United Kingdom

United Kingdom

A call for integrated global leadership

Climate change is a world threatening problem and the imperative for sustainable development requires global action. Renewable energy is a major part of the solution with wind currently at the forefront, but without government leadership on tasks and priorities the transition from fossil fuels will not be achieved. Such was the thrust of an international conference in London last month, "Can Renewables Deliver?" Of the technology solutions available, only wind was noted as being both technically and economically ready for the market. Moreover, wind is shown to be by far the cleanest of all renewables.

The world is still on the path of a fossil fuel future with climate change disaster now just a few decades away. But faster than anticipated advances in renewable energy technology, particularly wind power, are opening a window of opportunity for averting this catastrophic scenario -- with only marginal macro-economic penalties. World leaders will have to move fast, though, to change the underlying energy market infrastructure. They have until 2020

Climate change is a world threatening problem and the imperative for sustainable development requires global action. Renewable energy is a major part of the solution with wind currently at the forefront, but without government leadership on tasks and priorities the transition from fossil fuels will not be achieved. Such was the thrust of an international conference in London last month which asked speakers and delegates to debate the question, "Can Renewables Deliver?"

The question is not can renewables deliver, but will they deliver, said the World Bank's Dominique Lallement. It was a commonly expressed sentiment, both from the conference platform and the floor. "We have the technologies that can deliver, but we do not have the institutional structures," said Michael Grubb, professor of climate change at Britain's Imperial College. "Making it happen is going to require very forceful high level political action." Integrated planning and joined up policy is in its infancy, he lamented. Lallement equated the lack of government leadership with macro mismanagement and the resulting poor business climate for renewables. Energy sector reforms still ignore provisions for renewable energy, she added, and the energy markets are still full of institutional, trade and fiscal barriers.

Small wonder then that according to Robert Priddle, the director of International Energy Agency (IEA), fossil fuel production and exports are booming and the coal industry is more enthusiastic and confident than in years. "Indeed a rising share of the growing demand for energy between now and 2020 will be supplied by fossil fuels," he added. And even if pro-renewables policies arising from Kyoto are applied in the IEA's energy market projections, "The result is still a fossil fuel future," he claimed.

But Priddle did acknowledge, amidst his traditional pessimism on the chances for renewables displacing conventional generation, that Kyoto was "very significant" and that "things can change." Indeed, the dire warnings contained in the latest of a trio of reports from the UN's International Panel on Climate Change (box page 40) focussed conference attention on the potential of the Kyoto protocol to galvanise massive development of renewable energy.

The role of government

What is needed, continued Priddle, is an expression of "cohesive purpose by the governments of the developed world." It was a theme picked up again and again throughout the two day event, which attracted around 80 policy makers, industry leaders and journalists in the field of renewable energy to Chatham House, home of the Royal Institute of International Affairs (RIIA), a think tank. The scope of the conference, organised by RIIA in association with Forum for the Future, a UK charity, was wide ranging. Its span included presentation of an economic model showing that a significant increase in the use of renewables (mainly wind) will increase UK economic output rather than subtract from it (page 41), to a detailed update on the stop-go progress of the European Union's draft directive on renewables (page 22), to a discussion of the role of women in rural energy development in the Third World, to decarbonisation of fuels for transport. Focus on providing specific solutions to specific regulatory needs was not the conference's strong point.

"Governments know what they have to do, but how do they balance that activity?" asked Adam Brown, of Britain's AEA Technology. While from the sharp end of industry, Graham Stowell of biomass company Bronzeoak Limited, admonished: "Is it not time to stop the talking and start implementing projects?" He called for faster deregulation and privatisation to bring down the barriers and allow new players into the market for sales of electricity. "It is up to the market to develop these technologies, but they need to be led by government," he added. Australia was identified by Priddle as a country which had done just that. "It is a notable example of how governments can intervene in competitive markets to impose social obligations consistently on all market players. It serves to rebut the fears of those who see the drive to liberalisation of markets as somehow in conflict with the pursuit of environmental objectives," he said.

