renewable energy future white paperweb.pdx.edu/~wamserc/research/aitken.pdfpresent (2003) status of...

Transitioning to a Renewable Energy Future

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aper

Written by Donald W. Aitken, Ph.D., under contract to the International Solar Energy Society

http://whitepaper.ises.org

WP komplett > pdf 17.11.2003 15:37 Uhr Seite 3

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Contents

Executive Summary 3

Summary of Policy Options and Implementation Measures 6

Preface: Solar Energy from Then to Now and Beyond 7

Framework, Scope and Limitations of this White Paper 8

Definitions, terminology, and conversion factors 9

Introduction – 10A Global Energy Transition, Steering the Correct Course

New Elements Driving Public Policy toward 12a Renewable Energy Transition

Environmental warnings 12

Avoiding risks 13

Opportunities for governments 14

The Renewable Energy Resources: Characteristics, 15Status of Development, and Potential

Bioenergy 15

Geothermal energy 18

Wind power and intermittent 20renewable energy resources

Energy and power from the wind 20

Achieving high penetrations of energy from wind and other intermittent renewable energy sources 22

A few notes about the hydrogen transition 23

Direct use of the sun’s energy 23

Overview 23

Passive solar heating and daylighting of buildings 25

Solar water and space heating 27

Solar thermal electric energy generation 28

Solar photovoltaic electric energy production 30

National and Local Factors Supporting the Development and 34Application of Renewable Energy Technologies

Meeting international greenhouse gas reduction commitments 34

Enhancing the productivity of energy expenditures, and the creation of new jobs 34


Policies to Accelerate the Application of Renewable Energy 36Resources

Overview 36

City policies can lead the way 37

The Sacramento Municipal Utility District 37

Los Angeles and San Francisco 38

National policies to promote new renewable 39energy developments

Renewable electricity standards 39

Developing a balanced renewable energy portfolio 39

One especially successful policy instrument:“feed-in” tariffs 41

The developing nations 42

Market-based Incentives 43

Overview 43

Requirements for introducing fair market incentives 44for renewable energy

Redressing inequities in market subsidies for the energy sources 44

Developing a consistent method for estimating energy costs 45

The Role of R&D in Supporting the Renewable Energy Transition 47

Two Comprehensive National Clean Energy Policy Models 48

The United States: Leadership from the states, and a 48clean energy blueprint for an alternative future

Present (2003) status of renewable energy policies in the U.S. 48

A powerful clean energy blueprint for the U.S. 49

Germany: A significant long range renewable energy policy 51

Conclusion 52

Acknowledgements 54

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Executive Summary

This White Paper provides a rationale for effective governmental renewableenergy policies worldwide, as well assufficient information to accelerate effec-tive governmental policies. It is the thesisof this White Paper that a worldwide eff-ort to generate the renewable energytransition must emerge at the top ofnational and international political agen-das, starting now.

In the history of human energy use, theWhite Paper records that sustainableresources were the sole world supply,even in nascent industrial developmentwell into the 1800s, and that the worldwill necessarily again have to turn tosustainable resources before the presentcentury is over. The fossil fuel period istherefore an “era”, not an age, and high-ly limited in time in comparison with theevolution, past and future, of civilizationsand societies. Accordingly, it is criticalfor governments to view what remains of the fossil fuel era as a transition.

The White Paper reveals that policiesnow in existence, and economic expe-rience gained by many countries to date, should be sufficient stimulation for governments to adopt aggressivelong-term actions that can acceleratethe widespread applications of renew-able energy, and to get on a firm pathtoward a worldwide “renewable energytransition”, so that 20 % of world electricenergy production can come from rene-wable energy sources by 2020, and 50 % of world primary energy produc-tion by 2050. There can be no guaran-tee this will happen, but the White Paperpresents compelling arguments thatshow it is possible, desirable, and evenmandatory.

The window of time during which con-venient and affordable fossil energy re-sources are available to build the newtechnologies and devices and to powera sustained and orderly final great worldenergy transition is short – an economictimeline that is far shorter than the timeof physical availability of the “conventio-

nal” energy resources. The White Paperargues that the attractive economic,environmental, security and reliabilitybenefits of the accelerated use of rene-wable energy resources should be suffi-cient to warrant policies that “pull” thechanges necessary, avoiding the “push”of the otherwise negative consequencesof governmental inaction. There is stilltime left for this.

The White Paper presents three majorconditions that are driving public policytoward a renewable energy transition: 1) newly emerging and better under-

stood environmental constraints; 2) the need to reduce the myriads of

risks from easy terrorist targets andfrom breakdowns in technologies onwhich societies depend; and

3) the attractiveness of the economicand environmental opportunities thatwill open during the renewable energytransition.

The renewable energy transition willaccelerate as governments discoverhow much better the renewable energypolicies and applications are for econo-mies than the present time- and re-source-limited policies and outmodedand unreliable centralized systems forpower production and distribution.

Today, it is public policy and politicalleadership, rather than either technologyor economics, that are required to moveforward with the widespread applicationof the renewable energy technologiesand methodologies. The technologiesand economics will all improve with time,but the White Paper shows that they aresufficiently advanced at present to allowfor major penetrations of renewableenergy into the mainstream energy andsocietal infrastructures. Firm goals forpenetrations of renewable energy intoprimary energy and electrical energyproduction can be set by governmentswith confidence for the next 20 yearsand beyond, without resource limitations.

Specifically, with regard to the renew-able energy technologies, the WhitePaper shows the following:

Bioenergy: about 11 % of world pri-mary energy use at present is derivedfrom bioenergy, the only carbon-neutral combustible carbon resource, but that is only 18 % of today’s esti-mated bioenergy potential. Estimatesfor world bioenergy potential in 2050average about 450 EJ, which is morethan the present total world primaryenergy demand. Fuel “costs” for theconventional resources become in-stead rural economic benefits withbioenergy, producing hundreds ofthousands of new jobs and new industries.

Geothermal Energy: geothermal energyhas been used to provide heat forhuman comfort for thousands ofyears, and to produce electricity forthe past 90 years. While geothermalenergy is limited to those areas withaccess to this resource, the size ofthe resource is huge. Geothermalenergy can be a major renewableenergy resource for at least 58 coun-tries: thirty-nine countries could be100 % geothermal powered, with fourmore at 50 %, five more at 20 %, andeight more at 10 %. Geothermal ener-gy, along with bioenergy, can serve as stabilizing “baseload” resources innetworks with the intermittent renew-able energy resources.

Wind Power: global wind power capa-city exceeded 32,000 MW by the endof 2002, and has been growing at a32 % rate per year. Utility-scale windturbines are now in 45 countries. Theprice of wind-produced electricity isnow competitive with new coal-firedpower plants, and should continue to reduce to where it will soon be the least expensive of all of the newelectricity-producing resources. A goal of 12 % of the world’s electri-city demand from wind by 2020 appe-ars to be within reach. So is a goal of

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20 % of Europe’s electricity demandby 2020. This development pace isconsistent with the historical pace ofdevelopment of hydroelectric andnuclear energy. The 20 % penetrationgoal for the intermittent renewableenergy resources is achievable withinpresent utility operations, withoutrequiring energy storage.

Solar Energy: The energy from the sun can be used directly to heat orlight buildings, and to heat water, in both developed and developingnations. The sun’s radiant energy can also directly provide very hotwater or steam for industrial proces-ses, heat fluids through concentrationto temperatures sufficient to produceelectricity in thermal-electric genera-tors or to run heat engines directly,and produce electricity through thephotovoltaic effect. It can be useddirectly to enhance public safety, tobring light and the refrigeration of foodand medicine to the 1.8 billion peopleof the world without electricity, and toprovide communications to all regionsof the world. It can be used to producefresh water from the seas, to pumpwater and power irrigation systems,and to detoxify contaminated waters,addressing perhaps the world’s mostcritical needs for clean water. It caneven be used to cook food with solarbox cookers, replacing the constantwood foraging that denudes eco-systems and contaminates the air inthe dwellings of the poor.

Buildings: in the industrial nations,from 35 % to 40 % of total nationalprimary use of energy is consumed inbuildings, a figure which approaches50 % when taking into account theenergy costs of building materials andthe infrastructure to serve buildings.Letting the sun shine into buildings inthe winter to heat them, and lettingdiffused daylight enter the building to displace electric lighting, are boththe most efficient and least costlyforms of the direct use of solar ener-

gy. Data are mounting that demon-strate conclusively enhancements ofhuman performance in daylit buildings,with direct economic and educationalbenefits that greatly multiply the ener-gy-efficiency “paybacks”. The integra-ted design of “climate-responsive”buildings through “whole building”design methods enables major cost-savings in actual construction, normal-ly yielding 30 % to 50 % improvementin energy efficiency of new buildings at an average of less than 2 % addedconstruction cost, and sometimes atno extra cost.

Solar Energy Technologies: seriouslong-range goals for the application ofsolar domestic water and space hea-ting systems need to be establishedby all governments, totaling severalhundred million square meters of newsolar water heating systems world-wide by 2010. A worldwide goal of100,000 MW of installed concentra-ting solar power (CSP) technology by2025 is also an achievable goal withpotentially great long-term benefits.

Photovoltaic (PV) solar electric techno-logy is growing worldwide at an amaz-ing pace, more than doubling everytwo years. The value of sales in 2002of about US$ 3.5 billion is projected to grow to more than US$ 27.5 billionby 2012. PV in developed and devel-oping nations alike can enhance localemployment, strengthen local eco-nomies, improve local environments,increase system and infrastructure reliability, and provide for greater secu-rity. Building-integrated PV systems(BIPV) with modest amounts of stor-age can provide for continuity ofessential governmental and emergencyoperations, and can help to maintainthe safety and integrity of the urbaninfrastructure in times of crisis. PVapplications should be an element ofany security planning for cities andurban centers in the world.

The White Paper stresses the impor-tance of governmental policies that canenhance the overall economic producti-vity of the expenditures for energy, andthe great multiplier in the creation of jobsfrom expenditures for the renewableenergy resources rather than for theconventional energy sources. Utilities arenot in the job producing business, butgovernments are, supporting the needfor governments to control energy poli-cies and energy resource decisions.

National policies to accelerate the development of the renewable energyresources are outlined, emphasizing that mutually supporting policies arenecessary to generate a long-term bal-anced portfolio of the renewable energyresources. Beginning with important city examples, the discussion moves tonational policies, such as setting renew-able energy standards with firm percent-age goals to be met by definite dates.The specific example of the successfulGerman “feed-in” laws is used to illus-trate many of these points.

Market-based incentives are describedin the White Paper, to compare withlegislated goals and standards, anddiscussed in terms of effectiveness. It isshown that various voluntary measures,such as paying surcharges for “greenpower”, can provide important supple-ments to funding for renewable energy,but that they cannot be sufficient togenerate reliable, long-term growth inthe renewable energy industries, nor tosecure investor confidence. Reliable andconsistent governmental policies andsupport must be the backbone for theaccelerated growth of the industries.

It is also shown in this White Paper thatthe energy market is not “free”, thathistorical incentives for the conventionalenergy resources continue even today to bias markets by burying many of the real societal costs of their use. It isnoted that the very methodologies usedfor estimating “levelized” costs for ener-gy resources are flawed, and that they

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Executive Summary


are not consistent with the more realisticeconomic methodologies used by mod-ern industries. Taking into account futurefuel supply risk and price volatility in netpresent valuations of energy resourcealternatives paints a very different pictu-re, one in which the renewable energyresources are revealed to be competitiveor near-competitive at the present time.

Even though this White Paper empha-sizes the readiness of the renewableenergy technologies andmarkets to advance thepenetration of theseresources to significantlevels in the world, animportant component ofany national renewableenergy policy should besupport for both funda-mental and applied R&D,along with cooperationwith other nations in R&D activities to en-hance the global efficien-cy of such research. It is both significant andappropriate that theEuropean Commissionhas agreed to invest forthe next five-year period in sustainableenergy research an amount that is 20times the expenditure for the 1997-2001five-year period.

The White Paper concludes with thepresentation of two comprehensivenational energy policies to demonstratethe method of integration of various indi-vidual strategies and incentives into sin-gle, long-range policies with greatpotential returns.

All of those square meters of collectorsand hectares of fields capturing solarenergy, blades converting the power ofthe wind, wells delivering the Earth’s

thermal energy, andwaters delivering theenergy of river flows,waves and tides, willdisplace precious anddwindling fossil fuels and losses of energyfrom the worldwidephase-out of nuclearpower. Sparing the useof fossil fuels for highereconomic benefits, orusing them in fuel-savingand levelizing “hybrid”relationship with theintermittent renewableenergy resources (sunand wind), will contributeto leaner, stronger, safer

societies and economies. And, in theprocess, carbon and other emissionsinto the atmosphere will be greatly re-duced, now as a result of economicallyattractive new activities, not as expensi-ve environmental penalties.

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Governments need to set, assureand achieve goals to accomplishsimultaneously aggressive efficien-cy and renewable energy object-ives. The implementation mecha-nisms for achieving these goalsmust be a packaged set of mutu-ally supportive and self-consistentpolicies. The best policy is a mix of policies, combining long termrenewable energy and electricitystandards and goals with directincentive and energy productionpayments, loan assistance, taxcredits, development of tradablemarket instruments, removal ofexisting barriers, government lea-dership by example, and user education.


Summary of Policy Options and Implementation Mechanisms

National multi-year goals for assuredand increasing markets for renewableenergy systems, such as "RenewableEnergy Standards” (also called, in theU.S., "Renewable Portfolio Standards",or RPS), or the EU Renewables Direc-tive, especially when formulated tosupport balanced development of adiversity of renewable energy techno-logies;

Production incentives, such as “feed-in” laws, production tax credits (PTC),and net metering;

Financing mechanisms, such asbonds, low-interest loans, tax creditsand accelerated depreciation, andgreen power sales;

System wide surcharges, or systembenefits charges (SBC), to supportfinancial incentive payments andloans, R&D and public interest pro-grams;

Credit trading mechanisms, such asRenewable Energy Credits (RECs) orcarbon reduction credits, to enhancethe value of renewable energy, toincrease the market access to thoseenergy sources, and to value the envi-ronmental benefits of renewables;

Specific governmental renewableenergy “quotas” for city and staterenewable energy procurements;

Removal of procedural, institutionaland economic barriers for renewableenergy, and facilitation of the integra-tion of renewable energy resourcesinto grids and societal infrastructure;

Consistent regulatory treatment, uni-form codes and standards, and sim-plified and standardized interconnec-tion agreements;

Economic balancing mechanisms,such as pollution or carbon taxes(which can then be diverted as “zerosum” incentives to the non-pollutingand non-carbon technologies);

“Leveling the playing field” by redress-ing the continuing inequities in publicsubsidies of energy technologies andR&D, in which the fossil fuels andnuclear power continue to receive the largest share of support.

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Preface: Solar Energy from Then to Now and Beyond

Solar energy is not an “alternative ener-gy”. It is the original and continuing pri-mary energy source. All life and all civili-zations have always been powered bysolar energy. Expanding the technicalapplications of solar energy and its otherrenewable energy cousins to carry civili-zations forward is simply a logical exten-sion of its historic role, but also theinescapable key to achieving sustainabi-lity for human societies.

The solar energy that is absorbed by theEarth and atmosphere drives the greatcycles of weather and ocean currents,distributing the energy over the face ofthe Earth. Solar energy provides theevaporation engine, lifting moisture tothe atmosphere from where it can fall,bringing clean, fresh water to plants and filling the ponds, lakes, aquifers,streams, rivers and oceans, spawningand supporting all forms of life. Solarenergy is tapped by plants throughphotosynthesis to energize the growth,directly and indirectly, of all life on Earth.The solar energy stored in wood andwoody crops has been released by lightning in fire to renew wild ecologicalsystems. More recently humans havereleased that stored solar energy in controlled fires to provide comfort andcooking. And the sun’s direct heat hasbeen adapted into shelters to warmhumans in cold climates for time eternal.

As human social groupings evolved intocities, the sun continued to provide sup-port with ever expanding uses of itsenergy for life and commerce. Rivers filled by sun-provided water becametransportation sources and locations forgreat cities. The solar-driven power ofwind was tapped to grind grain in greatwindmills, and to power the sails acrossthe oceans carrying explorers, settlers,and materials for commerce, and cross-fertilizing civilizations. Water falling overwater wheels converted the sun’s ener-gy of evaporation to power for machin-ery, such as for the early printing pres-

ses and cotton gins, and then turnedthe early (hydroelectric) generators tobring electricity to cities.

The solar energy released in burningwood turned water to steam to greatlyadvance industry and transportation,and to provide for human thermal com-fort in homes and buildings. Althoughthe widespread use of coal developed inthe second part of the 1800s, and oilwas discovered in the1800s, wood was still theprimary energy used topower industrial civiliza-tions into the early 20th

Century.

It was only during thismost recent century thathuman societies transit-ioned to the fossil fuelsfor their primary energyneeds, forgetting, overtime, that the energy in gas, oil and coalis also solar energy that had been storedin living tissue (biomass) that did not geta chance to decay, but rather was sto-red, compressed, heated, and turnedinto fossil fuels over the last 500 millionyears. The cheap access to coal in newcoal-mining settlements, and then theconvenience of oil and gas, caused thewidespread abandonment of passivesolar, daylighting, and other environmen-tal design features for buildings.Although solar water heating was com-mercialized and common in a number ofareas at the beginning of the 20th centu-ry, it, too, was replaced by the cheapconvenience of gas and electricity. Thedirect use of solar energy has beenreplaced by the indirect use of storedsolar energy. Yet solar energy it still is.

So one way or another, civilizations haveremained, to this day, powered by solarenergy. (Of the two primary non-solarresources, nuclear energy contributed6.8 %, and geothermal energy 0.112 %,to world primary energy in the year2000.) Most often, though, we haveused profligately and wastefully, andtaken for granted, the limited resource of fossil fuels. The fossil fuels are beingsteadily depleted, and they cannot

be replaced on anyreasonable time scale of human civilizations.While the lifetime of oiland gas may stretch outthrough the first half ofthis century, the transi-tion to sustainable alter-natives must happenwell before the physicalor economic depletionof these valuable storedenergy resources. Civili-

zation must begin to take seriously thistransition.

There is a readily available solution – therenewable energy resources. They arenon-polluting, inexhaustible, operate instable harmony with the Earth’s physicaland ecological systems, create jobs andnew industries out of expenditures thatpreviously had gone to purchase fuels,contribute to physical and economicself-sufficiency of nations, are availableto both developed and developingnations, and cannot be used to makeweapons.

We have turned to "yesterday's sun-shine" stored in fossil fuels for about 100 years, after relying on “today’s sun-shine” for all of human history beforethat. Therefore, it is a thesis of this WhitePaper that the world must emerge fromthis brief fossil-fueled moment in humanhistory with a renewed dependence on“today’s sunshine” for the entire portionof human history yet to be written.

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From yielding the energy thatpowers the chemical, mechanicaland electrical functions of all livingthings, and conditions their sup-porting environment, the sun’s rolein life and ecosystems has alwayscome first, and will continue to doso for as long as life exists on thisplanet. Societies that accept thisprinciple will flourish, while thosethat try to evade this truth for theirown short-term economic benefitwill fail.


Framework, Scope and Limitations of this White Paper

Opening with a discussion of the newelements that are today driving publicpolicy toward the renewable energytransition, this White Paper presentsinformation on applications and policiesfor those renewable energy resourcesthat are in great abundance worldwide,but which have barely begun to bedeveloped to their full potential. The pre-sent status and rate of growth of eachof the major renewable energy technolo-gies is briefly summarized, to help informthe reader of their technical and marketmaturity and to demonstrate the poten-tial for renewable energy resource deve-lopment.

The “baseload” renewable energyresources (bioenergy and geothermalenergy) are first presented, because oftheir widespread historical contributionsto meeting the energy needs of theworld and their promise for future large-scale expansion. This is followed by the“intermittent” renewable energy resour-ces (wind and direct thermal and electri-cal applications of radiant solar energy).

The next section delineates the variouspolicies that have been emerging toadvance renewable energy technologiesand applications worldwide, to outlinethe portfolio of options available todayfor governments and nations.

Policies for the development of newlarge-scale hydroelectric power projectsare not presented. Hydroelectric energyhas been long commercialized. And anargument can be made that, while hydro-electric energy remains a very importantworldwide renewable (and sustainable)energy resource (producing about 2.3 %of world primary energy supply in 2000and 17 % of global electricity produc-tion), few large rivers remain to be tap-ped, and those that do are revealingecological benefits from running free thatexceed the benefits of being corralledbehind dams to impound water and toproduce electricity. Small hydroelectricapplications (“micro hydro”) can still fillimportant local niches for power.

Existing hydroelectric power has greatpotential to complement, level, and even store the energy from intermittentrenewable energy resources, therebyincreasing the value and utility of both.So it will continue to be a valuableresource in the transition and beyond.But on a worldwide scale hydroelectricpower is nearing its maximum potentialdevelopment already.

Nuclear power is also not presented as a realistic policy option in this WhitePaper. Nuclear energy currently makes a small but significant worldwide contri-bution (6.8 % of worldprimary energy – that is,all energy consumed byend users – in 2000, andabout 17 % of globalelectric energy produc-tion, both figures still lessthan those for renewable power andenergy production). But it appears thatthe pace of nuclear plant retirements willexceed the development of the few newplants now being contemplated, so thatnuclear power may soon start on adownward trend. It will remain to beseen if it has any place in an affordablefuture world energy policy. And even if it does, it would be incredibly foolish toplace all of the world’s hopes on justone resource, for if it fails, what then? As nature strengthens its ecologicalsystems through diversity, so mustgovernments seek policies that supporta diversity of energy resources. Fordeveloping nations, the energy re-sources of greatest importance arethose that are locally available, andwhich can be tapped and applied affordably by locally available humanresources. Nuclear power fails all ofthese tests. The renewable energyresources pass them.

In keeping with the aim of this WhitePaper – to accelerate the application ofthe presently commercialized renewableenergy resources – future possibly im-portant applications, such as oceanthermal energy conversion (OTEC), waveenergy, and tidal power, are also notdiscussed. But one can expect thatthese, too, will sometime in the futuretake their places in the complete port-folios of opportunities to utilize nature’sgift of renewable energies.

The following material presents justenough about each of the selected

resources to be read bybusy decision-makers,to support the types ofpolicies available tothem, to support thevalue of setting aggres-sive goals which are

also realistic, and to suggest the kindsof benefits that will accrue from thosepolicies. This paper focuses on genera-ting and supporting the process of therenewable energy transition.

This White Paper owes much to themany informational resources, both peo-ple and publications, from which thematerial for this paper has been drawn.But this is intended to be a policy piece,not a research paper, so, with theexception of the figures, the followingmaterial is presented without specificsource attributions. The principal re-sources are acknowledged at the end of this paper.

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The ultimate definition of “sustaina-bility” must accept as primary themaintenance and integrity of thesolar-driven ecological and physi-cal systems, or human societiesand economies will surely perish.


Definitons, terminology, and conversion factors

An attempt has been made in this WhitePaper always to put stated numbers in a relative context, to reveal their policymeaning. Nevertheless, it is helpful hereto relate energy units from the two majorsystems presently in use worldwide, orto other convenient measures, to revealvalues used throughout this White Paper,as well as to provide definitions appli-cable to this paper and in common usein reports.

Work performed at the rate of 1 Joule/second is one watt of power.Conversely, the energy produced by 1 watt of power over an hour is onewatt-hour. Power usage is normallymeasured in the more applicable unit ofkilowatt hours (kWh, or the energy pro-duced by 1,000 watts of power over aperiod of one hour).

For societal energy reporting, larger unitsmust be used. The most common forthe outputs of power production facilitiesand societal energy statistics is mega-watt hours (MWh, or one million watt-hours), or gigawatt-hours (GWh, whichis one billion, or 109, watt-hours). Fornational or world annual energy con-sumption, the unit of Terawatt-hours isthe most convenient (TWh, which is onetrillion, or 1012, watt-hours, or one billionkWh).

The most useful unit for cataloging ener-gy use by nations and the world is theExajoule (EJ), which is a billion billion(109 x 109, or 1018) joules. Since theenergy content of 1,055 joules is equalto the energy content of one Btu (theenergy needed to heat one pound ofwater one degree F), it is apparent that1.055 EJ is therefore equal to one qua-drillion (“Quad”, or 1015 Btu) of energy.(For confused decision-makers readingthis, it is sufficiently accurate to firstorder to just equate EJ and Quads in

one’s head while reading, to allowthought in the units to which the readeris most accustomed. A mental error ofonly 5.5 % is made that way, and it caneasily be corrected when thoughts areput to paper or computer.)

