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Energy security has until recently not been a key focus
issue for most nations. However, the increasing depletion
of indigenous fossil fuels (eg in the UK and the US) plus
several largely unforeseen geopolitical and meteorological
events over the past two to three years have focused the
governments of the developed world on the uneven distribution
of fossil fuels around the world, in particular oil and
gas. This is especially true if one considers the balance
of geographical energy requirements and fossil fuel distribution,
with increasing transportation fuel and energy needs,
especially in India, China, the US
and the EU versus the availability of significant resources
of oil and gas in Russia, the Caspian Sea region, Africa
and the Middle East. Europe, for example, is becoming
increasingly dependent on imported hydrocarbons.
The EU expects that in a ‘business
as usual’ scenario, the EU’s energy import
dependence will jump from 50% of total energy consumption
today to 65% in 2030. Reliance on imports is expected
to increase from 57% to 84% for gas by 2030 and from
82% to 93% for oil (source: EU White paper on
Energy Policy). We note that the US is in a similar
position, as today it imports over half of its oil
(60.4% in December 2006 – source: EIA). Gas imports
are minimal currently, although we expect that these
will rise in time, as US demand for natural gas rises
and reserves are depleted. By 2030, the US is expected
to be an importer of 16% of its gas in the form of
LNG.
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Major
Sources and Opportunities
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Nuclear
With oil prices relatively high and concern about the
potential impact of fossil fuels on the environment, talk
of a nuclear energy solution is enjoying a revival. This
talk comes at a time when new technologies are available
to make nuclear power safer and help deal with the issue
of disposal of radioactive waste.
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Advantages
Nuclear energy has a number of positives going for it. First,
it does not give off carbon emissions, earning it supporters
in the environmental community among those concerned about global
warming. Second, unlike oil, two of the three largest producers
are Australia and Canada, both of which have stable governments
and represent reliable sources of supply.
Third, once reactors are built, it is very cost effective to
keep them running at high capacity and for utilities to address
demand fluctuations by cutting back on usage of fossil fuels.
Fourth, nuclear plants tend to last a long time and many existing
plants have become more efficient over time, reducing their
demand for uranium.
Disadvantages
There are a number of disadvantages to the nuclear-power option.
These include not only the obvious safety questions but also
some economic and supply-related questions that are currently
being debated by those for and opposed to renewal of outdated
power plants or an expansion of the sector. In terms of safety,
two issues are regularly debated. First, the issue of nuclear
waste and, second, concerns over potential terrorist attacks
on nuclear power plants. The first objection may be overcome
through the introduction of new types of power plants, such
as the pebble-bed modular reactor. This type of reactor uses
graphite balls flecked with tiny amounts of uranium, rather
than conventional fuel rods. With the fuel encased in graphite
and impermeable silicon carbide, the theory is that the waste
should be relatively easy to dispose of. The terrorism fears
are less easily addressed and may ultimately stall the construction
of new plants in countries such as the U.S., where these worries
are greatest. Among economic concerns is the question of construction
costs. Although the cost of energy produced by existing nuclear
plants is competitive, the upfront capital costs of constructing
new plants are extremely high, calculated at $1,300-$1,500 per
kilowatt- hour, or twice the amount it costs to construct a
gas-fired power station.10 In addition, nuclear plant operators
are subject to a government tax to help pay for the disposal
of nuclear waste, pushing potential costs even higher. Given
the long life of nuclear power stations, however, supporters
argue that the upfront costs, at least, are justified.
Another concern is the availability of the main fuel source,
uranium. Having been stable for a number of years, uranium prices
nearly tripled between March 2003 and May 2005. As in the case
of oil, the source of this jump in prices can, in part, be traced
to China. Both the Asia Pacific Foundation of Canada and the
Uranium Information Center (UIC), an Australian-based organization,
believe that more supply will have to be found to meet growing
demand in Asia and in a revival of interest in the
western world. Only 55 percent11 of supply currently comes from
primary mine production, with the rest coming from military
and other sources, such as reprocessed fuel from the power stations
themselves. Both organizations believe that this percentage
is likely to rise in the future, along with production.
