Book Review: Energy Innovation – Fixing the Technical Fix

The energy policy of our time is a mess. What can be done about it? Lewis Perelman addresses the problem by first analzsing its various roots and subsequently pointing towards possible solutions. Not surprisingly, the roots are manifold comprising technical as well as political sources. In a nutshell: there are very good reasons to go “away from emissions regulation and toward technology innovation”.  The ultimate goal is to “make clean energy cheap”.

Clean energy, however, does not become cheap by subsidising a particular branch of industry (as is currently the case in Germany with detrimental effects to the economy) but rather by providing the appropriate technology which is competitive against conventional energy sources.

Needless to say that there is a lot of effort put into R&D as well as innovation programs funded by countries and/or international organisations. In spite of that the great breakthrough is still lying ahead of us. Nevertheless, technology is the ultimate answer to our energy problems. Clearly, there are clean technologies, but so far none of them is cheaper and/or equally practical as the conventional carbon-based ones.

Perelman is convinced that governments have an important role to play in that game. I wonder why the market should not be able to create its own viable (and sustainable) solutions without regulators interfering. Nevertheless, also the role of government has its limits as Perelman acknowledges.

Thus the only way out from the current state of affairs is a big technology breakthrough. But how do we get there? There are clearly new ways needed to stimulate innovation in the energy sector. Thinking out of the box is paramount.  Going beyond conventional mechanisms to promote innovation may open new possibilities. Perelman discusses various ways to overcome the traditional path of innovation management, like new financing models, prizes, the role of philanthropists etc.

All in all, Perelman’s book offers a great insight into the complexity of the energy problem as well as into the even more challenging complexity of how to overcome it. Technology can save us – it has to!

Energy Innovation – Fixing the Technical Fix

by Lewis Perelman


Germany´s Energy Future – part 2

One year ago Germany decided to quit producing nuclear energy by 2022. Since nuclear power plants are a central pillar the German energy mix, contributing some 22.5% to the entire electricity output in 2010, this means that until 2022 the equivalent of 140.6 TWh (2010) has to be replaced by other sources. This is a minimum estimate ignoring increase in consumption.

Already at this moment Germany begins to face the consequences of last year’s decision. As nuclear plants are successively being phased out, more strain is put on other sources, in particular renewables. In addition, the power grid is experiencing severe tensions as more controllable sources of energy are being replaced by less controllable (and predictable) ones. Especially the latter is a constant, or rather growing source of trouble.

One the one hand, it’s a clear goal of German policy to increase the share of renewables substantially. On the other hand, it seems implausible to be able to replace the entire nuclear bloc by wind and solar capacities only. Thus, it appears inevitable to commission a number of conventional, i.e. thermal power plants which are supposed to act as a backup for the fluctuating input from e.g. wind farms.

In my view, it is pretty obvious that wind will be the main source of renewable energy in the future, considerably outnumbering all other renewable sources taken together.

In 2010 the total capacity of German wind farms amounted to some 27190 MW which produced some 36.5 TWh. Taking into account the average specific output of wind farms as calculated in one of our previous postings we may estimate the extra capacity needed in order to fill the gap. Then we could show that the average output of wind power installations amounts to some 1600 MWh annually per MW of installed capacity.

Having these figures at hand we may easily estimate how much extra wind capacity is needed in order to replace nuclear in its entirety. Thus if wind power is supposed to be the only substitute (which is certainly an oversimplified approach) it would mean that Germany needed almost 88000 MW of additional wind power by 2022, thus an extra three times as much as was installed up till 2010. This in turn would mean that the country needed more than 115000 MW in wind turbines by the time the last nuclear power station is decommissioned.

Between the year 2000 and 2010 an average of 2000 MW was commissioned annually, in total some 20000 MW of wind power. Extrapolating this trend to 2022 implies that some 24000 MW of new capacity could be added to the grid until D-day. However, what is needed is almost four times as much. Thus the annual growth rate should be close to 7800 MW. Even if we assume that wind will only replace half of the nuclear output, a growth rate of about 4000 MW annually would be necessary, i.e. twice as much as has been the case during the boom period 2000-2010.

The figure below shows two different scenarios for Germany´s wind power capacity. The business-as-usual scenario (BAU) is based on the assumption that wind capacity will grow at a rate of 1900 MW per year, which is equivalent to the increase in 2010. The Target scenario on the other hand assumes an annual growth of 7800 MW which would theoretically be sufficient to replace Germany´s entire nuclear production as seen in 2010.

Total installed wind power in Germany.