A unit in widespread use is million-ton-nes-of-oil-equivalent (Mtoe), which is, bydefinition, 41.868 Petajoules (PJ, or 1015

joules). The energy content of a billiontonnes, or Gigatonne, of oil (Gtoe, or109 tonnes) is therefore about 41.9 EJ.

One kWh is also 3.6 million joules (3,414 Btu) of energy, allowing a conver-sion from customary electrical energy to thermal energy units. In order to keepdescriptions of both electrical and ther-mal energy in a common energy nota-tion, which of those is being discussedis sometimes made explicit by notatingkWhe for kilowatt-hours of electricalenergy, or kWht for kilowatt-hours ofthermal energy.

How much energy is available from therenewable energy resources? The brightoverhead sun can deliver energy to asquare meter of surface area on Earthdirectly facing the sun at the rate ofabout 1,000 watts (1kW – this is the“standard sun” used to evaluate the effi-ciency of solar energy systems, whichare consequently rated in terms of “peakwatts” output under a 1kW/m2 illumina-tion, or Wp). If the solar collector surfacecould absorb 100 % of the solar radia-tion that strikes it and if it could convertthat energy with 100 % efficiency then it would produce 1kWh of energy eachhour. Of course, it is not perfectly effi-cient, so the energy delivered by thesolar energy system is less – usually inthe range of 5 % to 15 %. The powercontent of an 11 m/sec (25 mph) wind is also about 1 kW/m2 perpendicular tothe wind direction, but wind turbinescannot extract that with complete effi-ciency, either – they usually range from25 % to 35 %. And an Exajoule (EJ) of

energy is roughly equivalent to the ener-gy obtainable from the transformation of52 million tonnes of dry wood biomass.

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Introduction – A Global Energy Transition,Steering the Correct Course

During the recent development of humancivilizations, societies and industries,experience has shown that it takes about60 years for the world to transition fromprimary dependence on one resource ofenergy to a new resource or set of re-sources. It took about 60 years for us totransition from our dependence on woodto coal, and by then we were already in the beginning of the 20th century. Ittook perhaps another 60 years or so(from 1910 to 1970) to transition fully out of dependence on coal to a domi-nant dependence on oil and natural gas, although coal has continued to beimportant for electricity production.

Much of the world has seemingly settledinto fossil fuels as though they will beforever available, or as though any fur-ther energy transitions will be the tasks of future generations, not of the present.And yet environmental limits to the unli-mited use of fossil fuels, with potentiallyhugely negative economic implicationsfor all nations, are now apparently emer-ging, and these limits are indeed beingtaken seriously in policy formulations bymost of the developed world’s govern-ments.

As this White Paper will substantiate, the renewable energy resources hademerged by the year 2000 into sufficienttechnological and market maturity to be-gin to affect global primary energy pro-duction, even though still very modest intotal percentage terms. If this is indeedthe tip of the next great energy transi-tion, then our own history suggests that,by 2030, we should be deep into theemergence of the next age of energyresources.

We have stalled the start of that transi-tion for at least the last 30 years. Fossilfuels have continued to dominate a high-ly distorted and artificial energy market.Today’s low fossil fuel prices result inpart from the continuing benefits of verylarge government subsidies, and in partfrom having no value assigned to thegreat chemical “feedstock” potential ofthese rich hydrocarbons in comparisonwith simply burning them. No economicvalue is assigned either to future resour-ce availability or to costs assigned to the environmental and human healthimpacts of their use. The money to beearned by the finders and sellers of fossilfuels, and the political power that hascome with that, has further delayed anyserious beginnings of the next energytransition.

The continuing political clout of nuclearpower advocates is leading to renewedinvestments of public funds in somecountries (e.g. the United States andFrance) to support that technology inamounts that greatly exceed invest-ments of public funds in renewable ener-gy resources, possibly delaying the tran-sition to a diversity of stable and reliableenergy sources even more. This is ahuge gamble by those few govern-ments. The majority of world govern-ments are turning away from this form ofenergy because it is such a complextechnology, expensive, vulnerable to ter-rorists or to misuse as a source of mate-rial for weapons of mass destruction,potentially dangerous in its own right(e.g. Three Mile Island, and Chernobyl),and dependent on waste storage solu-tions which have yet to be perfected.

Nuclear power will never hold its own infree energy markets, that is, withoutmassive public subsidies in assumingthe risks of owner default or accidentswith consequences possibly orders ofmagnitude more expensive than privateinsurance companies can afford tocover, or be affordable to developingnations. The lifecycle of nuclear power,from plant construction to decommis-sioning, and including the environmentalconsequences of the complete fuelcycle, leads to a significant emission ofthe very greenhouse gases that the useof nuclear power is touted to avoid.

Fuel for nuclear power plants is also anelement from the Earth’s crust that is inlimited abundance. And there are alreadyfar less expensive ways to make hydro-gen from renewable energy than fromnuclear energy, removing yet anotherpresumed economic justification for theconstruction of new nuclear powerplants.

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Fig. 1: Fuel Shares of World Total Primary Energy Supply, Year 2000. The growth of wind-electric installationsbetween 2000 and 2002 has increased wind’s share of world total primary energy supply to 0.042 %. Wind is0.7 % of world installed electric power capacity in nameplate rating, but closer to 0.2 % in power produced,because wind operates only about 30 % of the time at its full rating. This demonstrates how far the non-hydrorenewables must go in order to assume a larger share of the world’s total energy and electricity production. Source: IEA,”Renewables in Global Energy Supply”, an IEA Fact Sheet, November, 2002

Oil 34.8%

Coal 23.5%

Renewables 13.8%

CombustibleRenewablesand Waste(CRW) 11.0%

Geothermal 0.442%

Solar 0.039%Wind 0.026%Tide 0.004%

Hydro 2.3%

Other 0.5%

Gas 21.1%

Nuclear 6.8%


Nuclear energy maytherefore be practicalonly for a time limited byfuel resource availabilityand technical, security,environmental, economicand ethical considera-tions. While it may pro-vide some useful energyduring the transition,nuclear energy will mostcertainly not be a long-term survivor of the tran-sition. Other resourcesmust be developed andapplied on a global scale.

Continual postponementof a serious worldwide initiation of therenewable energy transition is a preca-rious gamble, potentially jeopardizing ourability to launch it at all as the clock toaccomplish it in economically attractiveways winds down. Further stalling therenewable energy transition also gam-bles the world’s security and stability, as present centralized energy systemsbecome vulnerable terrorist targets, anddependence on economically criticalresources from politically unstable areasof the world continues to increase.

For example, Canadawill not be able to pro-vide more exports ofnatural gas to meet theanticipated natural gasshortfall in the U.S. Butsince natural gas is thechoice for multiple newelectric power plantsbeing built or planned in the U.S., suggestionsare now surfacing thatthe U.S. growing needbe met by liquefiednatural gas importedand stored, which willgreatly raise the price of electricity, increase

U.S. dependence on foreign sources,increase the deficit in balance of pay-ments, and yield yet a new convenientset of targets for terrorists – LNG tankersand storage facilities

It is the purpose of this White Paper toreveal the enormous momentum nowbeing generated worldwide in renewableenergy applications and policies, tounderscore that the ingredients are now in place for the renewable energytransition to begin, to reveal the benefits

already known to derive from these firststeps, and to compare and evaluate thepolicies that are emerging as the mosteffective to accelerate the application of renewable energy resources.

The elements of that transition have al-ready appeared, and been tested bothfor technical feasibility and in world ener-gy markets. Governments don’t have tostart something new – they only needthe political will to expand that which isalready developed, studied and tested,and which now stands ready to burgeoninto a new life-supporting industry forthe world – the renewable energyresources.

It is a thesis of this White Paper that aworldwide effort to generate the renew-able energy transition must emerge atthe top of both national and internationalpolitical agendas, starting now. It is theexpectation that this White Paper canserve as the basis for the adoption withconfidence by governments of policiesthat will launch an orderly worldwiderenewable energy transition.

11

Stalling a serious, large scaleworldwide effort to launch the full-scale renewable energy transitionwill produce a more dangerousworld, gamble away any hope for equity between nations of theworld, and also gamble away thefuture opportunities of our ownchildren and grandchildren. Andwhat are the governments oftomorrow to say to them? We’resorry? It was the past govern-ments that blew it? Or, even worse, our past govern-ments really didn’t care about you,and used economic criteria thatdiscounted your rights while also acting on the assumption thatsaving the world was uneconomic?

0

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Fig. 2: Annual growth of renewable energy supplyfrom 1971 to 2000. Growth in total renewables keptup, in percentage terms, with growth in Total PrimaryEnergy Supply(TPES) during that almost 30-yearperiod, which means that total installed renewablesincreased considerably, but renewables installationshave not been gaining on total world supply increase.(The very high annual percentage growth rates forthe “new renewables” of solar and wind result in part from the very low level of applications at thebeginning of this reporting period.)Source: IEA,”Renewables in Global Energy Supply”,an IEA Fact Sheet, November, 2002


New Elements Driving Public Policy toward a Renewable Energy Transition

Environmental warnings

For years scientists, governments, andpeople have considered the potential of renewable energy resources for pro-viding society with efficient and environ-mentally responsible energy. In parallel,enormous strides have been made inrenewable energy technologies and mar-kets. But until recently most of thosehave all taken place at a leisurely pace,generally with no particular sense ofurgency.

This was not always the case. For ex-ample, U.S. President Jimmy Carter wasthe first world leader to announce, as hedid in 1976, that energy policy would behis highest priority. He launched vigo-rous programs to advance energy effi-ciency and solar energy, and to lead theUnited States on an “Energy Indepen-dence” path. But his programs soonmired in politics, and he was scorned forhis famous televised talk wearing a swe-ater in front of a fireplace. The U.S. sub-sequently turned its policy back to theconventional energy resources, and isnow the unfortunate world leader in theprofligate use of oil in inefficient vehiclesand in producing the world’s largest sin-gle share of greenhouse gas emissions

from all sources. Smaller countries withbigger ambitions have taken over theworld leadership in the development and sales of renewable energy techno-logies, clearly already to their own eco-nomic benefit.

The world scene is now dramaticallyaltering from the past. Of particular significance are the impacts of climatechange from global warming that areapparently emerging with already percei-vable negative economic consequencesfor most nations, and projections of very serious costs in the future. Whilepresent heat spells cannot be scienti-fically attributed to global warming, the 19,000 deaths in Europe from theAugust 2003, heat wave reveals omi-nous potential consequences. The initialcautious pronouncement by the Inter-governmental Panel on Climate Change(IPCC) of a “discernible” evidence ofhuman contributions to global warmingwas advanced in their 2001 Assessmentto “There is new and stronger evidencethat most of the warming over the last50 years is attributable to human activi-ties.”

It is not the warming per se that is ofsuch great concern so much as the

potential impacts that warming can haveon the energy flows on the Earth’s surfa-ce, which are expressed in perturbationsto the Earth’s climates. A scientific con-sensus is emerging, as expressed by theChairman of the IPCC, as he warned inthe 2001 Assessment that “The over-whelming majority of scientific experts,whilst recognizing that scientific uncer-tainties exist, nonetheless believe thathuman-induced climate change is alreadyoccurring and that future change isinevitable.”

A UN-sponsored report (by InnovestStrategic Value Advisors) further conclu-ded in October, 2002, that “Worldwidelosses from natural disasters appear tobe doubling every ten years … the cost of climate change could soar to US$150 billion a year within the next tenyears.“, and “The increasing frequencyof severe climatic events … has the po-tential to stress insurers and banks tothe point of impaired viability or eveninsolvency.” The projections are far graver and more basic for the low-lyingand developing nations, as seas rise andrains dry up, yet they alone cannot con-trol their environmental destinies. Theymust appeal to the developed nations toalter policies to reduce the risks for allnations.

12

500

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Surprise

Fig. 4: A very well known scenario for a possible renewable energy transition,prepared by Shell International in 1996. World energy growth would increasinglybe met by renewable energy resources, until, by about the middle of this centu-ry, more than half of the world’s energy needs would be met by the clean ener-gy resources. This scenario shows that, to accomplish such a transition, contri-butions by renewable energy sources, even though small, must begin to emer-ge onto the world scene very early this decade. Source: Shell International Limited

100

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1970-79 1980-89 1988-97last ten years

Fig. 3: The increasing impact on the U.S. economy from major weather and flood catastrophes, expressed in constant dollars. Already the share repaid bythe insurance companies is excessive, causing a reduction in the scope of storminsurance coverage, and leaving the American public increasingly exposed to theeconomic consequences of climate change. This is the basis for making the avoi-dance or mitigation of the impacts of climate change a matter of public policyand governmental action.Source: Munich RE Group, 1999


Avoiding risks

It is risk, and risk avoidance, that is thedramatic new driver of public policyemerging into public discourse today.Climate change is perceived as a seri-ous future ecological and economic risk.So is terrorism. Power plants, transmis-sion lines and substations, and gas andoil pipelines, are all attractive and acces-sible centralized targets for terrorists whowish to bring the working of a society toa quick and decisive halt. The distrib-uted renewable energy technologies, onthe other hand, operate in smaller units,often building-by-building, yielding tar-gets too widespread and small to be of interest to terrorists. Energy securitycomes from the integration of thesemany sources of energy into the grid.The destruction of one will have littleimpact on the others, or on the energynetwork as a whole. A few bombs couldnot bring a society based upon distrib-uted energy resources to its economicknees.

Risks to a nation’s energy systems alsoarise from within, from the very design of the systems and the potential unreli-ability of their components. This was illustrated in remarkable fashion by theenormous blackout in the United Statesin August of 2003. A sequence of gene-ration plant and transmission line “trips”,one leading to another, like falling domi-noes, began at 2 in the afternoon onAugust 14. Within two and one-half hoursfive major transmission lines, three coal-fired powerplants, nine nuclear power-plants, and an important switching sta-tion, had all tripped off.

Before it was over 100 power plants,including 22 nuclear plants in the U.S. andCanada, had gone off line. The powerfailures spread through eight states andtwo Canadian provinces, leaving 50 mil-lion Americans and Canadians, living inportions of the United States from NewYork City on the East to Detroit in theMidwest, and Toronto, Canada, to thenorth, completely in the dark. Economic

losses from this two-day event areexpected to be about US$ 5-6 billion.

The American President’s response wasto call for upgrading the nation’s agingutility grids, but more enlightened obser-vers recognized this as a sign of the fundamental failure of interconnected,centralized systems, and a call forgovernments to start diversifying the grid with distributed energy sources.This was echoed just four days later in a front page story, “Energizing Off-GridPower”, in the prestigious American business newspaper The Wall StreetJournal. The U.S. Congress has shown its unwillingness to invest anything likeUS$ 6 billion in the development and de-ployment of distributed energy systems,yet the failure to do so has been graph-ically shown to lead to the risk of lossesof equivalent amount.

Just one month later it happened again,but this time in Italy! Before this secondblackout was over 58 million Italians werewithout power. Once again, a problem in a central, interconnected grid tookdown an entire electricity system for anentire country. The case for a distributedsystem of diversified resources could nothave been better emphasized than bythese two massive outages.

Which policy is better for the economy?Losses diminish an economy. New technologies strengthen it. Continuing to invest in old ways of producing anddistributing energy does not reduce thesystemic risks from massive, centralizedsystems. Investing in new ways of pro-ducing and distributing energy in smallerscale, decentralized systems can greatlyreduce the large risks, and the possibilityof future economic losses from systemfailures. The safety and reliability attri-butes of distributed energy resourcesneed to be taken explicitly into accountwhen evaluating relative costs of energysupply systems.

Yet the risk to the very fabric of societyextends beyond terrorism and utility net-

work vulnerability. While we don’t knowexactly when the world demand for oilwill exceed daily production, when itdoes (certainly sometime in the early partof this century) it will forever alter theeconomics of world energy resources,and promote an intensive internationalcompetition for those resources. Wehave already seen how readily nationsare willing to go to war to protect regionsrich in oil resources. And the world isexperiencing risks to peace and politicalstability by nations with the potential toutilize nuclear fuel to create weapons ofmass destruction. Without the leader-ship of the developed nations in turningaway from these destructive paths, theworld will become more dangerous still.

13


Opportunities for governments

The risks of failing or outmoded nationalenergy policies can do great harm tonational economies. Energy costs areembodied in everything – day-to-daycosts for the energy essentials to sup-port lives, embodied energy in all thatwe make, consume, and eat, and em-bedded energy expenditures in thecosts of all goods on the domestic andworld markets. Societies that can makeand sell products with less investedenergy costs will get a very large advan-tage on the world market – and soon.Those societies that can stabilize theirlong-term energy costs, and isolate theirinternal and external market activitiesfrom cost increases and supply instabili-ties of conventional fuels, will have aneven larger advantage. And those socie-ties that transform the expenditures forfuels, which must be imported, into sup-port for useful and productive employ-ment for their own people in their ownenergy efficiency and renewable energyindustries, will convert an energy cost toan economic stimulus.

When governments consider all of therisks, the potential benefits to be enjoy-ed by energy-efficient societies that relyincreasingly on their own available andinexhaustible environmental energy re-sources, in locally and regionally distri-buted applications, become persuasive.Indeed, one can probably say with con-fidence that it will be those nations thatwill be the safest, most secure, and eco-nomically strongest by the middle of thiscentury. Or, one can state that the eco-nomic and policy risks of inaction in theaggressive adoption of energy efficiencyand the renewable energy resources arefar greater than any economic risks orimpacts of such programs.

These factors have been a driving forcefor policy development by the EuropeanUnion. The EU appears to be doing wellin holding firm to greenhouse gas re-duction targets, although meeting theemission cuts is proving difficult to somemember nations. The EU is already ex-periencing energy productivity gains,and a steadily increasing share of locallyavailable renewable energy resources intheir energy mixes, all in the interest ofproviding for risk avoidance, price andsupply stability, and enhanced job pro-duction and other economic benefitsthroughout Europe. Many members ofthe EU continue to recognize that, inorder to realize these benefits, strongfinancial incentive policies, coupled withfirm national goals, are still needed topull the renewable energy resourcesalong so they can compete on the(unevenly subsidized) playing field withconventional energy resources.

If the “external” costs of the impacts ofdeveloping and using conventional ener-gy resources are taken into account,and if “risk adjusted portfolio manage-ment” is adopted for energy resources,whereby the future price uncertainties ofconventional energy resources are facto-red into a net present evaluation of long-term costs, a good argument can bemade to governments that several of therenewable energy resources are alreadyless costly on a net present value basis,and far more beneficial to societies andeconomies, than the conventional ener-gy resources. Energy efficiency measu-res that save enormous amounts ofmoney are still waiting to be adoptedworld wide, and renewable energy tech-nology applications have scarcely begunto tap into their full potential. Yet bothturn costs for fuels into support for newjobs and more robust economies while,at the same time, dramatically reducingthe climate risks to all nations as abonus, at no extra cost.

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"There is nothing more difficult to plan, no more dangerous tomanage, than the creation of anew system. For the creator hasthe enmity of all who would profitby the preservation of the oldsystem and merely lukewarmdefenders in those who gain bythe new one." Machiavelli, 1513

New Elements Driving Public Policy toward a Renewable Energy Transition


The Renewable Energy Resources:Characteristics, Status of Development, and Potential

Bioenergy

Biomass is the result of the photosyn-thetic conversion of solar energy andcarbon dioxide into the chemical andphysical components of plant material.These, then, become storage mecha-nisms, enabling that solar energy to betransferred through plant and animalecosystems, humans, and industrialsystems. The useful work produced by the conversion of biomass is there-fore still “solar powered”. This is truewhether the biomass was producedover a 500 million year period, and hea-ted and compressed by geologic pro-cesses to become fossil fuels, or wheth-er newly grown plant material is used toproduce “bioenergy”. This includes thefunctioning of human bodies and minds,powered by the stored solar energy re-leased in food consumption. (“Biomass”as used today and in this White Paperdoes not refer to fossil fuels, but only tomaterial produced by present growthprocesses on Earth.)

Energy produced in various ways frombiomass for societal and industrial use istermed “Bioenergy”. Reasonable projec-tions accord the largest share of futurerenewable energy to bioenergy, justifyingits position as the opening renewableenergy resource in this White Paper.This is partly because of its great andaccessible uses in both developing andindustrial nations, and for its multiple

values, including direct heating, cooking,and the production of electricity or che-mical products. Except for the desertregions of the world (abundantly en-dowed with direct solar energy) or Arcticand Antarctic regions (abundantly en-dowed with wind energy), biomass is a resource found worldwide.

While bioenergy has remained criticallyimportant to the life support systems ofdeveloping nations, and continues inthat importance today, in the industrialnations bioenergy as a percentage ofnational primary energy has actuallyreduced significantly since the 1800s.For example, 85 % of the primary ener-gy of the United States came from bio-energy in 1860, a figure that had beenreduced to 2.5 % by 1973. In 1860 thedominant energy resource for residentialuse and industrial development of theUnited States was fuel wood, but byabout 1910 it had been supplanted bycoal, and later by the addition also of oil and gas. Bioenergy faded from ourindustrial economies for a time, but it is starting an extremely important re-surgence, for a variety of reasons allrelevant to the economic developmentand environmental protection of indus-trial nations.

Biomass is the only combustible carbonresource that is “carbon neutral”.Bioenergy conversion of biomass oper-ates within the Earth’s natural carbon

cycles, and therefore does not contri-bute to climate change and greenhousewarming problems. Analysis has shownthat the greenhouse warming potentialof biomass combustion is lower thanthat of all of the fossil fuels, includinggas, even with carbon sequestering.Analysis has further revealed that, withthe sole exception of carbon monoxide,the combustion of biomass producessubstantially lower emissions than thecombustion of coal.

Energy derived from biomass can offerimportant benefits for modern industrialsocieties. For example, the stored solarenergy can be released continuouslywhen used as a fuel in vehicles, or forthe production of “baseload” electricity.This feature allows bioenergy to serve asan energy “leveler” when used in hybridsystems that also get energy from theintermittent renewable resources – e.g.sun and wind. Ownership of bioenergyplants by operators of the intermittentresources also provides for importanteconomic counterbalances of the reve-nues from the intermittent resources. Itwas reported that half of the Germanywind power developers are diversifyinginto biomass and bioenergy.

Biomass can be mixed with coal toreduce environmental emissions in theproduction of coal-fired electricity, it canbe converted directly to liquid fuels, andit can greatly enhance rural economies

15

Fig. 5a: Bioenergy from wood refuse and chips Source: U.S. National Renewable Energy Laboratory (NREL)

Fig. 5b: Community combined heat and power (CHP) plant, fueled by wood chips,for 300 families in DenmarkPhotograph by Dr. Donald Aitken


through its production and harvesting. It has been estimated, for example, thattripling U.S. biomass energy use by2020 could produce US$ 20 billion innew income for farmers and rural areas.And the creation and conversion of bio-mass to bioenergy, biofuels and biopro-ducts can be a significant source of newjobs. It has also been estimated that, inthe U.S., 66,000 new jobs and US$ 1.8billion in new income were created fromthe production of electricity from bio-mass during the 1980-1990 period, anindustry that also attracted US$ 15 bil-lion in new investment capital.

The efficiency of utilization of the bio-energy resource is just as important asthe absolute amount of bioenergy that isutilized. Technical efficiency is dramati-cally enhanced when bioenergy is usedin combined heat and power (CHP)applications, whereby the top energyfrom biomass or biogas combustion isextracted for the production of electrici-ty, and the lower grade heat is used forthermal applications, such as the districtheating of buildings. This is also anexample of what the Europeans term“cascading” of energy.

The Danish, for example, responded toa new governmental policy to promoteCHP at a time in which essentially noneof the Danish electricity was produced in CHP systems. In only ten years (by2000) 40 % of all Danish electricity pro-duction had been converted to CHP(along with 18 % more to wind power).Oil burners were bypassed in homes inwhich the hot water from the new local(and locally owned) district heating plant,using locally-grown feedstocks, such asstraw, was piped in.

In 2001 20 % of Finland’s energy camefrom the bioenergy conversion of woodresidues and its use in CHP applica-tions. A remarkable example of “cas-cading” of bioenergy is in Jyväskylä,Finland, where a 165 MW wood-cofiredpower plant produces about 65 MW of

electricity, with the remainder of thethermal energy going first to buildings,and then, at even lower output tempera-tures, to greenhouses to promote foodproduction in the cold climate at that 61 degree North latitude. Analysis hasverified that the natural replenishment ofwood in the nearby forests exceeds theextraction rate for the plant.

