implementa- contributor to the Danish power supply with approxi- tion of sound national energy policies and strategies, mately 24% in 2003. If district heating is also taken into improve the institutional, legal and regulatory frame- consideration, the percentage of renewable energy is even work, strengthen the capacity of key stakeholders, and higher, due to the use of agricultural residues. Denmark’s improve monitoring and evaluation capacity; ambition is that the share of renewable energy should • supporting future large-scale investment programmes: grow to 35-40% over the next 20 years, especially if new Up to 20% of the Facility resources will be devoted to initiatives on energy efficiency are fully implemented. the preparatory activities needed for future large-scale Transport is singled out as a special challenge. Energy investment in cross-border interconnections, grid ex- use in the transport sector has increased steadily, com- tensions and rural distribution, preparing them for fi- pared with stabilisation or even decrease in other sectors. nancing by international finance institutions. since Danish taxes on cars and fuel are already among the highest in the world, additional taxation on its own In parallel, the European Commission is working with is not believed to be a viable instrument. Instead, chang- partner countries to integrate energy development as a ing the tax system to better reflect the energy consump-
  12. 12. Risø Energy Report 5 Global drivers for transformation of energy systems 11 3 tion and environmental loads of products and industries could be a way to stimulate the development of more efficient cars and alternative fuels. tional priorities. Finding a global energy development path that satisfies all three concerns, especially climate change, is a major challenge that requires coordinated In the climate area the above efforts will contribute but action from all countries. The EU has shown leadership in addition a number of specific instruments are being in mitigating climate change, and now its new energy implemented and will be expanded. These include the strategy is addressing the other two areas of concern. flexibility mechanisms known as Joint Implementation (JI), Clean Development Mechanism (CDM) and Emis- Recommendations for Danish society sions Trading (ET), including expansion of the quota sys- During the 1990s Denmark was a leader within the EU tem to include more sectors and entities. on climate issues and renewable energy development, Increased integration and market orientation of the but new political priorities in recent years have changed Danish power and gas market is also seen as a way to this position somewhat. increase the technical and economic efficiency of the With a significant share of renewables in its power sup- energy system. ply and domestic oil and gas resources, Denmark is in a good position to deal with energy security issues in the Conclusions short and medium term. Long-term resource availability Political, economic and environmental drivers have remains a concern, especially in the transport sector, pushed energy to the forefront of international politics which has been growing rapidly with no clear policies in in recent years. There is increasing concern about secu- place to change the situation to reduce its dependence rity of energy supply, climate change, and the role of on oil. energy in alleviating poverty. These three concerns are This seems an opportune moment to stimulate the de- interlinked in many ways, and it is desirable that indi- velopment of bioenergy resources, especially biofuels, vidual policies and programmes should benefit them as a way to deal with both energy security and climate all—or at least avoid harming any of them. issues at the same time. some of the following chapters As the previous sections have shown, however, decisions will expand on this. on energy policy are subject to many regional and na-
  13. 13. Risø Energy Report 5 Renewable energy outlook for selected regions 1 4 Renewable energy outlook for selected regions POUL ERIk MORTHORsT, RIsø NATIONAL LAbORATORy, DENMARk; DR. gAO HU, ENERgy REsEARCH INsTITUTE (ERI) OF NATIONAL DEVELOPMENT AND REFORM COMMIssION (NDRC), CHINA; DR. MARIO RAgWITz, FRAUNHOFER INsTITUTE FOR sysTEMs AND INNOVATION REsEARCH, gERMANy Introduction • improved economic and social prospects especially for Renewable resources, once almost insignificant, are now rural and isolated areas.” gradually expanding their role in global energy supply. In 2004, renewable energy from all sources accounted similar benefits are to be expected all over the world, for approximately 13% of global primary energy supply. giving rise to global, regional and national initiatives The biggest contributors were large hydropower (ap- promoting new renewables. proximately 2%) and biomass (a little more than 10%). In south Africa, for example, the Johannesburg Renewa- Around 1% of global primary energy came from new ble Energy Coalition (JREC) was established in 2002. The renewable sources such as photovoltaics, solar thermal, JREC “focuses on international, regional, and national