Renewable Energy: Explosive Growth, Tricky Integration – 6/6/16

Renewable energy use around the world has grown explosively over the last decade with a six-fold increase from 85 GW to 657 GW in non-hydro renewables.

Last year’s investment in renewable technologies was of $285.9 billion. It was the first year investment in developing countries was higher than in developed ones with three of the world’s most populous nations, China, India and Brazil accounting for more than half ($156 billion) of all investment.

Falling costs have driven the widespread adoption where traditional concerns over energy security, climate change, and air pollution could not. Between 2009 and 2014, prices for solar modules fell 75% which outpaced most expectations with similar cost reductions for wind. Those cost reductions are primarily technology-based (i.e. permenant improvements to cost-effectiveness) putting increasing pressure on fossil-fuels.

Jarring swings in fossil-fuel prices and the falling cost of renewable energy substitutes have encouraged electricity sectors to use resources less susceptible to the volatility of commodity pricing. Many companies and governments continue shifting capital away from coal power plants to avoid holding stranded assets. Coal-based electric generating capacity additions have dropped off sharply in the last few years, none are planned for 2016.

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The rise of renewable energy comes with a new set of challenges.

Variability in supply caused by large amounts of wind energy additions to the grid can cause system-balancing issues often dealt with by curtailing wind generation, which means wasting wind power unless power grids are expanded or upgraded. The problem may also be solved by battery storage if costs keep falling faster than expected thanks to economies of scale prompted by increased demand from electric car manufacturers.

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In addition, the decentralized nature of residential PV panels threatens to upend the business models of traditional utilities as they reduce revenue streams used to account for large fixed costs related to building infrastructure. Net-metering policies, where utility customers can sell the excess electricity to the grid, in particular are raising concerns about how utilities are going to deal with the rise of residential solar. The balance between cost and benefit among customers involved in net-metering and those who aren’t is becoming both harder to maintain and more important to consider as solar panels are installed in greater numbers.

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