Economic, environmental and socialconsiderations are leading biopowerproduction into new, more efficient tech-nologies, such as gasification, with thebiogas then used in integrated gas com-bined cycles (IGCC) systems. Finlandhas produced the world’s pioneeringbiomass gasification plant, which hasbeen operational for oversix years. A governmen-tal subsidy program has helped India to installmulti-megawatts total of small gasifier internalcombustion engines(ICE).

Brazil continues to be theworld leader in the pro-duction of Ethanol fuelfrom biomass (sugarcane), but the U.S. etha-nol production (fromcorn), at about 70 % ofthat of Brazil, may sooncatch up as a result ofgovernmental require-ments (Clean Air Act) for cleaner-burning(higher oxygen content) fuel mixtures.The European Union, which is promotingthe energy efficiency of diesel engines, is the world leader in biodiesel produc-tion (from oil seeds), also leading to cleaner burning engines and a reductionof contamination from accidental spills.Expenditures both for fuels and for emis-sion control devices that would other-wise have gone for energy resourcesimported from outside the region orcountry are instead diverted to the crea-tion of employment and the enhance-ment of local and regional economies.

(This White Paper will demonstrate thatthis is true for all of the renewable ener-gy resources.)

With all of this promising economic andenvironmental potential, where does bio-energy stand at present, and wherecould it be with more vigorous govern-mental support? Three recent estimatesput the present global primary energyderived from biomass at about 46 Exa-joules (EJ), with 85 % of that in “traditio-nal” uses (firewood, dung), and 15 % inmore industrial uses, such as fuel, com-bined heat and power (CHP), and elec-tricity. Put in perspective, the world pri-mary energy use for the year 2000 wasabout 417 EJ, so 11 % of world primary

energy use at present isderived from bioenergy.This is about 18 % of anestimated world bioener-gy resource potential ofabout 250 EJ at present.

To what extent couldbioenergy serve as a significant contributor to a renewable energytransition? The sourcesof biomass material forbioenergy conversion are from wood or forestresidues, agriculturalcrop residues, energycrops from surplus crop-land or from degraded

land, and waste from animals or humans,including the uniquely human energyresource of municipal solid waste. Whilethe future technical potential of bioener-gy resources can be estimated withsome degree of confidence, there are a combination of uncertainties in themultiple ways in which bioenergy re-sources can be gathered or developed,and uncertainties about future societalpolicies and priorities, that will profound-ly affect the actual extent of this renew-able energy resource.

16

The current bioenergy resourcepotential is significantly greaterthan present use, offering anattractive opportunity for newgovernmental incentives and policyinitiatives to increase the economi-cally and environmentally beneficialuses of this resource, without con-cern that these programs wouldbe resource limited. Aggressivegovernmental programs to tap intothe advantages of bioenergy willalso help to set future societalpriorities and reduce some techni-cal and social uncertainties, henceassuring that bioenergy can conti-nue to meet its potential for worldeconomies well beyond the renew-able energy transition.

The Renewable Energy Resources: Characteristics, Status of Development, and Potential


For example, the greatest potential forfuture bioenergy resources is expectedto come from production on surplusagricultural land. But whether there isany “surplus” land depends on the wayagriculture is conducted in the future(that is, whether it requires high chemicaland energy inputs, or progressively e-volves toward more sustainable meth-ods with low environmentally degradinginputs), and on the competition for food.The latter depends both on world popu-lation growth and on world average diet.These variables can lead to a range ofprojections that vary from significantland available for bioenergy crops to noland at all.

Careful recent analyses have been madeto try and determine, under conservative-ly optimistic but also realistic assump-tions, the world bioenergy potential thatcould be achieved by 2050. An averageestimate of about 450 EJ (10.8 Gtoe) is emerging, although, as suggestedabove, this could go from zero to overtwice this amount. Remarkably, thisuntapped bioenergy potential is morethan present total world primary energy.

Major worldwide bioenergy goals arebeing set, and governments are suppor-ting new bioenergy activities. A recentestimate suggests that the biopowergeneration alone in Europe could growto 55,000 MW (55GW) by 2020.

And a recently released “Vision for Bio-energy and Bio-based Products in theUnited States” sets goals for 2020 of 5 % of U.S. electricity and industrial heatdemand from bioenergy, 20 % of alltransportation fuels from biofuels, and forbio-based products to represent 25 %of U.S. chemical commodities.

New biopower plants in the 30 MW to40 MW range have been announced for Australia and Thailand. The UnitedKingdom is examining new biomasscrop plantations and forest residueresources for CHP applications. TheFinnish government in 2002 raised in-vestment subsidies for bioenergy by 40 %, opening the way for small-scalebiofuel-fired CHP plants to be profitable.This has the secondary benefit of en-hancing the profitability of sawmills astheir energy costs are stabilized.

For bioenergy – or any of the renewableenergy resources, for that matter – tomake meaningful contributions to therenewable energy transition, and beyond,requires considerably greater efficienciesin energy end-use utilization than today.A large absolute contribution of bioener-gy to a huge world energy appetitemight be relatively small, whereas thatsame amount could be highly significantto an efficient world. Government policytoward both bioenergy and energy effi-ciency will be driven by the expected

significance and economic and environ-mental benefits of the results.

The actual percentage of world primaryenergy demand in 2050 that 450 EJ ofbioenergy might meet depends thereforeon assumptions for world energy growthover the next 50 years. One scenariowould have 450 EJ of bioenergy be 15% of the requirement in a world in whichglobal primary energy demand over thenext 50 years has increased 500 %above today’s values. The vision of thisWhite Paper is of a renewable energytransition that leads to over 50 % ofworld primary energy from renewableenergy by 2050, which suggests that,perhaps at a minimum, bioenergy mightproduce about one-third of that require-ment.

Bioenergy development, as well as all ofthe other renewable energy resources,will also accelerate when many of the“costs” are recognized to be “economicbenefits”, contributing to the economy,rather than just taking away. In bioener-gy this is certainly true, for example inthe development of new jobs to enhan-ce rural and farming communities. A1992 analysis showed that already bythen 66,000 jobs in the U.S. were beingsupported by income from the woodand biomass industries, and that thepotential could be as high as 284,000new jobs by 2010 if energy crops and

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Fig. 6a: A farmer planting an energy tree plantation.Source: NREL

Fig. 6b: Community combined heat and power (CHP) plant, fueled by waste strawgrown in the near vicinity, for 300 families in Denmark Photograph by Dr. Donald Aitken


advanced technologies are commerciali-zed in the U.S. Most of these jobs wouldbe in rural areas. They would also pro-vide sufficient extra income to help far-mers to keep their lands.

Bioenergy also works within the Earth’scarbon balance (e.g. avoiding future car-bon taxes), and can contribute to themaintenance of biodiversity by offeringnear-urban ecosystems suitable forsome species of birds and wildlife. Whenall such advantages are quantified on aregional, state or country level, andwhen energy “costs” are viewed fromthe overall balance of governmental prio-rities and societal benefits, bioenergyand the other renewable energy resour-ces are much more economic than tra-ditional and narrow energy cost analysesstill seem to suggest.

Geothermal energy

Humans have always wanted to becomfortable, and have always been clever in their use of natural resources,so it is no surprise that archaeologicalevidence suggests that for possibly10,000 years Native Americans enjoyedthe benefits of natural hot springs. It iswell known that these benefits were alsoexploited by the Greeks and Romans2000 years ago. The world’s first geo-thermal district heating system was con-structed in Chaudes-Aigues, France inthe 14th century, a system that continuesto operate today.

Minerals were extracted from geother-mal waters starting in 1175, and chemi-cals from the waters in the early 1900s,both leading to new industries in thearea of Larderello, Italy, subsequentlyshown to be the hottest geothermalspot of the entire European continent.Prince Ginori Conti created the world’sfirst electricity from geothermal steam onJuly 15, 1904, in Larderello. The world’sfirst geothermal power plant, a 250 kWe

plant, was subsequently built, also inLarderello, in 1913, and by 1914 it was

providing electrical power to chemicalplants and many villages in the Tuscanyregion of Italy. Today the Larderello geo-thermal field produces 400 MW of elec-trical energy.

Because fossil fuels were already the“new” thing, there was a lull of 45 yearsbefore new geothermal power plantswere built, first in New Zealand in 1958,then experimentally in Mexico in 1959,followed by the beginning of the deve-lopment of the geothermal resource in the Geysers area just north of SanFrancisco, USA, in 1960. While geother-mal energy resources are not availableto all nations, 67 nations are now usinggeothermal energy, with geothermalelectric power production in 23 nations,so it is at least a pervasive, if not uni-formly available, resource. Following bioenergy it is presently the second largest non-hydro renewable energyresource worldwide, so it is being pres-ented as the second resource in this White Paper.

But is it “sustainable”? The Geysers, stillthe world’s largest single geothermalelectric power generation site, was

18

Fig. 7: Where world geothermal power production first started, Larderello, Italy. Site of the first experiment touse geothermal steam to produce electricity, on July 15, 1904, then site of the world’s first geothermal power-plant, 250 kWe, in 1914. Larderello, located on the hottest geothermal spot in all of Europe, today producesabout 400 MW net of geothermal electric power.Photograph by Dr. Donald Aitken



rapidly built up to 2,000 MW of powerplants, which subsequently tapped thesteam wells at a rate faster than theycould be replenished by water flowing to the geothermal heat sources. This forced a reduction of power productionto just under 1000MW.

This has, however, also produced a veryuseful synergy, in which 340 L/s (5,400gpm) of treated wastewater is soon tobe pumped 48 km from the city of SantaRosa to the geothermal fields and rein-jected into the underlying aquifer. TheLake County effluent re-cycling project is alreadyon line, and adding 70 MW back into thesystem. The extra energyproduced from the addi-tional steam resultingfrom the water injectionis greater than the ener-gy needed to pump thewastewater, so that twobenefits are achievedsimultaneously: wastewater disposal and en-hanced geothermalpower production. It is a moneymaking opportu-nity both for the city andfor the geothermal devel-opers.

Nevertheless, the important lesson learned from the experience at theGeysers is that while geothermal energyis renewable, it is only sustainable whenthe extraction of the heat energy is inequilibrium with the rate of replenishmentof the resource. It has been shown thatfor hot water and steam sources thisoccurs sufficiently rapidly to producetruly sustainable geothermal poweropportunities, provided that the resourceis proven in amount and sustainabilitybefore development, and then not overextracted. Extraction of geothermalenergy from near-surface magma heat,as on the island of Hawaii or in Iceland,is most probably also a “sustainable”resource on the time scale of human

societies. But for the production ofpower from the heat energy of hot rocksmuch farther below the surface thereplenishment of the geothermal heatextracted from the rock may occur veryslowly, and hence may be “depletable”on the time scale of human societies.

So where does geothermal energy standtoday, and what is the potential for itsexpansion in the future that would war-rant serious governmental policy andfinancial support? Geothermal energy isused both directly, as a resource of use-

ful heat, and for electricalpower generation. With regard to the latter,the latest estimate is8,000 megawatts (MWe)of geothermal electricpower capacity world-wide in 2002, producing50,000 gigawatt hours(GWhe) of energy peryear, primarily as base-load power, to provideelectrical service to 60million people, mostlyliving in the developingnations. This saves 12.5million tonnes of fuel oilper year (Mtoe).

The direct worldwide useof geothermal energy

was estimated for 2002 to be 15,200MWt, delivering 53,000 GWht/yr. Thissaves an additional 15.5 Mtoe per year.The end-uses for the direct use of geo-thermal energy are extremely diverse,including space heating, domestic waterand pool heating, geothermal heatpumps, greenhouse heating, aquacul-ture pond and raceway heating, agricul-tural drying, snow melting, absorptioncycle air conditioning, and a number ofother smaller uses. The greatest singleuse is for space heating, which absorbsabout 37 % of the direct geothermalenergy worldwide.

The greatest share of world geothermalelectrical energy generation (GWhe/yr)

is in the Americas (North, Central andSouth), collectively with 47.4 % or theworldwide total energy production, followed by Asia (including Turkey) at35.5 %, and Europe at 11.7 %. The largest proportional use of direct geo-thermal energy is in Asia (includingTurkey), at 45.9 % of the world total, followed by Europe at 35.5 % and theAmericas at 13.7 %.

The size of the geothermal resource ishuge. A U.S. Department of Energy esti-mate is that the thermal energy in theupper ten kilometers of the Earth’s crustis 50,000 times the energy of all knownoil and gas resources in the world.Another estimate has it that the geo-thermal energy potential for the westernUnited States alone is fourteen times the proven and unproven U.S. coal re-serves. Reasonable projections suggestthat at least a 10 % per year growth ingeothermal energy applications shouldoccur through 2010, which would leadto 20,100 MWe and 39,250 MWt of geothermal power worldwide by 2010.Other projections suggest that between35,000 and 72,000 MW of electricalgeneration capacity could be installedusing today’s technology, the higherfigure representing over 8 % of totalworld electricity production.

The Philippines has the largest propor-tion of geothermal-produced electricalenergy in its portfolio at 27 % (2002) ofnational electrical energy use. It is theambition of the Philippines to becomethe number one user of geothermalelectrical energy. It has been reported,however, that thirty-nine countries couldbe 100 % geothermal powered, withfour more at 50 %, five more at 20 %,and eight more at 10 %, demonstratingthat geothermal energy can be a majorresource for at least 58 countries.

It is not necessary to have a geothermalenergy potential that could provide amajor percentage of overall nationalenergy consumption in order for geo-thermal energy to be economically bene-

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Geothermal energy can provideeconomically beneficial energy tomany countries of the world. Itproduces little to no pollutants,while contributing to energy self-sufficiency of cities, regions andnations. The 95 % availability fac-tor for geothermal electric powergeneration can enhance the valueof portfolios of several of the inter-mittent renewable energy resour-ces. Geothermal energy candirectly contribute to the creationof new jobs, industries, andenhanced local and regional eco-nomic activity. It is incumbent ongovernments where geothermalresources are available to offerincentives to promote and acceler-ate the application of geothermalenergy.


ficial. In Hawaii, the geothermal energy is concentrated on the “Big Island”(Hawaii), while the population center ison the island of Oahu. The production ofhydrogen from electricity produced bygeothermal energy is about to be under-taken on Hawaii as well as in Iceland,heralding a model in which hydrogenbecomes the geothermal energy “car-rier” transported from remote sourcelocations to population centers and formultiple fueled end-uses. And geother-mal energy where available even inmodest amounts, can, along with bio-energy, provide a resource to help“level” a portfolio with large amounts ofintermittent resources (sun and wind).

The geothermal industry creates jobs inall aspects of geothermal energy pro-specting, development, and application.Geothermal facilities produce lease fees,taxes, and production royalties to localgovernments. The end uses of geother-mal energy produce more jobs, indus-tries, and revenues. The geothermalindustry in the U.S., the world’s largest,is a US$ 1.5 billion per year industry.Over the next 20 years geothermal energy could become a US$ 20 billionto US$ 40 billion worldwide industry.

Wind power and intermittent renewable energy resources

Energy and power from the wind

Wind Energy is solar energy once re-moved. The energy to move air massescomes from the unequal solar heating of the atmosphere and the Earth’s sur-face, resulting in unequal air pressuredistributions. Nature’s attempts to re-dress these inequalities produces thegreat flows of air, from local micro levelsto massive global levels. Some of thethermal energy of the sun is therebyconverted to the kinetic energy of theair. Giant blades turned by the winds spin powerful generators, converting the wind’s energy into electricity. The powerdensity of a 40 kmh wind (sweepingthrough one square meter of interceptedarea) is equivalent to the power densityof the bright sun (about 1,000 watts/m2).The total energy carried by the winds onthe Earth, therefore, is huge. The energythat can be extracted from winds acces-sible to human development is also huge.

Over 60,000 utility-scale wind turbinesare now operating in 45 countries, aswell as in 27 States in the United States,with total installed global wind powercapacity exceeding 32,000 MW (32 GW)by the end of 2002. Wind-electric gen-eration by the 12,000 MW of installedwind-electric capacity in world-leadingGermany produced about 20 billion kWh(20 TWh) at the end of 2002 to meet 4.7 % of Germany’s national electricityneeds, while 20 % of Danish electricitynow comes from wind-electric genera-tion. The Schleswig-Holstein area ofGermany had already surpassed its2010 target of 25 % of the area’s elec-trical energy needs from wind power by June 2003, with 26 % of the region’selectricity now from wind power. Thislow-cost and readily available renewableenergy resource, which is growing at a32 % annual rate, has led to a rate ofinstallation of new wind projects aroundthe world for both 2001 and 2002valued at about US$ 7 billion per year,

with renewed acceleration of growthexpected for 2003. The price of wind-produced electricity is now competitivewith new coal-fired power plants, andshould continue to drop until it is theleast expensive of all of the new electri-city-producing resources.

The wind industry is creating significantnew economic opportunities. A realisticworld target for wind-electric installationsin 2007 is 110 GW, representing US$100 billion in investments, and equalingthe installed capacity of all U.S. nuclearpower plants. By 2007 wind-power in-stallations could also represent 24 % ofall new world bulk power installations.By one estimate the wind industry couldbe worth US$ 25 billion a year by 2010,with over US$ 130 billion in cumulativeinstalled system value.

The Danish wind turbine manufacturerVestas has, since 1979, built over11,000 wind turbines that are installed in 40 different countries. It is a majorsource of in-country jobs and exportincome for the country. It has been esti-mated that the 12,000 MW of windenergy installed in Germany by the endof 2002 has created 42,000 permanentjobs – one job for every 285 kW of in-stalled capacity. And it has been notedthat much of the support for wind de-velopment in Spain has come from the“bottom up”, supported by regional gov-ernments wishing to build new factoriesand to create new jobs.

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1980 1985 1990 1995 2000

0

10.000

20.000

30.000 Megawatts

Fig. 8: The dramatic growth in world installed windcapacity, from 1980 through 2002. The recent growth rate of 32 %/year could lead toan installed capacity of 110,000MW (110GW) at theend of the next five years.Source: Worldwatch Institute, updated by EarthPolicy Institute from BTM Consult, AWEA, EWEA,Wind Power Monthly



The wind turbines that are seen onfarms and fields throughout Europe, theU.S., and India are proving to be wind-falls for the rural economies. Contrary tothe frequent assertion of the coal indus-try lobby that wind development “takes”massive amounts ofland, wind developmentis fully compatible withfarming and ranchingactivities. Wind turbinesplaced on a farm orranch might account foronly 1 % of actual landtaken out of agriculturalproduction for the tur-bines, or only 5 % whenallowing for accessroads. This slight loss of agricultural use is greatly offset, however,by economic benefitsaccruing to the land-owner.

For example, a three-turbine farmer-ownedand financed wind devel-opment in a good windregime, with 750 kW turbines, could net thefarmer US$ 40,000 peryear while simultaneouslypaying off the construc-tion loan in 10 years, leaving a net income inexcess of US$ 100,000per year after that. Eventhe revenue from leasing the space forthe turbines to developers can doublethe farmer’s or rancher’s per-acre in-come, adding an income source that is oblivious to droughts and fluctuatingcommodity prices. This income canmake the difference between a small farmer having to sell his property orbeing able to continue farming.

The wind resource and its economicbenefits are available regardless of eco-nomic status of the country. India ispresently 5th in total wind power appli-cations, with 1,702 MW installed by theend of 2002, and might have a total

developable resource of45,000 MW. The Ministryof Non-ConventionalEnergy Sources (MNES)in India encourages windas a means to diversifyIndia’s energy economyand to begin to weanIndia from oil, naturalgas and coal.

Factories have beenconstructed in India thatenable up to 70 % of thecomponents of the tur-bines to be made locally,and the entire systemassembled and installed,with local labor, produc-ing important new jobsin a job-thirsty country,and routing energy reve-nue through the localeconomies. Ownershipof locally-placed windturbines also addressesthe poor reliability ofIndia’s electrical infra-structure, adding valuefor factories or business-es, a factor in the de-velopment of locally-

owned “clusters” of privately ownedgenerators in India, rather than big-business or utility owned wind farms.

Estimates of wind power and energypotential have recently been revised toallow for the new wind turbine technolo-gies that operate more efficiently in lowerwind regimes and are placed at greaterheights above the ground, to take intoaccount the rapid growth in size of windturbines (the world average size of newturbines exceeded 1MW in 2002), andto include the most rapidly developingapplication – off shore installations.

One result of this reassessment is that,far more than just meeting all U.S. elec-tric generation requirements, wind powercould provide for all U.S. energy needs.Other estimates suggest that windpower could, in the future, meet all ofthe electricity needs of the world andperhaps even all energy needs of theworld.

Even if these estimates prove to be overlyoptimistic, a goal of 12 % of the world’selectricity demand from wind by 2020(equivalent to 20 % of the world’s 2002use of electricity) appears to be realisti-cally within reach. (This would be aboutone and one-quarter million MW of in-stalled capacity, producing a little over 3 billion megawatt-hours of energy eachyear.) The European Union’s goal of 20 % of Europe’s electricity demand tobe met by wind energy in 2020 is alsowell within reach. This development sce-nario for wind energy would be consis-tent with the historical pace of develop-ment of hydroelectric and nuclear ener-gy.

It is important to realize, however, thatthe 32,000 MW of nameplate wind ca-pacity installed worldwide at the end of2002 was 0.4 % of world electricity sup-ply. If projections suggesting 177,000MW by 2012 are realized, that might stillonly be about 2 % of world electricitysupply, but the growth is exponential, so that the 2020 targets remain bothreasonable and feasible.

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The wind resource is not, and willnot be, a limit to the developmentof wind energy worldwide.Experience has shown that goalsfor wind-electric installations thathave previously seemed to beambitious are being easily met,and are consequently being re-vised upwards for future years.Utility experience has demonstra-ted that major percentage penetra-tions of wind power systems arepractical. Billions of dollars of newindustries, and thousands of newjobs, are being created for thebenefit of the countries capitalizingon this globally-available resource.Costs for wind-electric power arenow in the range for wind energyto be able to compete with fossilfuel-based power production (andcertainly below the costs of nucle-ar power). Nevertheless, govern-mental policies, firm governmentalgoals, and governmental incentivesare necessary to provide assur-ance to the financial community sothat they will continue to invest inthe expansion of the wind industry,and to capture the additionalunquantified societal benefits ofreliable, sustainable, clean andlocally-produced power.


Achieving high penetrations of energyfrom wind and other intermittentrenewable energy sources

Experience gained to date in countriesand areas with significant shares of windresources in their energy mix shows thatintermittently available energy resourceswithin the present frameworks and ope-rations of existing utility grids can meetat least 20 % of electrical energy requi-rements. Areas in Denmark, with acountrywide average of 20 % of its elec-trical energy from wind power, gain attimes 100 % of their electric energy fromregional networks of wind turbines. The Schleswig-Holstein area of Germanyhas achieved an average penetration of29 % of the area’s electrical energyneeds from wind power. The inter-national targets for wind development by 2020 are therefore realistically andeconomically achievable within the presently installed utility infrastructure.

Wind and radiant solar energy resourcesare meteorological phenomena that arefairly well predictable within a 24-hourlead-time, which should normally be sufficient to plan for and facilitate adjust-ments to the energy flows in the grid.The larger the geographic scale of therenewable energy interconnectionsthrough a regional transmission grid, themore likely that a low wind resource in

one region will be off-set by wind avail-ability in another, or that low wind re-source availability at any one time andplace could be offset by a simultaneoushigh solar resource from a different area(provided that the region or country hasexploited the opportunity to develop andinterconnect a diversity of complementa-ry renewable energy resources).Regional and international transmissiongrids to allow for the import and exportof renewable electricity across differentclimate regions will therefore facilitategreater penetrations of the intermittentenvironmental energy resources. Suchmulti-country grids are being seriouslyconsidered to support a high renewableenergy penetration throughout Europeand Scandinavia.

The ability to increase the penetration ofenergy from intermittent resources intothe utility grids beyond the readilyaccessible figure of about 20 % willrequire additional technical and politicalfeatures. For example, the availability ofa stable electrical “backbone”, such asDenmark enjoys in that country’s trans-mission line interconnection withGermany, has enabled greater penetra-tion of Danish wind energy resourcesinto the grid, demonstrating that inter-national cooperation across nationalboundaries can enhance renewableenergy development. The reliability of

22

Fig. 9a, b: Wind energy developments are compatible with ranching, as shown in Denmark, and farming, as shown in the U.S. Income from wind developments on ranchand farmlands are important new sources of rural revenue. Photographs by Dr. Donald Aitken


such a “backbone” can also draw to aconsiderable extent on the “baseload”renewable energy resources, such ashydroelectricity, bioenergy and geother-mal, where they are available. Hydro-electric energy, for example, is alreadywidely available and quite convenientlyadjustable in output over a short timescale. Converting the hydroelectric re-source from baseload to “intermittency-leveling”, in systems with high penetra-tions of wind and solar energy, couldenhance both the reliability and renew-able resource capacity potential of thetotal electrical grid.

