REM201 – RENEWABLE ENERGY SYSTEMS (A)

MODULE ASSIGNMENT ANSWER - QUESTION 1:

“Discuss how the governments and market forces could employ the issues of
climate change, security of supply and the ongoing economic slump to promote
the uptake of renewable energy systems by industrial, commercial and domestic
consumers”

Paul Ogle

Kingston University ID: 1059295

Submitted 29 December 2010

1
Nations are currently in a situation whereby their Governments can lead a universal drive in
reducing global Green House Gas (GHG) output levels by enormous amounts. There is currently a
junction, whereby the combination of public scrutiny over energy supply security, the continuing
global economic slump and on-going climate change information painting potentially dire
consequences, form a unique, critical period whereby major environment saving actions need to be
implemented now. This drive must be born primarily by Western nations and needs to be
aggressively actioned through meaningful multi and single Government policy initiatives,
especially for lagging prominent EU countries such as the UK.

The Issues and why to Act Now

PC Ruffles (RAE 2006 p.4) paints a vivid picture when he states “For the first time since the start of
the Industrial Revolution, the availability of cheap and reliability energy is no longer assured”.
World wide oil and gas supplies have peaked in 2010 (Singh 2010 p3). As locally sourced
hydrocarbons reduce in the UK for example, this means by 2030 the vast majority of oil and gas
will be imported from less stable nations in the Middle East and North Africa (Singh, 2010 p 4).
Similar numbers can be expected in other EU nations. Should the 'business as usual concept
continue, then supply issues will multiply and resultant market forces will drive up hydrocarbon
prices. This will lead to energy sourced from renewables being even more economically
competitive than ever. Naturally, infrastructure and development of these must be in place prior to
this demand and price escalation. Such developments must be of such a massive scale that
definitive, quickly established Government policies, direct or indirect (eg education) government
funding and multinational operations both public and privately financed will be required.

Whether climate change is related solely to human industrial surge and deforestation in the last 200
years or not, does not diminish the fact that atmospheric CO2 levels have more than coincidentally
increased 50% (Stern 2006 p. 3) during this period . Ozone layer depletion observations provide
indisputable evidence of how human activity has an extraordinary affect on our Earth’s atmospheric
environment. The social and economic costs due to, for example, extreme weather events,
agricultural productivity reduction and habitation displacement resultant from a predicted 88%
median chance of a 2 degree global temp increase by 2035 (Stern 2006 p. 12) could be catastrophic.
Stern (2006) estimates 1% of country/global GDP is required to stabilise CO2 levels to manageable
500-550 ppm by 2050. This means a substantial but attainable price must be paid, initially directed
through Government investment and guidance, then ideally through self perpetuating market forces,
to mitigate these risks with an aggressive incorporation of renewable energy production in the most
efficient means for each particular country.

Unemployment levels in the EU are at 10.1%, up from 7.2% just prior to the recent economic crises
starting mid 2008 (Eurostat 2010). This abrupt decline in available jobs, of which a large majority
who are suffering are young people entering the workforce, creates a ready and waiting supply of
modern ideas and resources for the next financial bubble. Clearly, this bubble will come from the
vast infrastructural and renewable energy system investments and new trading markets which must
be incorporated for countries to achieve GHG reduction targets. The Western world, in particular
the EU, is where to initiate momentum, not merely because of their historical responsibility for
current levels of GHG in the atmosphere, but because they have the economic and political stability
to instigate substantial action and importantly, immediately. They also have the capacity to educate
the large number of people efficiently and professionally who will be required to fill thousands of
projected jobs when renewable energy systems attain their desired levels of transition.
Governments and academic institutions should use this opportunity of a young available workforce
to develop education programmes and training steered towards this new industry. Stern ( 2006)

2
reiterates the need to progress renewables uptake as quickly as possible, with the penalties being
potentially disastrous.

The three catalysts aforementioned should help governments push policy and inaugurate schemes
greatly. Up until now, there has been substantial environmental policy action at global, EU and
national levels during the last 20 years to address renewable energy's displacement of hydrocarbons
with varying degrees of effectiveness.

