In March 2013, the National Energy Administration (NEA) of China issued a Notice to urge development of wind-to-heat projects in northern China. This practice aims to reduce the waste of wind power and cut emissions from the coal-fired central heating system. Experiments have been carried out and the approach is going to be scaled up, but further innovations are needed to really shake the dominance of coal.

The niche for large-scale wind-to-heat

Figure 1. China’s installed wind power generation capacity, and average operation hours of the turbines from different sources (click image to enlarge graph).

According to the Chinese Wind Energy Association (CWEA), China’s total installed capacity of wind power jumped to 75.3 gigawatt (GW) by the end of 2012, while the annual installed capacity was 13 GW, nearly 27percent lower than that of 2011 (See Figure 1). This may reflect bottlenecks, such as growing wind curtailment, faced by the industry.

Since 2010, the operating hours of wind turbines have been decreasing (See Figure 1). Combined with growing generation capacity, wind curtailment in 2012 reached 20,000 gigawatt hours(GWh), nearly doubled the curtailed production of 2011.

Jilin Province is a region with one of the highest curtailment rates. Winter nights see high wind speed but low electricity demand, and the local grid’s flexibility for peak electricity management is limited. As a result, wind farms in Jilin Province, which have a total generation capacity of 3.3 GW, were generating for only 1,420 hours in 2012. This was much lower than the industry-adopted economic minimum of 1,900 hours.

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I visited Berlin a week after President Obama’s reelection, and came away envious of the strategic clarity and political consensus that mark Germany’s new energy strategy. After months of watching Democrats and Republicans bash each other with vacuous and contradictory rhetoric about where our country’s energy future lies, it was refreshing to see that one of our key allies has a plan—and is implementing it.

Despite having a relatively weak solar resource, strong domestic policy has enabled Germany to dominate the global solar PV market (Source: REN21).

In 2012, Germany got more than 25 percent of its electricity from renewable energy, up from 5 percent in 1995 and 10 percent as recently as 2005. Since 1995, the U.S. share of renewable electricity has hardly budged—going from 10 percent to 11.5 percent.) At the same time, Germany has rapidly increased its energy efficiency, and reduced its carbon dioxide emissions and dependence on imported fossil fuels. Government plans are even more ambitious—at least 80 percent of the nation’s electricity is to come from renewables in 2050.

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Having a stable and transparent policy framework is critical to boosting a country’s “investability” from a renewable energy perspective. But how do we measure such stability? Although investors commonly evaluate certain aspects of regulatory and policy risk—such as the likelihood that a government will alter existing regulations or policies that benefit a particular industry or sector—their assessments rarely consider such variables as policy efficiency, the impact of policy instability, and the gap between existing directives and actual implementation.

Impact of PTC Expiration on Annual Wind Capacity Additions, 1999–2013 (Source: American Wind Energy Association, U.S. Energy Information Agency)

Worldwatch hopes to shed some light on these and other policy measurements through its new Renewable Energy Indicators Project, currently being developed in partnership with the International Renewable Energy Agency (IRENA).

The U.S. wind market

Policy instability is a particular threat to the U.S. wind energy market, which has experienced remarkable growth in recent decades. In 2011, the United States accounted for 17 percent of global wind power capacity additions, second only to China at 43 percent. According to figures from Navigant Consulting, China’s share of the global wind market actually declined in 2011, whereas the U.S. share increased substantially—thanks in large part to the wind Production Tax Credit (PTC).

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Wind turbines in Brazil (Source: Daniel Spillere Andrade, Flickr Creative Commons)

In 2011, electricity generation in Panama comprised 55 percent hydropower plants and 45 percent thermal plants. Although hydropower represents more than half of the total installed capacity, high oil prices, along with high electricity prices and a nearly 7 percent increase in electricity consumption last year, are laying the ground for other technologies to enter the market.