wind power, small-scale hydropower, geothermal, biogas political initiatives that help foster an enabling environ- and new biomass (Table 1). ment for the promotion of renewable energy” [4]. by but while the two large contributors are increasing only now 87 countries have joined the JREC and still others slowly in absolute terms, or even staying constant, con- have expressed an interest in participating. tributions from new renewable sources are expanding In 2005 the Renewable Energy Policy Network for the rapidly. Today, the fastest-growing energy technology 21st Century (REN21) was launched in Copenhagen is photovoltaics, which over the last five years has in- to provide a forum for the development of renewable creased by 35% annually—albeit starting from a very low energy sources. The objective of REN21 is “to allow the level. Other new renewables are following the same line: rapid expansion of renewable energy in developing and over the same period wind power has increased by 28%, industrial countries by bolstering policy development biodiesel by 25%, and solar hot water heating by 17%, and decision-making on sub-national, national and in- all calculated as average annual growth rates [1]. ternational levels” [5]. Within the EU, the non-binding targets for the develop- Technology EJ Share ment of renewable sources in the EU-25 countries give Hydro 10.0 2.1% general guidance to member states‘ policies on support- Geothermal power 1.9 0.4% ing renewables. These targets are about to be extended Wind power 0.3 0.1% to 2020. The rest of this chapter describes in more detail the sta- Solar power 0.005 0.001% tus of renewables, including policy, in three important Geothermal heat 0.2 0.0% regions: the EU, China and the UsA. Solar heat 0.2 0.0% Biomass 48.3 10.4% Policy status and development of renewable Total renewable 60.9 13.1% energy in Europe Total global primary In the last ten years Europe has seen a rapid development energy consumption 465.4 100.0% of renewables, and is now in the lead in wind power, Table 1. The contribution of renewables in global primary energy sup- photovoltaics, biomass and biogas. Although only a few ply. [2] countries have actually been driving the development of renewables, policies in Europe have been reasonably The reasons for the success of new renewable sources are stable and continuous, and this has helped to sustain many, amongst these not least an important policy sup- fairly rapid development. port. A recent European Commission communication back in 2001 the European Commission established on support for electricity from renewable energy sources non-binding targets for renewable energy sources in the [3] says: EU-15, and in 2004–05 these targets were extended to “Increasing the share of renewables in EU electricity has the new member states of the EU-25. Although these tar- well recognised benefits, in particular: gets are not binding, they play a large part in driving • improved security of energy supply; renewable policies in the individual member states. The • enhanced competitive edge for the EU in the renew- overall targets are for renewables to cover 12% of the able energy technology industries; EU’s gross inland energy consumption by 2010 [6], and • mitigation of greenhouse gas emissions by the EU 21% of electricity consumption by 2010 [7]. power sector; In 2003 renewables provided approximately 13% of the • mitigation of regional and local pollutant emissions; electricity consumed in the EU-25, while approximately
  14. 14. 14 Risø Energy Report 5 Renewable energy outlook for selected regions 4 Electricity generation [TWh/year] 100 Wind off-shore 80 Wind on-shore Photovoltaics 60 Geothermal electricity Biowaste 40 Solid biomass Biogas 20 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 figure 4. The development of electricity generation from new renewables in the EU-25 from 1990 to 2003. [8] 6% of total primary energy was supplied by renewables. Feed-in tariffs have been highly effective in the deploy- Figure 4 shows the historical development of electricity ment of wind power in germany, spain and Denmark, generation from new renewables. and also for photovoltaics in germany. Nevertheless, the A number of different instruments are presently used in effectiveness of the support system depends heavily on the member states to support the development of renew- the specific design of the scheme. Other schemes might able energy. Quota obligations with tradable green certif- be just as effective in particular cases, for instance ten- icates, feed-in tariffs, tender procedures and tax measures dering in the case of offshore wind farms. dominate national support systems at the moment. Not only are the support schemes quite different be- At present, most support schemes are national in scope, tween member states, but the level of support also varies and cross-border trade of green power or green certifi- significantly between countries. To a certain extent this cates is limited. The only exception was a system under may match the different opportunities for renewable which the Netherlands imported green certificates; this sources in the