Are we headed for a Solar Power Revolution, as many investment analysts are claiming? According to Energy Post editor Karel Beckman, we undoubtedly are. Just as we are headed for a Coal Revolution. And a Nuclear Revolution. And a Shale Revolution. Welcome to the world of energy “gamechangers”.
Energy is often discussed in the form of alternatives. Do renewables have the future? Shale gas? Nuclear power? Or will it be business-as-usual-fossil-fuels after all? In reality, however, the most likely scenario – whether we like it or not – is that all of these “fuels” will see tremendous growth.
The Solar Revolution
Let’s start with the good news for sustainable energy enthusiasts. There surely is a Solar Power Revolution going on in the world. If you follow websites like RenewEconomy or Cleantechnica.com, you can follow it on an almost daily basis.
Recently, for example, RenewEconomy reported that the analysts of Deutsche Bank predict a (second) solar power gold rush in the next few years.
Both in 2011 and 2012, some 30 GW of PV capacity was added worldwide, bringing the total to over 100 GW at the end of 2012. According to estimates from Bloomberg New Energy Finance, some 39 GW were added in 2013, of which fully 12GW in China alone.
Deutsche Bank predicts that 46 GW will be installed in the world in 2014 and 56GW in 2015. This means that total capacity would add up to roughly 250 GW by 2015. What the number would be in 2020 or 2030, is anybody’s guess.
The most important reason why Deutsche Bank is so bullish on solar power, is that solar PV is currently competitive without subsidies in at least 19 markets already. That number is set to grow.
Actually, in November last year The Fraunhofer Institute in Germany published a report that claims that rooftop solar in Germany is already cost-competitive with combined cycle gas turbines and that by 2030 “PV utility-scale power plants in Southern Germany will drop considerably below the average LCOE (levellised cost of electricity) for all fossil fuel power plants by 2030.”
In other words, solar will become cheaper than coal – even in Germany. “Even small roof-installed PV systems will be able to compete with onshore wind and also with the higher generation costs in the future from brown coal, hard coal and CCG power plants”, says the report.
Deutsche Bank has a number of other reasons for predicting another solar gold rush, as RenewEconomy reports:
- US based distributed generation business models are set to become more pervasive in international markets and act as a significant growth catalyst in European markets that have significantly scaled back subsidies.
- Financing costs and availability for the solar sector are set to improve from 2014 – it noted that sufficient access to low cost financing has been a significant constraint inhibiting the growth of global solar sector so far.
- It expects downstream solar companies to participate in the “gold rush” to acquire solar customers at an accelerated pace. “Just like upstream/midstream solar companies participated in the gold rush to add manufacturing capacity during the 2005-07 timeframe, we expect another gold rush to add recurring MW over the next 2-3 years “until the (US investment tax credit) expires around 2016.
- While the past 5 years were above module cost reduction, the next 3 years would be about reductions in the balance of systems costs. This includes includes the cost of inverters, hardware, customer acquisition and financing costs.
Deutsche Bank is not alone in this assessment. Goldman Sachs, for example, also finds the renewable energy market “incredibly compelling”. Goldman Sachs has made a commitment to invest $40 billion in renewable energy in the coming years, on the assumption that costs will continue to decline as efficiency improves, that solar and wind will reach grid parity without subsidies in the not-too-distant future, and that energy storage issues will be solved.
As RenewEconomy reports, Goldman Sachs also believes that “the position of coal at the top of the global fuel mix is eroding – something that it highlighted in a recent report that said the window for thermal coal was closing rapidly”.
This last assumption may be a bit rash, however, as we shall discuss in a moment. Let’s first note that for all the success of the solar power, with its incredible growth rates (solar grew by 49% per year on average between 2000 and 2012), in 2012 it accounted for just 0.6% of global electricity generation, according to this report from the NREL (National Renewable Energy Laboratory) in the US. Biomass and wind did slightly better at 1.8% and 3.4%, geothermal added 0.3%. These numbers are still very, very modest. Hydropower accounted for 16.5% of global power production in 2012, i.e. more than twice as much as all other renewables production combined.