Outlook
In many countries, concerns about safety, short-term economics
and supply of uranium are likely to be outweighed by the desire
to acquire a relatively non-polluting and secure source of power.
China, for example, plans to build 30 new plants by 2050, generating
as much as 300 gigawatts10 of power. In certain European countries,
such as France and Finland, nuclear energy is a lot more popular
than it is in the U.S.
Distributed
Energy : Increasing the Attractiveness of Alternatives
The massive blackout across the northeastern
United States in August 2003 did much to focus attention on
the problems of the electrical grid structure in the U.S. It
served to increase interest in different ways of looking at
electricity transmission, including providing the grid with
storage capacity and distributed energy; that is, localized
energy production and distribution. Such localized power production
may ultimately encourage swifter adoption of alternative energy
sources.
Energy Storage
Storage of electricity through conversion to another fuel is
expensive. Nevertheless, higher initial costs are typically
offset over the longer term due to the efficiencies storage
promotes. Storage also provides flexibility through the peaks
and troughs in demand, as well as supply. To deal with fluctuations
in demand, energy storage is most commonly used in conjunction
with nuclear power. Nuclear plants need to operate flat out,
which often means that excess electricity is generated overnight.
If a nuclear plant is paired with a hydroelectric plant, and
the surplus energy generated during trough demand is used to
pump water back up behind the hydroelectric dam, this energy
can be stored and released as hydroelectric power during peak
demand periods.
One of the criticisms often leveled at alternative energy sources
such as wind and solar power is that they are intermittent in
nature. Using wind or solar energy to generate hydrogen converts
these types of energy sources into other fuels, helping to bridge
the gap when, for instance, the wind
is not blowing or the sun is not shining.
Symbiotic pairs include:
. Coal plus oil field for carbon storage
. Nuclear plus hydroelectric
. Wind/solar plus hydrogen production
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Hydro Energy : Biggest Alternative
Source
Hydro is the biggest alternative
energy source currently
The IEA estimates that hydro is currently the biggest
alternative energy electrical power
generation source, accounting for around 20% of global
electricity generated. However, the market for hydro power
is relatively mature. The IEA estimates that globally
around 60% of available hydropower resources have already
been exploited
Biomass and biofuels
Biomass refers to a number of different processes whereby
living matter or its metabolic byproducts (eg manure)
are converted into energy. Most commonly, biomass is converted
into biofuel, but biomass can include biodegradable waste,
which can be burnt for heat/power or turned into methane.
This has vast potential in many countries. Biofuels include
bioethanol, biodiesel, biobutanol and biogas. |
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Like coal and petroleum, biomass is a form of stored
solar energy. Essentially, biomass is part of the carbon cycle.
Carbon from the atmosphere in the form of CO2 is converted into
biological matter through photosynthesis. Biomass is converted
into fuel in a biofuels plant, which is then in turn combusted
in an engine, releasing the carbon once more into the atmosphere,
where it is once more used by plants to create biological matter
through photosynthesis. This is important because in essence
biofuels are not emission less. When combusted, most biofuels
do not emit sulphur, nitrogen or other impurities and thus are
‘clean’ in the sense that they produce only CO2.
Sourcing fuels from biological sources is critical to the perception
and regulatory support of
biofuels. This is because the biomass from which they are produced
removes CO2 from the
atmosphere and the use of biofuels reduces carbon and other
emissions by displacing the combustion of traditional fossil
fuels. Different types of biomass absorb different amounts of
CO2 when growing and therefore the type of biomass used will
impact the amount of carbon offset for each type of plant. We
believe that only the conversion of Brazilian sugarcane to bioethanol
actually results in a net reduction in overall CO2, including
the energy expended to convert the sugar cane to fuel. For most
other types of biomass and most other biofuels, we believe that
the carbon balance is less favourable, either because of the
amount of carbon consumed by the biomass is low or more importantly
the energy needed to convert the biomass into biofuel is higher
than for sugar cane. Typically, types of biomass include corn
and soybean in the US and primarily rapeseed and flaxseed in
Europe. Sugarcane is the main biomass in Brazil and palm oil
in Southeast Asia. These types of biomass are used to produce
principally biodiesel and bioethanol. Agricultural and household
waste such as straw, wood chippings, sewage and food can be
used to make biogas. The production of biofuels clearly has
a seat at the energy table as a means of ensuring security of
national transportation fuel, especially for those countries
such as the US, Brazil, Europe, which are increasingly reliant
on imported oil and gas. The manufacture of biofuels is clearly
more expensive (by a factor of around 2.5 times) than wind in
USD/kW of output. However, emissions reduction and energy security
are driving favourable legislation, subsidies and tax breaks
to encourage the industry, especially in Europe but also in
the US. We believe that biofuels have a future, although we
note that a number of serious issues face the industry, including:
Solar Energy
Solar power involves converting the sun’s
energy into heat or electricity via solar photovoltaic (PV),
concentrated solar power or solar thermal systems. Solar
power is currently experiencing prolific growth and should
continue to form a small but growing part of the energy
matrix – not only solar power for distributed power
sources (domestic etc) but also to some extent for commercial
solar “farms”. As for so many of the renewable
or alternative energy sources, the key mantras remain energy
security and emission reductions.
