Worrying Deceleration In The Growth Rate of Wind & Solar

The latest report from the Renewable Energy Policy Network for the Twenty First Century (sponsored by the United Nations)[1] is witness to is a significant deceleration in the growth rate of wind and solar capacity increases. For wind energy, the yearly capacity growth rate has subsided from about 20% up to 2010 to around 14% now. Solar capacity growth has decelerated from around 40% to around 20%.

Such a deceleration is not surprising, as it becomes harder and harder to keep up a growth rate as the installed base gets larger and larger. As wind and solar (together with biomass and geothermal) provided only 1.4% of the world’s final energy consumption in 2014, radical policy and investment actions from governments will be required for wind and solar to significantly decarbonize the economy. In 2015, the global total for all renewable investments was only 3% higher than the previous peak in 2011.

Global renewable capacity growth did pick up somewhat in 2015, with wind capacity growing by 25% in 2015, but this seems to have been mostly driven by Chinese developers rushing to beat an end-of-year phase out of higher feed-in-tariffs[2]. The result was a large drop in Chinese renewable investment spending at the start of 2016, leading to a fall of 22% at the global level[3]. The problems generated by rapid growth, and the resulting rapidly increasing scale, may be being seen in Europe where investment in renewables fell 21% year over year in 2015. This is the lowest level of European renewable investment in 9 years. Adding relatively small amounts of solar and wind to an energy network is relatively painless, but as the amount increases the economic and technical complexities can rapidly escalate.

Apart from the need for an ever-expanding level of capacity increases to keep up the yearly growth rate, there are major hurdles to the rapid rollout of intermittent renewable energy sources. Firstly, in the absence of non-hydro cheap massive-scale energy storage, they need to be balanced by other sources that can be easily ramped up and ramped down. In nations such as Canada and Norway, which have abundant hydroelectric capacity not impacted by possible climate change induced drought conditions, this may not be a problem. The only other alternative is to use fossil-fuel (and some bio-mass) based dispatchable power generating plants, as has been the case in Germany. That country reached a 5.9% electricity share for solar and 13.3% for wind in 2015[4].

Solar and wind tend to destroy the profitability of the fossil fuel (and nuclear) providers. As the variable cost of wind and solar is zero, when they reach peak output they tend to drive the marginal cost of electricity down to zero, or even below. Nuclear and coal plants cannot quickly reduce output and therefore need to supply a relatively fixed amount in the short-term. With solar and wind offering zero cost electricity, this results in nuclear and coal plants having to pay to provide energy to the grid (i.e. negative prices)[5] [6]. Repeated cycling up and down of backup natural gas generating plants also tends to reduce fuel efficiency and increase maintenance costs. In Germany (as in most countries without extensive use of air conditioning) the peak of electricity demand is between 9am and 3pm, a time when traditional electricity providers used to be able to charge higher prices. As this period is also the peak generation period for solar energy, the previous highly profitable mid-day demand peak prices were competed away, further reducing profitability[7]. Even places like California, where the extensive use of air conditioning pushes the peak demand period into the late afternoon, are starting to grapple with this aspect of solar electricity generation[8]. As the penetration of wind and solar escalates, these issues can only escalate.

The result is either financial difficulties for fossil fuel and nuclear providers, or increasing government subsidies to keep that capacity in place. The latter will be required so that capacity is not reduced faster than renewables can replace it; to keep the required dispatchable capacity in place; and to keep energy providers financially viable. As large-scale electricity generating plants have been financed on the assumption of many decades of profitable activity, any reduction in their active life may lead to very large financial losses and possible insolvency for the energy providers. In the short-term Germany has partially evaded this issue through its decision to close down its nuclear generating plants after the Fukushima disaster, together with increasing electricity exports. Going forward it may have to slow down its growth in renewables to limit the scale of premature closures of current generating plants[9]. Rapidly growing countries, such as China, have side-stepped these issues in the short-term as new renewable capacity helps supply the increased electricity generating needs rather than replacing current plants.

As intermittent renewable energy sources become an increasing percentage of electricity grid capacity the scale of the issues created by this transition will escalate. This will be the reality for any replacement for our massive energy infrastructure; simple extrapolations of previous growth rates are not realistic, even if the required financial resources could be put in place. The growth in renewables in a given country will rapidly slow down as the sheer scale of incremental investment escalates and the above, and other, issues intensify. Extending the provision of electricity to replace the usage of such things as liquid fuels will add another layer of complexity and inertia (electricity provides less than half of humanity’s energy usage). Continued economic growth driven increases in energy demand will then provide a moving target that the renewables will not be able to catch up with.

A report by Bloomberg New Energy Finance[10] shows this reality in an otherwise optimistic assessment for the future of renewable energy. This assessment assumes a 24-fold increase in utility-level solar capacity, 17-fold in local solar capacity, 25-fold in offshore wind, and 5-fold in onshore wind by 2040. In addition, it sees energy efficient technologies reducing demand growth by nearly half. Even with such huge renewable capacity growth, and increasing energy efficiency, the 56% growth in electricity demand (driven by economic growth) during the same period means while renewables decrease the share of fossil fuels in electricity generation (67% to 44%), the generation by fossil-fuel sources hardly changes between 2014 and 2040. Carbon emissions from the electricity sector keep increasing until 2029, then slowly decrease to a level still 13% higher then in 2014 (and this does not include the effects of fugitive methane emissions from increased usage of natural gas).

De-carbonization, driven by increased renewable usage, can only be part of the answer to a rapid reduction in human carbon emissions. The other parts must include radically enhanced energy efficiency and an acceptance of limits on economic growth. This can only be achieved by much greater government action, through such things as the setting of a high carbon price and investment in infrastructure to support renewables (in the same way that the post-war motorway boom in North America and Europe enhanced the usage of oil), and a move away from growth-oriented efforts to improve social welfare in the richer countries. Additionally, the rich countries must help the developing countries to power their development in ways that do not lead to increasing levels of coal, oil, and natural gas usage. With no increase in the level of global carbon emissions, the 450ppm limit will be exceeded in 2035. With the increased emissions seen in the Bloomberg assessment, this “climate safety limit” will be breached years earlier.

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