Political Initiatives
The United Nations Framework Convention on Climate Change (UNFCC) is an international
environmental treaty produced by the United Nations in 1992. Although not itself considered
legally binding, its role is to provide updates that would set mandatory limits. Its principal update is
the Kyoto Protocol and modifications are ideally updated yearly (Wiki 2010). Problems with
unilateral compliance or acceptance of this global attempt at reducing GHG emissions are well
publicised. Most famously, the largest energy consuming nation, the USA, declined to participate
in any of the Kyoto emission standards. Reasons given included negative economic effects and
unfair disparity regulations between nations (Swift Hook 2010 p3). This really gave the entire
programme a lack of substance, however what is interesting is that despite the USA's, and in some
part, India and China's rejections to prescribed GHG emissions proposals, these three nations
installed 60% (Swift Hook, 2010 p4) of the worlds wind power production. China, who produce
40% of the worlds PV cell production (SHBJ 2010) are also forecast to become the next world
leader in actual PV installations. In addition to this, they have also had an overwhelming majority
of renewables Intellectual Property and Patent certification– a sign which directly pertains to R&D
extent, hence investment in this area (Cullen 2009). Clearly, these nations have their own worries
of supply security, oil based reliance and no doubt some climate change precautionary angst as well
which has lead to this large scale uptake of renewables. But on top of this, and more importantly in
terms of continuing uptake, recent analyses now show price drivers are dictating the preference of
renewable energy systems also. An example of this is the generating costs of wind energy in the
US. Per unit costs of electricity are now at least on par, if not slowly surpassing traditional
hydrocarbon production costs(Swift Hook p.5). Economies of scale and improving technology and
production facilities are reasons for this price competitiveness, which, since renewables are
fledgling industries relative to the mature hydrocarbon market, efficiency and price advantages will
increase.
The recent failure of the Copenhagen Accord to overcome some of Kyoto's emission commitments
expiring in 2012 meant a backward step was taken for the global environmental movement.
Perhaps Kyoto was just too ambitious and its blanket approach for GHG controls for so many
nations could never get full support because of innumerable views of very different nations. The
failures of this political tool hints at the need to centralise green energy uptake and provide
attainable goals between groups of nations in a similar economic and political spectrum.

A much better example of Environmental Policy successfully in action is the EU2020 Renewable
Energy Targets scheme. The result is a defined, quantitative and answerable solution to promote the
uptake of renewables in EU to such a level that targets of 20% energy consumption must come from
renewables by 2020. This programme is hierarchical in nature, much as a business system. At the
top of the pyramid is the EU targets. Next comes multi national co-operation, then the individual
governments who, having established targets formulated by the EU2020 commission, must
formulate their own policies and tactics to enact their renewable transformation success. This is the
real key area to where results are visibly achieved since from this political position, investors,
developers and individuals ultimately are affected and are the ones responsible for action.

3
If the great challenges are met in this developed part of the world, then its successes and
technologies can then be passed onto the poorer nations who do not have adequate funds to develop
their own systems.

One can look at the UK as an example of how the Government has developed their country's uptake
of renewables by modifying policies as problems arise. Concrete environmental action really began
in the UK with the Renewable Obligation (RO), a policy mechanism for growth incentives in
renewables in the UK. Introduced in 2002 it requires electricity utilities to source some of their
supply, at a gradually increasing level over time, from certified renewable generators (Walker
2008). Goals in the UK have been behind target, yet results are starting to be noticeable (Runyan, J
2010). The UK's slow start, if we compare to say Denmark with its current wind energy uptake at
20% percent (Wiki 2010) has probably been, up until recently, because of its relatively cheap
indigenous supply of oil and gas. This is despite the UK's great off shore wind and marine
potential. The UK's RO system largely favours more developed, mature alternative technologies,
for example on-shore wind energy production and does not greatly push other potential avenues
since incentives are blind to energy source. This leads to a deterrence to entrepreneurs of venturing
into other less known fields. An example of this was the development of on-shore verses off-shore
wind energy installations. Aside from obvious higher grid connection and installation issues, off-
shore wind turbines, because of their remoteness and lack of guaranteed access for maintenance,
need a higher level of engineering, at a higher production and necessary developmental cost
(Walker 2008 p 6). This associated cost understandably puts industry and fledgling businesses in
doubt since new development and technology convey a certain level of risk to these parties, despite
the fact that off shore wind production has a huge scope.