Given that there is considerable resistance among the population against onshore wind farms, it is indeed hard to see how this can be achieved. In addition, as  subsidies for renewable energies are becoming a serious burden for consumers, they are likely to be reduced in the future. This in turn may jeopardize further investment in wind power, and thus even the more conservative BAU scenario may, in fact, be too optimistic. As a consequence, other energy sources are desperately needed if Germany wants to maintain her standard of living. We will come back on this issue in another posting.

Renewable Energies in the UK

As in many other countries, the share of renewable energies in the UK is growing dramatically. During the past two decades renewables have surged at an impressive pace. In fact, supply from renewable energy sources has more than quadrupled since 1990 whereas overall consumption has remained fairly constant. The raw data of this analysis stem from Eurostat and UK National Statistics.

The huge gap in the respective trends between the overall energy demand and the contribution of renewables can be seen in Fig. 1 where the data for final energy consumption and the supply figures from renewable energies are shown. To make comparison easier we present the figures in an indexed form with 1990=100.

Fig. 1 Final energy consumption (FEC) and energy supply from renewable sources in the UK. 1990=100.

Whereas final energy consumption has increased only slightly (index value 105 in 2010) with a decreasing tendency since 2001, supply from renewables has more than quadrupled over the same period. Accordingly, the weight of  hydro, wind, biomass etc. in the energy mix has risen sharply. Nevertheless, this picture should not obscure the fact that in 2010 renewables contributed only 7 % to the entire energy production.

One interesting aspect of looking at the UK figures is to check the specific output of the various renewable energy sources, i.e. MWh produced per MW of installed capacity. Here we find significant differences between hydro, wind and other renewables as shown in Fig. 2. The latter comprise landfill gas, biofuels, waste combustion etc.

Fig. 2 Specific output of renewable energy sources in MWh per MW installed.

All of them show annual fluctuations which is normal since not the entire capacity is available all the time. Wind and hydro are particularly vulnerable to external factors. However, there is a significant difference between the two as regards short-term availability. Electricity generated from water is much more stable for the grid than wind which is by definition more erratic in its availability.

Apart from that we can see clearly in Fig.2 that the specific output of the various sources differs enormously. The least efficient way to produce electricity from renewables is wind as becomes apparent from Fig. 2. This conclusion is fairly independent of the fluctuating nature of all the sources taken into consideration. The average output of wind farms is 2140 MWh per MW installed. The values for hydro and others are 3060 MWh/MW and 5200 MWh/MW, respectively. Thus we may safely conclude that using hydroelectric plants is on average 43 % more efficient than using wind turbines. The difference is even more striking for the other renewables which tend to be more than 140 % more efficient than wind.

Given this state of affairs it might be worthwhile to put more emphasis on other green power sources rather than wind. However, wind farms have already become a significant factor in several countries as we have shown in some of our previous posts, e.g. here, here and here. Bearing in mind the inherent weaknesses of wind power, it appears that other renewables such as hydro and biomass are not only more reliable, but also more efficient. They, too, deserve their chance.

Does Saving Energy Push Renewables?

Yes it does. Let us look at a concrete example in order to get the point. The EU plans to improve its energy efficiency by 20% by 2020. In other words, 20% less energy will be used by then, according to plans. The baseline is the primary energy consumption for 2010 which was 1770 Mtoe. Thus, if all measures are in place, by 2020 this figure should be down to 1416 Mtoe.

In all likelihood, the savings will concern almost exclusively the use of conventional energies (coal, nuclear, oil) whereas renewable energies will not be touched by this development. Therefore, we may safely assume that on the consumption side renewables will be equally well off  as they are now. In fact, this is a very conservative estimate. On the contrary, renewable energy use may well be expected to rise over the next decade. But let us stick to our conservative approach for the time being. In 2010, the consumption of renewables amounted to some 172 Mtoe corresponding to 9.7% of total consumption.

Fig. 1 EU Gross inland consumption in 2010

Given our  2020 scenario from above and keeping renewable consumption at 172 Mtoe, we may conclude that by then renewables account for about 12.2% of total consumption. Bear in mind that this is true even if energy production from renewable sources does not increase.

The projection for 2020 would consequently look like this.

Fig. 2 EU Gross inland consumption in 2020

Thus, by saving energy the relative weight of renewables in the energy mix is automatically increased. The bigger the savings on the one hand the bigger the extra share of renewable energies on the other.



Germany´s Energy Future

Germany´s decision to quit electricity production from nuclear power plants by 2022 raises a number of challenging questions. How big is eventually the task to replace all existing nuclear capacities by renewables and/or conventional power plants? Which alternatives are available and what is their potential? What concequences might be expected by consumers?