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Solar – initial usage for domestic
and small business?
We believe that solar will find its biggest applications in
domestic and small business usage,
as the high cost of solar will discourage most utility-scale
operations, while we expect that the land usage of solar facilities
will militate against most commercial facilities, apart from
on the tops of buildings. While solar power cannot be generated
at cost parity with wholesale electricity prices, its cost is
comparable to the retail price of electricity. Given the cost
and the fact that electricity generated is DC, this gives it
potentially lots of domestic applications. Solar Century, a
UK-based installer of domestic solar tiles on roofs, estimates
that eight m2 are required to provide 1kW of electrical output,
which means that most average three bedroom houses could support
around 2kW of production capability and that you get about 125W
from each m2 of PV cell.
Solar too expensive for utility-scale
facilities?
| Most commercial facilities are simply too
small for widespread utility scale power generation and
also they would take up too much space. The world’s
largest solar farm is in Bavaria with a capacity of just
10MW. It occupies 63 acres, suggesting that it generates
just 40W of power per m2. The first commercial-scale plant
is being planned in New Mexico – a 300MW plant. However,
the cost is estimated to be USD1.6bn, or USD5,333 per kW,
versus around USD1,400 per kW for wind and around USD500
per kW for gas-fired generation capability. |
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(We analyze in more detail the relative cost position of the
different technologies in the chapter entitled ‘Cost comparison
of different sources of power generation’.)In addition,
the plant will occupy a staggering 3,200 acres, or 12.25km2.
By comparison, assuming mains gas, we estimate that the average
750MW rated CCGT would occupy about 350,000m2. This would therefore
mean that you could fit 38 CCGT plants with a generation capability
of around 28GW, or nearly 100 times more power, if a gas turbine
were installed rather than solar PV, at a cost of USD14bn or
just 10 times the cost of the solar farm. For a comparison with
wind, we estimate that one 3MW wind turbine requires roughly
14 acres of land. Turbines in a park need to be sighted between
3-5 rotor diameters apart in the direction perpendicular to
the prevailing wind and between 5-9 rotor diameters apart in
the prevailing wind direction. This space is greater so as to
optimize the turbine’s efficiency; as the turbulent air
created by the turning of the rotor needs around 5-9 rotor lengths
to return to being “clean” again Turbulent air would
affect the efficiency of a turbine behind any turbine upwind
of it. Thus, to make the same comparison for wind versus solar,
on our 3,200 acre site you could locate 230 3MW turbines, generating
just short of 700MW of electricity, i.e. more than twice as
much as if the land were dedicated to solar, at a cost of USD700m
or 44% of the solar farm. The beauty of course of wind power
relative to conventional power generation is that 98% of the
land can be returned for farming usage (if indeed the land is
arable), whereas with solar or CCGT/coal, the land can have
no other use apart from power generation. Aesthetes may argue
about the industrialization of the arable landscape, although
we think farmland with a few windmills on it is preferable to
12km2 of solar panels or 38 CCGT plants either floating or fixed,
either to the ocean floor or to piles. This form of power generation
has also been referred to as damless hydropower. Tidal power
Tidal currents can also be harnessed by creating a dam or barrage
across a river mouth, estuary or bay, such as the plant situated
at La Rance in France. However, we do not foresee a substantial
future for these types of project as the environmental impact
is too great. In any case, if you can put a tidal turbine in
a river mouth, why would you dam the whole river mouth? The
pros of marine/tidal power All forms of marine and tidal power
are still in the very early stages of development but we believe
that converters of marine/tidal energy have huge prospects,
based on the following notions: _ The relative predictability
of tides means that the capacity load factor of marine turbines
would necessarily be much higher than that of wind turbines
_ Environmental issues such as noise and visual impact are not
present for marine/tidal turbines as they are underwater
Geothermal Energy
Geothermal energy is generated from heat that comes from
the earth, and is used as a heat source or a power source.