One of the main barriers facing most forms of renewable energy is the capital cost of installation
(Walker 2008). The next major UK governmental policy to aid the implementation of renewable
uptake was the 2007 Energy White Paper. This powerful renewable energy policy was the outcome
of Governments 2006 energy review and was directly responsible for the recent Feed In Tariff (FIT)
subsidy system, Planning Bill to ease planning approvals and Renewable Transport Fuel Obligation
(RTFO). This last programme was a little over ambitious as its target was to have 5% of all vehicle
fuel be supplied from sustainable sources by 2010 but current hovers around 3.5% bio fuel use
(Spakman 2010). FIT's for micro generators of up to 5MW (ernergiplc 2010) complement the RO
by providing certainty needed to support small scale production installations. This scheme should
also provide an immediate boost to the job market since projected subsidies on new installations
will reduce from 2012, hence a 'dash for subsidies' should occur if marketing is properly organised.
At 20.7MW of new installations in the first five months (Runyard 2010), results for this scheme are
steady but not ground breaking.

Potential Problems

Looking to the future, governments will have to start rewarding more then just the energy
generators exclusively (RAE 2006). As world demand for renewables increases dramatically during
the next 10 years, demand strains on materials, particularly from foreign suppliers, may ironically
result in supply security worries and price fluctuations for these products. Therefore, home grown
production or overseas owned plants needs to be promoted with commercial and industrial tax
breaks in the renewables market as well as education directives such as national scholarships or
grants offered in specialist fields of research, and training.

4
“For the UK and other EU nations to achieve EU2020 targets, a number of major projects need to
be undertaken, but alongside this, a gradual expansion of the renewables sector” (RAE 2006). This
gradual expansion is occurring with the aid of FIT systems, however government funds for these, as
well as major ageing grid restructuring and renewable energy production plants must be sourced
from ever tightening budgets. In this respect, the UK's FIT scheme could therefore be partially
misguided as the potential costs of installing and subsidising renewables with less then ideal
productive potentials could be better spent on developing marine and wind energy production
programmes. These are realistically the two strengths the UK will use to meet their deadlines. One
only has to look at Germany’s enormous expenditure on its domestic PV installations. The IEA
have estimates of €1000 cost per tonne of carbon saved for small scale PV installations. Since the
inception of their EEG programme in 2001, figures as high as €50 billion paid in subsidy's have
been given in more than one report (Stokes 2009). This phenomenal sum could have been better
spent to achieve what is for Germany, a very small fraction of overall electricity production. There
is an on going review and likely reduction in subsidised amounts occurring which also underlines
the financial stress this particular programme is causing. What's more, the critical periods which
must be catered for, that is cold winter nights and mornings are the periods when capacity factors
for such renewables are non existent. Careful guidance and analyses between similarly positioned
EU countries must therefore be properly researched so as to attain value for money.

The Future

A practical method to overcome government financial difficulties could be the centralisation of

various EU operations and a combination of resources. A recent example of government
expenditure sharing is the military co-operation agreement between England and France, each
saving billions of Euros. Another example could be a joint EU mega grid linking high energy
potential sites such as the North Sea wind capacity reserves. Probably more important will be
corporate investment used to develop large scale operations. The German lead DII proposal
Concentrated Solar Power (CSP) plant plan was launched last November with partners including
Munich Re, the world’s biggest re- insurer, and some of Germany’s biggest engineering and power
companies. DII is a €400 billion project aimed at to utilising CSP in southern Europe and northern
Africa (Larson 2010). Throughout the EU, legislation is being continually streamlined to overcome
planning approval barriers. The rejection of the Lewis Wind farm in the UK in 2008 (Johnson
2008), with a purported capacity of 700MW is an example of such set backs which could be
overcome with regulations leaning more in favour of renewable energy developers.

The road to reducing CO2 levels while maintaining secure and affordable energy supply requires
co-ordinated, integrated energy policies which allow scope to develop and improve. The EU and
their incumbents have taken fantastic, accountable steps forward in leading the world renewables
uptake by finally saying this is what we must produce by this date to help save our planet. The
goals described need to be attained to show other nations what massive levels of renewable
incorporation can be made economically and the associated benefits of supply independence and
economy boosted effect beneficial spin-offs these entail. Turmes (RAE 2006) sums up government
interaction in instigating renewable energy incorporation with the clear message “The main obstacle
to reaching renewable energy targets is not technology. The obstacle is political and nothing else.”