Recently, government support pushed forward new regulation favoring renewables, putting the country on the fast track to attract new renewable energy investments. In April 2011, Panama enacted Law 44, which aims to diversify the country’s energy matrix by promoting wind power. The law mandates “wind-only” long-term power purchase tenders, recommending contracts for up to 15 years to ensure developers a constant revenue stream while delivering a stable stream of renewable electricity to retailers. Law 44 also provides fiscal incentives (mainly tax and import tariff deductions and accelerated depreciation of equipment used to produce wind power), making the development of wind projects more competitive in the energy market. In addition the Law holds the state-owned transmission company, Empresa de Transmisión Eléctrica, S.A (ETESA), responsible for organizing the “wind-only” tenders.

Panama has previously gained ample experience in carrying out long-term power auctions. However, successful auctions have not been achieved without setbacks. In the early 2000s, after a five-year period in which ETESA managed power tenders, distribution companies conducted their own power tenders following rules and regulations established by the government. This process created a number of inefficiencies, resulting in a lack of new investment and new installed capacity, as well as high electricity prices between 2004 and 2007. This situation prompted new rules aimed at establishing minimum levels of contracting in the future, long-term contracts, and the adoption of clear, stable, and standardized power-purchasing processes. Under the new procedures, ETESA resumed organizing the centralized procurement of power on behalf of energy distributors (after consulting on their power needs), and contracts are now signed directly between generators and distributors.

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Despite recent growth, the US wind industry now fears a sharp slowdown. As the Wall Street Journal reports, domestic demand for wind turbines is falling. With the production tax credit (PTC) set to expire at the end of this year, manufacturers are not receiving many new orders. The CEO of Vestas, the world’s largest producer of wind turbines, forecasts that the US market will decline by 80 percent over the next year. Although the PTC originated during the George H.W Bush administration and originally reflected bipartisan consensus, clean energy policy has become increasingly politicized. A congressional agreement to extend the credit is unlikely during a contentious election year. Even if policymakers renew the tax credit after the election, the market will remain uncertain and investments in the wind energy sector in 2013 are bound to be much lower than the record levels we have seen in the recent past. Unlike previous instances in which the PTC was temporarily withdrawn, the US now has a manufacturing base for wind turbines which will be negatively impacted by a decline in demand, placing several thousand jobs at risk.

The uncertain future of the PTC is characteristic of a US renewable energy (RE) policy that lacks long-term predictability. No national target for RE development exists, and most programs have traditionally only been extended in one- and two-year intervals. Unless Congress can agree to extend some of the expiring initiatives, the only federal clean energy policies left after 2014 will be a 30 percent investment tax credit (ITC) for the solar industry, several underfunded RD&D programs, and a few initiatives for energy efficiency and conservation. Some of the core RE policies passed as part of the 2009 American Recovery and Reinvestment Act expired last year and were not renewed.  Examples include the Department of Energy (DOE)’s Section 1705 loan guarantee program, famous for its loans to Solyndra, and Section 1603 treasury grants allowing RE projects to receive an up-front cash grant in lieu of tax credits.

GreenMountainWindFarm (Source: Leaflet/Wiki Commons)

Even with this uncertainty, the RE sector in the US has grown. Without a national target, the main driver of RE deployment in the US has been a combination of these federal financial incentives and a number of state initiatives. For example, 29 US states and the District of Columbia currently employ a mandatory renewable energy portfolio standard (RPS). A total of 8 states have RE goals and 18 offer additional financial incentives such as feed-in tariffs or tradable RE credit schemes. The combined impact of these policies has been rather successful. Renewable energy in the United States is maturing, evolving from a niche market to an increasingly competitive alternative to fossil fuel-based generation. For US sites with the best natural conditions, wind power can already produce power as economically as coal, gas and nuclear generators. Solar photovoltaic (PV) has experienced an unprecedented boom over the past few years and Crystalline silicon PV modules now cost as little as USD 1/watt. The share of total US electricity generation from non-hydropower RE increased from 3.7 percent in 2009 to 4.7 percent in 2011. Last year, nine states generated more than 10 percent of their electricity with non-hydro RE, up from only two states a decade ago.