These stable locally available load-leve-ling energy resources can sometimesalso work in synergy with other nationalenergy efficiency goals, such as the conversion of 40 % of the nation’s com-bustion sources of electrical energy inDenmark during the 1990s to combinedheat and power (CHP). Many of thesenew CHP systems are small, local bio-energy plants using biomass fuel fromnearby fields. This not only puts thewaste heat to useful work, greatly in-creasing the overall efficiency of thecombusted fuels, but also providessources of power that could be regu-lated locally to balance the productioncharacteristics of local wind turbines or solar-electric “farms”. The farmers,biomass plant owners and operators,


and wind turbine or solar system ownersand operators, are all paid out of fundsthat would otherwise have gone to thepurchase of electrical energy poweredby imported fuels.

Nevertheless, in the future energy storagemechanisms will alsohave to be developedand adopted. At presentserious work is beingdone on a number ofenergy storage technolo-gies, such as capacitors,batteries and fuel cells,springs, flywheels, com-pressed air, or pumpedstorage of water. Forexample, a UK “flow battery” has been con-structed with a capacityof 120 MWh, and a maximum ratedpower output of 15 MW. Discharge canbe in minutes or hours (limited by themaximum power delivery rate), and canbe cycled indefinitely. Advances in all ofthe other potential storage technologiesare also being made.

A few notes about the hydrogen transition

The most likely long term candidate for energy storage from the intermittentrenewable energy sources will be hydrogen, which can convert electricityderived from renewable energy into afuel, for its development will also be supported by its potential for transform-ing transportation and stationary energysystems worldwide. Remote sources ofrenewable energy in areas of attractivewind, solar or geothermal energy poten-tial can become hydrogen factories. The transportation of that hydrogen foruse in local, distributed fuel cells (whichare also CHP devices) will then allow theoriginal renewable energy to be deliver-ed as power and heat on demand, andwhere needed.

The renewable energy transition, how-ever, does not need to wait for furthermajor new developments in other tech-nologies. Widespread and large-scale

application of energystorage technologies willnot be needed until after2020, and perhaps notuntil 2030. The devel-opment of hydrogen fueland applications will pro-ceed independently ofthe renewable energytransition, pulled by theattractive economicbenefits of the hydrogentransition, and pushedby aggressive govern-ment programs, so thatby then the hydrogentechnology and infra-structure can be ex-

pected to be sufficiently ready to sup-port higher penetration levels of theintermittent renewable energy resources.

The corollary of this argument, though,is that the environmental success of thehydrogen transition will depend entirelyon the utilization of renewable energyresources instead of the conventionalenergy sources to produce the hydro-gen. This was emphasized by RomanoProdi, President of the EuropeanCommission, in a speech in June, 2003:"It is our declared goal of achieving astep-by-step shift towards a fully inte-grated hydrogen economy, based onrenewable energy, by the middle of thecentury." (Source: Renewable EnergyWorld, July/August, 2003.)

Direct use of the sun’s energy

Overview

The indirect uses of solar energy, suchas hydroelectric, wind power, and bio-energy, together with the non-solar envi-ronmental energy resource, geothermal,produce energy that presently dwarfsthe combined outputs of all direct appli-cations of radiant solar energy, and willcontinue to do so for perhaps two moredecades. But the value of renewableenergy resources in future societal port-folios is not measured just by the kilo-watt-hours that are produced. The greateconomic advantages of many of theuses of solar energy in direct end-useand distributed utility applications, thegreat security value of many of thoseapplications, the high value-added eco-nomic benefits of several of the solarenergy technologies and their relatednew industries, the availability of radiantsolar energy resources where the otherresources are not also present (e.g.deserts, areas with little wind, etc.), and the importance of developing adiverse “portfolio” of renewable energyresources to provide for system stabilityand resource reliability, all support thecritical importance of direct solar energyapplications and governmental policiesto accelerate those applications.

The energy from the sun can be useddirectly to heat or light buildings, to heatpools for the affluent or communities, orto provide domestic hot water to meetbasic thermal and hygienic requirementsfor the rich and poor alike, in both de-veloped and developing nations. Thesun’s radiant energy can also directlyprovide very hot water or steam for in-dustrial processes, heat fluids throughconcentration to temperatures sufficientto produce electricity in thermal-electricgenerators or to run heat engines direct-ly, and produce electricity through thephotovoltaic effect.

23

The synergy between hydrogendevelopment and the application ofthe renewable energy technologieswill be significant. Hydrogen, aclean energy when burned, will beproduced by clean energy resour-ces. And the energy from thoseclean resources will be convertedto fuel for on-demand clean energyapplications, fully decoupled fromrenewable energy source fluctu-ations. The economic and societalvalues of both the hydrogen andthe renewable energy resources will be enhanced by that synergy.The parallel renewable energy andhydrogen transitions will be mutu-ally supportive.


Fig. 10a, b: Solar energy in all of its diversity. The house, located in Boston, Massachusetts (designed by Solar Design Associates) features energy-efficient design, passivesolar space heating, daylighting, active solar space heating, solar water heating, and solar electricity, all integrated to produce a “zero net energy” home. But equally impor-tant is the use of solar energy to bring the basic essentials, such as fresh water, light, and medicines, to developing nations, represented by the PV-powered fresh waterpumping in India shown on the right. Fig. 10b: Photograph by Dr. Donald Aitken

The radiant energy from the sun can beused directly to enhance public safety,to bring light and the refrigeration offood and medicine to the 1.8 billion people of the world without electricity,and to provide communications to allregions of the world. It can also be usedto produce fresh water from the seas, topump water and power irrigation sys-tems, and to detoxify contaminatedwaters, addressing perhaps the world’smost critical needs for clean water todrink and to grow food. It can even beused to cook food with solar box coo-kers, replacing the constant wood fora-ging that mostly falls on the shoulders ofwomen, and which also denudes ecosy-stems and contaminates the air in poorshelters.

It is this diversity of opportunities thatmakes solar energy such an attractiveoption for so many applications and withcritically important potential for all cultu-res, regions, economies and peoples ofthe world.

Of course, these applications only pro-duce energy during daylight hours, andwork better where there is more solarinsolation, both of which are often men-tioned as serious limitations to the use-fulness of solar energy. But with properdesign and choice of materials, solar

energy that enters buil-dings during the day cankeep those buildingswarm and comfortablethrough the night, whilewell insulated watertanks can store solarheated water for use atall times of the day ornight. People are mostcommonly at workduring daytime hourswhen carefully shadeddaylighting can replacethe electricity demandand heat output of artifi-cial lighting, and daylight-ing of buildings workswell even when it iscloudy. Businesses mostcommonly need industri-al process heat duringthe daytime, and themajor demand for elec-tricity is during daylighthours.

As a result, the effectiveness of solarenergy production is a matter of its abili-ty to meet the needs of the users, ratherthan only related to the time of its collec-tion. This is also true with regard to thecoincidence of radiant solar energy tothe needs of the electrical grids, which

tend to peak in the after-noons, especially on hot,sunny days, so the “ca-pacity factor”, or outputon a 24-hour average, ofsolar energy systems,has little economic mean-ing. The effective capaci-ty factor of solar electricenergy production, thatis, the availability of solarelectric energy producedwhen it is needed, cansometimes exceed 80 %,or even 90 %, and isoften 3 times the physi-cal “capacity factor”,while other solar appli-cations, such as water,pool and space heating,can deliver their value bythe heat collected duringthe day and stored in thewater or building, over a24-hour period.

Human behavior can also influence theeffective capacity factor of solar energysystems. Washing clothes and bathingin the evening maximizes the benefit ofwater heated by the sun during the day.

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It is today public policy and politi-cal leadership, rather than eithertechnology or economics, that arerequired to move the widespreadapplication of solar energy techno-logies and methodologies forward.The technologies and economicswill all improve with time, but theyare sufficiently advanced at pre-sent to allow for major penetra-tions of solar energy into the main-stream energy and societal infra-structures. And significant goalscan be now set with confidencefor major percentage improve-ments in energy efficiency andincreases in solar and renewableenergy applications for the next 50years, at which time the worldshould be receiving over 50 % ofall energy needs from locally avail-able environmental resources, withmost of these being from directand indirect uses of solar energy.There are no resource limitationsto this scenario.



Similarly, in Denmark it was shown thatpeople with PV systems alter their beha-vior to maximize the use of PV electricitywhen it is being produced. In California(USA), time-of-use metering of net-me-tered PV systems gives economic ad-vantage to just the opposite behavior, inwhich the sale of PV-electricity back intothe grid during peak times is maximizedby minimal electricity use in the buildingduring those times, when the return tothe producer can be as high as 30 UScents/kWh. Low-cost electricity is thenpurchased by the customer during thenon-daylight hours. Since most of thebuildings are residential, they are oftenunoccupied during the day anyway,when the owners are at work.

The annual solar resource is surprisinglyuniform, within a factor of about two,throughout almost all of the populatedregions of the world. The lower end ofthis resource availability would be aneconomic death knell if solar were onlyfeasible in desert climates, but the extra-ordinary applications of photovoltaicenergy technology in Germany (at lati-tudes parallel to southern Canada) andJapan, the significant solar water heatingapplications in Germany and Austria,and passive solar and daylighting appli-cations in Finland and Alaska, demon-strate that economically attractive appli-cations of solar energy are not limited to just the sunniest climates. It is a suffi-cient resource almost worldwide.

Productive R&D programs, supportedboth by industry and by governments,are continuing to advance the technolo-gies, and address areas, such as energystorage, to further the economic benefitsand value of the application of solarenergy. But in the meantime, housesand buildings are now ready to makeuse of direct solar energy applications,and, as presented earlier in this WhitePaper, electricity grids are now wellpositioned to allow for major penetra-tions of the intermittent renewable elec-tric energy sources.

Passive solar heating and daylightingof buildings

In general, in the industrial nations, from35 % to 40 % of total national primaryuse of energy is consumed in buildings,a figure which approaches 50 % whentaking into account the energy costs ofbuilding materials and the infrastructureto serve buildings. A recent analysis of energy use in buildings revealed that,when fairly including all energy costs in and related to buildings, the U.S. buildings sector accounts for 48 % ofprimary energy consumption, 46 % of all CO2 emissions, and is the fastestgrowing source of energy consumptionand emissions.

In Europe, 30 % of national energy useis for space and water heating alone, re-presenting 75 % of total building energyuse. In the United States 37 % of all primary energy is used in buildings, and2/3 of all of the electricity used in thecountry is used in buildings, with up tohalf of that directly or indirectly resultingfrom artificial lighting and the thermalimpacts of those fixtures. Buildings can account for one-third of a nation’sgreenhouse gas emissions, and one-third of a nation’s production of waste.

From a thermodynamic standpoint, let-ting the sun shine into buildings in thewinter to heat them, and letting diffuseddaylight enter the building to displaceelectric lighting, while providing for care-ful summer shading and interior glarecontrol, are both the most efficient andleast costly forms of the direct use ofsolar energy. Such simple concepts arerooted in prehistoric structures. EarlyNative Americans, for example, providedfor year-round comfort in harsh environ-ments with natural heating, cooling andventilation designs.

Early Greek and Roman architects adap-ted the principles of natural energy de-sign to their homes and cities. Socratesencouraged the use of what today iscalled “passive solar” design in homes,praising the value of letting the low win-ter sun penetrate the south side of buil-dings, and the benefit of being able toshade out the high summer sun.

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1960

Architecture

Transportation

Industry

1970 1980 1990 2000

0

200

400

600

800 Mmt

2000 2005

Architecture

Architecture(implementation)

Architecture(implementation + 10/20)

2010 2015 2020

40

50

60 QBtu Energy consumption

Fig. 11a, b: In the U.S., “architecture”, which in-cludes all residential and commercial sectors, alongwith the portion of the industrial sector containingbuildings and building materials, is the largest singleenergy user (at 48 % of primary energy), as well asthe largest, and fastest growing, emitter of CO2.Aggressive but totally achievable (and affordable)changes in buildings efficiency policy nationwidecould lead to a reduction in building energy use,shown as the “implementation” trajectory in the lower graph. If the Union of Concerned Scientist’s“Clean Energy Blueprint” is also adopted (10 % of U.S. electricity from renewables by 2015 and 20 % by 2025) the energy impact of buildings in the U.S. could be further reduced as shown in the“implementation + 10/20 portion” of the graph.Source: Edward Mazria, SOLAR TODAY, May/June,2003, 48-51


Fig. 12a, b: The Real Goods Solar Living Center, a retail store in Hopland, California, USA (designed by Van der Ryn Architects). A complete “bioclimatic” design, the buildingfeatures passive solar heating, daylighting, natural ventilation and cooling, PV electricity and native landscaping. Energy savings compared to a conventional design in theHopland climate are 90 %. In-store sales are 50 % higher than projected because the interior daylighting and comfort are so good.

Photographs by Dr. Donald Aitken

Vitruvius took these principles further intowhat is today called “climate responsive”design, noting that different climatesrequire different designs for comfort. Thegreat European cathedrals of the middleof the last Millenniumused daylight in specta-cular fashion to illuminatethe interiors. Office buil-dings constructed ingreat cities to almost theend of the 19th centuryhad to rely on carefuldaylighting design andnatural ventilation for illu-mination and comfort.

These same techniquesare available today, withenormous worldwidepotential to reduce theenergy and climateimpacts of buildings on a short time scale. This isaided by lessons learnedfrom important pro-grams, like the passivesolar and daylightingtasks of the IEA (Inter-national Energy Agency),and by important advances in buildingmaterials, specularly selective glazings,insulation, and lighting technologies and

controls, along with ever more user-friendly computer simulation tools tohelp designers achieve the best result.

Data are mounting that demonstrateconclusively enhance-ments of human perfor-mance in daylit buil-dings, with direct econo-mic benefits that greatlymultiply the energy-effi-ciency “paybacks”.Office worker productivi-ty and job satisfactionhave been shown to beimproved in daylit buil-dings, resulting in verylarge “bottom line” bene-fits for the employers.Increases of up to 15 %in sales in daylit shop-ping areas and storesare leading to changesin design approaches tothese commercial estab-lishments. And up to 25 % improvements inlearning rate and testscores of children indaylit classrooms are

being recorded in careful statistical research.

All of these measured results demon-strate significant societal values that gowell beyond the energy and climatereduction potentials of such “sustain-able” building designs. One can arguethat expenditures to reap these econo-mic benefits justify the energy-efficientand daylighting designs on their ownmerits, so that the reduced energy useand emissions of greenhouse gasesfrom such buildings are “free” benefits. The integrated design of “climate-responsive” buildings through “wholebuilding” design methods enables majorcost-savings in actual construction, normally yielding 30 % to 50 % improve-ment in energy efficiency of new buil-dings at an average of less than 2 %added construction cost, and some-times at no extra cost. Simple cost pay-backs are in the range from immediateto a maximum of five years.

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After efficiency in all areas, themost accessible, least cost, andeconomically beneficial startingpoint for any national or local ener-gy policy aimed at reducing theuse of conventional energy resour-ces and lowering the production of greenhouse gases is with buil-dings. This includes upgrading existing buildings, and designing all new residential and commercialbuildings for maximum energy efficiency and the optimal use oflocally available environmentalresources for light and comfort.Billions of US dollar equivalentscan be diverted in this way out ofunnecessary expenditures for buil-ding energy and lighting into pro-ductive economic uses, such ascreating new jobs, or supportingeducation and health. And billionsmore can be earned as a directresult of the improved performanceof occupants and users of thosesame buildings and schools.



Solar water and space heating

Solar water heating is hardly a newtechnology, but even with the rapidgrowth presently being experienced inEurope, Israel and China it still falls shortof its potential. Gas-fired and electricwater heaters are convenient and tech-nically simple, but by using high gradeand high temperature fossil-fueled orelectric energy to heat water almost allof the thermodynamic“work” potential of thoseenergy resources iswasted, potential whichcould be put to muchmore productive econo-mic use. And for many indeveloping nations, solarwater heating in simplepassive tank-type units is the only affordablesource of hot water forwashing and bathing.

Although hot water in thehome does not producejobs and does not powerindustries, the fuel nowbeing used to heat that water certainlycould. And shortages are already fore-seen for gas-fired electrical energy pro-duction. When that electricity is used forwater heating, it is a particularly wastefuluse of natural gas, since it takes twiceas much gas for a unit of heat in thewater when the gas is burned in apower plant to produce electricity than it does if the gas is burned directly in the water heater. But gas-fired waterheating also wastes all of the potentialchemical benefits of natural gas, whichcould otherwise have high value-addedapplications.

It is a far better investment for society tolet the sun provide a major share of theheat for the water, in order to recoverthe economic benefits of the displacedgas resources. The water is still reliablyheated, but with a much lower propor-tion of conventional energy required. The solar-displaced gas is returned to

power other more important elements of the economy. The money that wouldhave been spent for fuels to heat waterbecomes money spent instead, forexample, on jobs to produce, install andmaintain the solar water heaters, andthose jobs also enhance the strength oflocal economies. The value to society of solar water heating, therefore, is fargreater than simple cost “payback” calculations would suggest. And solar

water heating can makea significant contributionto the meeting of targetsfor the reduction of CO2

emissions, a social obli-gation not governed bysimple cost paybackconsiderations.

Solar water heatingtoday is a fully maturetechnology. About 12.3million m2 of solar waterheaters had been instal-led in the EU membercountries by the end of2002, with the annualrate of installation at

close to 1.5 million m2 per year in 2001,but down to 1.2 million m2 in 2002.About 60 % of these, however, are injust three countries – Germany (withover 50 % of the EU sales of solar waterheaters), Greece and Austria – whichhave the best-developed markets.Cyprus, with over 50 % of its Medi-terranean hotels and 92 % of all homeshaving solar water heating, leads theworld in terms of square meters of solar water heater installed per capita,

at 0.8 m2 per person. In continentalEurope, Greece leads this measure of public acceptance at 0.26 m2 percapita, followed by Austria at 0.20 m2

per person, and then, in order, Denmark,Germany and Switzerland. The overallEU average at the end of 2002 was 0.26 m2 per person.

The European Union has set a goal of100 million m2 of solar collectors instal-led by 2010 in Austria, Belgium, Britain,Denmark, France, Germany, Greece,Italy, the Netherlands, and Spain, whichwould require an annual rate of growthof over 35 % (referenced to the year2000). The present European growthrate would produce about 80 million m2,so the EU goal is for an even moreambitious installation rate. Still, thesefigures pale in comparison with an estimated EU countrywide potential of 1.4 billion m2, which could generate683 TWh of thermal energy per year.

The increasing popularity of solar waterheating for “active” space heating inGermany, Austria and Switzerland, aswell as serious considerations beinggiven to solar district heating, as pio-neered in Sweden, can help to drive upthe sales of this technology. So can Cityordinances, such as the one adopted in 1999 and implemented in 2000 inBarcelona that requires solar systems tobe used to deliver at least 60 % of thehot water for homes and businesses.Within 18 months the solar thermal collector area in Barcelona increased750 %, to 14,000 m2. This city require-ment is being introduced in Madrid and

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It is to the benefit of all economiesto promote and accelerate solarwater heating on a large scale. The overall economic benefit tosocieties of solar water heatingjustifies serious promotional andincentive programs by govern-ments. Serious long-range goalsfor the application of solar do-mestic water and space heatingsystems need to be established by all governments, totaling world-wide at least several hundred mil-lion square meters of new solarwater heating systems by 2010.Governments will need to providesupportive political framework con-ditions for this to be accomplished.

Fig. 13a: Solar Water Heating in China.Source: Li Hua, RENEWABLE ENERGY WORLD,July/August, 2002, p. 105

Fig. 13b: Solar water and space heating inKathmandu, Nepal.Photograph by Dr. Donald Aitken


Seville and other areas. And in order to revitalize a stagnating solar waterheating industry, the German govern-ment agreed in February, 2003, to raisethe incentives for solar water heatingsystems from 92 Euros to 125 Euros per square meter of collector surface,which has noticeably improved the 2003 Germany market.

The European figures (and population)pale in comparison with China, whichhad 26 million m2 of solar water heatersinstalled by the end of 2000, and 1,000manufacturers of solar water heatingcomponents and systems by the end of2001. The Chinese government goal isfor 65 million m2 of solar water heatersby 2005. It has been speculated that, ifhomebuilding continues according toChinese government goals, and there iseven a modest use of solar water heat-ing in those new homes, China couldreach 3 billion m2 per year by 2010. Thisis driven by the lack of availability of gasfor water heating, so that solar waterheating competes with electric waterheating, and is the cheaper alternative.

Solar thermal electric energy generation

When solar energy is concentrated byreflecting surfaces, the energy densitycan be dramatically increased. This en-ables high temperatures to be achievedin fluids in “receivers” that can then betransferred to generate electricity in ther-mal-electric generators. This technology,generically referred to as “CSP” for“Concentrating Solar Power”, falls intothree categories: parabolic troughs,power towers, and heat engines.

Parabolic troughs are long parabolic-shaped mirrors mounted in rows to heatthe fluid that flows in energy-collectingreceiver pipes maintained along theirlines of focus by adjustment of the posi-tion of either the mirror or the receiver.The hot fluid is then flashed to steam ina conventional (but low-temperature) tur-bine generator. Power towers representfields of mirrors (“Heliostats”) that focustheir energy onto the top of a tower,where it is collected and sent by veryhigh temperature fluid to the thermalpower generator.

Heat engines (Stirling engines) directsolar energy with very highly focusedheliostats onto a piston, which then drives an engine through air expansion.Each Stirling engine is directly mounted

onto its own three-axis tracking helio-stat. The technical target for the Stirlingengines is to be maintenance-free for50,000 to 100,000 hours of operation.

Dish-Stirling engine/heliostat combina-tions have been mounted and tested,with development moving well on theway toward the anticipated 25 kWe

modular units that could be so valuablein the future. (Until recently, a Dish-Stirling engine/heliostat combination heldthe world record for efficiency in conver-ting solar energy to electricity of about35 %.) More work remains to be done to assure the targeted long life and reli-ability of the engines, and to producelow-cost heliostats. The technical bar-riers appear to be quite within range ofeconomic solutions.

The world’s largest set of solar-electricgenerators, 354 MW of parabolic troughtechnology in three fields, continues tooperate in the United States in southernCalifornia. The first units were installed inthe early 1980’s, and the completedsystem has been in full operation for thelast 17 years. The Harper Lake plant is160 MW, and the Kramer Junction plantis 150 MW. Much has been learnedfrom these significant projects, and theyhave proven the practicality and reliabili-ty of this solar thermal electric techno-logy. Similarly, the 10 MW power tower,

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Fig. 14a: A portion of the world’s largest solar thermal-electric generator (on theleft), part of the 354 MW system in California. Shown also is the embedded gas-fired generator for 25 % “hybrid” operation, to level the output of the solar system,demonstrating a useful synergy between renewable energy and conventionalenergy production.

Fig. 14b: Solar I, the 10MW “power tower” in southern California.Source Fig. 14a: NRELSource Fig. 14b: U.S.D.O.E.



also in southern California, Solar I and II (the second representing a rebuild ofSolar I to accommodate the introductionof liquid sodium heat transfer and stor-age into the project), met all researchobjectives for performance and reliability.

Even though CSP plants can be builttoday which produce energy at abouthalf of the present costfor photovoltaic-pro-duced electricity, theCSP technologies in par-ticular have been slow tobe extrapolated to largerscale and world markets.The slow acceptance ofCSP has been due tovarious financial andinstitutional barriers. Theprimary one is that buil-ding a solar plant is likebuilding a fossil fuel plantand paying for 30 years worth of fuel allat the same time. Consequently, theplant must be fully financed up front,with an attractive return to investors. Inaddition, the physical plant is generallytaxed, while fuels for conventional powerplants are not. This unfairly penalizes thesolar plants for the “free” fuel.

These barriers can be addressed by pro-viding subsidized low-cost loans, redres-sing the tax inequities, providing energyproduction incentives, and continuing tosupport R&D that can lead to more effi-cient reflectors, components and thermalsystems. CSP is also extremely sensitiveto the solar resource, needing to be builtwhere it is the sunniest and clearest, andmost economic when built in systems upto 400 MW in size.

If the barriers are all addressed, and thebest physical conditions can be met,projections suggest that, after the instal-lation of a few thousand megawatts ofCSP power plants, the costs withoutsubsidies could come down to be com-petitive with fossil fuels. But in contrastto fossil fuels, CSP plants will provideeconomic certainty for the 30-year war-

rantied life of the plant, free of the highlyvolatile and unpredictable costs andavailability of conventional fuels well intothe future.

