TRENDS IN RENEWABLE ENERGY:

LOOKING FORWARD

José Donoso Alonso

European Business Director
Gamesa Energía
World Energy Council Task Force on Financing Renewables
 World Energy Council (WEC)
To promote the sustainable supply and use of energy for the
greatest benefit of all

• Established in 1923 as the World Power

Conference
• Member Committees in 97 countries
• Multi-energy, non-governmental, non-
commercial
• Triennial World Energy Congress
• Work Programme: Studies, Technical
Committees, Regional Programmes, Global
Energy Information System (GEIS)
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• The current path of world energy
production & consumption, even with
presently expected policy measures, is not
sustainable
– Environmental impact
– Access to lasting, dependable & affordable energy sources
– Disparity of levels of energy consumption
 The components of a sustainable energy system

• Lasting, dependable & affordable access to primary

energy sources
• Adequate capacity of infrastructures & security of
delivery
• Sustainable environmental impact
• Adequate economic development. Issues:
– Impact of environmental regulation on
competitiveness
– Questionability of endless growth

• Reasonably fair universal access to modern forms of

energy supply
World Electricity Production
2002
Renew ables
2%
Nuclear
17% Coal
39%

Hydro
17%

Gas Oil
17% 8%
DATA ON INVESTMENT, PRODUCTION AND EXTERNAL
COSTS OF ELECTRIC POWER PLANTS
Production cost * Rate external
Average (including exploitation,
External costs ** cost /
Type of plant Investment cost * investment amortization,

(€ / kW) fuel and R&D) (€95 / MWh) production cost

(€ / MWh) ( %)

0.05 – 4.8
Nuclear 1730 29 0.2 – 17 %
( 0% actualization)

Coal (CFB) 1273 33 19 – 99 58 – 300 %

Gas (CCGT) 488 35 7 - 31 20- 89%

Hydro 40 0.04 – 6.03 0.1 – 15 %
Micro Hydro 1250
Wind (terrestrial) 1000 45 0.5 – 2.6 1.1 – 5.8 %
Solar PV (grid - 1.4 – 3.3
8000 650 0.2 – 0.5 %
connected) (only one study)

Biomass 1200 128 2.0 - 50 1.6 - 39 %

Geothermal 1830 55*** 0.2 – 0.5*** 4 – 14%
* Source Eurostaf Les Echos march 2003 ** Source European Commission ExternE 1999 *** Source IGA 2004
 Life Cycle Emissions
Life Cycle Emissions CO2 SO2 NOx
g/kWh G/kWh g/kWh g/kWh
Coal Best Practice (UK) 955.00 11.80 4.30

Coal FGD and low N0x (UK) 987.00 1.50 2.90

Gas CCGT (UK) 430.00 - 0.50

Hydro small scale 9.00 0.03 0.07

Hydro large scale 3.60-11.60 0.009-0.024 0.003-0.006

Wind 7.00-9.00 0.02-0.09 0.02-0.06

Solar PV 98.00-167.00 0.20-0.34 0.18-0.30

Energy crops current
17.00-27.00 0.07-0.16 1.10-2.50
practice
Energy Crops future practice 15.00-18.00 0.06-0.08 0.35-0.51

Geothermal 79.00 0.02 0.28

• Energy markets are the results
of a political choice
Why should we support the renewable energy
markets?

no geo-political risk
no external energy dependence
no energy imports
no fuel costs
no fuel price risk
no exploration
no extraction
no refining
no pipelines
no resource constraints
no CO2 emissions
 Renewable Energy Market
It is today a reality in Europe, but…
• Not in all countries
• Limited to Wind Energy
• Outside Europe the only interesting markets are
USA, Canada, Australia, India and China
• Very depending on administrative decision
• In developing countries the only real market is in
rural electrification. Even though Kyoto Protocol may
change this situation
 R. E. Market
• Region
– OCDE countries
– Asia and South America
– Developing countries
 R. E. Market in Asia
and South America
• Lack of appropriate regulatory frame
• Market too tighten to bilateral agreement
• Important growth of energy demand, specially
electricity
• Market niche in rural electrification
• High rates of population growth, economic growth
and energy consumption
• Highly sensitive to international energy prices
variations
 R. E. Market in
Developing Countries
• Lack of public support programs
• Weak or not existence of public support structures
• Good natural resources
• Market niche in rural electrification
• Clean development mechanism from Kyoto protocol:
limited reach
• Dependence on the international or bilateral
development aid programs
 R. E. Market in
Developing Countries
• Immediate need of additional energy, specially
electricity
• High rates of demographic and energy consumption
• High political and exchange rate risk
• Very sensitive to international energy prices
• Lack of financial capacity
 R. E. Market
• OCDE Countries
• Depending on public support programs
political will
• Environment is the main driver of development
• EU Leadership
• Big differences amongst countries
• Very diverse support schemes framework
• Financial capacity
• Little sensitivity to variation on international price
levels
Requirements for
R.E.S. Set Up
Regulation
Resources
Grid
+
Country Risk
+
Public Awareness
 Required actions for the
worldwide development of R.E.

