Renewable promise

OECD Observer

Click to enlarge. Source: IEA

Can our insatiable appetite for energy be met efficiently and cleanly by renewable sources?

Global electricity demand is growing rapidly. Demand for transport energy is also rising. Renewable energy is as yet not capable of matching the energy-density of fossil fuels, and it absorbs a lot of land, whether for cultivating biofuels or laying out solar panels. From solar to hydro, renewable sources are also unevenly distributed and supply can be irregular.

Nevertheless, technology and knowhow are improving and renewable energy sources have already started to contribute more to the overall energy mix. Together with policies and other developments on the demand side, in business and households, these could make for a healthier outlook for 2030.

The main renewable energy sources are hydropower, biomass and waste, wind, geothermal, solar, and tide and wave-generated energy. Hydropower and biomass are the most exploited sources today and the use of wind power is growing fast. In 2004, these renewables, including biofuels for transport, accounted for around 13% of total world primary energy demand.

The impact on electricity generation is noteworthy: renewables in 2004 accounted for some 18% of total terawatt hours generated and, according to the IEA’s World Energy Outlook 2006, will account for 21% in 2030 on current policies. With extra investment and stronger policies and measures, that share rises to 26% in the report’s alternative policy scenario, and could climb even higher.

Hydropower accounts for most renewable electricity generation, with a 16% share of total power generated in 2030, compared with less than 10% for all other renewable sources. Some hydropower is under-exploited, with only a third of potential now tapped globally. Extra expansion could take place in the developing world. But capacity constraints mean hydro’s share in total electricity supply in the IEA’s alternative scenario for 2030 would not increase much, even if new policies are adopted. The contribution from other renewables would be nearly eight times higher than now, thanks in large part to an expansion in wind power and biomass. Wind’s contribution in the alternative policy scenario rises by over a fifth compared with the IEA’s business-as-usual reference scenario.

In fact, such is the room for efficiency improvements in energy use that we could achieve far more from less. Overall electricity generation would be 12% lower in the alternative, yet quitefeasible scenario for 2030 than under a business-as-usual outlook if measures were adopted on the demand side, from fitting better light bulbs to improving house and office building construction. The share of oil, for instance, slides from 7% of electricity generation in 2004 to 2.9% in 2030.

These projections are realistic. The costs of research and development into improving technologies are high, but will fall as technology improves. This is already happening in the solar and wind markets, and in its alternative policy scenario, the 2006 WEO puts the investment cost of solar photovoltaic energy in 2030 at less than half the current figure. As over a quarter of new power-generating capacity will come from renewables, the cost of development is expected to reach $2,300 billion (in year 2005 dollars), or nearly half of power generation investment in the next 25 years.

There are limits to the promise of renewables, though. For one thing, developing countries will most likely be unable to use renewable alternatives on a large scale to leap-frog conventional energy sources such as coal to supply their future needs, unlike what some countries have been able to do in telecommunications with mobile phones, for instance. But renewables will still permit a better energy mix and could reduce usage of some of the less healthy forms of biomass, such as wood and charcoal burned in inefficient stoves, which the IEA points out kills nearly 2 million people every year. In any case, rapid economic growth in countries like India and China requires energy densities beyond the present scope of renewables. Both are starting to develop policies on renewable energy, in part to help curtail pollution.

How clean? 

While renewable energy is relatively environmentally friendly, it does leave a footprint. Its appetite for land is striking, even if conventional energy installations, like pipelines and oil refineries, also take up space. Biofuel production may mean fewer food crops, which in an age of rising populations could pose problems.

Also, corn-based ethanol is particularly draining on soil quality and water resources. But while biofuels can achieve cleaner air by cutting emissions, as in Brazil, hybrid mixes are also to be found in “gas guzzlers” whose CO2 emissions remain high compared with other vehicles.

As for hydroelectric power, even this emits large quantities of CO2 and methane after a reservoir is initially flooded and submerged vegetation decays with changing water levels. Over time, new vegetation is engulfed and decomposes without oxygen, generating methane which the dam’s turbines churn up into the atmosphere. The effect of methane on global warming is 21 times stronger than that of carbon dioxide. Also, though we know the environmental costs of burning fossil fuels, the sideeffects of new energies are not fully understood. The impacts on local habitats or vegetation, or even climate patterns, of solar or wind power installations are still being documented. As tantalising and clean as it may be, renewable energy will probably not deliver a perfect world.

Still, renewable energy is in vogue, stimulating exciting expectations and business opportunities, not to mention high stock values. As ever, the countries with the right business frameworks seem to be benefiting first. In the UK, where renewable energy has received early political support, the London Alternative Investment Market (AIM) already lists 20 companies with a combined market value of nearly £1.5bn ($2.9 bn). Wind and solar are attracting large corporations, too, including automotive and energy companies. British Petroleum (BP) says it intends to invest $1.8 billion in solar photovoltaic cells over the next three years. This is good news for the energy industry and small innovative firms, as well as for spin-offs in engineering, construction and conventional technology. Expect new companies to emerge and challenge incumbents, particularly large and unwieldy network providers, as lighter technologies bring energy supply to more local, flexible levels. Enabling regulation will be important.

Renewable energy is a promising technology, but as we warned in 2001 when dot-coms were expanding, hype should be resisted. The last e-bubble ended in tears. Global warming means it is in everyone’s interest for a new e-economy based on renewable energy to take hold and stay a steady course. LT/RJC


IEA (2006),World Energy Outlook 2006, Paris. Visit For more on BP’s plans, see

For further information on renewables in the IEA’s World Energy Outlook, contact and

©OECD Observer No 258/259, December 2006

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