The economics become more attractiveand on a shorter time scale when CSPprovides solar energy to supplement gasenergy in an Integrated Solar Combined

Cycle System (ISCCS).The solar energy dis-places some of the fuelas well as some of thecombustion emissions,improving both the fueleconomics and environ-mental performance,while the marginal costof the solar componentsadds proportionately lessto the overall cost of thegas-fired system. Smallerand more versatile CSP

plant designs are being developed forthe 100 kW to 1 MW range, with theapplication flexibility that this would pro-vide compensating in local benefits forthe higher kWh production costs. Andstorage techniques that are being devel-oped to provide up to the economicoptimum of 12 hours of energy storage,which would yield maximum utility forthe received solar energy, will alsoenhance the economics of CSP.

World interest in CSP is picking up, withsignificant projects planned in manycountries, and valuable GEF fundingbeing provided for more. New CSP pro-jects are underway in the U.S. (Nevada)and Spain, and nearly so in Israel andSouth Africa. GEF funding of US$ 50million each has been given to Mexico,Egypt, Morocco and India, for CSP pro-jects presently under development. Iran,Algeria and Jordan are consideringISCCS projects. Economic projectionssuggest the viability of CSP also forGreece, Italy, Portugal, Australia, Brazil,Liberia, Tunisia and China, and a poten-tial for a cumulative world total of over100,000 MW of CSP electricity genera-tion in place within the next 25 years.

The Nevada 50 MW parabolic troughsystem is particularly interesting in that itis the direct result of new state govern-mental policy. The Nevada legislatureadopted in 2001 an aggressive renew-able portfolio standard (RPS) which willrequire the State’s investor owned utili-ties to provide 5 % of their energy salesfrom renewable energy (geothermal,wind, solar and biomass) in 2003, ram-ping up over the next ten years to 15 %in 2013. In order to promote the devel-opment of a “portfolio” of renewableenergy resources in a State that alreadyhas geothermal power plants and inwhich wind energy will be competitive,Nevada added an explicit “solar” com-ponent to their RPS, in which 5 % of allnew renewable energy developmentmust be in the solar energy technolo-gies. This will require about 60 MW ofsolar-electric generation over the nextten years.

The Nevada utilities elected to build a 50 MW solar thermal parabolic troughpower plant, with expansion possibilityto 60 MW, as a one-shot response tothe solar RPS requirement. The systemwill be constructed by Duke Power, andis to come online in 2005. The Nevadautilities will buy the power output of thesystem over a 20-year sales contractperiod, guaranteeing the income neces-sary to support the financing of the con-struction and operation of the system.The system is expected to produce anaverage of 102.4 thousand MWh eachyear, enough to meet the 1,000 KWhmonthly average needs for 8,400Nevada homes (large homes in a veryhot climate, requiring significant air con-ditioning).

The experience gained with this newparabolic trough system should help tolead to cost-reducing developments,and the further revival of solar thermalelectric systems in the United States,demonstrating the value of governmentpolicy in accelerating the developmentand application of the renewable energytechnologies.

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Concentrating Solar Power (CSP)is a valuable component of therenewable energy portfolios ofcountries with a sufficient solarresource, and warrants inclusion ingovernmental policies aimed at sti-mulating and developing balancedresource portfolios of the renew-able energy technologies. A world-wide goal of 100,000 MW ofinstalled CSP technology for 2025is an achievable goal with poten-tially significant long-term benefits.


Solar photovoltaic electric energyproduction

The most recognizable solar energytechnology today results from the manyapplications, considerable publicity, andnumerous incentive programs in supportof solar electricity production by photo-voltaic (PV) systems. Even though it isthe most expensive of the solar techno-logies in terms of energy production, it is the most versatile, simplest to installand cheapest to maintain, and providesa highly valued product – electricity –generally at or close to the point of use,avoiding the cost and risk of failure ofinfrastructure.

PV modules can be used to power tele-phones or traffic and warning signs, toreduce corrosion in metal bridges, topower water pumps and wells, to pro-vide light and power for remote housesand villages, to refrigerate medicines, toreduce purchased energy in grid-con-nected homes and commercial esta-blishments, to provide both power andshade in parking lots, to charge electriccars, and for many more applications. Adesigner can readily specify PV roofingshingles, standing seam roofing with“stick-on” PV, PV shading overhangs,PV curtain wall glazing, and PV skylights.Flat hotel and commercial roofs arebeing decked over with PV without re-quiring any roof penetrations and provi-ding for insulation and shading at thesame time, producing electricity andreducing the cooling load for the building.The provider of half of the commercial PV rooftop systems in the United States has seen their average systemsize grow from 94 kWp in the year 2000to 260 kWp in 2002, and to close to 350 kWp in 2003. This includes severalinstallations of 1 MW or more.

PV systems integrated throughout thegrid in a “distributed utility” structure canmake it impossible for a terrorist to bringdown a city by destroying its energysources. The convenient and centralizedtargets of power plants, substations and

transmission lines will vanish within citiesthat produce and distribute their ownpower on-site. Similarly, a city with dis-tributed energy systems that can be"islanded" from the grid will be shieldedfrom many of the problems caused whena major transmission network collapses,or central power plants suddenly go off-line, all of which occurred simultaneouslyin the Northeastern U.S. in August of2003 and in Italy in September.

Building-integrated PV systems (BIPV)with modest amounts of storage canprovide for continuity of essentialgovernmental and emergency opera-tions, and help to maintain the safetyand integrity of the urban infrastructure:street lights and communication links willcontinue to operate, and essential cityand safety services will continue to beavailable from civic and administrationbuildings with their own energy systems.This should be a basic element of se-curity planning for all cities and urbancenters in the world.

PV is an industry that is growing world-wide at an amazing pace. Over 560 MWp

of PV modules were manufactured andsold worldwide in 2002. The averagerate of growth of the industry in thebeginning of this Millennium has been36.6 %, representing more than a doub-ling every two years, and it increased by 44 % in 2002. The value of worldwide

PV sales in 2002 of about US$ 3.5 bil-lion is projected to grow to more thanUS$ 27.5 billion in 2012.

Far from settling down on one majortype of technology (like VHS beating out Beta in video recorder standards),the PV industry continues to innovate inmany ways. The most popular PV tech-nologies are still monocrystalline andpolycrystalline (or multicrystalline) siliconcells (93 % of worldwide PV cell sales in 2002), because they are the most effi-cient, are proven by years of applicationand operation, and are very stable.Silicon is the most abundant element onthe surface of the Earth, and it is non-toxic.

The ability of thin films to be adapted so easily to building materials, such asglass facades and windows, along withthe potential for high volume mass pro-duction of films on glass or on flexiblesubstrates, is leading to new PV cellcompounds that are also being devel-oped and marketed, such as single- or multi-junction amorphous Silicon or mixed-phase microcrystalline silicon,Copper Indium Diselenide (CuInSe2, orCIS) and Cadmium Telluride (CdT). Still,close to 99 % of worldwide solar cellproduction in 2002 was silicon-based,which supports an apparent emergingtrend away from products requiringscarce or toxic materials.

30

2000199019801970

0

100

200

300

400 Megawatts World Photovoltaic Shipments

100.00010.0001.000100101

1

10

100 US$(2001)/Wp PV module price

22.0

00 M

Wp

1.50$

Cumulative shipments (MWp)

Fig. 15a The dramatic increase in world photovoltaicmodule shipments. It surpassed 500 MWp in 2002.Data source: Paul Maycock.

Fig. 15b: PV experience curves for 1976-2001 andprojection to a breakeven price of US$ 1.50/Wp, demonstrating the importance of promoting highvolume applications.Slide source: Dr. John Byrne, data by Paul Maycock (2002)



The ability to layer films to capture thefull solar spectrum potentially allows thinfilm solar cells to achieve efficienciesequivalent to the crystalline devices.

And PV is sold by the watt, not by thesquare meter, so lower-efficiency appli-cations directly applied to convenientbuilding materials with ample surfaceareas (walls, roofs, glass) can often bethe most economic choice. Neverthe-less, the reliable and proven crystallineand polycrystalline modules will probablycontinue to dominate the PV field for thenext two decades.

Measuring the value of PV in cost perkWh produced undervalues many of theattributes of this versatile technology. Forexample, when PV is used to powerroadside emergency phones, the cost ofthe produced energy by the small PVpanels on the top of the poles may wellbe over $ 1/kWh, but the cost of the tele-phone is US$ 5,000 less than it would beif wires had to be run underground fromphone to phone. So the use of PV canoften enable a lower overall project cost.

Equally important is the value of PV inmeeting some of the most essentialneeds of humanity. In India, by the endof 2002, 5084 solar PV water pumpshad been installed in rural areas, with atotal capacity of about 5.55 MWp. And2,400 villages and hamlets had beenelectrified in India with PV. This barelytaps into the potential for bringing freshwater and light to the poor and remotepopulations in India, but it certainly con-firms the feasibility and benefits.

Large, ground-mounted central PVpowerplants in sunny areas may wellbecome important in the future. Suchapplications become ever more feasibleas the efficiency of PV cells continues to improve. A solar-to-electric energyconversion efficiency of 20 % for largearea crystalline silicon cells for moduleproduction was reached by a Japanesemanufacturer in 2003. A world recordefficiency for the conversion of sunlight

to electricity of 36.9 % was achieved in2003 in a compound cell designed to beused in a tracking concentrator. Mirrorsare less expensive than solar cells, sosuch developments should aid in re-ducing the costs of central-station typesof PV powerplants.

The energy potential of such solar appli-cations is huge. In the U.S., for example,a fairly small fraction of the government-owned Nevada Test Site land in SouthernNevada could, in theory, provide enoughsolar electricity to meet the needs of theentire United States (in quantity – thisignores the difficulty of transporting thatenergy all the way across the country,but it does illustrate the resource poten-tial).

The most popular application of PV today, however, is on roofs. The world leaders today in rooftop installations are Japan and Germany. In Japan, agenerous subsidy from the governmentsince 1994 has promoted this market,while, in Germany, the costs of incentivesupports are spread to the whole elec-trical system customer base through the“feed-in” payments made to the produc-ers of PV electricity. These policies, inturn, enable their own manufacturers to reduce costs by volume sales and tobecome more competitive in the worldmarket.

The Japan and German policies are alsodriven by long-range national goals toincrease the penetration of renewableenergy for its societal and economicbenefits. This policy has vaulted Japaninto a position as the world’s leadingmanufacturer of PV modules, producingalmost half (49.1 %) of the world pro-duction in 2002. Just one manufacturerin Japan has outdone all of the otherregions of the world in producing 123.07MWp of PV in 2002, while a second hasannounced plans to produce over 100MWp annually by 2004. All of Europeproduced 135 MWp (24 %) of the world’sPV modules in 2002, while the UnitedStates produced 120.6 MWp (21.5 %),and the rest of the world produced 55 MWp (9.8 %).

The three most significant national PVprograms are the “Residential PV SystemDissemination Program” in Japan, the“100,000 Roof Solar Electric Program” inGermany, and the “Million Roofs” solarprogram in the United States. But whilethe Japanese and German programs areheavily subsidized by credit or productionincentives, to assure that the goals aremet, the U.S. program is voluntary.Pledges in the U.S. that exceed one million solar (thermal or electric) systemsby 2010 have been announced, but theactual installation of that many is not atall certain. Meanwhile, installations by the

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Fig. 16a: A residential solar roof application in Japan. Source: Photo from Japan Photovoltaic Association

Fig. 16b: A multifamily building in Freiburg, Germany,using the roof for solar water heating, and the southwall for solar electric energy production.


thousands are continuing in Germanyand Japan, as well as in other Europeancountries.

Applications in 2002 for what was to be the final year (2003) of the Japaneseprogram exceeded 32,000 for privatehousing alone, with a total of 40,000applications for the year. This broughttheir "70,000 roofs" program to117,500! Total Japanese governmentexpenditures on this program over itsfive fiscal years (1999-2003) have beenUS$ 739 million. The program is sopopular that the government agreed to continue it for 3 more fiscal years (to2006). This will certainly aid the Japangovernment’s near-term goal of manu-facturing 500 MWp of PV annually, with250 MWp for internal consumption andthe rest for export. They are also sup-porting this goal with an FY 2003 invest-ment of US$ 218.6 million for PV R&Dand “promotion”, which even includessupport for “grass roots” activities.

The rate of growth in PV applications in Germany since 1999, driven by the“100,000 roof” program, has been im-mense. Total installed PV system powerin Germany grew from about 68 MWp

in 1999 to 278 MWp by the end of 2002,producing, in 2002, 190 gigawatt-hoursof electricity. By the end of 2002, 55,000rooftop PV systems had been installed in Germany, with 98 % of those grid-con-nected. The total power of the acceptedapplications for PV roofs in 2002 inGermany was over 78 MWp, up from 60 MWp just the previous year, andbringing the total installed power just onresidential roofs to 200 MWp. Financialincentives and low-interest loans forFY2003 are expected to continue to sup-port the installation of 95 MWp more ofrooftop systems, but with the supportshifting more to production (feed-in)incentives.

The result of these policies is that over60 % of the PV systems installed in theEU countries were installed in Germany.This is followed by Italy and Switzerland,

each with about 10 % or so of Germa-ny’s installations. But when taking thepopulation numbers into account,Switzerland actually leads the EU instal-lations at 2.8 Wp per capita, followed by Germany at 2.3, and the Netherlandsat 1.1.

It is important to note that the measuredaverage daily energy production fromthe German rooftop PV systems is about2.33 kWh/kWp of instal-led capacity (averagedover the entire year),scarcely half of the out-put that can be achievedin the sunnier climates ofthe world. This demon-strates that the value ofaggressive solar energyprograms to governmentsand economies does notrequire the “best” solarclimate but, again, simplya “sufficient” one.

For some time PV hasbeen the low-cost optionfor many remote andmodular applications,needing no further eco-nomic justification. Butthe apparent high costfor urban PV applications has remained adeterrent (again the problem of effective-ly buying the hardware and the lifetimeof energy production all up front).Fortunately, the cost of PV modules andsystems continues to reduce dramatical-ly. Factory prices for PV modules arenow from US$ 2.00 to US$ 3.00/ wattand complete operational systems cannow be installed in the United States forbetween US$ 5/watt and US$ 7/watt,depending on the size of the systems,without subsidies. Prices for fully instal-led systems in Japan were at US$6.50/Wp in 2002, before the governmentsubsidy, showing a dramatic price de-cline as a direct result of the govern-ment's multi-year buy-down programand the tens of thousands of installedsystems that resulted from it.

When subsidies or volume sales andexperience, or both, bring the costs topurchasers down to US$ 3.00/watt forfully installed systems, the effective costof the electricity amortized over 30 yearswill be from 8 to 12 US cents/kWh,making PV not only fully competitive withutility provided electricity, but probablythe cheaper option as future electricitycosts from conventional fuels continueto rise. And the cost of that PV-pro-

duced electricity willremain fixed for the life-time of the PV system,yielding at least one costfigure for people andbusinesses that will notgrow in the future. (PVmodules are currentlywarrantied for 20-25years, but should last for twice that long.)

One forecaster seesthese very low costachievements by the endof this decade, at whichpoint he expects to seethe world market reach10,000 MWp in annualshipments. An averagePV production growth of 25 % from 2000 to

2010 would lead to annual production of 2,500 MWp by 2010, while an averagegrowth rate of 50 % would lead to annualproduction of 16,000 MWp by 2010, so the 10,000 MWp estimate lies some-where between these growth rates.

A recently published estimate showsthat even if costs are reduced to US$ 1.50 per Wp for the modules and US$ 3.00 per Wp for installed systemsby 2010, the PV industry would stillneed to expend from US$ 25 billion toas high as US$ 114 billion during the2000-2010 period to support PV factoryinvestment, working capital and end-userfinancing. Gaining investor confidence to assure these capital investments willtherefore be extremely important, poten-tially greatly aided by long-term govern-

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It is appropriate and important forall governments to include firmsolar electric energy goals, gearedto specific targets for specificyears, in their policies. This is morethan just encouraging “RenewablePortfolio Standards”, for the renew-able energy transition will requirethe development and deploymentof the full spectrum of solar energy technologies, not just the leastexpensive of the renewable energytechnologies (e.g. wind). Specificprovision to encourage photovol-taic applications and to advancephotovoltaic technologies must bepart of any renewable energy poli-cy, in order to assure the benefitsunique to this technology, and to continue to provide the market pull that will bring the costs downfurther.



ment PV-purchase programs along withannually growing and long-term legisla-ted system-wide or country-wide goalsfor PV applications (e.g. part of a “solarRPS” component). The reward will beenhanced economic activity for the hostregion or country, more than returningthe governmental incentive investments.

For example, a 1992 input-output analy-sis by the U.S. Department of Energy ofthe potential economic impact of a new10 MWp PV fabrication plant planned forFairfield, California (near San Francisco)showed that the sum of direct and indi-rect sales would be about US$ 55 millionper year, while adding in the “induced”economic activity related to the locationof the plant and its employees and thedirect and indirect sales activity couldexceed US$ 300 million per year. Stateand local income taxes could be en-hanced by US$ 5 million per year, andlocal sales tax revenue could be anotherUS$ 3million per year.

Solar photovoltaic technology, in concertwith energy efficient and sustainabledesign of buildings and integrated intothe electrical grid, can make a substantialcontribution to the energy needs ofalmost all countries of the world. But the societal value of PV, and hence the worthiness of public support andgovernmental stimulus, goes well beyondjust the kWhs produced by the PVsystems. PV in developed and develo-ping nations alike can enhance localemployment, strengthen local economies,improve local environments, increasesystem and infrastructure reliability, and provide for greater security. The PVindustry is already a multi-billion dollarnew industry, growing worldwide byalmost 40 % per year, with opportunitiesfor economic advancement and inter-national marketing competitiveness bythose nations, such as Japan andGermany, that make a concerted effort to draw the industry to within theirboundaries.

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National and Local Factors Supporting theDevelopment and Application of RenewableEnergy Technologies

Meeting international greenhousegas reduction commitments

The major driving force for the expan-sion of renewable energy applications incountries other than the United Stateshas been national commitments to meetthe greenhouse gas reductions adoptedin the Kyoto Accord (the Kyoto confe-rence of parties to the Climate Conven-tion in 1997, COP-3). Even without theU.S. participation, the 55 states representing 55 % of the world CO2

emissions produced bydeveloped nations in1990, required for formalratification of the accord,will be reached whenRussia signs on.

The European Commis-sion ratified its participa-tion in the Kyoto Accord,and set firm targets, insupport of the Accord’sobjectives, for renewableenergy percentages of12 % EU-wide energyfrom renewables by2010, and 22.1 % pene-tration into the electricitysector by renewables in2010. This will be policywhether or not the treatyenters into force. Japan has taken thesame stand, introducing in 2003 a new“environment tax” to continue to raisethe funds necessary to reduce emis-sions down to their Kyoto Accord levels.

Within this EU-wide goal each EU nationhas been assigned a specific carbon-emission reduction target (in percent,compared to 1990 levels), based ontheir past accomplishments and re-source availability as well as their currenteconomic strength. But some EU mem-ber states have set longer and moreambitious targets, such as the proposalby the British Prime Minister for a 60 %reduction in UK greenhouse gas emis-sions by 2050. An 80 % reduction

of emissions has been proposed forGermany by 2050, the latter as a conse-quence of their long-range efficiency and renewable energy policy (moreabout this below).

Long term carbon reduction goals are powerful long-term drivers for therenewable energy industries, leading toambitious goals for renewable energydevelopment beyond 2010, such as that

of England, for 20 % ofits energy from renew-able energy by 2020;Scotland, for 40 % of itsenergy from renewablesby 2020; and Germany,for about 40 % of its pri-mary energy and 65 %of its electricity fromrenewable energy sour-ces by 2050.

Goals are only goals,though, unless suppor-ted by implementinglegislation and actions,with sufficient financialbacking. Long-termgoals for the reductionof greenhouse gas emis-sions create a rationalframework for govern-ments within whichenergy supply and effi-

ciency policies and programs may beestablished and justified, and annualnational financial commitments set toimplement these goals. Without these,the goals will not be met.

Enhancing the productivity of energy expenditures, and the creation of new jobs

The policy rationales for renewable ener-gy applications go well beyond just envi-ronmental. The opening language of the “Directive 2001/77/EC of the Euro-pean Parliament and of the Council of27 September 2001” states:

The Community recognizes the need to promote renewable energy sourcesas a priority measure given that theirexploitation contributes to environmentalprotection and sustainable development.In addition, this can also create localemployment, have a positive impact onsocial cohesion, contribute to security of supply…

In support of the stimulus of local em-ployment by renewable energy, an analysis by the U.S. Public Interest Re-search Group calculates that an invest-ment to increase the use of renewableenergy in the U.S. to 20 % of the nation’selectricity supply would create “three tofive times as many jobs as a similarinvestment in fossil fuel.” The U.S.Worldwatch Institute estimated that solarthermal systems would generate from 2 to 2.5 times as many jobs as coal ornuclear. Global employment in the windindustry alone by 1999 was estimated tohave contributed directly and indirectlyto the creation of 31,000 new jobs, andworld applications have doubled sincethen, creating thousands of additionaljobs.

It has been estimated that, over the 12 years (1991-2002) following theBundestag’s 1990 approval of the“Electricity Feed-in Law (EFL)”, whichgave producers of solar and wind ener-gy in Germany a wholesale price guar-antee of 90 % of the retail price of elec-tricity, leading to a 5 % share of Germanelectricity from those technologies in2002, approximately 40,000 new jobswere created. In contrast, the Germannuclear industry, which supplies about

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The evidence is that, when re-newable energy development isaccompanied by aggressive ener-gy efficiency goals and programs,the committed reduction of green-house gas emissions can beaccomplished in the industrialnations at little to no net long-term cost to their economies. On thecontrary, a number of studies have shown that short term increases inexpenditures will be balanced bylong-term energy cost savings,and new efficiency and renewableenergy industries and jobs will leadto a flow of new monies through-out society, stimulating all sectorsof the economy. Avoidance ofgreenhouse gas emissions is there-fore expected to be a stimulus fornet positive economic benefits forcountries over the longer term. Renewable energy developmentand implementation will be a major component of these programs.


30 % of Germany’s energy, employs38,000 people, suggesting that renew-able energy industries are ten timesmore efficient in producing jobs than the nuclear industry. It has been furtherestimated that meeting the German tar-get of a 100 % increase in renewableenergy (from 6 % to about 12 %) by2010 could create 25,000 more jobs inall of the renewables.

In the United States,25,000 new jobs havebeen created in, by andfrom the PV industry,which has developed toan annual productionand sales in 2002 of 100 MWp. A U.S.Department of Energyestimate is that thiscould increase to 68,000jobs (direct, indirect andinduced) by the time theU.S. is producing 480MW of PV each year.Another recent estimateis for 300,000 jobs in the U.S. PV indus-try by 2025. These values make the PVindustry in the U.S. equivalent at presentto major computer industries, such asDell Computer, or Sun Micro-systems,and it could become as large as GeneralMotors. This is also equivalent to theestimate (284,000 jobs) that would beproduced in the biomass power industryin the U.S. when it reaches a level ofannual activity of about US$ 6 billion.And it has been estimated that theGerman long-range energy model pre-sented later in this paper could lead to250,000 to 350,000 new jobs by 2050.

When new jobs are created, the “eco-nomic multiplier” goes into effect, greatlyexpanding the economic benefits of the direct expenditure on the jobs. Forexample, a 1992 input-output analysisby the U.S. Department of Energy of the potential economic impact of a new10 MWp PV fabrication plant planned forFairfield, California (near San Francisco)showed that the sum of direct and indi-

rect sales would be about US$ 55millionper year. Adding in the “induced” eco-nomic activity related to the location ofthe plant and its employees and thedirect and indirect sales activity couldexceed US$ 300 million per year, yiel-ding a 500 % multiplier in local andregional economic benefits. State andlocal income taxes could be enhancedby US$5 million per year, and local sales

tax revenue could beanother US$ 3 million peryear, further increasingthe regional benefits.

An input-output analysisby the State Departmentof Administration in Wis-consin (USA) in 1995revealed that the impactof the spending of US$ 6 billion by Wisconsin forout-of-state fossil fuelenergy resources (coaland oil) was equivalentto sending support for175,000 jobs out of the

State. This represented a significant lossof economic productivity for Wisconsin.That same analysis showed that analternative scenario for the developmentof 750 MW of new electric generationcapacity within Wisconsin from locallyavailable indigenous resources (mostlybiomass), compared to the conventionalfossil fuel scenario, would have increasedthe cost of electricity in the State byabout 1 US cent/kWh. This would bemore than offset, though, by the benefitsto the State economy from the new jobscreated by the new local renewableenergy industries, which would be equi-valent to putting about 2.5 US cents/KWh back into the overall State econo-my. The higher cost for electricity fromthe local renewable energy resourceswould consequently still produce a largenet benefit for the State’s economy.Added up over 30 years of operation,this could yield several billion US dollarsof net disposable income and net grossproduct to the State.

