Overcoming hurdles to growth in the renewable energy sector
Posted January 22, 2013
This is a guest post from Daniel Lorch, Program Assistant, Energy & Transportation/CMI, New York
Late last year, I attended the 2012 Social Enterprise Conference hosted by Columbia Business School. The focus of the event was to bring together industry experts and leaders to showcase the growth of social enterprise, “and share success stories and challenges across a wide range of sectors and causes.”
One session I attended was Moving the Needle for Large-Scale Implementation of Renewable Energy. Focusing on the recent growth of renewable energy both internationally and domestically, this session was especially of interest due to our continuous work highlighting Clean Energy Jobs – our monthly newsletter showcasing the ongoing creation of new jobs in the renewable energy sector.
According to the session moderator, there is reason to be optimistic about clean energy due to the growth currently taking place in the worldwide renewable energy sector, with investments rising from $53.6 billion to $260 billion in just a few years and a 60% growth rate over that period for renewable energy generation.
One of the most interesting questions was: What is the biggest hurdle for the further growth of the renewable energy sector: financing, technology, or policy? Can it be overcome, and if so when?
With each speaker bringing his unique background to the question, I found something new and fresh in their responses.
Steve Corneli, Senior Vice-President of Sustainability, Policy and Strategy at NRG Energy, took a bottom up approach in his response.
“I use to think that biggest gap was the lack of a pricing on carbon emissions, along with getting the cost of renewable energy or clean energy resources including: carbon capture and sequestration and nuclear to a point where they were competitive with mainstream energy resources.
Now I believe that the single biggest gap is that without a product, there is no urgency to build the necessary infrastructure. For example, NRG Energy is currently installing networks of charging stations, to incentivize people in buying electrical vehicles. Once people own an electrical vehicle, where will they charge them? There is now a “range anxiety” problem to solve, and the need to have charging stations installed in locations such as: supermarkets, malls, and movies arises.
So the biggest challenge in making a clean energy future happen is the entrepreneurial creation of effective businesses, effective business models, and effective transactional networks, allowing for success. This is a bigger challenge then the cost and policy.”
In other words, it is essential for entrepreneurs to create viable and successful business that can develop products that will enable economical, social, and political changes to take occur. His example of electric vehicles was right on point. In the US alone electric vehicle grew more than 300% between 2011 (17,500 sold) and 2012 (53,000 sold), resulting in new pockets of electric vehicle infrastructure popping throughout the country. From new charging stations at the San Diego Zoo parking lot to VETCARS, a program focused on training returning veterans in the installation of EV charging stations nationwide.
Clint Plummer, Vice-President of Development and Deepwater Wind, thought it was vital to have active government participation.
“To grow something a lot of things have to go right. To grow something like renewable energy you need balance amongst policy issues and clear political willpower. To grow clean energy sector you first need the right commercial models (counter the effects of the low prices of natural gas). Second, develop a clear and stable tax incentive program(s) like the one Europe has had (albeit not the best). This has allowed them to grow the capacity, especially in offshore wind. Last, you need right supply chain – but you can only get people to build the new manufacturing facilities that will lower costs, by first getting the right commercial models and incentive structures. Balance is key, and it all comes back to having the clear political will to act.”
Mr. Plummer based his political analogy on his experience growing up in a farm in Western Ohio. He said that in order for a crop to grow, a series of different elements have to go right. The same is true when it comes to expanding the renewable energy sector; where you need to create balance between policy issues and clear political willpower.
As he summarized in one of his points, incentives in Europe may not be perfect, but they are clear and stable. This has allowed the renewable energy sector in Europe to grow dramatically in the past few years (as seen on Figure 14, p22)
Izzet Bensusan: President and CEO of Karbone, answered the question by combining some of the points made by the previous two speakers
“What differentiates renewable energy sources from the conventional ones is storage capacity. The lack of such capacity forces wind farms in Texas to sell their power at a loss, and preclude them from selling excess energy to their neighbors and/or to larger grids.
Storage is the one technological solution that will have a significant ramification for the development of renewable energy. It will allow developers to build large scale solar and wind projects, selling the energy on demand and storing the remainder.
Combined with that, there is still a significant knowledge gap on the part of the consumer. Renewable energy is still not perceived as an infrastructure project, but as a gimmick that is used to generate energy. The consumer cannot grasp that renewable technologies are made to deliver electricity just like fossil fuels.”
As Izzet pointed out, unlike convenient energy sources whose infrastructure has been in place for decades, the lack of infrastructure could force wind and solar farms to sell their energy at a loss. According to him, once the storage capacity is in place, energy generated by sizeable wind or solar projects could be sold on demand to neighboring states and/or to larger grids.
Ultimately, answering this question right is critical to a clean energy future. It may just be that the best answer combines the points presented by the three panelists. Balance is essential for the future growth of the renewable sector. We need a collaborative strategy, where the private sector develops and brings to market the clean energy technologies while the government facilitates a constructive and stable business and political ecosystem necessary for the development of new power systems.