countries, but it is not always the case, as had some adverse effects, not least because most of the Figure 6 shows for biomass power generation. certificates came from existing plants, and the system Figure 6 makes it clear that levels of support do not was abandoned after a few years. The general picture of necessarily match long-term generating costs. In a EU support mechanisms is rather fragmented (Figure 5). number of countries the support levels are either below Figure 5 shows that the most common support system is or significantly above generation costs, signalling that the feed-in tariff, followed by quota obligation schemes there still is room for improvement of support policies accompanied by green certificates. According to the re- for renewables in the EU. cent EU communication on support for renewable sour- Although the EU has considerably increased energy pro- ces [3] the most effective scheme in general is the feed-in duction from renewables, significant potential still exists tariff because investors perceive this to have the lowest across the member states (Figure 7). risk. figure 5. Renewable electricity support systems in Europe. The “old” EU-15 countries are on the left and the “new” EU-10 countries plus Bulgaria and Romania on the right. [8] Feed-in tariffs Quota obligation Feed-in tariffs Quota obligation FR LA DK EE SI PT BG DE LU SE CZ LT ES HU GR NL IT UK RO CT PL AT BE PL SK Certificate systems Certificate systems UK MT IE FI CZ Fiscal SI Fiscal FR incentive incentive Tenders Tenders
  15. 15. Risø Energy Report 5 Renewable energy outlook for selected regions 15 4 200 180 Minimum to average generation costs [€/MWh] Average to maximum support level [€/MWh] * System gives the option for co-firing 160 140 120 100 80 60 40 20 0 AT* BE* DK FI FR DE GR IE IT* LU NL* PT ES SE UK* figure 6. Support levels compared to long-term marginal generating costs for biomass electricity based on forestry residues in the “old” EU-15. [8] Except for traditional large-scale hydro, significant po- EU are dominated by just a few countries; if the EU is to tentials1 exist for all renewable sources. biomass and reach its indicative targets for renewables, more coun- wind power (both onshore and offshore), especially, tries will have to contribute significantly. have great scope to contribute to the EU’s energy supply. A long-term vision for renewables development in the but although the potential is there, will the current rapid EU is needed, including long-term milestones for each expansion of renewables in the EU continue, and what of the member states and an outline of how the support direction will future EU policy take? systems for renewables should develop. The integration According to the EU itself, there is no need at present of renewables in Europe’s energy systems should be stud- to change EU policy in order to meet the 2010 targets. ied more thoroughly, especially the possibilities of estab- What is needed is closer links between national policies. lishing stronger interconnectors between member states, In the medium term this should create clusters of coun- to facilitate the cross-border trade of green power. tries or regions with similar support regimes, which in turn will provide benefits such as cross-border trade in Renewable technologies in China renewable energy production and green certificates. Renewable energy resources play a key strategic role in The EU has huge potential for developing renewable en- maintaining the balance between energy supply and ergy sources, and has established a strong foundation for demand in China. At present, traditional and non-com- this in recent years. Nevertheless, renewables within the mercial renewable energy, such as fuel wood, provides 1 Potentials are calculated using the Green-x model, which takes into account both technical and economic considerations figure 7. Actual (2004) and additional potential by 2020 for renewable electricity in the “old” EU-15. RES-E – Electricity generation potential [TWh/year] TWh/year 0 50 100 150 200 250 300 300 Biogas (Solid) Biomass 250 Biowaste 200 Geothermal electricity Hydro large-scale 150 Hydro small-scale 100 Photovoltaics Solar thermal electricity 50 Tide Wave Wind onshore 0 AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK Wind offshore Additional potential 2020 Achieved potential 2004
  16. 16. 1 Risø Energy Report 5 Renewable energy outlook for selected regions 4 China with the equivalent of more than 300 million tons of coal (TCE) annually. Roughly 328 TWh of electricity comes from hydropower stations, accounting for 17% • co-sharing system to cover extra costs of renewable en- ergy productions; • a special fund for renewable energy development; of China’s total electricity output. Excluding traditional • favourable loans and tax policies for renewables. uses of biomass, China’s total use of renewable energy in 2004 was more than 130 million TCE, accounting for 7% The Renewable Energy Law is a high-level policy of the nation’s total energy consumption. [9] that needs to be backed up by detailed and practical China possesses plenty of hydropower, biomass, wind measures. so