The NREL report also notes that although renewable energy generation almost doubled in the period 2000-2012, its share in total power production increased only modestly, from about 20% in 2000 to 22.7% in 2012. The reason for this of course is that total power consumption also increased significantly during this period.
This brings us to our second Power Revolution, the one going in coal-powered capacity.
The Coal Revolution
For this we have to look no further than China. China is currently the darling of renewable energy supporters, as the country is investing heavily in solar and wind power. However, as Armond Cohen, Executive Director of the Clean Air Task Force (CAFT) pointed out in a recent article, last year new fossil fuel energy output in China (most of it coal) actually exceeded new wind energy output by six times and solar output by 27 times. Cohen produced this interesting chart to illustrate his point.
Cohen also notes that “given the relative youth of China’s coal plants – the vast majority of them have been built since 1990 – they are unlikely to be bulldozed anytime soon. If their carbon is not abated, they will be emitting for another half century, with a carbon overhang of centuries.”
In addition, he cites a recent news story from Reuters, which reports that “China approved the construction of more than 100 million tonnes of new coal production capacity in 2013 – six times more than a year earlier and equal to 10 percent of U.S. annual usage . . . The scale of the increase, which only includes major mines, reflects Beijing’s aim to put 860 million tonnes of new coal production capacity into operation over the five years to 2015, more than the entire annual output of India.”
Thus, “even under the most aggressive renewable development scenarios, roughly two thirds of China’s power in 2030 will come from fossil energy, the vast majority of it coal”, writes Cohen, noting that “until we scale up carbon capture and storage, these ongoing China coal trends will continue to be an unmitigated climate disaster.”
None of this is really new of course – the International Energy Agency has been putting out the same story for some years now – nor is it confined to China: countries like India and Indonesia are also building coal-fired power plants at a massive scale. And these are often less efficient than the Chinese ones. Even Germany is headed for a coal power boom in addition to its solar and wind power booms.
The Nuclear Revolution
If you thought that Renewables + Coal means No Nuclear – well, not quite. Actually, new nuclear power plants are proliferating all over the world. At this moment, some 60 new nuclear power plants are being constructed in the world, most of them in Asia. In addition, some 160 new power reactors with a total net capacity of some 177 GW are planned.
Let’s just take India as an example. This country, writes Ritwik Mukherjee of the Indian energy journal Energy Ensemble, “has a vision of becoming a world leader in nuclear technology due to its expertise in fast reactors and the thorium fuel cycle”. India has just opened a new Russian-built nuclear power plant at Kudankulam that its owners say “is one of the safest nuclear power facilities in the world. It is so safe that it could resist even the strongest of tornadoes or even direct impact by an aircraft.”
That’s just a start, however. According to Mukherjee, India actually has plans to build 470 GW (!) of new nuclear power by 2050. That is more than the entire nuclear power capacity in the world today, which is under 400 GW. Yes, this sounds crazy. If we think in terms of 1 GW units, it would mean they have to build 1 new nuclear power plant every month.
This hardly seems realistic. Nevertheless, as the World Nuclear Association points out, in the decade of the 1980s, 218 new nuclear power reactors were started up, an average of one every 17 days. In the US during this decade alone one new nuclear plant came online every 77 days. This means that certainly China and India together could do one a month for a few decades.
Consider also that, as Mukherjee reports, 500 million people in India do not have access to electricity at this moment, more than the entire population of the US or the EU. If we assume that all these people will get grid power by 2050, it is clear that India will have to massively expand its power production capacity. Is there any other way to do this cost-competitively, without becoming hugely dependent on outside sources, without a large contribution from new nuclear power?
The Shale Revolution
So what about the Revolution that we have heard most about in the past few years, the Shale Revolution in the US? Could that be copied elsewhere in the world? Well, there are many reasons – and you have heard them many times – why it is unlikely that the US experience can be replicated in other countries – in the short term.
