Research Directions: Clean and Renewable Power Generation

Increasingly stringent emissions regulations and the rising costs of traditional powergen fuel sources, such as coal and natural gas, are leading to heightened interest in clean and renewable power generation. Meanwhile, with the exception of some markets such as China, global investment in power plants has been slow in recent years as utilities and IPPs have had to address the fallout from the Enron collapse and more recently a spike in natural gas prices that has raised questions about the long term costs of electricity derived from combined cycle gas turbines (CCGT).

Yet the world will require nearly 5,000 GW of new electricity generation over the next 25 years to meet growth in demand in developing countries and to replace coal and nuclear plants that will become obsolete during the period. With CCGT investments facing questions about long-term fuel costs and supplies, with new nuclear stalled in most OECD countries due to public policy and financing obstacles, and with coal combustion a leading contributor to global warming, there would seem to be no clear solution available to meet the enormous requirements mounting in the utility sector.

• Renewable power generation technologies, largely emissions free and with little or no fuel costs, are receiving broad policy support in Europe and many US states, but beyond wind every other renewable source faces scaling obstacles, whether technical feasibility (wave and tidal power), non-competitive capital costs (solar PV), fuel availability (biomass, biogas, landfill gas), or geographic limitations (solar CSP, geothermal, ocean power)
• Carbon policies globally are expected to tighten considerably over the next decade, driving significant new investments in clean power generation such as clean coal, which will require the costly process of separating and storing or consuming CO2, and eventually next-gen nuclear

EER’s industry advisory services will continue to track these trends and to seek answers to these key questions: Behind wind, what is the next scalable renewable technology? How will the renewable policy environment shift in the years ahead, and how will that impact renewables investments? What are the economics of clean coal, and IGCC in particular, and what is a realistic timeframe for substantial growth? How do costs of energy compare among emerging generation technologies, and how do they compare if carbon is taxed? What shape will carbon policies take and in what timeframe? How will they impact utility and IPP growth strategies?

Utilities and IPPs build strategies in renewable power generation

For utilities, renewable generation strategies are driven by a combination of regulatory pressure, efforts to improve generation business performance, and strategic growth opportunities. While more expensive than operating existing coal, nuclear and CCGT fleets, renewable investments are seen as hedges against future fuel price volatility and carbon penalties.

Utilities in Europe are increasingly adding renewable energy to their generation portfolios as they address a shifting set of strategy drivers in an increasingly competitive power market. EER anticipates that Europe’s top 20 utilities will double their renewable capacity in the next five years and have already ear-marked €50 billion solely for renewable energy projects. In the US, twenty-plus states have adopted some type of renewable portfolio standard, and a longer-term production tax credit is under discussion in Congress.

Wind has clearly been the renewable technology of choice for utilities, IPPs and investors (see Research Directions: Global Wind Energy) but new renewables policies are now supporting solar, biogas and ocean power. Whether driven by feed-in tariffs in Europe, or the US PTC, wind developers emerged – both established players such as IPPs, engineering and construction firms, or new start-ups – to target the opportunities, many evolving into specialized wind-IPPs. This same evolution is now taking place in other renewable segments.

After 15 years of relative inactivity, utility-scale solar power projects are gaining considerable momentum globally. Currently over 45 solar CSP projects are in the planning stages globally with a combined capacity of 5,500 MW. Dozens of solar thermal generation projects have moved ahead in the southwest US, Spain, and some parts of the developing world. Project development is being led by CSP system suppliers, by wind-IPPs diversifying into other renewables, and by engineering & construction firms.

The developer model is also taking root in solar photovoltaics (PV), as system integrators and installers of large PV parks are bundling installations to achieve financing and operating economies, selling power back to utilities or directly to customers. PV has become the fastest growing renewable power source, with around 5 GW of capacity installed worldwide. Germany is the world’s largest PV market, with 85% of total installed capacity in Europe.

A flurry of announced wave and tidal projects—primarily off the shores of Portugal and the UK and Canada—have engaged a growing number of energy companies, including Nova Scotia Power, GE, Total, EDF, and Norsk Hydro. Following a gradual ramp up, EER expects that by 2020 a minimum of 3,000 MW of ocean power capacity will be in place.

Carbon issues to drive investment in coal IGCC and other clean technologies

Fuel security issues, rising natural gas prices, and increased concern over climate change are sparking investment in coal IGCC as an alternative to conventional coal combustion. IGCC (Integrated Gasification Combined Cycle) with pre-combustion capture is the lowest cost option for capturing CO2 from coal power plants, providing more flexibility in an uncertain carbon regulatory environment.

Source: Emerging Energy Research

Over 50 projects have been announced or have entered planning worldwide in the past few years, according to EER analysis. The US is leading commercialization of IGCC globally with 27 projects (in 16 states) at some stage of development with a combined capacity of 14,806 MW. Several new IGCC plants using liquid refinery wastes became operational from 2000 to 2006, with the next coal IGCC project scheduled to come online in the US by 2010.

In the US, Federal tax credits, loan guarantees, and other regional incentives are being allocated to help bridge the commercial and economic gap between IGCC and conventional coal combustion. The US government initiative to provide $1.6 billion in tax credits toward investment in clean coal facilities has attracted 22 applications, of which 18 were IGCC projects, altogether representing $27.7 billion in proposed projects.

IGCC is emerging as a potential replacement of carbon emitting coal combustion alongside CCGT, wind, and nuclear as a utility-scale generation option to consider as future carbon constraints become reality.

EER Resources – Clean and Renewable Power Generation

EER offers significant resources in the areas of clean and renewable power generation. Click on the following links for more information:

Advisory Services

• Clean Power Generation Advisory Service
• Renewable Power Generation Advisory Service

Market Studies and Key Deliverables

• Market Study - Renewable Generation Strategies of Europe’s Utilities 2006-2011
• Market Briefs: Solar CSP, Solar PV, US Landfill Gas, IGCC
• Ownership Databases – US Utilities and IPPs, European Utilities