far, several of the most urgent of these and solar energy resources, which could provide a sound have been worked out. One example is the feed-in ta- basis for large-scale development of renewables. by 2004, riff for electricity produced from biomass. The tariff has the installed hydropower capacity was 108 gW, which is two components: a benchmark in line with generating only 25% of the economically exploitable potential. costs at Chinese coal-fired power stations fitted with flue Despite its huge inland area and long coastline, China is gas desulphurisation (FgD), in the range €0.023–0.044 still in the initial stages of exploring its wind resources. /kWh, and a subsidy of €0.025 /kWh. by the end of 2004, only 43 grid-connected wind farms Tariffs for grid-connected wind power are set through a and a total capacity of 760 MW had been installed in bidding process. For other solar, wave, tidal and geother- China. Moreover, China has only fully mastered the mal power projects, which so far remain small in scale, manufacture of wind turbines with capacities up to 750 prices are in principle set by the government on the basis kW, compared to the multi-MW machines available in of costs plus reasonable profits. Europe and the UsA. The extra cost of grid-connected electricity from renew- Two-thirds of China‘s land area has more than 2,200 able sources, plus the costs of extending the grid, and hours of sunshine a year. solar water heaters (sWHs) operating and maintenance costs for stand-alone renew- are extensively used by both urban and rural house- able-energy power stations in remote areas, will be shared holds. The country also has 30 MW of solar photovol- by all power consumers through a small surcharge on taic systems, of which half are used to supply domestic the price of electricity. electricity in remote rural areas and another half are To give the market clear signals on what kind of tech- used in commercial and industrial areas as power sup- nology will be encouraged, the government has issued ply. grid-connected photovoltaic systems on roofs and a guidance Catalogue on renewable energy industry. major buildings are mostly pilot projects in a few big Other detailed regulations for practical implementation cities. of the law, such as quota obligation for major genera- Most of China’s biomass energy is used for heating in tors, and incentive instruments, are in preparation and conventional furnaces and boilers. New technologies, are scheduled to be issued soon. The 11th Five year Plan such as gasification, liquid fuels, and biomass for power (2006–2010), to be issued shortly, will also help to guide generation, are developing only gradually and are still the development of renewable energy in the near term. small in scale. In line with the new law, central and provincial govern- ment agencies are required to make plans to develop re- Policies and plans for renewable energy newable energy. The central government has created a The Chinese government has for many years seen renew- draft plan for medium- and long-term renewable energy able energy as important. In the 1980s China formulated development (up to 2020), and is expected to issue it many policies and programmes to support the develop- before the end of 2006. The plan proposes to increase the ment of renewable energy in rural and poor regions. In fraction of renewable energy (including large hydro) in the 1990s the government announced several policies to the country’s energy mix from its present level of 7% to encourage renewables generally, but these proved unsus- 10% by 2010, and to 16% by 2020. tainable; they were either applied only in limited areas, Hydro, wind, solar and biomass power generation will be or were too general and lacked concrete systems for im- the dominant technologies. by 2020, the plan is to in- plementation. crease hydro capacity to 300 gW, and wind and biomass In 2003 the government began work on a new Renewable power capacity to an ambitious 30 gW each. grid-con- Energy Law, which came into force on 1 January 2006. nected photovoltaic capacity should reach more than 1 As well as highlighting the strategic significance of re- gW by 2010, mainly in large cities. newable energy, the new law attempts to remove barriers to development, and through institutional innovations The future of renewables in China to create a market atmosphere conducive to renewables. As the world’s second-largest producer and consumer of Actions include: energy, China is experiencing great energy-related pres- sures because of its huge population and rapid economic • identifying national targets; development. • priority and preferential tariffs for grid-connected re- With limited oil and natural gas reserves, China is one of newables schemes; the few countries to depend mainly on coal. Nearly 90%