Market mechanisms

James Cameron, Barrister of Counsel and an expert on international environment law, also believes that market mechanisms, such as the Clean Development Mechanism (CDM) to have emerged from the Kyoto climate change debate and the more recent development of green energy certificates trading, will enable markets in which renewables can reach their full potential. "Doing nothing and leaving it to the great entrepreneurs will not be enough," he warned. "You need to make it commercially unacceptable not to make a response to global warming."

One of the purposes of the G8 Task Force on renewables is "to create a platform for the future energy vision." As examples he suggested the G8 group of the world's most powerful countries could agree on a standard regulatory requirement for net metering of electricity, the basic model so successfully pioneered for wind power in Denmark and Germany whereby individual consumers can offset their purchases from the grid with their own electricity production; and he pointed out the huge potential for emissions reductions which would be contained in an internationally agreed package of investments to develop huge wind farms in western China, with the power transmitted to centres of population.

Just last month the G8 reaffirmed its desire to ensuring the environmental integrity of the Kyoto protocol, but Cameron admitted the possibility of the Kyoto protocol never being ratified, or being pushed throughout without the US as a signatory. "We need commercial, economic and business people in the room to put a deal together," he explained. But the concept of the CDM and emissions trading will survive even without ratification, he predicted. "There never was the need to create a top down international trading system." Citing Denmark, the UK and Australia, Cameron commented that a common theme of green credit trading was emerging. "Governments are putting in place trading mechanisms they see will work for their circumstances."

Also big business is experimenting with trading mechanisms. An in-house cap-and-trade emissions reduction program by oil company BP (which since last year stands for Beyond Petroleum) has arrived at a price of $7.60/tonne of carbon for emissions traded so far, said BP Solar's Graham Baxter. He joined the chorus of those at the conference in search of a clear market framework. "One of the difficulties is how to focus the effort," said Baxter. He admitted there is "a conflict and a dilemma" for oil and gas companies. "I do not think you will ever see a level playing field," he added.

Giving the distinct impression that BP was being pushed rather than pulled into renewables, he pointed out that of the world's primary energy supply oil and gas provides 65% of daily energy needs. "And that figure will increase over the next 20 years." But with the insurance industry now predicting that global warming disasters can cost $300 billion a year, BP now sees renewables "as part of the solution." Like Priddle, who said that "oil and gas could have a major role in a carbon constrained future," Baxter believed the transition to renewables will be evolutionary rather than revolutionary and warned of the risk of technical failure if growth is too fast. Even so he proudly pointed out that in three years natural gas had rocketed from being 15% of BP's business to 45% today, not a scenario he apparently envisaged for renewables.

Now or never

Baxter and Priddle's acceptance of only gradual change for renewables contrasted sharply with the need for urgency outlined by Greenpeace's Karl Mallon. The window of opportunity for taking action to stabilise carbon emissions this century was only open until up to 2020, he said. Action taken now would set the scene for the following decades. Michael Grubb agreed. Half of the potential for emissions reductions can be achieved by 2020 with direct benefits (energy saved) exceeding direct costs. The other half will cost $100 per tonne of carbon equivalent, in 1998 prices, he said.

Tom Blundell, chair of Britain's Royal Commission on Environmental Pollution, said it was generally agreed that a 60% reduction of energy related C02 output by 2050 was needed to combat global warming. The options are to trap and store C02; to remove it by the use of "sinks" (forests), though this option will not have a large impact on the problem; to use energy more efficiently; and to use alternatives to fossil fuels.

Wind out in front

Of the technology solutions available, biomass is hampered by the complicated chain of supply requiring changes not only in the energy market, but also in agriculture and transportation, explained Grubb. Only wind was noted by conference speakers as being both technically and economically ready for the market. Moreover, a life cycle analysis of all the renewables shows that wind is by far the cleanest of them, followed by hydro, energy crops, solar thermal and PV, according to Tom Thorpe of AEA Technology Environment.