The best areas for utility-sized plants are where there
is seismic and magma tic activity as well as young volcanism.
In areas with high-temperature ground water at shallow depths
wells are drilled into natural fractures in basement rock
or into permeable sedimentary rocks. Hot water or steam
flows up through the wells, either
by pumping or through boiling (flashing) flow The steam
produced is used to drive a turbine,
thereby generating electricity. Medium enthalpy geothermal
may have large scale heating
applications rather than power. Around 25 countries make
extensive use of geothermal energy, especially the US, the
Philippines, Italy, Mexico and Iceland. |
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The relatively widespread nature of available resources, despite
the attractive cost position of
geothermal, does not make it a globally viable technology. However,
as noted above, the availability of resources in certain specific
locations makes it an interesting niche application,
although not a power source that we expect to have global commercial
application. We estimate that globally there is in the region
of around 13GW of geothermal power capacity.
Wind Power
Wind-generated electricity accounted
for 0.6% of global generation in 2004 and the IEA expects
this to grow to 2.4% in 2014. The Global Wind Energy Council
(GWEC) hopes that wind power will provide 12% of total power
generation by 2020, although we believe that this is an
aggressive target.
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Key wind industry conclusions
Specifically on the wind industry our conclusions are that:
_ Wind is currently the most cost-competitive renewable energy
technology. Pricing and shortages of raw materials and components
have masked the reduction in terms of
overall costs
_ Wind power is comparable to conventional fossil fuel sources
from a cost position with oil prices over USD50. Given its emission
profile, we therefore expect strong growth for wind
_ Wind remains a massively underutilized resource, with only
7% of available onshore
resources utilized in Europe alone, within the current the grid
infrastructure
_ This ignores the vast potential for offshore as well as further
onshore potential in the event
of grid upgrades
_ We forecast industry growth in the global market for wind
turbine generators (WTG) of
a five-year CAGR of 14% over 2006-10, despite some growth constraints
on key
component supplies
_ Strong demand for wind turbines is being driven by the entrance
of utility players
(rather than eco-individuals and private companies) into the
renewable energy market.
We expect this to continue. These utilities are investing in
renewable energy and wind
power to diversify their energy mixes to hedge against increasing
oil and gas prices
Conclusion.
The results show that onshore wind and geothermal are competitive
at current fossil fuel
prices. Both are cheaper than coal and equivalent to gas on
a fully costed EUR/MWh basis – only CCGT and nuclear are
cheaper. We have observed the following:
The capital cost of geothermal and wind are among the highest
but the only cost going
forward is operating & maintenance cost as the fuel is essentially
free
- Coal- and gas-based technologies look very cheap on a capital
cost only basis but in fact
the bulk of the ultimate cost of the power generation is in
the fuel and to a lesser extent
the carbon costs
- Natural gas-based turbine technology is less sensitive to
carbon prices as the emission of
CO2 is around half that of coal-fired plant
- Offshore wind still has a long way to go to become cost-competitive
- Solar and fuel cells have even further to go
- Wind, geothermal and solar have relatively predictable compared
with any fossil fuel driven sources of power generation, as
the raw material costs are zero, whereas all fuel based
generation systems have uncertainty and volatility of oil, gas
and coal prices
- Wind and Solar need to be used in conjunction with base load
plants, as meteorological conditions are intermittent. We are
therefore seeing the development of
hybrid wind/gas and other such plants to cope.
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Introduction