In 2009 Germany´s 17 nuclear plants had a total capacity of 20.5 GW, contributing some 26.1% to electricity generation. In that year the country produced in some 592.5 TWh (a significant drop when compared to the 637.2 TWh in 2008, data from Eurostat). From these 154.6 TWh were covered by Germany´s nuclear capacities. This is the order of magnitude which needs to be replaced by other sources and/or imports if Germany wants to keep its current level of economic performance.

The country´s current electricity mix looks as follows:

Fig. 1 Germany´s energy mix in 2009

The are some potential substitutes for nuclear energy. First one could think of extending the coal-fired plant capacities. This, however, meets one serious obstacle, since Germany has committed itself to reducing CO2 emissions within the next decades. Thus comissioning new conventional plants based on hard coal or lignite could significantly jeopardize the ambitious goals set by the government. One might also think of additional capacities in terms of gas turbines. Gas is, on the one hand, a cleaner energy source than coal. On the other hand, Germany is already largely dependent on gas imports. And therefore it is questionable whether the phasing out of nuclear energy should be met with a stronger import dependency on gas.

During the past two decades Germany has significantly enlarged its renewable energy capacities. The most recent figures indicate that almost 16% or 94 TWh of the total electricity mix originate from renewable sources. Let us look at these sources in more detail and examine their future potential.

One natural candidate for replacing nuclear facilities would be hydroelectricity. Indeed, some countries like Norway, Sweden and Austria cover a substantial part of their electricity from water-based power plants. Germany has some capacity in that field, producing about 20 TWh annually which corresponds to a bit more than 3% of the total output. The potential for building new dams, however, appears quite limited given the geography of the country on the one hand and environmental concerns on the other. Thus hydroelectricity is not the first choice when it comes to searching for new production capactities. According to the Bundesverband Erneuerbare Energien (BEE), however, there seems to be some potential to extend the use of hydroelectricity. Their projections aim at a more than 50 % increase in hydroelectrical production by 2020 which then would amount to 32 TWh.

Another largely neglected resource is the use of geothermal energy. So far there are very few installations of that kind in Germany contributing less than 1 TWh to the total electricity mix. Of course, it would be desirable to use more of that in the future. However, the usefulness of geothermal plants largely depends on the location. Thus, there appear to be limits to its growthe potential. Nevertheless, BEE estimates a total geothermal output of 4 TWh in 2020. This scenario is certainly more optimistic than the one we applied.

Wind and solar energy saw a tremendous increase in the past decade, and we will instantly analyse their potential as suitable substitutes for the existing nuclear plants. Although wind power output almost quadrupled since 2000, it came down by almost 5 % in 2009 due to unfavourable wind conditions. The total production in 2009 was 38.6 TWh. However, wind mill capactiy is expected to grow over the next years. We could therefore expect a further substantial increase in  electricity stemming from wind mills. According to our model calculations we anticipate an output of some 113 TWh in 2022. Note that our estimate is considerably more conservative than the forecasts by the producers (Bundesverband Windenergie), according to which 149 TWh of wind energy could be reached already by 2020. Note furthermore that this projected output would roughly correspond to the electricity produced by nuclear facilities in 2009.

As regards solar energy, its contribution to the energy mix is less significant than the one from wind power. Nevertheless, in 2009 some 6.6 TWh could be fed into the grid. Using once again our model calculations, we expect some 37 TWh of solar electricity in 2022. This is roughly in line with the expectations of the Bundesverband Erneuerbare Energien (BEE) which forecasts a production level of 40 TWh in 2020.

Thus both wind and solar energy producers together should be able to face the challenge of compensating the loss of nuclear energy at the time of phasing out nuclear installations in Germany. However, the picture on renewables is still not complete. One additional source to be taken into account is electricity generation from biomass which has strongly increased over the past two decades. Its output in 2009 was 25.5 TWh and, applying our model of expected growth rates, we would expect production figures to arrive at about 88 TWh in 2022. In this case, our scenario is more optimistic than the one from BEE which expects 54 TWh coming from biomass burning in 2020.

Summing up, here are two different scenarios for the contribution of renewables to Germany´s energy mix in 2022 (the forecast by BEE refers to 2020). All figures are given in TWh.

Table 1 Renewables in Germany in 2020 (BEE) and 2022 (VMIS), TWh

Given these independent model calculations it appears likely that Germany may reach its ambitious goal of phasing out all nuclear power plants by 2022. Our considerations refer only to technical feasibility and projected growth rates which make it plausible that the entire output from nuclear may be compensated by renewables only.

However, decomissioning existing capacities and simultaneously building up new production facilities comes at a price for the consumer. So far nuclear electricity has been considerably cheaper than electricity from renewables. On the other hand, given their huge potential and their fast pace of growth, renewables might become economically comptetitive in the not too distant future. We will look into that matter in more detail in one of our subsequent articles.