These kinds of regional economic analy-ses provide ample justification for theexpenditure of State funds, supportedby all energy users in the State (througha System Benefits Charge, or SBC – asmall surcharge on each kWh sold) tosupport the higher-cost electricity fromlocally available resources, because itgenerates more net money and newjobs for the State. The same argumentshold for the benefits of the feed-in lawsof Germany, Spain and Denmark, wherethe higher costs for electricity created byrenewable energy resources is spreadover all utility bill payers in the country.

While much of this discussion has centered on the United States and Ger-many, both wealthy industrial states, the same arguments can be made forthe economic efficiency of keeping ener-gy money flowing in the local economy,rather than sent away for imported fuelsor electricity, for all cities, States andcountries. This is of particular meaningfor the developing nations, where thecreation of jobs is critically important.Every opportunity to convert expendi-tures for necessities into meaningfulemployment needs to be exploited.Relying on locally produced energy from local energy resources also con-tributes greatly to economic security and reliability.

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The economic impacts from thedevelopment of new renewableenergy sources, and the localapplication of the technologies,offer important ancillary benefits forsocieties, not the least of which isenhancement of economic diversi-ty and security, the creation ofnew jobs, and greater local andnational economic productivity ofmoney spent for energy. It is alsoclear that energy resource policiesare appropriate to governments, not the utilities, for the utilities arenot in the job-producing business,and governments are.


Policies to Accelerate the Application of Renewable Energy Resources

Overview

All of the foregoing considerations pro-vides sufficient justification for seriousefforts by governments to provide policyand financial incentives for the acceler-ated application of the renewable energyresources, and for serious legislatedgoals for ever-increasing amounts of renewable energy in the primary powerand electricity mixes. A myriad of mech-anisms and policies to accomplish thishave been adopted by different coun-tries, some intended to “push” the appli-cations through laws and binding com-mitments for percentages of renewableenergy in the energy and electricitymixes by certain dates, and some inten-ded to “pull” the technology and appli-cations through funding for R&D andvarious incentives schemes. These inclu-de the following generic policy frame-works and elements:

National multi-year goals for assuredand increasing markets for renewableenergy systems, such as RenewableEnergy Standards (also called Renew-able Portfolio Standards – RPS – in the United States), Renewables Obliga-tion, or the EU Renewables Directive,especially when formulated to supportbalanced development of a diversity of renewable energy technologies;

Specific governmental renewableenergy “quotas” for city and staterenewable energy procurements;

Production incentives, such as “feed-in” laws, production tax credits (PTC),and net metering;

System wide surcharges, or systembenefits charges (SBC), to supportfinancial incentive payments, R&D and public interest programs;

Financing mechanisms, such asbonds, low-interest loans, tax creditsand accelerated depreciation, andgreen power sales;

Credit trading mechanisms, such asRenewable Energy Credits (RECs) orcarbon reduction credits, to enhancethe value of renewable energy, toincrease the market access to thoseenergy sources, and to value the envi-ronmental benefits of renewables;

Removal of procedural, institutionaland economic barriers, and facilitationof the integration of renewable energyresources into grids and societal infra-structure;

Consistent regulatory treatment, uni-form codes and standards, and sim-plified and standardized interconnec-tion agreements;

Economic balancing mechanisms,such as pollution or carbon taxes;

“Leveling the playing field” by redres-sing the continuing inequities in publicsubsidies of energy technologies andR&D, in which the fossil fuels andnuclear power continue to receive thelargest share of support.

Within these generic policies, though,are many sub-options that must becarefully selected to insure the best program for any particular technologyappropriate to country and locale. For example, in the promotion of solarthermal energy in Europe, the followinglisting of potential funding instrumentsand incentive systems has recently been put forth:

Fiscal measures– tax relief, exemption, write off– low-interest credit– energy/CO2 taxes– reduced VAT– exceptional write-offs

Investment support– national– regional– local– energy suppliers– special foundationseco-bonus

for sustainable building– support for bottom-up initiatives

Regulations– exceptions from building regulations– energy and building standards– obligations

Organizational measures– centralized information centers– DIY groups– free/cheap advice– long-term agreements– approved financing plans

Other– project financing– exceptional financing– approved funding policy– information/solar campaigns– demonstrations projects– solar prices

Source: ASTIG 2001, quoted fromMarion Schoenherr in REFOCUS,Mar/Apr 2003, p. 33

There have been varying degrees ofsuccess by the various policies, andmuch has been learned. And althoughsome policies (e.g. the ”electricity feed-inlaws“ of Germany, Denmark and Spain)appear to have been much more effec-tive in leading to significant expansion of renewable energy production thanothers that have been tried and thenrejected (e.g. the “quota” policy of theUK), the European Commission is al-lowing the diversity of mechanisms inmember states to advance renewableenergy to continue through 2005 beforeattempting to implement a Communityframework.

A recent report by the LawrenceBerkeley National Laboratory (Berkeley,California, USA, as reported in REFO-CUS, Jan/Feb. 2003) examined casestudies in the United States of theimpacts and effectiveness of “cleanenergy funds” on utility scale projects.The mechanisms examined included up-front grants (actual support for projects),forgivable loans (to support early expen-ses, and paid back only if the project iscompleted), production incentives (pay-ments per kWh of actual production),

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power-purchase agreements, and re-newable portfolio standards. They con-cluded that long-term power purchaseagreements (at least ten years) for theoutputs of renewable energy systemsare critical, but investor confidence tosupport those agreements comes firstfrom stable long term policies, such asrenewable energy standards, supple-mented, but to a lesser extent, by greenpower markets.

Working capital requirements for therenewable energy industries must alsobe met. An analysis of PV financingrecently concluded that 80 % to 90 % ofthe PV market would need to havefinancial assistance for the end-user. Itwas also reported that end-user creditwith reasonable terms can increase themarket demand for PV by ten times.Similarly, in developing nations theacquisition of PV systems could increasefrom a 2 %-5 % level without financingto possibly 50 % with financing. Not tobe ignored are also the capital require-ments for factories and sales distribu-tion, including inventory and receivables.All of these can be facilitated by govern-mental buy-downs of interest rates,along with tax and investment incentives,to facilitate the infusion of funds into therenewable energy industries.

City policies can lead the way

Countrywide programs with the supportof national governments for the develop-ment of renewables will clearly have thegreatest impacts. But often creative initi-atives can be generated by progressive-minded city governments, leading tomajor advances in public perception ofnew technologies. This seems to be par-ticularly true with regard to PV technolo-gies, since so many of the building-inte-grated grid-connected PV systems canbe applied within cities, and the distribu-ted benefits from those PV applicationscan be especially advantageous for enhancing the reliability and safety of cityservices and infrastructures.

City governments can take responsibilityfor the decisions of their utilities in atleast two ways. Certainlythe simplest is a city-owned utility, or a “mu-nicipal” utility, as it is termed in the UnitedStates. While the munici-pal utility is governed byan elected Board ofDirectors, they are citi-zens of the city, and theworkings of the utility are integrated into thefinancial and administra-tive structures of the city. Utility resourcedecisions that can benefit other city eco-nomic sectors, such as the productionof new jobs, can be made. But citiesthat are served by large, investor-ownedutilities can also take it upon themselvesto finance energy efficiency and renew-able energy applications that providefavorable environmental, economic andreliability benefits to the city.

An intermediate framework that is justnow raising interest in the United States,because of recent enabling legislation, is "Community Aggregation". This per-mits all utility customers in a city, or inmultiple cooperating cities, to writepower purchase agreements as one sin-gle customer. The contract can be with

an energy service provider (ESP), eitherfor lower cost service, or to meet morestringent requirements set by the city for conservation, efficiency and meetingrenewable energy standards greaterthan those imposed on their previousutility service provider. The first of thesewas the "Cape Cod Agreement", inwhich 21 towns on Cape Code, (Massa-chusetts) aggregated and wrote a newand lower-cost contract for electricalenergy.

Rural-electric cooperatives, which caneither represent individual cities or smallregions, are also governed by electedBoards, and are hence answerable tothe people they serve. This gives themsome leverage in promoting the localeconomic welfare when they elect tobuild and own locally-sited renewable

energy resources, orsupport farmer-devel-oped local renewable electricity sources withlong-term power pur-chase contracts.

In the following, threeU.S. (California) examplesare offered, all of whichare large enough to havesome influence on theworld PV market. The

first two are municipal electric utilities,while the third, San Francisco, is a citywhich does not own its own utility, butwhich has nevertheless made a majorfinancial commitment to efficiency andPV applications. All three demonstratethe enthusiasm of city residents to par-ticipate in a city’s energy future, and inthe renewable energy transition, as wellas the power of cities to accelerate thattransition.

The Sacramento Municipal Utility District

Perhaps the world’s most consistent,famous and exemplary city renewableenergy policy has been the PV programsof the Sacramento, California, Municipal

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Cities can be major players in sti-mulating the market and loweringcosts for the renewable energyresources for all countries of theworld. And because they arecities, where people live and work,public confidence and support forthe renewable energy transitioncan be spurred. City programs can be replicated throughout theworld, tailored to local cultures,economies, and renewable re-sources.


Utility District (SMUD). The new renew-able energy programs were initially stimu-lated by the city’s decision to shut downa very expensive and poorly-operating800 MW nuclear powerplant. That shut-down forced the city to purchase 25 %of its power from the market, leading toseveral rate increases. A very progres-sive new SMUD administrator, DavidFreeman, vowed that within three yearsSMUD could make up the power short-fall with energy efficiency, become thenation’s leading solar utility, and recoverthe previous low electricity rates.

That promise was fulfilled. SMUD be-came the world’s leading solar-electric utility during the latter half of the 90s.Today, the electricity rates in the city,without the nuclear plant and with in-creased energy efficiency and the solarand other renewable energy sources,are about the same as they would havebeen if those changes had never beenintroduced. The lessons learned by theSMUD experience have been presentedand praised worldwide.

The SMUD PV program was based onan early vision by the SMUD programofficials of the potential of PV nationwideand worldwide. They could foresee15,000 MW of PV installed in the U.S.,and 70,000 MW installed worldwide, by2020. Simultaneously, they anticipatedthat with such aggressive installationrates PV costs could be driven down toUS$ 3.00/installed watt (realistic AC out-put rating), including operations andmaintenance (O&M) costs, by 2010, and further lowered to US$ 1.50/installed AC watt output by 2020. SMUD officialsthen set SMUD’s own goals for partici-pation in this overall vision: 10 MW of PVwithin the city by 2003, and 25,000 in-stalled city systems (about 50 MW) by2010.

The SMUD District conducted a survey,and discovered that 24 % of their cus-tomers would be willing to pay more forPV-produced electricity, representing acity PV market potential of over 200

MW. More particularly (and realistically),they found that 14 % of their customerswould be willing to pay 15 % more, and8 % would be willing to pay 30 % more,still representing over 35 MW of poten-tial PV customer base.

By the year 2000 SMUD had installed650 systems within the city for about 7 MW of new, distributed PV power,including 550 homes, as well as churches, schools, businesses, and parking lots. Their largest city-ownedsystem was a 500 kW array that alsoprovides shading in their hot climate for cars in the County Fairgrounds parking lot.

As the SMUD District launched their PV Pioneer II program in 1999, anothersurvey showed a market potential of10,000 to 36,000 new customers whowanted to own their own systems, re-presenting an opportunity for between30 MW and 100 MW of additional PV.Under the PV Pioneer II program SMUDbuys down PV system costs of its cus-tomers to US$ 3.00/watt, fully installed,representing about a 50 % contributionfrom SMUD to the customer. On thebasis of long-term (5-year) contractswith their suppliers, the aim was to have the SMUD contribution graduallydiminish, and to have the actual installedcost of the later Pioneer II systems bereduced to a total of US$ 3.00/watt AC.When US$ 3.00/watt costs for PV areplaced on a 30-year home mortgage,this produces PV electricity for thoseSacramento customers at from 9 to 12 US cents/kWh, making it fully eco-nomic for the home owning customersto opt for the PV installations.

SMUD justified their own expenditures inthe start-up of the program by explicitlyquantifying not just the value of the elec-tricity produced by the PV, but also theprimary and secondary voltage supportbenefits of PV introduced into the distri-bution grids, as well as other tangibleand real “distributed utility” benefits fromPV. And SMUD adopted a policy frame-

work of the “Sustained Orderly Develop-ment” of PV systems over the years, aframework in which guaranteed multi-year bulk PV purchases and numbers ofnew installations would contribute to areduction in costs. They held their sup-pliers to this cost-reduction timetable asa condition of signing multi-year con-tracts.

SMUD’s program has not been withoutsetbacks. For example, their primarycontracted supplier failed to meet theSMUD purchase needs, forcing theDistrict to purchase replacement PVmodules at higher costs. And a fewother obstacles appeared that have slowed, but certainly not stopped, theirambitious programs. Nevertheless, well-earned widespread publicity has beenlavished on this program, and worldwideawards bestowed on its creators. It is acourageous effort – one city determinedto affect the development of a worldmarket and world PV prices.

Los Angeles and San Francisco

Stimulated by the Sacramento prece-dent, the Los Angeles, California Depart-ment of Water and Power, the world’slargest municipal utility, now offers up toUS$ 5.50/watt cost buydown incentivefor PV systems in its territory. This isincreased to a US$ 6.00/watt rebate ifthe PV is manufactured in a plant locat-ed within the city limits (because of theeconomic “multiplier” benefit from locallyproduced components). In 2002 2.3 MWp of PV systems were installed.In 2003 Los Angeles reaffirmed its 10year, US$150 million incentive programfor PV. Incentive programs for energyefficiency and “Green Power for a GreenLA” purchasing options complement thisprogram.

In 2001 the voters of San Francisco,California, without a municipal utility anddependent on the regional investor-owned utility for its power, approved a US$ 100 million bond issue to serveas a public loan fund to buy down the

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costs for new energy efficiency projectsand the installation of 50-60 MW of new PV electricity within the City. After beingshown that neighborhoods within thiscity, which is famous for its summerfogs, actually have 85 % of the radiantsolar energy potential of Phoenix,Arizona, and with the endorsement ofbusiness, labor, public health and en-vironmental groups, the San Franciscovoters approved the bond measure by a vote of 73 % in favor.

The San Francisco PV and efficiencybond program combines energy savingswith the new solar energy applications,so there will be no net new cost to SanFrancisco taxpayers. It is expected thatthis will increase reliability of city servicesand safety, displace fossil-fueled genera-tion that would otherwise have to beconstructed to meet growth within thishighly-developed and beautiful city, andcreate new businesses and jobs for thecity. Already the cities of San Diego,Denver and New York have contactedSan Francisco to understand how theymight accomplish the same objectives in their cities.

Procedural requirements will delay theissuance of those bonds for a year ormore. But instead of waiting, the cityproceeded to fund and construct its first major project on its own, combiningan energy efficiency conversion with a650 kW rooftop PV array on the City’sMoscone Convention Center. This willlower the city’s energy bill for their con-vention center by US$ 200,000 per year.Many more projects are to follow.

This is to be followed by the installationof 100 more rooftop PV systems, inorder to develop the infrastructure andsimplify the city's procedures in prepara-tion for a massive intrusion of PV oncethe bonds have been issued. These projects are all being developed in a“revenue neutral” way, which will allowthe city to recover its costs for theseprojects.

National policies to promote newrenewable energy development

Renewable electricity standards

The policy of setting renewable electricitystandards (often in the literature called-Renewable Portfolio Standards, or RPS)is now expected to be the primary policythat drives the development of renewableenergy in the United States, and the con-cept is emerging as fundamental to theassured development of renewable ener-gy worldwide. Every country that setsfirm goals for an incrementally increasingpercentage of renewable energy thatmust be introduced into the country’senergy mix by certain dates, with inter-mediate goals for intermediate dates, has in effect set “A Renewable EnergyPortfolio Standard” (or a RenewableEnergy Obligation, as it is called in the UK). Thisis now true for the entireEuropean Union and all of its member states.

Because there are no firm federal targets for renewable energy de-velopment in the UnitedStates, 13 states (as of August, 2003) haveadopted some form of a renewable electricitystandard. State-by-state renewable energyprograms are extremely important togenerate momentum and confidence inthe new renewable energy industries. Butindividual state programs become poorsubstitutes for a nationwide policy if anentire country is to make meaningful pro-gress toward the renewable energy tran-sition.

Adopting firm goals for incremental year-by-year renewable energy developmentprovides the framework for confidentmulti-year investments in new busines-ses, stimulating the economy while alsoassuring that the goals will be met. Butthe renewable electricity standard is also

a simple policy to implement, one whichuses market forces within the spectrumof renewable energy resources to meetthe scheduled applications goals at thelowest renewables market cost. Onlythose renewable technologies that aremarket ready and proven can compete.

Developing a balanced renewable energy portfolio

Merely setting goals, or adopting multi-year standards, however, does notassure anything. Government-sponsoredimplementation programs and furtherincentives are absolutely necessary toback-up those goals. Germany’s feed-in laws, for example (see the next sec-tion of this White Paper), are aimed atachieving specific long-range goals forthe addition of renewable energy to the

country’s energy mix.The funding mechanismof the feed-in law ap-pears to be providingsufficient incentive forthe market to respondwith enough new re-newables to meet theGerman goals. ButGerman governmentspending programs andloans form the basis for this.

One of the strengths ofthe renewable energy

standard can also be one of its potentialweaknesses. The very free marketmethod the adopted standard inurescan preclude development of any butthe least cost renewable energy options.At current prices, wind is the big winner,while solar, geothermal and bioenergycannot compete equally.

Yet, ultimately, the final, great, worldenergy transition will require utility-scaleapplications of all renewable energy tech-nologies, to promote large-volume pro-duction and large-scale applications thatcan drive prices down, and to enhancesystem reliability through resource diver-

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An adopted renewable electricitystandard gives great flexibility toelectricity providers. They can electthe least expensive means to meetthe standard’s time and percen-tage requirements by generatingthe renewable electricity them-selves, or by purchasing it fromsomeone else, or through buyingcredits from other providers. Theresult is the greatest amount ofnew renewable energy generationat the least cost, and a continuingincentive by renewable energy providers to drive the costs downstill further.


sity. A multi-year renewable electricitystandard works in the best long-terminterests of any country, therefore, whenit is included within a package of policyinstruments intended to support thedevelopment of a balanced portfolio ofrenewable energy technologies tailoredto the state of development of each ofthose technologies.

The renewable energy standard can be“fixed” to accommodate a diversity of re-newable energy resources. For example,the standard can be divided into “tiers”,such as introduced in both the States ofArizona and Nevada when they specifiedthat a certain percentage of the renew-able electricity resources developed tosatisfy the state RPS standards must be from the solar energy technologies.This complicates the application of thestandard somewhat, but has been shownto be quite feasible.

The standard itself can be somewhat“self-fixing” if a large enough standard is adopted. Analytical appraisals by theUnion of Concerned Scientists demon-strated that, with a standard of 10 % or less, a modest amount of geothermalenergy and landfill gas will still be able to compete. But if the standard is ashigh as 20 % by 2020, a considerableamount of new biomass also becomescompetitive, and near the end of theforecast period so do the solar techno-logies. It is important, though, to pro-mote the parallel development of the fullspectrum of renewable energy resourcesearly on, rather than waiting for marketdynamics to open the competitive door,for governments and utilities will want toknow that the technologies are matureand reliable, and markets and electricitycustomers will be rewarded if priceshave already been brought down byvigorous incentive programs.

A “package” of policies can include directfinancial incentives for those technologiesthat cannot yet compete to fulfill thestandard’s obligations. For example, inthe United States, major rebates for in-

stalled photovoltaic systems are offeredby many states and municipal utilities,even in those states that have adoptedaggressive renewable portfolio standards.In California, the state with the largestrenewable electricity standard in the U.S.(20 % renewable electricity by 2017), arebate of US$ 4.00/ watt is provided in2003 for PV systems ofup to 30 kWp in size.(The incentive amountwill gradually be reducedfor new systems installedin subsequent years, totrack expected reduc-tions in PV system costs.)Larger commercial-sizedPV systems received asignificant multi-yearfinancial boost when theCalifornia Public UtilitiesCommission authorizedUS$ 125 million per yearfor five years (2004-2009)to support incentives of US$ 4.50 per Wp forsystems over 30 kWp

in size. And commercialestablishments inCalifornia can also add federal solar andinvestment tax credits to the utility cre-dit, allowing them to install PV systemsthat will deliver electricity for around 9 US cents/kWh, a fully competitiveprice, and one that won't increase overthe years.

Similarly, Japan's “70,000 (PV) Roofs”program, reliably announced and fundedfrom 1994 to the present (and extendedto 2006) led to 424 MWp of installedsystems (117,500 roofs) by the end of2002, dropping the cost to the consu-mer by 41 % from 1995 to a 2002 priceof US$ 6.50/Wp. As the price dropped,so did the government subsidy, from 50 % in 1994 to 15 % in 2002, but thepopularity of the program continued togrow.

The PV electricity cost is still higher thanelectricity delivered wholesale into gridsby wind systems, but the PV output cost

is the customer cost, since building-integrated PV systems do not requireexpenditures for transmission and distri-bution. The result is that, within a pack-age of governmental incentives, PV elec-tricity can indeed compete with lower-cost but remote resources developedunder a national set of renewable elec-

tricity standards. InCalifornia, as well as inGermany and otherEuropean countries, thishas led to major newcommercial rooftop andparking lot PV systems.

A market-indicatorshowing the benefit ofthe California stategovernment PV incen-tives is that the providerof half of the commercialPV rooftop systems inthe United States, inclu-ding most of those inCalifornia, has seen theiraverage size for newinstalled PV systemsgrow from 94 kWp in

2000 to 260 kWp in 2002, and to nearly350 kWp in 2003, with several installa-tions of 1 MWp each.

Geothermal and biomass-derived energy are also more expensive than windsystems today. But both can be used in combined heat and power applica-tions (CHP), with potential end-use effi-ciencies for the conversion of energy touseful work of up to 80 %. Twice theusable energy outputs, even at twice thecost of other competing heat-only orelectricity-only energy resources, can stillbe cost-effective. And both geothermalenergy and bioenergy can provide stablesupply “backbones” with very highcapacity values to enhance the usefulcost effectiveness of the intermittentrenewable energy resources, therebyfurther increasing the value of therenewable energy network.

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The conclusion reached here, andagain and again in this WhitePaper, is that governments needto develop energy efficiency andrenewable energy policies that areappropriate to the specific coun-tries, and that maximize the overalleconomic “value” of balanced anddiverse policy portfolios. The lar-gest segment of a renewable elec-tricity standard might well be deli-vered by the most competitive orleast costly form of renewableelectricity production, but supple-mentary incentive programs adddiversity to pure market responses,increase the development of newindustries and the creation of newjobs, and provide greater assur-ance of reliability in a future, inte-grated energy network.



In similar fashion, solar thermal-electricenergy generation is today also moreexpensive than the conventional formsof electric energy production. But theoften near-coincidence of the electricaloutput from solar plants with the expen-sive peaking power periods of local and regional grids can greatly enhancethe value of the produced electricity. InCalifornia, for example, homes and busi-nesses with time-of-use meters payabout 30 US cents/kWh during the12:00 - 6:00 PM peak demand times, a period almost completely spanned by the available solar energy resource. All of the renewable electric generationoptions can beat this price! And evengreater economic benefit and reliabilitycan be produced with hybrid solar/gas-fired power plants, assuring that thepeak demand schedules will always bemet, while (as revealed by the Californiasolar-thermal electric experience) up to75 % of the energy can be met by solarenergy.

One especially successful policyinstrument: “feed-in” tariffs

It is illustrative to examine one quite successful policy application in somedetail – the "feed-in" laws (a fixedgovernmental incentive payment foreach kWh produced). The Danish feed-in incentive was the driver for thewidespread adoption ofwind energy in Denmark.Other countries followedsuit.

