Employment Potential of Emerging Renewable Energy Technologies

Floating solar photovoltaic (FPV) technology offers a new and additional pathway to realize India’s clean energy ambitions. It taps the country’s large water reservoirs to overcome some of the persisting issues of ground-mounted solar, such as the lack of levelled land, evacuation infrastructure and performance degradation due to high operating temperatures. Concurrently, FPV provides additional employment opportunities. The Council on Energy, Environment and Water (CEEW), the Natural Resources Defense Council (NRDC), and the Skill Council for Green Jobs (SCGJ) have undertaken periodical studies to estimate the direct jobs created in the solar and wind industry since 2014. In this study, we estimate the direct employment potential across the project deployment cycle in the FPV sector. This estimate is drawn from project-based case-studies generated through surveys and interviews with manufacturers, developers, and EPC (engineering, procurement, and construction) providers. We also provide an insight into the operational strategies and team structure in addition to discussing the typical duration of different phases of project development and the corresponding workforce employed.

KEY FINDINGS

• A small-scale FPV plant (capacity <1 MW) directly employs 58 workers while a mid-scale (capacity <10 MW) plant 45, over the course of their deployment.

• The FPV sector generates indirect job opportunities through manufacturers of specialized components like floats, anchors, and mooring system as well as domestic module manufacturers.

• The FPV sector offers opportunities for people qualified in hydraulic engineering, marine
architecture, and plastic blow-moulding techniques, some of the key skills required for bringing an FPV plant to life, in addition to those required in groundmounted solar operations.

• By setting time-based targets for FPV capacity, the government could widen the employment potential of this sector, which would bolster efforts to drive India’s COVID-19 economic recovery and achieve its Paris Agreement goals.

Table ES1 Overview of Operations in Deploying a Floating Solar
Photovoltaic Plant of Different Capacities

Employment Insights from the Development of a Mid-Scale Plant

Figure ES1 Time-Share (days) of Project Development Cycle
Phases for a Mid-Scale FPV Plant

Floating photovoltaic (FPV) solar is an emerging technology in which solar photovoltaic (PV) modules are installed (floated) on a water body. Asia has taken a lead in FPV solar deployments, driven by rapid capacity deployments in China, India, South Korea, Taiwan,
Thailand, and Vietnam, and is expected to host two-third of the global capacity. FPV’s global installed capacity was 2.6 GW by August 2020 and a study projects a 20 percent annual growth till 2025.1 A conservative estimate puts the global FPV potential at 400 GW, which indicates enormous opportunities for this sector’s growth.

For clean energy transition, FPV technology offers immense opportunities for India, as water bodies are spread across its vast landscape. By the middle of 2019, India had about 2.7 MW of installed FPV capacity and projects with a combined capacity of 1.5 GW capacity are under development.3 The Government of India has set a target of achieving 10 GW of FPV capacity by 2022.4 According to someestimates, India can build 280 GW of FPV capacity by by utilizing about 30 percent area (nearly 1,800 square kilometres) of its medium and large water reservoirs.5 The bid prices for FPV tenders are also steadily declining, registering a 45 percent drop in prices between 2016 and 2018. As a result, India has achieved the lowest cost for FPV projects at `35 ($0.5)/watt, which was offered during the bid for 70 MW FPV capacity in Kerala.

OPPORTUNITIES FOR FPV IN INDIA
FPV offers a promising option for supporting India’s clean energy transition. FPVs face fewer challenges compared to ground-mounted solar plants which are often confronted with issues such as unavailability of levelled land for installation, lack of power evacuation infrastructure in proximity to the installation site, and performance losses due to high operating temperatures. FPV eliminates the need for land by exploiting the existing artificial and natural water bodies like reservoirs and lakes. When these water bodies are in close proximity to an electricity generation site (e.g. hydropower dams or thermal power plants), an easy access to the transmission network is assured. The efficiency of solar generation is also enhanced by cooling effect of the water beneath and reduced soiling of the module surface.

Overview of floating solar technology

An FPV system consists of PV modules mounted on a floating structure, supported by mooring lines and anchors embedded in the water bed. The floating structure consists of a float, commonly made of high-density polyethylene (HDPE), designed to withstand water currents, local wind, and weight of the PV modules and auxiliaries. The floats are occasionally made of fibrereinforced plastic (FRP) and metals. Cables connect the modules to the inverters, which are typically installed at the shore. Figure 1 shows a schematic representation of a typical FPV system with its main elements.

Figure 1 Schematic Representation of Different Components of an FPV Plant

METHODOLOGY
As FPV is a sunrise sector of the economy, we use a project-based analysis to assess the employment potential in the sector. We derived insights about operation strategies, organisational structure, and employed workforce at a project level through surveys and interviews with manufacturers, developers, and engineering, procurement, and construction (EPC) providers.

KEY FINDINGS AND DISCUSSION
We provide insights from the survey responses and telephonic discussions in this section. We have gathered details on the average duration of activities and number of people employed along with how the duration of activities and workforce employed change based on the project size and company profile. These are indicative numbers based on the limited responses. A more comprehensive study undertaken when the sector matures would provide a clear picture of overall employment created over the course of an FPV project.

