Industry fears ambitions for renewables outsrip reality
Amid a wave a renewable energy targets issued by European governments, the wind and solar power industries warn of the practical hurdles they need to overcome. Sonja van Renssen reports
“The UK is now the world’s number one location for investment in offshore wind,” announced British industry minister John Hutton at a conference in Berlin in December. He outlined proposals to dramatically upscale the country’s offshore wind capacity to 33 gigawatts (GW) by 2020 – four times the level currently planned.
Other EU countries have also announced big plans for wind power expansion. For example, in the same month the Swedish energy agency proposed a twenty-fold increase in wind power to 30 terawatt hours (TWh) per year by 2020. This is a huge leap from an existing target to reach 10TWh by 2015.
There are similarly ambitious plans for solar power, another promising renewable energy technology. Spain’s industry ministry last autumn said it wants to triple photovoltaic (PV) power to 1.2GW by 2010. This form of power uses the sun’s energy to generate electricity; it is distinct from solar thermal power, which uses it for heating.
These ambitious plans have not materialised out of thin air. According to renewable energy consortium Eurobserver, the EU’s wind industry grew by a record 19 per cent in 2006, to 48GW. Europe accounted for two thirds of the sector globally. The consortium also reported 57 per cent growth in the PV industry, to 3.5GW, exceeding the EU’s 2010 target.
But despite strong past growth and ambitious plans, there are concerns in the wind and solar industries about the viability of the latest commitments.
Proposals for a renewable energy directive published by the European commission in January were described as a milestone by the renewables industry.
“We will have market clarity for the next 13 years like nowhere else in the world and much more stable investment,” says Peter Brun, senior vice president at Danish wind turbine manufacturer Vestas. The company has a leading 28 per cent share of the global turbine market.
Mr Brun expects the commission’s proposal to provide more certainty over renewables support schemes and to push member states to address barriers such as planning procedures and national grid connection. These are the wind industry’s three major concerns, he says.
Gordon Edge, director of economics at the British Wind Energy Association (BWEA) also highlights stable, long-term government support as a priority.
The UK’s renewables obligation, which requires electricity firms to source a rising proportion of power from renewable sources, must be extended beyond its 2027 cut-off, he says, otherwise few new wind farms will be built after 2017.
Mr Edge expects Britain to source 25-30 per cent of its electricity from wind by 2020. To achieve this, planning and grid connection delays must also be overcome. Over 200 planning applications for onshore wind farms in the UK are stuck in the system, some for more than four years.
Meanwhile, planning delays for grid connection mean that even after a connection is agreed it can take up to ten years to win approval and build transmission lines.
Mr Brun says these issues affect more countries than just the UK. Not everyone shares his view that the EU renewables directive will help address the problems.
“We’re a bit nervous,” says Mr Edge. “Certainly the primary nervousness stems from the possibility of any form of trading impinging on the success of national mechanisms.”
He fears an EU-proposed cross-border trade in guarantees of origin (GOs) could put the UK’s renewables obligation in doubt. Mr Edge argues there is no case for harmonising the renewables market when the electricity market is not fully liberalised.
The European Photovoltaic Industry Association (Epia) is more than nervous. It fears the EU directive may undermine its existence. “Trading would be very bad for our industry,” said Christoph Wolfsegger, economist at Epia. “There will be one value for [GO] certificates and that will probably be so low that investors cannot get back their PV investment.”
PV is one of the least competitive renewable technologies today, but has a huge potential to reduce costs, says Mr Wolfsegger. He fears GO trading would reduce investment by undermining feed-in tariffs, which provide technology-specific support. PV has only taken off in countries with feed-in tariffs.
An opposite view is being put forward by at least one utility – with a trading desk – which believes trading can complement existing support schemes. A full trading system would allow utilities to sell their GOs to the highest bidder in Europe.
Supply chain skirmishes
Even with fewer regulatory hurdles and long-term government support, renewables targets may still hang in the balance.
One of the biggest constraints on wind power has been a global wind turbine shortage. This has forced delivery delays and price rises of 40-60 per cent in the past 3-5 years.Manufacturers have been reluctant to gear up production capacity because of uncertainty over long-term demand. Industry representatives like Mr Brun say this will change with the new EU renewables directive. But will the industry be able to keep up with demand?
“It’s a major concern,” says Anders Dahl, head of wind energy at energy giant Vattenfall. “The supply market is very constrained… and this negative impact will increase with more ambitious targets.”
Growth of the wind market outside Europe is stretching suppliers. In 2007, the US put up 5GW of turbines, 2.5 times what the UK has built since 1991. “It’s just gone bananas,” says Mr Edge. Other parts of the world are following.
Manufacturers are investing heavily to keep up, but there is also a shortage of component parts, especially gearboxes and bearings. Indeed Mr Edge believes competition is greater at this level. Parts are in short supply not only because of the booming wind sector, but also because many are used by other industries. Steel plates, cables and control systems are being hoovered up by China and India. These emerging giants have also put pressure on the raw materials, such as steel and copper, that make turbines.
Both parts and turbine manufacturers are working hard to increase their capacities. Bearings supplier SKF plans to double its production every two years in the next 4-5 years, says Mr Dahl.
Others are exploring more creative solutions. For example, Germany’s top turbine manufacturer Enercon sells a model that uses magnets instead of a gearbox.
A shortage of skilled engineers also must be addressed, believes Mr Dahl. Turbines are the most demanding application for gearboxes and only few companies have the skills to make them for this purpose.
With supplies tight and likely to remain so for some time, wind power companies are fighting over what’s available. Large utilities are winning the battle, especially in the newer, riskier field of offshore wind. Impressive balance sheets, ability to bulk buy and credibility give them preferential access to suppliers.
Oil and gas companies such as StatoilHydro are exploiting their offshore know-how to access the sector. One advantage they have is vessels to install turbines. Wind power developers must compete for these with the oil and gas sector.
The PV industry has suffered in recent years from a shortage of silicon, which is essential to solar cells. While the raw material is plentiful, processing capacity is limited. This problem is “almost over now” though, says Mr Wolfsegger, as suppliers have boosted capacity.
Policy and resource issues dominate the wind and solar industry’s concerns today. But others loom on the horizon.
In September last year, several offshore wind farms had to be shut down because of corrosion damage, reported Norwegian engineering journal Teknisk Ukeblad. It said the problem was so severe that Vestas stopped all sales of offshore turbines over 3MW. At the time, Mr Dahl warned that material defects threatened offshore wind’s future.
A second major concern is the impact that a high degree of wind power, which can be intermittent, would have on electricity supply. Most studies have modelled the impact of wind supplying 20 per cent of electricity at most, but the UK at least envisages a far higher contribution. Mr Edge says the intermittency problem could be controlled by building inter-connectors to mainland Europe to diffuse the effect across a bigger system.
In the PV sector, there is the rising spectre of the EU’s waste electronic and electrical equipment directive. In October last year, Epia launched an EU-wide voluntary take-back system for PV waste to try to avoid future coverage by the directive. It says this will enable it to recover 90 per cent of PV waste by 2015.
Yet, despite the concerns, the overall mood in the renewables sector is positive. “The 20 per cent renewables target has totally changed the game for us,” says Mr Edge. “We have lost a cringe.”
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