Tuesday, November 15, 2011

Renewable Energy

Renewable energy sources have been growing rapidly but still constitute a minuscule amount of total primary energy production.

Hydro power still dominates renewable energy production, although solar and wind power have been growing rapidly from a very small base. Hydro power is likely to gradually lose its dominance given the rapid growth of wind and solar power, although both have a long way to go.

From The Economist's Daily Chart.




According to The Economist: "Solar power saw the biggest leap in 2010, with the installed base jumping 70% compared with 2009 to 40 gigawatts. Wind power also grew strongly, adding 24% of generating capacity. Yet the biggest source of renewable electricity, hydropower, and the smallest, geothermal, both only added 3% to capacity".

Not surprisingly North America lags both Europe and Asia.

While these figures sound impressive, it's worth getting a grip on the reality of renewable energy production. To get an idea of the scale of renewables compared to other sources of energy, you can go to the International Energy Agency's website and in particular look at the World Energy Outlook.

The latest report reveals some very interesting graphs both backward and forward looking.

While economists often worry about the level of renewable subsidies they pale into insignificance when compared to fossil fuel subsidies. As the IEA reports:

Energy subsidies – government measures that artificially lower the price of energy paid by consumers, raise the price received by producers or lower the cost of production – are large and pervasive. When they are well-designed, subsidies to renewables and low-carbon energy technologies can bring long-term economic and environmental benefits. However, when they are directed at fossil fuels, the costs generally outweigh the benefits. 
Fossil-fuel consumption subsidies worldwide amounted to $409 billion in 2010, with subsidies to oil products representing almost half of the total. Persistently high oil prices have made the cost of subsidies unsustainable in many countries and prompted some governments to try to reduce them. In a global survey covering 37 countries where subsidies exist, at least 15 have taken steps to phase them out since the start of 2010. Without further reform, the cost of fossil-fuel consumption subsidies is set to reach $660 billion in 2020, or 0.7% of global GDP (at market exchange rates).  
... 
The share of energy subsidies going to renewable energy is poised to continue to grow. Global renewable-energy subsidies increased from $39 billion in 2007 to $66 billion in 2010, in line with rising production of biofuels and electricity from renewable sources. Despite a projected decline in unit production costs due to cost reductions and rising wholesale prices for electricity and transport fuels, subsidies would need to expand even further to meet existing targets for renewable energy production. In all three scenarios most renewable energy sources need to be subsidised in order to compete in the market. 
In 2035, subsidies to renewables reach almost $250 billion in the New Policies Scenario. Onshore wind becomes competitive around 2020 in the European Union and 2030 in China, but not in the United States by the end of the projection period. All other technologies require continuing subsidies.


While the current position is marginal the IEA predicts their use will grow rapidly up to 2035.

Solar, wind, geothermal etc are included under "Other". That's it that red section - can't see it? That's because it's so small. Biofuels and hydro are of course renewables as well. 

The big reduction has been in oil usage (after the twin 1970s oil shocks). "Other" has increased by a factor of 8 but still accounts for less than 1 per cent. Nuclear has grown considerably as well and coal has increased its share.


Some other interesting graphs are below. All latest stats. Remember there is a distinction between electricity and total primary energy supply. 


When it comes to electricity supply, coal still dominates.












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