Germany first instituted“feed-in” financial in-centives in 1990, whichwere subsequently im-proved in the RenewableEnergy Law (EEG) thatwent into effect on April1, 2000. Under the EEG,solar generated electricity in Germany is subsidized by a payment of up to45.7 Euro cents/kWh, to a maximumprogram total of 1,000 MWp. The tariffcontinues to be paid for 20 years, butthe payment for new systems diminishesby 5 % per year on the assumption that costs will decline over time. In Spainthe tariff for PV power production is 40 Euro cents/ kWh for systems smallerthan 5 kW, and 20 Euro cents/kWh forsystems up to 25 MW in size. Francebegan in 2002 to offer 15 Euro cents/kWh for electricity produced by PV.

Similar (but, of course, lower) “feed-in”incentives are offered in Germany forwind energy, as well as for other renew-able energy resources. The difference infeed-in incentives is designed to balancethe differing financial needs of the variousrenewable energy resources accordingto their state of market emergence, sothat a true “portfolio” of renewable ener-gy resources is developed. This is anexcellent policy that is especially impor-tant for the solar energy resources, asthey presently produce more expensivepower than wind energy.

The EEG in Germany remains flexible,subject to change as experience dictates.For example, in order to redress the ad-vantages of wind systems placed in thewindiest regions with the relative disad-vantages of those placed in regions oflower wind velocities, the German feed-inincentive for wind production is nowdependent on the strength of the wind

resource at the site of the turbine.

It appears to be no acci-dent that the adoption ofthe “feed-in” law policy inGermany, Denmark andSpain has placed thosethree countries in posi-tions of preeminence inwind and solar energyapplications. But the very success of such

laws can also lead to unacceptable burdens on government finances. The Germans therefore finance the direct production incentives, as well asaccumulate the resources for low-interestloans for renewable energy producingfacilities, from surcharges placed on thesale of electricity to all customers (this is called a Systems Benefits Charge, or SBC, in the United States). Spreadaround this way, the surcharge is a verysmall percentage of the monthly utilitybills. This demonstrates the synergy ofhaving multiple policies, including bothguaranteed payments to renewable ener-gy producers and the passing of thefinancial responsibility onto all energyusers of the country through a small surcharge.

This does not imply that simply adoptingfeed-in laws will guarantee a rapid esca-lation of renewable energy applications.Portugal, Greece and Italy, for example,also adopted feed-in laws, but did notsupport them sufficiently with otherimplementing legislation, such as simpli-fying planning permits, providing low-cost loans, or guaranteeing grid access.As a result, they have not been effective.

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No single renewable energy sup-port or incentive policy will be ableto stand alone in assuring the de-sired acceleration of renewableenergy development. It will alwaysbe necessary for governments toformulate a package of policiesthat provide a combination ofgoals, incentives, removal of bar-riers, and further enabling actions,to advance the development of the renewable energy resources.


The developing nations

Although the importance of the renew-able energy transition to developingnations was acknowledged at the begin-ning of this White Paper, it has focusedheavily on policies appropriate to thedeveloped nations. The leadership in thedevelopment of the renewable energytechnologies and in the large-scaleapplications that will bring prices downfor all nations must necessarily fall onthe developed nations. The urgency istherefore for those nations to commit to the renewable energy transition assoon as possible. On the other hand,the developing nations have the oppor-tunity to move directly into the renew-able energy transition, skipping many of the large-scale centralized powersystems that are now becoming obso-lete and dangerously unreliable in thedeveloped countries, and maximizingtheir energy expenditures for the benefitof the creation of new jobs and localindustries.

In this paper it was noted, for example,that China is supporting the develop-ment of millions of solar water heaters,stimulated by the lack of natural gasinfrastructure and the high cost of elec-tricity. The San Francisco-based EnergyFoundation has a Bejing Office and isproviding technical and policy expertiseto the Chinese Government toward theintroduction of energy efficiency and therenewable electric energy sources intoChina’s utilities. There are highly quali-fied engineers and scientists in China, a huge pool of potential labor, and veryserious air-pollution and resulting publichealth problems caused by fossil fueluse, all of which provide the necessaryunderpinnings for serious Chinese gov-ernment policy developments in theapplication of the renewable energyresources.

China is instituting its first large-scalerenewable energy application with a US$ 340 million electrification programto bring PV electricity to the 30 million

inhabitants still without electrical power,and putting it all on a fast track. The first20 MWp of PV, along with small hydroand PV-diesel and PV-wind hybrids, areto produce village power systems in1061 villages and to be completed inonly 20 months, by the end of 2004.This is to be extended to another20,000 villages during the 2005 - 2010 period. This will make China a majorplayer in the world PV market, with aprogram sponsored solely by theChinese government, butrelying for technical andtraining assistance on anumber of internationalinstitutions, including the U.S. Department ofEnergy.

India launched a seriouswind-electric program inthe 1990s, and is nowone of the world leadersin the application of that technology.Even though India imports critical com-ponents of their wind systems, they arecapable of manufacturing up to 70 % ofthe components in India and, of course,installing and maintaining the systemswith local labor. India has also intro-duced a few thousand solar-electricwater pumps.

Although India has sought to bring cen-trally-produced electricity to all of itscommunities and, especially, to its far-mers, the electric distribution networksare generally inefficient, unreliable andhave huge losses (including major powertheft). As with China, India has qualifiedscientists and engineers, a huge pool ofpotential labor, poor air quality and dirtysources of coal, again setting the stagefor an aggressive turn away from theunproductive centralized systems andtoward the new renewable and distri-buted systems. India is just now consi-dering adopting renewable energy devel-opment as a major new and permanentenergy “core” policy.

The most urgent needs in Africa areaccess to clean water and detoxificationof dirty water to promote public health,and at least a little light in each dwelling,office and school to enhance living quali-ty and productivity and to aid in advan-cing education. The PV technologies,which are admirably suited to meetthese needs and to mitigate the pro-blems of the poor centralized energysystems, are now being applied by thethousands, but they are still only a tiny

fraction of Africa’s garg-antuan need. Africa’scountries are mostlystruggling to meet morebasic needs, and relyingon outside countries andagencies to bring rene-wable energy applica-tions to them

Applications of renewa-ble energy resources in

the developing nations can help to meetthe most basic of human needs andenhance the quality of life for billions ofpeople. From the sheer numbers ofpotential applications, millions of smallrenewable energy systems in developingnations can contribute in major ways tothe lowering of costs and the expansionof the renewable energy transitionaround the world. But, with the possibleexception of China and, perhaps soon,also of India, firm long-range nationalstandards and governmental policies inthe developing nations are generally notyet evident in forms helpful for discus-sion in this White Paper. Their lack offinancial resources and need for techni-cal and economic assistance from out-side often outweighs all else.

It is those governments that can affordthese first important steps that are theprimary audience of this White Paper,explaining the emphasis on policiesappropriate to the developed nations.

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The benefits of the renewableenergy transition will accrue to allnations of the world. But it is thegovernments that can afford totake the first steps that must doso. Governments that can affordaid to the developing nations in theform of renewable energy techno-logies must provide it. The renew-able energy transition must takeplace everywhere.



Market-based Incentives

Overview

One of the strengths of the renewableelectricity standard is that it is market-based, but it depends first on govern-ments adopting and implementing thelong-term goals, and regulating andenforcing compliance. Investors see it as a beacon of confidence. But otherssee it as bad policy, requiring what they think is heavy-handed governmentintervention in what they feel should bea fully free energy market. Various alternative “market-based” incentiveschemes have been introduced for thepromotion of renewable energy, partly tosatisfy a political philos-ophy by some legislatorswho would prefer to seemarket mechanisms determine winners andlosers than to rely on government coercion orincentives. These includeQuotas, the “CertificatesTrading Model (CTM)”,“green power” sales, andthe international tradingof “green certificates”.These have been operating with varyingdegrees of success (and also failure) inseveral European countries.

The idea of certificate trading is thatsupport for the renewable energy tech-nologies will come from having two markets, one for the power producedand the second for the value of the cer-tificates generated and traded. Thatvalue can either be set by the free mar-ket, or, better, supported by govern-mental policies in which firm targets forcarbon emission reduction or renewableenergy development have been imple-mented with explicit requirements andpenalties for non-compliance. These targets can be met either by acquiringrenewable energy directly, or by develop-ing new on-site renewable energy gen-eration, or by the acquisition of equiva-lent generation through the purchase ofgreen certificates, e.g. one RenewableEnergy Credit (REC) for each MWh of

renewable energy generated by the sell-er of the certificates. This enhances thevalue of the green energy for the pro-ducer, potentially making it more profit-able to produce and sell the energy andattracting investors at an earlier stage in the renewable energy market develop-ment. And it greatly enhances the po-tential for the successful fulfillment ofnational RPS goals.

The difficulty with these schemes hasbeen in the loss of certainty for invest-ors, since they cannot predict marketdemand or price for certificates, so the renewable energy generators can

no longer reliably pre-dict revenue. When theDanish governmentrecently switched fromthe fixed feed-in tariffs tothe CTM, their renewableenergy industries camevirtually to a halt. AndBritain’s introduction ofthe “Renewable Obliga-tion Certificate” (ROC) aspart of the April 2002,UK “Renewables Obliga-

tion Order”, has not, in its first year,been very successful. This is due in partfrom a disparity between too many sell-ers and too few buyers, but there areother structural issues emerging as well.Monies that might have gone into theconstruction of new wind systems, forexample, have instead been buried inROC financial transactions. And differentmarket rules in different countries cancloud the operation of an internationalcertificate trading market.

Emissions credit trading is another po-tentially important market-based policyoption, to ”internalize” societal costs of emission impacts. Europe will soonbegin carbon emissions trading. Somost probably will Canada. And, as withrenewable energy policy, several U.S.states are developing their own carbonemissions credit-trading program, in theabsence of a national U.S. commitmentto targeted greenhouse gas reductions.

A similar emissions credit trading systemis well established in the United Statesfor various environmental pollutants(SO2, NOx, and VOCs). But emissionstrading is just one option, and cannot beimplemented simultaneously with renew-able energy credit (REC) trading, orgreen power sales, to avoid “doublecounting” of renewables benefits.

Emissions and credit trading policies do not on their own carry the economicpower to accelerate and maintain renew-able energy markets. Successes, suchas in Texas (USA), where wind energyhas been installed at a rate well in ex-cess of intermediate goals toward a2010 RPS, have resulted from the suc-cessful combination of certificate trading(RECs) within a policy framed by a signi-ficant RPS, and aided by the U.S.Production Tax Credit (PTC – equivalentin concept to the European feed-inincentives).

The REC portion of the Texas policycovers about 10% of the cost of thewind power generation, but that fairlysmall increment can often be an impor-tant contribution toward paying the marginal extra costs of green powerproduction. That also depends on thevalue of the RECs. In cases, such as theUK, the “ROC” (Renewable ObligationCertificates) has been introduced in sucha way as to yield prices of up to US$100 per MWh. So the rules by which theRECs (or ROCs) are introduced have aprofound affect on their ultimate marketvalue.

“Green” power surcharges and certifi-cate sales can also be very effective intapping into the interest of those mem-bers of the public seeking to participatedirectly in affecting better energy poli-cies, and hence raising at least somefunds for renewable energy from outsidethe normal governmental revenue stream.The potential total financial resources tobe gained by this approach are limitedto that segment of customers who arewilling to pay more, for social returns

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Credit-trading mechanisms andexploitation of the green marketshould supplement, and be imple-mented in combination with, themore powerful policy instruments,such as renewable electricity stan-dards and feed-in laws. In this cir-cumstance the trading of renew-able energy credits and the finan-cial bonus of the green marketscould play a major role in develop-ing and supporting renewableenergy markets.


(estimated, for example, to be a maxi-mum of 8 % of utility customers in theUnited States). And high marketingcosts for green power products can eatup much of the green premium before itcan be invested in new or existing re-newable energy production. The result isthat economies of scale probably cannotbe reached with funds raised from greenpower surcharges alone, so that thiswould remain a relatively expensive wayto raise support for renewable energy.

The Netherlands green power program,however, offers an example of the kindof framework in which green power mar-keting can be raised to a level of signifi-cance. In that country, 1.3 million custo-mers, or 20 % of the population, had, by the end of 2003, signed up for greenpower, exceeding the capacity ofNetherlands producers to deliver, andhence requiring out-of-country purcha-ses of green power to meet this newmarket. This success has been drivenby the implementation by the Dutchgovernment of a countrywide andalmost income-neutral “ecotax”, increas-ing the cost of conventional power by 6 eurocents/kWh, and hence allowingsome green power to be offered at adiscount. The World Wildlife Fund hasaided the Netherlands in supporting amajor media campaign to stimulatecustomers to accept these attractivegreen power contracts.

It is clear, in parallel with the conditionsnecessary to make RECs into importantfinancial policy instruments, that withadditional supporting governmental policy and public education the power of a green market can be substantiallyenhanced. Again, it is the combinationof policies and financial instruments thatproduce effective results.

Requirements for introducing fairmarket incentives for renewableenergy

Redressing inequities in market subsidies for the energy sources

The biggest problem of any “marketbased” program is that the present markets for the conventional energyresources are highly distorted by continuing governmental subsidies.“Subsidies” of any kind for an energytechnology must be created and imple-mented fairly. Unfortunately, policymakers only look at (andoften complain about)new proposed subsidiesfor new renewable ener-gy resources, forgettingthat the conventionalenergy resources havereceived, and are contin-uing to receive, massivesubsidies that have produced fully artificialprices for fossil fuels and nuclear poweralike. This makes it impossible for therenewable energy resources to competeon the open market, as many policymakers would like to think, since there isno such thing at present as a fair marketfor the conventional energy resources.

For example, a report by the RenewableEnergy Policy Project (REPP) estimatedthat out of US$ 150 billion spent by theU.S. government on energy subsidiesfrom 1947 to 1999, nuclear power re-ceived 96.3 %. Nuclear energy and windenergy in the United States each pro-duced about the same amount of energyin the first 15 years of the application ofthose technologies, but during thatstage in their development the subsidieswere US$ 39.4 billion for nuclear andUS$ 900 million for wind, a difference of a factor of 40. More telling, the first15-years of subsidy amounted to US$15.30/kWh produced by nuclear power,US$ 7.19/kWh produced by solar ener-gy technologies, and 46 US cents/kWhproduced by wind power. Expanding

these averages to the first 25 years ofcommercialization of each of these tech-nologies reveals even longer-term subsi-dies for nuclear power of 66 US cents/kWh, for solar energy of 51 US cents/kWh, and for wind energy of 4 UScents/kWh.

This inequity was not redressed by 1999,even though support for renewableenergy had grown to the US$ 1 billion/year level by then (with 75 % of that intax subsidies for Ethanol fuels). Fossilfuels received US$ 2.2 billion in subsi-dies in that same year. Nuclear energy in

the U.S. was in its 52nd

year in 1999, and it stillreceived US$ 640 millionin direct subsidies.

Recent consideration bythe U.S. Congress ofguaranteed loans for theconstruction of six toeight new nuclear powerplants would represent

a public exposure of potentially US$ 13billion in liability against potential defaultby the plant owners. And extension ofthe Price Anderson Act, which limits theliability of insurance carriers in the UnitedStates to US$ 9 billion in the event of a nuclear accident, exposes the U.S.public to up to US$ 300 billion in un-recoverable costs in the event of a major nuclear power accident, such as happened in Chernobyl, or almosthappened at Three Mile Island in theU.S.

No accident could conceivably happenat a renewable energy power plant thatwould expose the public to economicliability of these massive proportions.And the impact of shielding the publicfrom these very great financial risks, and using public funds to support that“shield”, gives completely false marketsignals.

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A consistent imbalance of subsi-dies creates a false message inthe marketplace about the viabilityof renewable energy resources.Equalizing subsidies to all energysources must include recognitionof risks and price volatility factors,and should also include an explicitaccounting of social and environ-mental costs and benefits.



Developing a consistent method for estimating energy costs

Another difficulty in market-based schemes for the promotion of renewableenergy is the highly distorted method of estimating “levelized” prices for theconventional energy resources, againstwhich the “competitiveness” of the re-newable energy resources is determined.It is well known, for example, that thefailure to estimate the environmentalcosts of energy production, and to inter-nalize those in some way to be reflectedin the cost of conventional energy pro-duction, leaves the consumers payingfor energy resources simultaneously outof different pockets – direct purchases,indirect taxes and health costs. If thesesocial costs could be made explicit, orexplicitly tied to the decision to buyenergy produced by a particular re-source, the disparity between the costsof the conventional energy resourcesand the non-polluting renewable energyresources would be greatly reduced, if not, in many cases, completely elimi-nated.

Good arguments can be made that if inthe U.S., for example, the costs of mili-tary measures taken to protect accessto foreign sources of oil were factoredinto the direct cost of oil, the price at the gas pump would probably double,bringing the cost of American oil andgas up to the levels now experienced inEurope, and perhaps causing Americansto rethink the benefits of fuel efficientvehicles.

The failure of market analyses to proper-ly evaluate costs and prices for conven-tional energy resources goes even deep-er, though, into the very mathematicalframeworks of the analyses. For exam-ple, the pioneeringworks of Dr. ShimonAwerbuch show convin-cingly that energy secu-rity will be more greatlyaffected by fuel pricevolatility then by fuelsupply disruptions. Hisanalyses further demon-strate that the volatilityof conventional fuel pri-ces adds a “risk” ele-ment to an estimation of discount rates thatdramatically raises thenet present value of thecosts of conventionalfuels, while at the same time loweringthe net present value of the costs of therenewable energy sources. Related analyses by the Lawrence BerkeleyLaboratory (U.S.) quantify this “gas fuelprice hedge” from gas price volatility as adding 0.3 to 0.6 US cents/kWh forgas, or reducing the cost for the fuel-free resources by the same amount.Awerbuch concludes that the cost

models used by energy planners hearkenback to the Model T days, and havebeen discarded in other industries. Yetthey continue to be used for projectionsof relative costs of energy.

The conclusion from risk-based economic analy-ses is that biomass,hydroelectric energy,wind, and geothermal, allshow lower net presentvalue costs today than all of the conventionalfuels, including boiler-burned and IGCC coal,turbine-burned and com-bined cycle gas, andnuclear energy. Solarthermal and PV also haverisk-adjusted costs thatare shown to be lower

than conventional estimates, but are still higher than the other renewable energyresources.

Furthermore, the entire concept of “levelizing” energy costs over a longperiod totally ignores the impact thatrising energy costs will have on futuredecision makers. Whereas the cost ofgas “levelized” over 30 years may

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Proper social accounting of costsand benefits of energy sources,econometric analyses that followthe relative economic efficiency ofexpenditures for energy in terms oflarger societal benefits (e.g. newindustries and jobs produced), and correctly applied risk-adjusted andvolatile-price economic theory,paint a dramatically different pic-ture from conventional economicanalyses, one in which the renew-able energy sources are quite evi-dently the safest, securest, and probably even today the cheapest,alternative

Fig. 17: Risk-Adjusted Cost of Electricity Estimates Based on Historic Fuel Price Risk.Source: Dr Shimon Awerbuch, RENEWABLE ENERGY WORLD, Mar-April, 2003, p. 58, with PV data addedfrom other Awerbuch work.

CoalBoiler

CoalIGCC

GasCC

GasGT

Nuclear Bio Hydroconv

Wind Solar Geo PV PVMax Insol.

0

0,02

0,04

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0,16 US$ Levelized Market-Based Electricity Cost and Price Estimates – Historic Fuel Price Risk

Traditional Price Cost


appear to be lower today than the costof geothermal energy, or biomass ener-gy, when the costs for gas begin toescalate (from the squeezing of domes-tic and world gas markets) while thecosts for geothermal and biomass ener-gy continue to be reduced, there will bea time when all of those costs crossover, leaving gas as clearly the moreexpensive immediate resource. Futuregovernments and decision makers will be dismayed to then find that they aretrapped into 20-year purchase agree-ments based upon the unreal “levelizing”of what is really a dynamically changingmarket. The renewable energy sourceswill look ever more favorable in futuremarkets and to future governmentaldecision makers, while the conventionalenergy resources will become more andmore costly.

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2000 2005 2010 2015 2020 2025 2030

PV

Gas CC

0

0,04

0,08

0,12

0,16

0,20 US $ Projected Annual Generating Costs

Fig. 18 a, b: Levelized costs mask important inter-temporal information. Customers after 2015 may bedispleased with the year 2000 choice of gas CC. Source: Dr. Shimon Awerbuch

2000 2005 2010 2015 2020 2025 2030

PV

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The Role of R&D in Supporting the Renewable Energy Transition

Countries with the most advanced R&Dprograms will become the technologyleaders. In the case of renewable energythe technologies are still improving anddeveloping while, at the same time, fullymarket-ready applications of the techno-logies are also being continuously im-proved from experience gained in com-mercial applications inthe field. Continued R&Din solar energy has a veryimportant role to play foryears to come.

For example, in the areaof PV it has been notedthat much fundamentalR&D remains to be donethat goes beyond just cell research to includebalance of systems com-ponents and integratedsystems. Fundamental physics remainsto be done to increase efficiency andreliability of PV cells or films, but equallyimportant are continual improvements inthe integration of PV into building com-ponents and systems and into distribu-ted energy supplies. Significant new breakthroughs and new directions arestill possible.

There is much R&D still to be done withthe solar thermal electric technologies aswell, in order to increase efficiencies andreduce costs of mirrors, heliostats, col-lectors and electric energy generators,and to develop and refine thermal ener-gy storage systems that can give up tothe critical 12 hours of thermal storagethat will greatly enhancing the econo-mics of solar thermal electric systems.But equally important is research toreduce the cost and increase the reli-ability of solar water heating compo-nents.

Biomass gasification holds much pro-mise for future clean energy production,but needs considerable further develop-ment. More work also needs to be doneto improve the ability to co-fire biomasswith coal. And, of course, much agri-cultural R&D remains to be done todevelop and optimize energy crops for

bioenergy production.

Building science hasemerged as an impor-tant scientific and en-gineering discipline.Tools for “whole buil-ding” design, to facilitatesystems integrations ofcompatible energy andarchitectural compo-nents, are being devel-oped and refined andmade ever more “user

friendly”, in order to be useful in theactual design process. The result istoday that major energy savings can be realized with relatively minor overallcost impacts. In some cases energy effi-ciency and renewable energy collectionin large buildings can be accomplishedwithin the same budget for a “standard”building without those features.

These design tools need to be furtherdeveloped and validated against measur-ed building performance. The monitor-ing of buildings must also be continuedand expanded to develop a data basefrom actual experience. And research onnew building technologies, such as lightsand glazings, is already producing hugegains in efficiency and performance.

The largest single investment of theEuropean Union’s five-year Frameworkshas been energy research, spurred bythe world oil shock of 1973. Energy re-search was first seen “as a matter ofsurvival” for the EU. By the late 1990’sthe proportion of EU funding for R&D in renewables had grown to 14 %, and12 % for R&D in efficiency.

The European research focus today ischanging. Energy security remains a pri-mary driver for EU R&D in renewables,but environmental protection and econo-mic competitiveness are now the impor-tant drivers. The focus of EU R&D fund-ing has been to “help European firms tocapture a major portion of the growingworldwide market for renewable energytechnologies”.

As such, the EU R&D budget for renew-ables has become more oriented towardapplied R&D, rather than to basic re-search. In this context it is highly signifi-cant that the European Commission hasagreed to invest US$ 2 billion in sustain-able energy research for the next five-year period, an amount that is 20 timesthe expenditure for the 1997-2001 five-year period. Japan combines support for R&D with the “promotion” of PV, withbudgets of US$ 302.4 million in 2002,and US$ 218.6 million in 2003.

The G8 Renewable Energy Task Force,in its July, 2001 Final Report, urged that “The G8 countries should continueand expand support for R&D of renew-able energy technologies that address all sectors of the energy economy – buildings, industry, transport, and utilityenergy services.” They also urged co-operation on R&D with developing coun-tries to help with technology transfer tailored to developing country use.

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An important component of anynational renewable energy policyshould be support for both funda-mental and applied R&D, alongwith cooperation with othernations in R&D activities to enhan-ce the global efficiency of suchresearch. R&D can lead to newindustries, and R&D breakthroughscan produce new competitiveadvantages for nations, while con-tributing to the advancement ofthe fields for the benefit of allcountries.


Two Comprehensive National Energy Policy Models

It is instructive to present two compre-hensive national energy policy models,to demonstrate the integration of poli-cies in a way that can produce majoreconomic and environmental benefitssimultaneously, while also leading coun-tries into the renewable energy transition.The United States is presently being led by State policies, so the followingproposed national model is presentlyhypothetical, yet realistic, holding greatpromise for future U.S. federal govern-ments more enlightened than the pre-sent one. The German model, on theother hand, is an actual national frame-work for German energy policy, takingGermany deep into the renewable ener-gy transition.

The United States: Leadership from the States, and a clean energyblueprint for an alternative future

Present (2003) status of renewableenergy policies in the U.S.