5
REFERENCES:

1. Appleyard, D 2010 “7.2GW of New PV Capacity Installed in 2009”, viewed 21 Nov 2010
http://www.energysavingweekly.com/pv-global-outlook-a-bright-future-shines-on-pv/

2. Cullen, S 2009.“Alternative Energy Powers Up – Staking the Patent Landscape for Energy
from Wind, Sun and Waves”, L-352266/9-09, Thomson Reuters.

3. http://www.energiplc.co.uk/latestnews/feed-in-tarriff-fit-switch-over-from-roc-
incentive/2010/03/

4. Eurostat (n.a.) 2010. “Euro Area Unemployment Rate at 10.1%”. 180/2010 – 30 November
2010. Viewed and Uploaded from Eurostat website 20 Nov 2010
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-30112010-BP/EN/3-30112010-BP-
EN.PDF

5. Jha, A 2010 “Europes Renewable Energy Supergrid”, view 21 Nov 2010,

http://ourworld.unu.edu/en/europes-renewable-energy-supergrid/

6. Johnson, S 2010 “Lewis Wind Farm Rejected by Scottish MP's”. Viewed 20 December 2010
http://www.telegraph.co.uk/earth/earthnews/3340258/Lewis-wind-farm-rejected-by-
Scottish-MPs.html

7. Larson, K 09 Apri 2010, “Reaching the EU's 2020 renewable energy targets”, viewed 23
Nov 2010, http://www.renewableenergyfocus.com/view/8620/reaching-the-eus-2020-
renewable-energy-targets/

8. Stokes B 2009 “What, Exactly, is a Feed in Tariff?”.Viewed December 15, 2010

http://nationaljournal.com/magazine/what-exactly-is-a-feed-in-tariff--20090425?
mrefid=site_search

9. n.d. “Description of Kyoto Protocol” – viewed 21 Nov 2010

http://unfccc.int/kyoto_protocol/items/2830.php

10. Royal Academy of Engineers (RAE) 2006 “Developing a Sustainable Energy Strategy –
Report on a Programme of Energy Seminars”. The Royal Academy of Engineers, London

11. Runyan, J 2010. “Strong Growth of Renewable Energy in UK”, viewed 21 Nov 2010.
http://www.renewableenergyworld.com/rea/news/article/2010/08/strong-growth-of-
renewable-energy-in-uk

12. SHBJ Solar Home and Business Journal – n.a. (2010) “China Looking to Ramp up Domestic
Solar Installations”.Viewed 10 December 2010.
http://solarhbj.com/news/china-looking-to-ramp-up-domestic-solar-pv-installations-
ministry-says-01179

13. Singh, H 2010. Energy Security Issues, Lecture 2 notes made available for the module,
REM201 Renewable Energy Systems A, Kingston University, Roe Hampton Vale Campus,
on 1 Nov 2010.

6
 14. Stern, N 2006. “Stern Review on The Economics of Climate Change. Executive Summary”,
HM Treasury, London. Archived from the original on 18 Nov 2010.
http://www.webcitation.org/5nCeyEYJr

15. Spakman 2010 “UK Bio Fuel Hots Target Early”. Site visited December 20 2010.
http://www.fwi.co.uk/Articles/2010/10/22/124060/UK-biofuel-use-hits-target-early.htm

16. Swift-Hook, D 2010. Lecture notes and report 'No Doubt about Wind Power' made available
for the module, REM201 Renewable Energy Systems A, Kingston University, Roe Hampton
Vale Campus, on 2 Nov 2010.

17. Walker, A 2008. “The Economics of Renewable Energy – Response from The Royal
Academy of Engineering to the Lords Economic Affairs Committee”, Viewed and Uploaded
from RAE website 15 Nov 2010
www.raeng.org.uk/.../responses/.../Economics_Renewable_Energy_response.pdf

18. Wiki (2010) “Wind Power”. Viewed 4 December 2010.

http://en.wikipedia.org/wiki/Wind_power