  17. 17. Risø Energy Report 5 Renewable energy outlook for selected regions 1 4 of the energy for power generation comes from coal, which also accounted for 67% of the national energy mix in 2004. such heavy use of coal has severely dam- of environmental damage, are therefore one of the main determinants of the level of support; • federal renewable energy policies are complemented aged the environment. by state policies which often differ considerably from Renewable energy resources are important for China’s sus- one another; tainable development, and have the advantage that they • voluntary green power programmes, which allow con- are located mainly in rural regions. Nearly 20 million sumers to support renewable energy by paying a sur- people in remote and poor regions do not yet have access charge on their electricity bills, are becoming increas- to electricity, and it is economically viable as well as desir- ingly popular. able to use renewable energy to help close this gap. Electrification in rural areas promotes local development, Research and development in renewable technologies reduces poverty and increases the quality of life. Accord- are supported at federal level. The federal government ing to the medium- and long-term renewable energy also sets the Production Tax Credit (PTC), a subsidy that plan, this will be achieved through a combination of off- has significantly influenced the development of renew- grid generation from renewable resources, and extension able technologies, especially wind power. Although the of the existing grid. As well as facilitating improvements PTC is in principle good for wind power, the “stop-and- in the energy infrastructure and environment protection go” way in which it has been implemented have cre- that are critical for China’s development, renewable en- ated significant uncertainty in the industry and delayed ergy can therefore also play an important role in rural investment decisions (Figure 8). The PTC is also closely development and in creating a harmonious and well-off intertwined with Us tax policy, making it difficult to cal- society. These strategic points have been adopted by the culate the actual level of support for renewable technolo- government. gies [11]. Challenges remain for the future development of renew- With the exception of California, not much RD on able energy in China. For instance, domestic manufac- renewable technologies is supported at state level. How- turing capability is quite weak, particularly in the wind ever, more and more policy initiatives to support renew- industry. The current Wind Concession Programme re- ables are being taken at state level. broadly, four kinds of quires at least 70% of components to come from Chinese market-push programmes are being pursued [10]: quotas companies, which benefits industry in the long term and for renewables, subsidies, utility and information pro- even may influence development of wind power in the grammes (Table 2). short-term. Chinese production capacity for photovoltaic cells and Policy measure Number of states modules is booming and has reached nearly 100 MW per Renewable portfolio standard 18 plus Washington DC year. However, both the silicon needed as a raw material Net metering for utilities 48 and the market for photovoltaic devices depend heavily Disclosure programmes for 24 on foreign countries. RD activities too, in areas such customers as grid connection for wind power and roof-mounted Public benefit funds for financing 16 photovoltaic modules, need to be strengthened to sup- port large-scale development. Most important of all, the Table 2. Renewable energy policy measures in place in 2000 at state set of policy instruments needed to support the law re- level. [12] mains incomplete, and this will inevitably slow down the development of renewable energy. Despite these issues, renewable energy in China has a prosperous future. Encouraging factors are the govern- MW /Year ment’s proven commitment to renewable energy, and 3000 USA the critical problems affecting fossil-fuel energy systems 2500 PTC expiration in China. 2000 Spain Renewable technologies in the USA 1500 The UsA has been developing and deploying renewable 1000 energy technologies since the first oil crisis back in 1973. Policies and support for renewables, however, have been 500 subject to discontinuities that have hindered progress. 0 Us policy has been characterised by three main issues 1983 1987 1991 1995 1999 2003 2008 [10]: • the basic policy rationale is to ease the development of figure 8: The effect of the Production Tax Credit (PTC) on the develop- renewables by avoiding market failures and removing ment of wind power in the USA, compared to the much more stable commercial barriers. Externalities, including the level support regime in Spain.
