Renewable electricity must compete harder

LONDON: Growth in renewable electricity risks slowing in the world’s two major economies in the near-term, especially if China can replicate US shale gas success.
That has implications for global wind and solar manufacturing over-capacity and climate targets.
The narrative of global energy forecasting has been for renewables to outstrip fossil fuels, putting combined wind, solar, bioenergy and hydropower on an equal footing with coal-fired power generation in two to three decades.
But soaring domestic US production of natural gas from shale deposits has helped depress international coal prices and poses a competitive threat to rival energy technologies including wind and solar.
The latest US forecasts suggest renewable energy will trail far behind gas and coal for the next three decades, while data shows growth in US natural gas power generation last year was far ahead of wind and solar both in percentage and absolute terms.
Meanwhile, fossil fuel’s share of energy consumption in China grew in 2011 despite Beijing targeting the opposite, showing the heavy lift for more expensive renewable energy to displace fossil fuels.
Renewable technologies have so far only achieved commercial parity with fossil fuels in niche markets.
Faster growth will require further cost-cutting, and benefit from stiffer carbon pricing policies which may be expected in the 2020s if climate change impacts more dangerously.
Energy forecasters see renewable electricity overtaking coal as the world’s leading source of power generation in the next few decades.
For example, the International Energy Agency in its World Energy Outlook last November predicted that renewables collectively would account for 31 percent of power generation in 2035, under existing policy commitments, surpassing natural gas and just short of coal.
The oil and gas company BP is slightly less ambitious in its outlook, seeing all renewables accounting for 26 percent of total power generation in 2030, behind coal at 38 percent.
But both of these are far ahead of the US outlook.
The abridged, early release of the US Energy Information Administration’s (EIA) Annual Energy Outlook 2013, published last month, saw natural gas rising to almost a third of US power generation by 2040.
It saw all renewables accounting for just 16 percent of power generation, up from 13 percent now. The EIA had amended its forecasts on the back of lower natural gas prices, it said.
That is a warning to renewable energy if other countries can replicate or benefit from the US shale gas experience.
US natural gas last year not only displaced coal but outstripped wind and solar, posting faster percentage growth than non-hydro renewables for the first time since 2007, EIA data published last month showed.
Gas-fired power generation leapt a quarter in the first 10 months of the year compared with the same period in 2011.
Natural gas took market share predominantly from coal, in the month of April drawing closer than ever in absolute terms, all but level generating about 96 terawatt hours (TWh) each.
But gas also posted absolute growth 10 times that of non-hydro renewable energy, at 214 TWh compared with 21.4 TWh.
That was even as the US saw record growth in wind and solar capacity which the country will not equal this year.
Wind power installations will slump around 75 percent this year because of uncertainty injected by the last-minute extension of a key tax credit, according to preliminary estimates from Denmark-based MAKE Consulting.
The world’s biggest economy looks no closer to agreeing ambitious federal climate, carbon or renewable energy targets.
Meanwhile, China saw a decline in the combined share of non-fossil fuels in all energy consumption (heat, transport as well as electricity) in 2011, the latest year for BP energy data.
Non-fossil fuels (nuclear, hydropower and other renewables) accounted for 7.4 percent of the country’s energy mix in 2011, down from 8.0 percent in 2010, according to BP’s “Statistical Review of World Energy” published last year.
That should be a temporary blip following a dip in hydropower generation, given Beijing has targets to raise the collective share of non-fossil fuels.
But China is also actively targeting a shale gas strategy which could put a spanner in the growth of renewable energy.
A widening, global experience of the impacts of shale gas exploration so far all but confined to the US will demand further sharp falls in renewable costs to compete.
— The author is a Reuters market analyst. The views expressed are his own.