The United States (2003) has no signi-ficant national energy efficiency and re-newable energy policy. Even though itwas acknowledged in the 2001 NationalEnergy Plan that, without the efficienciesintroduced in the U.S. following the oilcrisis of 1973, the U.S. would be using30 % to 50 % more energy today than itdoes, the U.S. has no stable, long-termpolicies to continue to reap these bene-fits in the future. This is particularly truewith regard to renewable energy, for theAdministration’s prediction in the 2001National Energy Plan that renewableenergy use would grow from 2 % todayto about 2.8 % in 2020 is hardly what isneeded to energize investor confidence.

That is not to say that there is no federalsupport for renewable energy applica-tions. The production tax credit of 1.8US cents/kWh for energy produced bywind turbines and dedicated biomassplants, for example, has played a veryimportant role in the renewed develop-ment of the U.S. wind-electric industry.But even this support has been on-againand off-again, voted in or out on a year-by-year basis, without the policy assur-ance needed to attract new businessdevelopment and investments.

Fortunately, a number of the state gov-ernments have decided not to wait for alagging federal government, and havemoved decisively to take responsibility forthe energy security and economic futuresof their states. Those state governmentshave enacted legislation to promote theaccelerated application of renewableenergy. Enough state programs havebeen developed to confirm the feasibilityof aggressive national renewable energygoals, and to begin to suggest a de factonational policy emerging from outside ofthe federal government.

By mid-2003, thirteen states had imple-mented minimum renewable energystandards (RPS) which will produce over14,230 MW of new renewable power by2017 – a 105 % increase over 1997levels. Eight of those states enacted theRPS legislation as part of restructuringtheir electric utilities. Wisconsin, a statethat did not restructure their utilities,enacted the RPS in support of “electricreliability”, explicitly incorporating one ofthe most important future benefits ofrenewable energy into early governmen-tal energy policy.

California will be the numerical leader in U.S. development of new renewableenergy resources, requiring the State’sinvestor-owned electric utilities and ener-gy providers to increase their renewableenergy usage by not less than 1 % peryear to a target of 20 % by 2017. Theadditional 21,000 gigawatt hours peryear from renewable energy generationby 2017 amounts to a doubling ofCalifornia’s renewable energy usage,which will make serious inroads intoCalifornia’s dependence on natural gasfor electricity production.

The California Energy Commission re-leased an analysis in 2003 confirmingthat there would be sufficient renewableelectricity generation in the State toreach that target, with possibly 25,000gigawatt hours per year to come fromprojects already under development in2003. That report also confirmed thatabundant additional renewable energyresource capacity would still be availablefor development beyond the 2017 tar-get. This report, in turn, confirmed thefindings of the California Public UtilitiesCommission that transmission line plan-ning for California’s future will also needto be targeted to support the State’smajor renewable energy developmentareas.

Nevada has the second highest new U.S. statewide percentage goal, requiring15 % of their electricity to come fromrenewables by 2013, with 5 % of that to

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be produced by solar-electric technolo-gies. But Minnesota recently adopted an RPS requirement of 10 % of powerproduction from renewable energy by2015 for the State’s largest electric utili-ty. When added to their previous PrairieIsland Nuclear Plant waste storage “set-tlement” requirement of 950 MW of windand biomass energy, the utility will havea de facto RPS of 19 % by 2015. Texaswill be second to California in total in-stalled new renewable energy generationwith a requirement of 2000 MW of newrenewables by 2009, signed into law bythen – Governor George W. Bush.

Fourteen states have also legislatedrenewable energy funds totaling US$ 4.5 billion by 2017. The combination ofall RPS and renewable energy fund pro-grams will develop 15,215 MW of newrenewables, and protect 7,020 MW ofexisting renewables, by 2017. This willbe equivalent in the reduction of CO2

emissions to removing 7.4 million carsfrom the road, or planting11.2 millionsacres (4.5 million hectares) of trees.These programs are complemented by other legislated state programs insupport of energy efficiency, totalingUS$ 8.6 billion by 2012, and for R&D,totaling US$ 1.1 billion by 2012.

The development of distributed genera-tion (primarily PV and small wind) in the U.S. has been promoted by “netmetering” legislation passed in 36 of the country’s 50 states. Most of the PVsystems allowed to be directly connec-ted into the utility and to gain full retailcredit by “running the meter backwards”are restricted in size in various state poli-cies to 10 kW, or 25 kW, or a few up to100 kW. California, however, allows PVsystems up to 1 MW to qualify, leadingto a boom of many hundreds of kW incommercial rooftop and parking lotsystems.

It is now being seen that experience inconstructing and operating renewablepower installations builds confidence inthe utilities. Enough new renewable

energy generation had been added inWisconsin by early 2003, for example,aided by a State policy that allows un-limited “banking” of renewable energycredits, to meet their RPS goals through2011. Texas exceeded their 2002 RPSrequirement by 150 % (installing 900MW of new wind, while required only to install 400 MW), and is likely to reachtheir 2009 goal of 2000 MW severalyears in advance of the legislated re-quirement. Two states – Nevada andUtah – revisited their earlier conservativeRPS legislated goals and dramaticallyincreased their earlier standards. AndNevada will have nearly met their new2013 solar power requirement by 2005,when their 50MW solar thermal-electricpower plant goes on line.

A powerful clean energy blueprint for the US

The leadership provided by state govern-ments in the U.S. is extremely important,filling the policy vacuum left by the fed-eral government, but so much morecould be accomplished with a nationalpolicy based upon national goals sup-ported by facilitating legislation. To de-monstrate this, and to provide incentiveand support for national legislation, theUnion of Concerned Scientists (UCS) – a national member organization of scien-tists and those who support them inpromoting the public interest in severalfields, including clean energy – develop-ed in 2001 a “Clean Energy Blueprint”.Based upon realistic appraisals of bothtechnology costs and resource potential,the Clean Energy Blueprint reveals that aU.S. nationwide goal of 20 % of electricityfrom renewable energy by 2020 is feasi-ble and would offer attractive economicand environmental benefits comparedwith the administration’s “business asusual” policies.

It has been stressed in this White Paperthat accelerating the application of re-newable energy cannot result from justone or two adopted policies. The CleanEnergy Blueprint integrates many energy

and efficiency policies into a mutuallysupportive package. Specifically, the following policies are proposed, and the integrated impacts appraised ana-lytically:

A renewable portfolio standard wouldrequire utilities to increase the use ofenergy from wind, biomass, geother-mal, solar and landfill gas from 2 per-cent in 2002 to 10 percent in 2010,and 20 percent by 2020. It would besupported by tradable energy creditsto help assure compliance at thelowest possible cost.

A public benefits fund would be cre-ated by a 0.2 cent/kWh surcharge on electricity, equivalent to about US$ 1/month for a typical household.It would be used to match state funding for energy efficiency, renew-able energy, R&D, and low-incomecustomer protection.

Production tax credits of 1.8 US cents/kWh for renewable energy would beextended to 2006 and expanded tocover all clean, nonhydro renewableenergy resources, helping to level theplaying field with fossil fuel and nucle-ar generation subsidies.

Net metering would be extendednationwide, to treat fairly those grid-connected consumers who generatetheir own electricity with renewableenergy systems of up to 100kW, loca-ted on their own premises, by allowingthem to feed surplus electricity backinto the grid and spin their metersbackwards.

Research and development spendingon renewable energy would increase60 % over three years to US$ 652million by 2005 (this is a little overtwice the 2002 renewables R&D bud-get for Japan.) Energy efficiency R&Dwould grow by 50 % to US$ 900 mil-lion by 2005.

Combined heat and power: invest-ment tax credits and shortened de-preciation periods would be provided,and regulatory barriers removed, for

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power plants that produce both elec-tricity and useful heat at efficiencies of 60 % to 70 %.

Improved efficiency standards: nation-al minimum efficiency standardswould be established for a dozen pro-ducts, generally to the level of goodpractices today. In addition, existingnational standards would be revisedto levels that are technically feasibleand economically justified.

Enhanced building codes: stateswould adopt model building codesestablished in 1999/2000, as well asnew more advanced codes to beestablished by 2010 that would gowell beyond today’s “best practices”standards.

Tax incentives would promote efficien-cy improvements for buildings, appli-ances and equipment beyond mini-mum standards, through rebates andinvestment tax credits.

Industrial energy efficiency measures:industry would improve its efficiencyby 1 to 2 percent per year throughvoluntary agreements, incentives, ornational standards. The federalgovernment would provide technicaland financial assistance, and increasefederal R&D and demonstration pro-grams.

An economic analysis of the costs andbenefits of the combination of all ofthese policies, using the U.S. EnergyInformation Administration’s NationalEnergy Modeling Systems (NEMS) com-puter model, produced the followingresults:

The United States could indeed meetat least 20 % of its electricity needs byrenewable energy sources – wind, bio-mass, geothermal and solar – by2020.

U.S. consumers would save a total ofUS$ 440 billion by 2020, with annualnet savings reaching US$ 105 billionper year, or US$ 350 per year for atypical family.

Monthly electricity bills for a typicalhousehold would decline from aboutUS$ 40/month in 2000 to US$ 25/month in 2020.

The Blueprint’s efficiency and renew-able energy policies could reducenatural gas prices by 27 percent by2020, savings businesses and homesanother US$ 30 billion per year by2020.

Demand for natural gas would bereduced by 30 % and for coal bynearly 60 % (reducing the burning ofcoal by 750 million tons per year)compared to business as usual pro-jections for 2020. More oil would besaved in 18 years (400 million barrelsper year by 2020) than could be recovered economically from theadministration-proposed pipeline inthe Artic National Wildlife Refuges(ANWR) in 60 years.

The need for 975 new power plants(average 300 MW each), out of a projected 1,300 new plants under the National Energy Policy, could beavoided, and 180 old coal plants (aver-age 500 MW each) and 14 existingnuclear plants (1,000 MW each) couldbe retired. 300,000 miles of new gaspipelines and 7000 miles of electricitytransmission lines, both called for inthe Administration’s National EnergyPolicy, would not have to be built.

Carbon dioxide emissions from powerplants would be reduced by two-thirdscompared to business-as-usual pro-jections for 2020, and harmful emis-sions of sulfur dioxide and nitrogenoxides from power plants would bereduced by 55 percent.

How realistic are these conclusions andbenefits? The impact of a national re-quirement (RPS) for 20 % of U.S. electri-city from renewable energy by 2020 was examined, using rather high costassumptions for renewable energy andother conservative assumptions, by theU.S. Department of Energy’s EnergyInformation Administration (EIA).

Their results showed a modest saving in national energy bills by 2020. Otherstudies which included more realistic assumptions, and which combined ener-gy efficiency measures with renewableenergy development, showed billions ofdollars of savings for U.S. consumers by2020 compared with the Administration’sNational Energy Plan.

This model, then, reveals the kinds ofbenefits awaiting governments that de-cide to pursue an integrated set of poli-cies leading toward the renewable ener-gy transition. In order to reap those be-nefits, though, governments must beprepared to take long-range policy views,and to be willing to invest in the earlyimplementation of those policies. Thedevelopment of renewable energy inGermany, for example, has shown analmost steady growth over the past tenyears, resulting from consistent policies,while the U.S. renewables industriesflounder from year to year in a mire of an uncertain and inconsistent renewableenergy policy framework with a very shorttime horizon.

The next example therefore looks at themodel for Germany’s long-range goalsand strategies that is “pulling” Germanrenewable energy policy and govern-mental investments toward a genuinerenewable energy transition.

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Two Comprehensive National Clean Energy Policy Models


Germany: A significant long rangerenewable energy policy

Germany has adopted policies intendedto dramatically reduce the emission ofgreenhouse gases and, as part of thatpolicy, to develop its renewable energyresources on a fast track. The result hasbeen a jump to leadership in the worldof wind energy, with 12,000 MW instal-led in Germany by the end of 2002, and3rd in the world in PV capacity.

Germany’s policies are being driven andformulated in part by long-range sustain-ability models put forth by the GermanFederal Environment Ministry, supportedby the analytical work of the WuppertalInstitute. The key elements of that Long-term Scenario “Solar Energy Economy in Germany” are, first, that energy pro-ductivity will improve by 3 to 3.5 % peryear up to 2030. This means that, eventhough the Germany economy will con-tinue to grow, total primary energy willactually diminish by a little over 30 % by2030. This is the energy efficiency andenergy intensity policy underpinning ofthe renewable energy transition thatmakes the renewable energy contribu-tion into a significant factor.

By 2030, nuclear energy will have beencompletely phased out, and renewableenergy could contribute possibly 25 %of national primary energy. This figureincreases to 58 % by 2050, at whichpoint Germany will essentially have engi-neered the renewable energy transition.

The model further envisions a transfor-mation of the electricity sector by 2040,when renewable energies exceed 50 %of total electricity generation, expandingfurther to a 65 % renewable energy con-tribution by 2050. This transformation isenabled by structural changes from cen-tral power to heavy reliance on site-spe-cific power generation, facilitated byphasing in many of these changes be-fore 2020, during the period when 70 %of Germany’s aging power plants wouldotherwise have to be replaced.

These results also assume energy-savingtransformations in the buildings, trans-portation and heating sectors, with in-creasing reliance on renewable energyresources for all three. So, for example,according to the model the total amountof electricity required by Germany wouldbe only about 12 % lower in 2050 thanfor the year 2000, because of the in-creasing share of electricity needed toproduce hydrogen fuels.

These changes would not come withoutcosts, but they are also balanced bycost savings, such as in fuel and avoid-ed power plant construction. The esti-mate is that the discounted annual cost/year for this transition would be perhaps3.8 billion EUR/year, or 48 EUR/year/person, representing about 0.14 % ofthe gross domestic product. And thesefigure do not take into account the eco-nomic benefits from the new renewableenergy industries and jobs that wouldaccrue. (The same analysis suggeststhat 85,000 to 200,000 jobs would be

created or conserved in the buildingindustry, and 250,000 to 350,000 newjobs created in the renewable energyindustries.)

Finally, projecting the model still further,renewable energies could deliver 100 %of the power and energy required forGermany by 2070, with a continuingaggressive program, or at least by theend of the century with a more modestprogram.

The Germany Advisory Council on GlobalChange (WBGU), in a 2003 report, pro-posed that these kinds of measures andgoals could move the world through thetransition to energy security with environ-mental protection and energy equity be-tween rich and poor nations. In additionto the efficiency and renewable energygoals, though, would need to be com-mitments to cut all fossil fuel subsidiesto zero by 2020, investment in grid infra-structure to support distributed genera-tion, and increasing R&D for renewablesby ten times.

51

Fig. 19: A plausible long-term German plan to reduce energy use in an expanding economy, and to bring renewable energy use up to significant percentage levelsSource: Dr. Manfred Fischedick, Wuppertal Institute for Climate, Environment and Energy

1995 2030 2050

0

1

2

3

4

5

6

7

8

9

10

ElectricityImport from RES

2010

100 80 67 58 100 = 9.2 EJ/year

Longterm Scenario ”Solar Energy Economy” in Germany – Final Energy by Sources

Heat Fuels from RES

Electricityfrom RES

Heat, Electricity,Fuels from Gas

Heat, Electricity,Fuels from Oil

Heat, Electricity,Fuels from Coal

NuclearElectricity

1000,2841,5

550,2734,5

330,265

25

260,238

58

Energy-Intensity (1995=100)CO2-Intensity (fossil, kg/kWh)Share of RES (%)


Conclusion

No single renewable energy technologycan be proclaimed to be more importantthan another in terms of delivering usefulenergy to society. Each has its place inthe portfolio of technologies to meetsocietal needs and to provide societal,economic and environmental benefits.Just because PV is popular does notmake it always more important to socie-ty or economies than sustainable buil-ding design or solar thermal technolo-gies. And using solar energy to displaceother energy resources, including electri-city, is every bit as important for econo-mies and the environment as creatingnew electricity by solar energy.

One square meter of surface area candeliver 100 AC watts of peak electricalpower with PV technology. One squaremeter of mirror can also deliver about100 watts of peak electrical energythrough solar thermal electric technolo-gies, and perhaps 200 watts of electrici-ty with Dish-Stirling heat engines. Butone square meter of intercepted solarenergy can also deliver 300 watts ofthermal power for heating domesticwater or for active solar space heating,displacing 300 watts of electric waterheating. And one square meter of inter-cepted solar radiation can deliver over600 watts of heating energy, if the solarradiation is delivered directly into a buil-ding through a square meter of glass,displacing 600 watts of electric spaceheating. That same square meter ofglass can deliver daylight with an effi-ciency of about twice the lumens/wattratio of the very best interior artificial illumination technologies, displacing,with daylight-tracking lighting controls,100 watts of electrical lighting energy.

All of those square meters of collectorsand hectares of fields capturing solarenergy, blades converting the power ofthe wind, wells delivering the Earth’sthermal energy, andwaters delivering theenergy of river flows,waves and tides, willdisplace precious anddwindling fossil fuels and losses of energyfrom the worldwidephase-out of nuclearpower. Sparing the useof fossil fuels for highereconomic benefits, orusing them in fuel-saving“hybrid” relationship withthe intermittent renewa-ble energy resources(sun and wind), will contribute to leaner,stronger, safer societies and economies.And, in the process, carbon and otheremissions into the atmosphere will begreatly reduced, now as a result of eco-nomically attractive new activities, not as expensive environmental penalties.

It is encouraging to see the emergenceof region-wide renewable energy devel-opment policies, and the setting of rulesto assure accomplishing those targets

that apply across nation-al boundaries. The proposed EU program,“Intelligent Energy forEurope”, is aimed atconsolidating variousprogrammes from the1998-2002 frameworkinto a more efficient, andbetter funded, 2003-2006 framework. Thename implies the “intelli-gent” role of energy effi-ciency and the renewa-ble energy resources inthe larger well being of

all of Europe. The EU Parliament hasalso proposed a “European IntelligentEnergy Agency”, which would facilitateenergy efficiency and renewable energyapplications, and the replication of “best practices” learned by experience,throughout the EU.

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Energy policy should be a policy insupport of those integrated, inter-connected pieces that define theenergy systems on which societydepends. It should steer the evolu-tion of those systems in the publicinterest, away from environmentaland social destruction, and towardcompatible and restorative rela-tionship with the natural world.Energy policy must be predicatedon sustainability and opportunityfor future generations or it will fail,and bring economies and societiesdown with it.

Fig. 20: A story of a beginning. The Rancho Seco Nuclear Power Plant in Sacramento, Cal., was decommis-sioned because of excessive costs. Its power production has since been replaced by energy efficiency and the world’s largest utility collection of photovoltaic solar-electric generation. The utility rates came back downto where they would have been if this courageous first step had not been taken. The first step is always thehardest.Photograph by Dr. Donald Aitken


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When these proposals are added to theJanuary 23, 2002 EU Commission’senvironmental liability directive based on the “polluter pays” principle, it isbecoming clear that, in a large part ofthe world, at least, “intelligent” energyefficiency and renewable energy policiesare coming of age in packages thatexplicitly include environmental emis-sions reductions, protection of the envi-ronment, stimuli for regional economicgains, removal of existing barriers, andfinancing mechanisms.

Governments should also become theirown best customers. The largest ownerof buildings is usually the government.Governments should design and converttheir own buildings to be examples ofefficiency and sustainability. Govern-ments need to stimulate bulk purchasesand cost reductions of the renewableenergy technologies by applying them togovernmental safety and defense opera-tions. In these kinds of ways govern-ments can help to “pull” the solar tech-nologies into the market place, to com-plement the “push” of their firm goals,policies and laws.

The renewable energy transition will happen city-by-city, region-by-region,country-by-country. It will be a processgenerated in each locale when a “criticalmass” of the application of a renewableresource has been reached. These turning points happen when people,governments, regulators, utilities, andthe financial community have all becomefamiliar with the technology. With wind,this appears to be when 100 MW havebeen installed. With PV, it happenswhen PV roofs, for example, becomenot only pervasive but sources of perso-nal pride. The City of Sacramento,California, with close to 1,000 PV roofs,has thousands of applicants for newones. The same holds true for theJapanese and German solar roofs pro-grams, except in those countries thereare tens of thousands of applicants.

Governments need to set, assure andachieve goals to accomplish simultane-ously aggressive efficiency and renew-able energy objectives. The implementa-tion mechanisms for achieving thesegoals must be a packaged set of mutu-ally supportive and self-consistent poli-cies. The best policy is a mix of policies,combining renewable energy standardswith direct incentive and energy produc-tion payments, loan assistance, tax cre-dits, development of tradable marketinstruments, removal of existing barriers,government leadership by example, anduser education.

Furthermore, the legislative and financialmechanisms to achieve these goalsmust be consistently applied, from yearto year. This will require the continuity ofpolitical will through many administra-tions and several generations. Achievingthat alone will be a stunning advance-ment for society.

This White Paper demonstrates that therenewable energy transition is not just afantasy, but rather a real vision, whichcan be implemented by industrialnations with available technologies, in areasonable time, and at reasonablecosts. It is apparent that leadership ari-sing from people and their governments,combined with the adaptability of utilitiesand societal institutions, will determinewhich countries succeed and which fail.

The renewable energy transition muststart now, or it will be too late.Governments, cities, companies, andpeople must cooperate in moving itbeyond the first difficult steps, knowingthat great societal, environmental andpersonal rewards will come. Solar ener-gy, the source of all life on Earth, will bethe underpinning of a sustainable, safeand sane future energy policy.

Fig. 21: Children can now touch, feel, and experience the beginning of the renewable energy transition, whichwill be so important to secure their own future well-being.Photograph by Dr. Donald Aitken


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Acknowledgements

This White Paper was assembled frommany sources, as well as from reviewsand suggestions by many people. Theauthor of this White Paper (DWA) wishesto acknowledge with gratitude some ofthe principal sources for information andcomments utilized in this report. The fol-lowing lists those who were personallycontacted, who directed the author toother resources or persons, gave coun-sel, and performed reviews of draftmaterial:

Bionergy Dr. Ralph Overend (NREL)Prof. Larry Baxter (BYU)

Geothermal energy Anna Carter (IGA)Dr. John LundDr. Gary Huttrer Dr. Cesare Silvi

Energy and power from the windRandall Swisher (AWEA)Jim Caldwell (AWEA) Dan Juhl Peter AsmusPaul Gipe

Passive solar heating and daylighting of buildingsEdward Mazria

Solar thermal electric energy generationDr. David KearneyDr. Michael GeyerDr. Gilbert Cohen (Duke Energy)Dr. Frederick Morse

Photovoltaic energy generationPaul MaycockSteven StrongDr. John Byrne (University of Delaware)Dan Shugar (PowerLight)

Policies and policy examplesDr. Niels Meyer (Technical University of Denmark)Rick Sellers (IEA)Alan Nogee (UCS) Steve Clemmer (UCS)Jeff Deyette (UCS)

European Union policies and resourcesRian van Staden (ISES)

Germany sustainable energy case exampleDr. Manfred Fischedick (Wuppertal Institute)

German policiesBurkhard Holder (Solar-Fabrik AG)Rian van Staden (ISES)

China policies and solar installationsDr. Jan HamrinDr. Li Hua

Japan policies and PV installationsOsamu IkkiTakahashi Ohigashi

Cyprus solar installationsDr. Despina Serghides

Denmark policiesTorben EsbensenDr. Niels MeyerPreben Maegaard (Folkecenter for Renewable Energy)

India policies and renewable energy installationsDr. V. BakthavatsalamS. Baskaran (IREDA)

Many written resources contributed tothis White Paper. In addition to nume-rous published journal articles andreports, the following journals providedcontinuing and invaluable updates andinformation: REFOCUS (InternationalSolar Energy Society, published byElsevier Science, Ltd.), RENEWABLEENERGY WORLD (James & James,Science Publishers, Ltd); SOLARTODAY (The American Solar EnergySociety); BIOMASS & BIOENERGY(Elsevier Science, Ltd.)

Particular thanks go to Edward Milford,Publisher of RENEWABLE ENERGYWORLD, for helping the White Paperauthor to contact article authors and toreceive digitized illustrations.

The author’s professional colleague andwife, Barbara Harwood Aitken, providedsubstantive and helpful input, expert edi-ting, and great support for the writingproject.


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The International Solar Energy Societygratefully acknowledges Dr. Donald W. Aitken, former Secretaryand Vice President of ISES, who drafted this White Paper with input from expert resources worldwide, and technical review and input by the Headquarters and the ISES Boardof Directors.

© ISES & Dr. Donald W. Aitken 2003All rights reserved by ISES and the author

Produced by:ISES Headquarters

Design: triolog, Freiburg

Printing:Systemdruck, March

Printed on 100% recycled paper


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