That giant power company ABB believes wind is ready for the market was left in no doubt by ABB's chief technology officer, Markus Bayegan. In a dynamic presentation he made it abundantly clear that wind is the renewable which has caught ABB's attention (pages 29 & 47). And like any other energy technology, of course it needs government backing, he said. A major sponsor of the conference, "ABB believes it should be active and participating in the political forum," said Bayegan.

Wind has moved beyond the market experimentation stage of the 1990s and is now moving into market growth, said Grubb. But market structure developments are needed if that growth is to be maintained. At the moment greatest growth (in Germany) is at "very heavy costs," continued Grubb. "For sustained growth what really matters is that the value of renewable energy comes forward." According to Grubb, two specific areas need looking at: agricultural policies and whether renewable energy is now seen as part of the rural scene; and electricity structures and liberalisation, such as ensuring that market pricing structures recognise the advantages of embedded (distributed) generation and do not penalise intermittent resources such as wind.

Such attention to detail was apparently not part of the brief for Can Renewables Deliver? Despite wind's clear ascendancy, there was almost no wind industry representation and not one speaker from the sector. Indeed, it appeared that wind power was broadly regarded as commercial by the conference and was therefore expected to fend for itself in the real world.

In a lone attempt to redress the balance, Eddie O'Conner of Irish green power marketer Eirtricity pointed out that wind power, using today's technology onshore and offshore, could provide 80% of Europe's electricity needs with no negative impact on the region's macro economy. Why, he asked, was the focus of a conference titled Can Renewables Deliver? not directed at securing the regulatory details which would enable wind to deliver its full potential?

O'Connor declared that he was "very suspicious of the G8 process -- buying credits in Russia; building renewable energy in China." Cameron, however, assured that, "The flexible mechanisms are not designed to let the US off the hook. They are designed to give us some negotiating flexibility." CDM is to meet development needs, he explained, while carbon trading is to create a global market.

Price signals still false

Wind's ability to compete on open markets if the resource and a fair regulatory framework are in place had clearly moved it into a league of its own at an all-renewables gathering. "Finance is saying wind is commercially proven and not biomass," admitted Bronzeoak's Stowell. Indeed, Paul Ekins of Forum for the Future pointed out that with wind making up a large proportion of a future renewables scenario, the macro economic implications of a transition to renewables by 2020 is very small.

This point was not disputed by the IEA's Priddle. "Governments are increasingly comfortable with the notion of external costs and the need to act on behalf of society to reflect these costs through new forms of policy intervention," he said. In a veiled reference to fluctuating fossil fuel prices, Priddle also indicated that today's market players are not yet aware of the full impact of open competition. "They are not subject to the full risk aspects of market prices," he said. "The low price risk of renewables is not properly evaluated yet by market players." As a result, "Renewables may be considerably more cost effective than is widely believed."

Comparing a business as usual scenario with one for accelerating the use of renewables, in which it is assumed that OECD countries meet their renewables targets, the IEA concludes there is very little change in overall cost. The total discounted system cost is $10,800 billion for the renewables scenario, only slightly higher than the $10,758 for business as usual, despite investments from governments and industry. "If that is right all we have to do is create the right framework to set these forces free," concluded Priddle, who admitted he was finishing on an optimistic note "despite himself."

But the lack of a shared global understanding of the problem and a common vision remains the greatest obstacle, said Chris Hazard of PN Energy Services in South Africa. "At present there is almost an impression that rich and poor countries are talking past each other." The real needs of developing countries are not being dealt with by rich countries, while the concerns of the rich countries are not be acted upon by poor countries. "It is now time for true reciprocity between rich and poor countries because they are ultimately interdependent," continued Hazard Williams. "The European Union, the Group of Eight industrialised countries, the World Bank and the United Nations need to co-ordinate their development activities more effectively to avoid duplication and waste of time."

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