  18. 18. 1 Risø Energy Report 5 Renewable energy outlook for selected regions 4 The Renewable Portfolio standard (RPs) is similar to the tradable green certificates used in Europe: it basically in- troduces a quota of renewables, typically expressed as a In summary, renewable development in the UsA has been affected significantly by the stop-and-go policies pursued by the government. This is true not only for minimum share of power production. the amount of renewable energy used, but also for the Net metering specifies the conditions under which util- development of the renewables industry itself. several ity companies must buy electricity from their customers. times—especially in wind power and photovoltaics—the This includes installations where the meter is allowed to UsA has taken the lead in early development, but do- run backwards for part of the time, which is especially mestic manufacturing has not been able to keep up with relevant for photovoltaics on buildings. developments abroad. The result is that the UsA has low Disclosure Programmes ensure that consumers have in- market shares in many renewable technologies, even formation about the technologies and fuels used to gen- though the country has a significant domestic demand. erate their electricity, while Public benefit Funds make The UsA has a large potential for new renewable energy finance available for renewables and other energy pro- capacity, and perhaps the recent surge in wind power grammes [10]. heralds a better future for the Us renewables industry. Four types of renewables are currently important in the UsA: wind power, photovoltaics, biofuels for transport, The future of renewable energy sources and biomass for power and heat. As mentioned above, What will be the global role of renewables in the long the development of wind power has been seriously af- run? Can renewables contribute a significant share of fected by delays in extending the PTC. In the 1980s future energy supplies, or will they remain a niche area and early 1990s the UsA was in the lead of developing compared to conventional energy? successful develop- wind power. Discontinuities in support for wind power ment of renewables requires at least six issues to be care- caused problems for Us equipment manufacturers, how- fully considered: ever, and by the end of the 1990s only one wind turbine manufacturer was left in the UsA: the wind energy divi- 1. stability and continuity in government support poli- sion of Enron, which later became gE Wind. cies are of the utmost importance for the develop- Recently the development of Us wind power has soared, ment of renewable technologies. Many of these tech- with more than 2,400 MW installed in 2005, and the nologies have large upfront investment costs, which country is now the world’s largest market for wind increase the risk for investors, even though they have power. The main reasons for this success are that wind low costs for fuel, operation and maintenance. To power is getting closer to being economically competi- make the risk premium as low as possible it is impor- tive with conventional power generation, and that more tant to have a long-term framework for support. The timely extensions of the PTC have created a more stable importance of this is clearly seen by comparing the commercial environment. situation in Europe and the UsA. The net metering programmes introduced by a number of 2. Long-term targets for renewables development signal states have also paved the way for the rapid development political willingness to increase the share of renew- of photovoltaics since the mid-1990s. between 2002 and ables in the energy mix, which increases the long- 2004 a number of states also implemented specific “set- term confidence of investors. both the EU and China asides” for photovoltaics in their RPss, resulting in the are sending out strong signals in the form of goals es- installation of 75 MW of grid-connected photovoltaic tablished for renewable energy, whilst the UsA as yet capacity during the period 1999–2003 [11]. Although the shows no such clear picture at Federal level (although market continued to grow, the Us photovoltaics manu- several states have clear policies). facturing industry suffered a downturn in 2003 and sev- 3. An appropriate level of payments should be set. subsi- eral manufacturers reduced their production. At the end dies that are too low will result in no development of of 2004 Us manufacturers held only 11% of the world renewable energy. subsidies that are too high simply market for photovoltaics, compared to a peak of 46% in increase the cost of development. In the worst case, 1995 [11], while german and especially Japanese manu- the resulting lack of competition could keep renew- facturers have increased their market shares. able energy costs high, by hindering renewable tech- Tax incentives have been used intensively to promote the nologies to slide down the learning curve towards development and use of biofuels in the UsA. In 1979 the lower prices. Energy security Act created a federal ethanol tax credit 4. The development in renewable energy should be re- of up to 60 cents per gallon, proportional to the percent- viewed every year, and support policies adjusted if age of ethanol in the fuel, and in 2004 this was extended necessary. until 2010 [11]. In 2006 the UsA overtook brazil as the 5. It is very important that new renewable technologies largest producer of ethanol in the world. are assured access to the grid, and that plants are built biomass for power and heat still constitutes more than in the right places. Lack of planning about where to 90% of all renewable energy used in the UsA, but biomass site investments can hinder development, as in the use saw virtually no increase in the period 1996–2004. case of wind power in the Uk.