This dynamic can continue to succeed, but only if the right policy framework is in place. RE technologies are still far from their full potential – and further substantial cost reductions can be expected. However, various RE technologies require different levels and forms of support to further them on their pathway to competitiveness. The federal policy environment remains a key variable in this. Several effective policy tools are available.

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Worldwatch is happy to announce the launch of the much anticipated 2012 REN21 Renewables Global Status Report (GSR). GSR 2012 details worldwide developments in the renewable energy sector through 2011. The report highlights a number of key developments, including market and industry trends, investment flows, the shifting policy landscape, advancements in rural renewable energy deployment, and the evolving synergy between renewable energy and energy efficiency.

REN21 Renewable 2012 Global Status Report (source: REN21)

The new GSR data highlights many remarkable worldwide trends, demonstrating that the renewable energy sector has emerged from the global finical crisis stronger than ever. In 2011, new investment and added power generation capacity for renewables broke their all-time records yet again. Global investments in renewables were estimated at US $257 billion in 2011, an increase of 17 percent over 2010. Investment in renewable energy power generation was $40 billion greater than investment in fossil fuels in 2011.

Total renewable power capacity grew by 8 percent in 2011, reaching over 1,360 gigawatts (GW) of installed capacity by year-end. Renewable energy technologies now account for 16.7 percent of total final energy consumption and over 25 percent of the world’s installed power-generating capacity. China, the United States, Germany, Spain, Italy, India, and Japan are leading in new renewable investments and now account for almost 70 percent of the world’s non-hydro renewable power generation capacity.

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In a previous blog, I discussed the value of pumped-storage hydro systems, especially when it comes to integrating intermittent renewable energies like wind and solar into a power system. However, traditional pumped-storage hydro systems require two reservoirs of fresh water (one upper and one lower), which are not always available at locations that might otherwise benefit from an energy storage system. An exciting technology that tackles this problem – requiring only one on-land reservoir – and that has gained recent momentum is seawater pumped-storage hydro.

An aerial view of the seawater pumped-storage hydro system on Okinawa Island (Source: wastedenergy.net)

Seawater pumped-storage hydro works similarly to traditional systems. Excess electricity from fossil fuel, nuclear, or renewable energy power plants is used during periods of low power demand to pump water uphill to be stored in reservoirs as potential energy. Then, when demand peaks the reservoirs are opened, allowing water to pass through hydroelectric turbines to generate the electricity needed to meet power demand. The main difference for seawater pumped-storage is that instead of having a lake, river, or some other source of fresh water serve as the lower reservoir, these systems pump salt water uphill from the ocean to a land reservoir above. This lowers the system’s fresh water footprint and greatly expands the potential for pumped-storage hydro worldwide because seawater pumped-storage is much less site-specific than traditional systems.

There is currently one seawater pumped-storage hydro system operating in the world, on the northern coast of Okinawa Island, Japan. The system began operation in 1999 and has the potential to generate up to 30 megawatts (MW) of power. The hydropower plant has a total head – the vertical distance, or drop, between the intake of the plant and the turbine – of 136 meters and the upper reservoir is located just 600 meters from the coast.

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In 2010, for the first time ever, countries that did not industrialize first have invested more money in renewable energy than those countries that were first to industrialize, according to Bloomberg New Energy Finance. Yet within many middle-to-low income countries, large portions of the population continue to have limited or no access to electricity and other energy services. In some parts of sub-Saharan Africa, such as Uganda and Malawi, as much as 90 percent of the population is without electricity. And while there is no single standard for how energy development should take place, addressing the needs of populations with minimal or no access to energy and related services is a critical part of sustainable development. Fortunately, many regions and communities are implementing decentralized and distributed approaches to renewable energy in sustainable ways, including through locally self-determined initiatives and by engaging in international collaboration.

