Is Clean Energy the Economic Saviour?
Global markets continue to reel from energy price fluctuations and energy security concerns, the economics of energy alternatives is in the spotlight. The US continues to struggle to stay out of a double dip recession and to bring its deficit and debt under control. Rising utility costs are seen as a constraint of consumer demand as well as industry profitability and productivity. Can clean energy be the job stimulus work markets are looking for?
Economists look at rising fuel costs, and growing demand for electricity, not only as challenge, but as possible ways to both stimulate the economy and deal with energy security. The US and Europe both cite rising energy costs and energy security as key impediments to stabilized economic growth. A renewed commitment to greenhouse gas emission reductions has also meant that countries around the world are looking to clean energy to solve these issues.
With all this chaos in world markets, there is an emerging economic opportunity for Canada, as a world energy leader, to make a unique contribution. While worldwide investment in energy in the first quarter of 2011 declined, the investment in renewable energy increased from $97 billion in 2010 to $152 billion according to the EIC Monitor.
Canada is not challenged with the same issues of energy security as other countries. There is a growing understanding that renewable energy and, clean and decentralized energy solutions need to part of our energy future. A recent Conference Board of Canada study for the Canadian Electrical Association concluded that an investment of over $293 billion was needed in the Canadian electrical system in the next 20 years. Nearly $200 billion of that would have to be in new generation to meet the growing demand and to replace obsolete generation infrastructure. Clearly, with this level of demand in consideration of the carbon footprint of each generation option, a cost effective and balanced approach to energy policy gets increasingly complex.
But, like any emerging industry, the economics of these renewable energy options is still lagging the traditional energy sources. Governments worldwide are focused on how to best stimulate the innovation and private investment necessary to bring clean and renewable energy projects on line and to develop the economies of scale necessary to drive overall costs down. This is not an easy task given the range of factors to be considered (cost of capital, fuel costs, run time/efficiency, supplemental revenue from heat sales (Combined Cycle), costs of waste, and operational losses (energy needed to produce energy)) . There are a variety of analyses over the past several years but the US Department of Energy has produced the most current comparison of levelized costs of renewable options to traditional energy generation.
The DOE analysis shows that the most cost effective solution for power generation is advanced combined cycle systems largely due to low natural gas costs. Of course intermittency of wind and solar continue to keep these options at the top end of the cost scale despite production costs improvements. As evidenced by the table, for renewable energy to be cost competitive with traditional energy sources, both costs, and efficiency need to be improved.
In addition, and not included in the recent perspective from the US DOE, is the costs of carbon. In fact, the following table of lifecycle costs of greenhouse gas emissions of energy generation makes government program development even more complex as they try to deliver on commitments to reduce GHG emissions. Quickly the cost advantage of natural gas is eroded when the cost of carbon emissions are added.
| Lifecycle Greenhouse Gas Emission Estimates for Electricity Generators |
||
| Technology | Description | Estimate (g CO2/kWhe) |
| Wind | 2.5 MW offshore | 9 |
| Hydroelectric | 3.1 MW reservoir | 10 |
| Wind | 1.5 MW onshore | 10 |
| Biogas | Anaerobic digestion | 11 |
| Hydroelectric | 300 kW run-of-river | 13 |
| Solar thermal | 80 MW parabolic trough | 13 |
| Biomass | various | 14-35 |
| Solar PV | Polycrystaline silicon | 32 |
| Geothermal | 80 MW hot dry rock | 38 |
| Nuclear | various reactor types | 66 |
| Natural gas | various combined cycle turbines | 443 |
| Diesel | various generator and turbine types | 778 |
| Heavy oil | various generator and turbine types | 778 |
| Coal | various generator types with scrubbing | 960 |
| Coal | various generator types without scrubbing | 1050 |
The policy strategies are needed to bridge the early stage economic gaps. Governments across Canada have committed to encourage the deployment of clean and renewable energy alternatives, investing in capital incentives (grants), operational incentives (FITs and producer credits), or carbon pricing systems. Of the new generation projects under construction and proposed across Canada, the largest proportion are renewable energy.
Clearly, Ontario’s foray into Feed in Tariffs (FITs) to stimulate investment in electricity was effective as over 11,000 megawatts of power are either planned or under construction. The Ontario has supported the tariff program with a Long Term Energy Plan that incorporates conservation as well as new energy generation.
Alberta, where no feed in tariff exists, ranks second with over 7,500 megawatts in the pipeline. Alberta invests capital in clean energy alternatives through Specified Gas Emitters regulation. Alberta, one of the few jurisdictions in North America with carbon penalties, prices carbon emissions at $15 per tonne CO2e, and directs funds into GHG reduction initiatives. The offsets available for clean energy systems can make a significant difference to project economics.
Federal and Provincial governments continue to make a wide range of investments in energy including an estimated $2.84 billion for oil and gas, led by Canada and Alberta. More recently, government investment in energy has extended to clean energy. Since the federal election in the spring a number of incentives for energy generation and conservation have been announced including the most recent nearly $500 million for NRCan programs; SDTC is also now accepting Statements of Interest for technology solutions aimed at Climate Change, Clean Air, Soil and Water; and CCEMC is open for Expressions of Interest from Small and Medium Sized Enterprises with near commercialized technology targeted to GHG emission reduction.
Check www.WADEcanada.ca regularly to find out more about available
financing support for clean and decentralized energy.