• Establish firm objectives for R.E.

• Remove existing barriers and
subsidies that damage R.E.
• Put in practice mechanisms to assure
and accelerate a new market
 Actions to facilitate the development of R.E.
in a big scale

• Energy prices do not reflect the social costs of generation.

– External costs
– Subsidies to “conventional generators”

• To achieve the benefits or R.E. generation, some kind of

regulations on the market is needed
– Subsidies
– Price based mechanisms
– Quantity based mechanisms

• To assure the right implementation of “Clean Development

Mechanisms” and “Joint Implementation” of Kyoto
Protocol.
 Price mechanisms
9 Transparent • Macroeconomic: industrialization and
supply guarantee, multiplies added value
9 Homogeneous • Investment analysis from the point of view of
business
9 Global
• Microeconomic
• Externalities
9 Cost
• Cost-benefit relationship (Macro level)

• Price support required to reflect the lack of

9 Substitution externality costs in the final price
• Based on technical limits and not political
objectives (and the incentives to achieve these)
9 Stability
• Less financial risk
Regulation it’s not only establishing a
support scheme
Š Good and transparent administrative procedure
Š Clear and transparent systems of connexion to the grid
geographically
Declaration of public usefulness sectorial
Š To avoid dispersion of ruling
Š To reduce discretional nature in the administrative decision
processes

“ The devil is in the detail”

 R. E. volume long term objectives
for the differet Renewable technologies
Technology Objective Goal Year Source Forecast Comments
date
Wind 1.245.000 MW Mundial 2020 Wind Force 12, 2005 In this scenario a 12% of
EWEA production would be
produced
Solar PV Energy 205 Gw p 2020 European 2005 Annual world growth
Mundial Photovoltaic predicted to be 15%
Industry
Association
Biomass 200 Mill. EU 2020 European Biomass 2005 Including biomass for
TEP/a Industry thermal and electrical
Association use and biofuels
Geothermal 48000 MW 2020 European 1999
(thermal use) EU Geothermal
Energy Council
Geothermal 8000 MW 2020 European 1999 This goal has already
(electricity EU Geothermal been reached
generation) Energy Council
433.718 Gw 2015 European Solar 2003 Technical maximum
Thermal solar h/a EU Thermal Industry
energy Federation
19.137 Gw 2015 Asumming actual growth
h/a rate
Minihydro 14.000 MW EU 2010 Eurobserver 2004
Renewables 20% 2020 Greenpeace 2005
as a whole
 Wind Energy: Global Considerations
• Evolved Market. The most successful case of
integration of a RES technology in the global energy
market.
• Increased participation of utilities and financial
investors
• Small developers tending to disappear => market
concentration
• High competitive market in countries with more
favourable legislation
• Future depends:
– Resolution of technical and financial uncertainties for
off-shore wind farms
– Repowering
– Development in transitional economies
Estimates of wind GW installed per decade
 BIOMASS: SPECIAL CASE

™ It is the R.E. source with biggest share of

primary energy
™ Regulatory milestones: readiness of raw
material
™ Supply obligation: residuals and waste have
environmental normative that force them to
have an energetic destination
™ Seasonality and local source (transport)
™ EU agricultural policies
™ Rationalization of the developed MW cost
™ Added value for the generated kWh
Hydropower: Usage/Potential
 Conclusions

The International R. E. S. Market

will present significant opportunities
in the coming years,
however…
 Conclusions
¾ No single energy technology on its own will
provide the solution. We will need a wide
range of technology options.

¾ Today, Wind energy is the most competitive

and reliable source of energy.

¾ Hydropower has an important potential in

developing countries but has to deal with
serious ecological constraints.
 Conclusions
¾ PV have a niche of the market in rural areas.

¾ Biomass must solve many technological, economical,

structural and resource availability problems in order
to become an alternative with significant share in the
energy balance.

¾ An interesting future alternative is the combination of

wind energy and other renewable technologies.
Hydrogen could play a role improving the quality and
the profitability of the installations.
 Conclusions
¾ There are many uncertainties due to the strong
dependence of the market on government policy.

¾ The successful strategy must take into account the

different risks associated with each national market.

¾ The strategies that work in one country may not

necessarily work in another

¾ Right implementations of Kyoto Protocol, could mean

an important opportunity. So far its impact is rather
limited.
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Thanks!