Wind power can be tied to large centralized grid systems or to municipal micro-grids (Source: Reuters)

Decentralized renewable energy

Still today, the bulk of energy financing goes to centralized, grid-connected power plants. In 2010, for example, an estimated $40–45 billion was invested in large-scale hydropower, compared to only $2 billion for small hydropower projects. One reason for this disproportionate focus is that international efforts and funds typically emphasize policy change at the national level and through capital-intensive, industrial markets. But while implementing change at these levels is important and necessary, it is not the only way.

Indeed, numerous studies and examples indicate that policies oriented solely toward centralized production and distribution of electricity are inadequate to meet the needs of marginalized people and communities. In contrast, renewable energy technologies provide the opportunity for a development path that is more culturally self-determined, giving individuals and communities control over their own energy sources. Distributed renewable energy technologies constitute an important, community-driven alternative to centralized projects that are often driven by national politics and that can be largely removed from community interests.

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Four of seven Central American countries have utility scale wind projects.

On December 1, I attended a conversation on energy and infrastructure in Central America hosted by the Brookings Institution here in Washington, D.C. In many ways, the discussion reaffirmed the case for a socially and environmentally sustainable course of development through renewable energy. José Fernández, Assistant Secretary of State for Economic, Energy and Business Affairs at the U.S. Department of State took part, along with other knowledgeable panelists working on the region. The discussion was highly relevant to a new project here at Worldwatch on the state of renewable energy development in Central America, and the transition to a more sustainable energy future.

Energy economies in Central America vary widely. Costa Rica, for example, generates 90 percent of its energy through sources other than fossil fuels (primarily large hydropower), whereas El Salvador depends on fossil fuels for 80 percent of its electricity. According to Pablo Rodas, Chief Economist at the Central American Bank for Economic Integration (CABEI), the region currently generates 45 percent of its electricity using oil, spending some $7 billion annually on imports. Costa Rica alone spends $2 billion annually on oil. This means that as policy incentives improve and financing increases, while technology costs for new renewables such as wind, biomass, geothermal, and solar go down, market forces due to high oil prices will provide the motivation for countries to look toward these alternative energy sources.

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November 6-12 is Energy Week in the Caribbean.

The winds of change are blowing in Haiti’s energy sector. President Joseph Martelly identified four priorities for his term: education, employment, environment and rule of law (Education, Emploi, Environnement, Etat de Droit – four “E”s in French). Last month, as the President attended a workshop on energy organized by Rene Jean-Jumeau, the recently nominated Secretary of State for Energy, he added energy as the fifth “E”. He emphasized the impact of the current energy situation on Haiti’s decreasing forest cover as trees are cut for the production of charcoal, and the importance of transitioning to a modern and resource efficient energy supply. President Martelly concluded, “Electricity is needed to develop Haiti’s industry, and cast away the darkness of moonless nights.” This added priority was also reflected in the general policy statement from the Prime Minister Garry Conille on October 11^th, where he mentioned the development of alternative sources of energy (notably) and the improvement of the country’s electricity supply as national priorities.

Haiti’s energy sector is marked by very low per/capita energy consumption, a very low electrification rate, a high dependency on fossil fuels with the highest energy intensity in the whole Latin America and Caribbean (LAC) region, and high supply prices. Haiti’s energy sector is primarily reliant on charcoal, which represents 75 percent of the country’s final energy consumption and, along with fuel wood, often constitutes the only source of energy for households living in rural areas. Intensive use of charcoal has been hugely detrimental to the vegetation cover of Haiti. Over 70 percent of Haiti’s 10 million people live without access to the electricity grid, which has led President Martelly to comment, “in terms of energy, Haiti is still in the Middle Ages.”  About 63 percent of electricity generation in the country is based on imported diesel fuel, mainly from Venezuela. Hydropower constitutes 37 percent of the country’s electricity generation. A recent WorldBank/Nexant report identified imported distillate to be the most expensive fossil fuel resource option for Haiti in the future, after LNG and coal, with a forecasted levelized price of US $22.45/GJ over 2014-2028.

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