  19. 19. Risø Energy Report 5 Renewable energy outlook for selected regions 1 4 6. Cost-sharing mechanisms are important for renew- able energy development in developing countries like China, since large subsidies are needed in rural and oil and gas prices, pave the way for increased develop- ment. More countries are becoming aware of business opportunities in renewables, and the environmental poor areas. benefits are also important driving factors. Renewable energy is now growing rapidly in the EU and As the previous sections have shown, renewable technol- the UsA, and the signals for faster growth in China are ogies are capable of delivering a significant share of the promising. Nevertheless, the development of renewable world’s energy. The increasing efficiency and reliability energy remains vulnerable, and a number of barriers of renewable technologies, alongside high prices for oil could slow or even stop the process. It is important to and natural gas, pave the way for much greater use of tackle these barriers at an early stage, and to set up long- renewables. term goals and coordinated support schemes for renew- A number of renewable technologies are not yet eco- ables. Renewables will remain a niche area of the world’s nomically mature, however, and need a period of sup- energy supply for some years, but in the long run they port before they can be considered economically com- can make a significant contribution that should not be petitive with conventional fossil fuel technologies. A missed. value for carbon emissions placed on fossil fuels would assist in this matter. Recommendations for Denmark Experience in Europe has shown that a strong renewable Denmark was one of the early movers in renewable en- energy industry can develop, given a climate of trans- ergy technologies, but current work needs to be intensi- parent payment mechanisms and long-term political fied if the country is to retain its leading role. targets. This contrasts with the UsA, where the domestic For new renewable technologies, continuity and stability renewables industry has suffered under stop-and-go sup- in support policies are important if the investor risk— port policies. The Chinese experience seems promising, and thus costs—are to be kept low. The Danish govern- with its strong long-term goals and huge efforts to ex- ment should develop a long-term strategy to support pand the use of renewables and create a domestic indus- renewables. The strategy should contain medium- and try. Only the future, however, will show whether China long-term milestones for reducing costs, so that manu- can sustain this enthusiastic start. facturers would know at an early stage what they would In the long term, renewable energy will be important in have to live up to. achieving national and international targets for cutting Danish politicians should also develop long-term targets carbon dioxide emissions, ensuring security of supply for renewables in the national energy mix. Long-term and contributing to economic growth worldwide, in- goals signal political willingness to increase the share of cluding rural areas. To achieve this, renewables will need renewables in the energy supply, which in turn increases to be fully integrated into the mainstream global energy the confidence of investors. markets. A domestic market for renewable technologies is impor- tant for Danish manufacturers. This is not so much in Conclusions terms of turnover, but mainly because the home market Although their contribution to global energy supply is allows manufacturers to get rapid feedback from their still small, new renewables are expanding rapidly, with customers. For the same reason it is important to have annual growth rates above 25% for technologies such as domestic demonstration facilities that allow manufac- photovoltaics and wind power. The increasing efficiency turers to test new products. and reliability of renewable technologies, alongside high
  20. 20. Risø Energy Report 5 Innovation in energy technologies 21 5 Innovation in energy technologies PER DANNEMAND ANDERsEN, MADs bORUP AND MICHAEL HOLM OLEsEN, RIsø NATIONAL LAbORATORy, DENMARk Introduction of business clusters, models for the innovation process, Innovation in energy technologies is high on the politi- the role of demonstration projects in innovation, the cal agenda in many countries. President bush, in his state concept of learning curves and the possible role of ven- of the Union speech in January 2006, said that the UsA ture capital in innovation. Finally, we will discuss the is “addicted to oil”, and later announced a 22% increase changed framework for energy technology innovation in clean-energy research at the Us Department of Energy in Denmark. [1]. The European Union in its seventh Framework Pro- gramme is expected to increase energy RD budgets, not only for reasons of energy and climate policy, but also to Innovation and innovation systems help increase the EU’s overall competitiveness (the “Lis- Innovation can be defined generally as changes in ways bon Agenda”) through initiatives such as the Competi- of doing things. The process of innovation is often tiveness and Innovation Framework Programme (CIP). complex and uncertain. It involves both technical and In this sense “Lisbon” has become as relevant as “kyoto” commercial uncertainties and risks. One way to miti- in European energy technology policies. gate these risks and uncertainties is to share the inno- As argued elsewhere in this report, there is a long-term vation process with other stakeholders—not just other need for introducing new and renewable energy technol- companies, but all the different actors that make up the ogies to the energy markets. It is generally acknowledged surrounding environment or framework. This means that this need will increase over the decades to come. that technological innovation is not solely a matter of A recent report from the OECD states that innovation technology, manufacturers and markets. Policy makers, in energy technologies has widespread implications, not analysts and innovators also have to address the wider only for OECD members’ energy policies but also for framework or environment in which companies operate, their economies in general [2]. As a result, understand- and in which innovation and new technologies emerge. ing how to stimulate innovation in energy technologies The concept of an “innovation system” takes this broad is of growing importance. view of the process of innovation. In the following several important aspects for an im- An innovation system can be defined as the “elements proved understanding are discussed: the concept of in- and relationships which interact in the production, dif- novation and innovation systems in general, the role fusion and use of new and economically useful knowl- figure 9. Linkages within a national system of innovation [4]. Framework conditions Competition, labour market and capital conditions Companies Knowledge Institutions Other Juvenile regulation, education councils and programmes Customers • Universities, higher education Producer and sector research institutions • Technology promotion centres Suppliers • Knowledge networks • Clusters • Incubation centres IT-infrastructure and application

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