At the same time, there is no reason why the US experience could not be replicated elsewhere – in the long term. If countries want it to.
As Roberto Aguilera and Marian Radetzki point out in a recent paper in which they analyze the global prospects of shale gas and oil, a country like China may have significantly more shale gas and oil reserves as the US. The same goes for e.g. Argentina and Canada. It may well take the Chinese 10 or 20 years to be able to get into the shale game – but once they do, the impact on worldwide oil and gas production (and reserves distribution) would be gigantic.
Aguilera and Radetzki end their paper with an interesting “thought experiment to gauge a possible impact of the international shale revolution spread.”
They start “by summarizing the US accomplishments in 2005–2013, the early stage of the revolution, and conservatively disregard all future US achievements that will undoubtedly come. With roughly a 9% share of global shale gas resources (EIA 2013c) and a 4% share of shale oil resources (DERA 2012) , the USA in 8 years expanded its gas output by 196 mtoe (million tonnes of oil equivalent) and oil output by 186 mt (million tonnes). Assume, then, that the rest of the world (ROW) is equally successful as the USAwas between 2005 and 2013 in exploiting its share of the resources between 2015 and 2035, i.e., with a substantial delay and at less than half the speed attained by the USA. This would yield a ROW 2035 shale gas output of 2,170 mtoe and a shale oil output of 4,650 mt in the same year.”
They conclude: “The importance of these supply additions can be measured in many ways, but they are truly stunning. The projected gas expansion corresponds to 71 % of current global output; the 2035 ROWshale oil output works out greater than total global oil production in 2012! The 20-year output growth projections for ROW shale gas given in the table are twice as large as the global production rise in the preceding 20 years; for oil, they are more than five times as large! Note that future conventional output increases, such as those following from recent discoveries of gas in the Eastern Mediterranean, have to be added to those from shale gas and shale oil, to obtain the global 2035 aggregates.Were our speculation to materialize, the total change over the coming 20 years would be revolutionary indeed—a game changer for the gas and oil markets.”
Aguilera and Radetzki do not claim that their scenario will come true. They merely say that “it is a useful widener of concurrent visions and perspectives of what plausibly could occur” – and I think we can agree that it is.
Indeed, more likely than other Revolutions will happen (energy storage, methane hydrates, energy harvesting, wave energy??) that will change all of these games completely.
Mike Parr says
“500 million people in India do not have access to electricity at this moment……… If we assume that all these people will get grid power by 2050, ……….”
Sunny place India, windy in places as well. PV & wind and off-grid could get electricity to some/many/most of these people well before any nuclear plant was built plus the network to get the power to the 500m or so without power. Won’t happen because this approach will not benefit those in power in India today & indeed in 2050. Still it is nice to speculate on the “shape of things not to come”.
pedro Moraleda says
Solar and shale are really game changers as they involve new technologies and represent a qualitative step forward. I find hard, however, to say that increasing coal demand in a limited number of countries or replicating nuclear power plants are game changers.
You missed the Fifth energy revolution:
The rise of energy self-consumption
As more and more end-users install PV or Wind (BMW plant, Liepzig) purely for self-consumtion the revenues of dedicated electricity producers and the utilities in general will decline. And the grid as it is at the moment may become obsolete.
I recommend a report from Edison Electric Institute titeled:
Financial Implications and Strategic Responses to a Changing Retail Electric Business
Karel Beckman says
Thanks, I know the report. You’re right of course! My list was not meant to be exhaustive. Karel Beckman
Nice. That report is a must-read. One can not make predictions without self-consumption nowadyas. Strange as it is.
What’s going to happen with the grid is the big unknown.
Jason Deign says
Great, thought-provoking article, Karel. I agree with Dimitar that self-consumption is potentially going to be an important factor in energy market dynamics not only in developing countries but also many parts of Europe and even the US.
Grid efficiency in developed economies is another factor to bear in mind. But with your stats about coal consumption in China, perhaps the subject that should be getting most attention right now is CCS… and I don’t see that happening.