Figure 2 An FPV Solar Project Traverses Four Stages for a Successful Deployment

OPERATION AND MAINTENANCE
Operation and maintenance (O&M) of FPV plants are relatively smoother than ground-mounted solar. This is because installations on water do not give rise to issues like
accumulation of dust and/or sand, common in groundmounted installations. Therefore, periodic maintenance, which includes activities such as module cleaning and site cleaning, is done only four times a year for a small-scale plant and 28 times a year for a mid-scale plant.

Overview of Operations in Deploying a Floating Solar
Photovoltaic Plant of Different Capacities

We are upbeat about the sector’s potential to grow, and our respondents foresee an increase in employee strength in the coming three years. An interesting observation from our case-study is the possibility of additional employment prospects for local boatmen in project sites. Since the FPV project is primarily accessed by a boat, for carrying out installation and maintenance activities, the developers and EPCs can outsource these services to the local community living close to the water body. Although the number of jobs created would be small, it surely opens up an additional source of livelihood.

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How India’s Solar and Wind Policies Enabled its Energy Transition

Trading Coal Plants for Solar Farms in India | NRDC

In 2015, India announced ambitious targets for renewable energy—175 GW by 2022—one
of the largest expansion initiatives in the world. Just four years later, at the United enewable energy (RE) capacity to 450 GW by 2030 (PIB 2019). India’s journey to reaching these targets is at a critical juncture. The pace of capacity addition in utility-scale wind and solar power, which saw a rapid increase during 2014–2017, has since slowed down (Figure ES1).

Figure ES1
Pace of capacity
addition in wind and
solar projects has
slowed down

Private investment has shaped deployment trajectories so far. Today, solar and wind technologies have advanced, supply chains have strengthened, and expertise has developed.
Despite the highs and lows, investor confidence in India’s RE sector continues to remain robust. Further, many factors favour investments in RE. It has proved itself to be resilient in
times of crisis, including the COVID-19 induced shocks in 2020. There are strong signals
that RE is a preferred choice, not just because of its green attributes, but because of its
favourable cost economics for all stakeholders.

Central policies: kickstarting solar but leaving wind behind
The initial drivers for RE capacity addition were fiscal, financial, and tax incentives, like
accelerated depreciation, generation-based incentives, and feed-in tariffs (FiTs) determined
by state commissions. Wind turbine manufacturers were the first movers. The de-licensing of
generation under the Electricity Act 2003 (EA) set the stage for private investments in RE.

Currently, apart from setting up inter-state projects, there are no other mechanisms to equitably share the costs of hosting RE projects to supply power to other states. Further, despite RE tariffs attaining grid parity, investors continue to rely on RPOs for demand creation, indicating deeper causes obstructing further RE penetration in markets. Inadequate compliance of Central policies by states also point to certain legitimate state concerns that may not have been addressed (Figure ES2).

Figure ES2
State concerns that
remain unaddressed
in Central policies till
2014 and beyond
Source: Authors’ analysis

Private investment has shaped deployment trajectories so far. Today, solar and wind technologies have advanced, supply chains have strengthened, and expertise has developed. Despite the highs and lows, investor confidence in India’s RE sector continues to remain robust. Further, many factors favour investments in RE. It has proved itself to be resilient in
times of crisis, including the COVID-19 induced shocks in 2020. There are strong signals that RE is a preferred choice, not just because of its green attributes, but because of its favourable cost economics for all stakeholders.

From approximately 21 GW of utility-scale solar and wind capacity at the end of financial year (FY) 2012 (1 GW solar and 20 GW wind), India achieved 70 GW capacity by 31 September 2020 (32 GW ground-mounted solar and 38 GW wind) (MNRE 2020b). This growth story is undoubtedly remarkable. Solar and wind energy have also proved to be resilient in times of crisis, including during the COVID-19 pandemic in 2020, and have continued to attract investment and attention from policymakers.

Figure 1
The rate of growth
in solar and wind
capacity addition
is slowing down
(2008–2020)

Before we embark on a policy analysis to determine the best tools to address the above challenges, we look back and study the sector’s evolution and evaluate the policies’ impact
on RE. As RE growth slows and faces newer challenges, it is the right time to conduct such
an analysis. Such an exercise will enable us to understand what are the gaps in the existing
policies that need to be mended to adapt to the changing dynamics and yet achieve our
objectives. The legislative architecture, along with a diversity of stakeholders and their objectives and interests, makes power sector policymaking and governance a complex space.
Therefore, policy evaluation can be done through multiple lenses. This study focuses on
the evolving risks for project developers in the bulk RE procurement market and the policy
response of the Centre and states to those risks.

Solar Park Scheme
Land procurement in India is hugely complicated, with challenges ranging from the legal to the political (TERI 2017). For developers, private procurement is expensive and timeconsuming. This is evidenced by the consecutively increasing time limit for obtaining possession under the NSM. In Phase I, 180 days was the time limit; in Phase II, Batch I, the time limit was increased to 210 days; and currently, developers must show possession only at the time of commissioning the project.

The pace of solar
park development
under the Central
scheme has been
slow (as on 31
December 2019)

Renewable purchase obligations – a regulatory mechanism for creating demand

The NSM, Solar Park Policy, and other fiscal incentives are supply-side measures, targeted
at reducing investment risks. However, a measure to create demand was essential because
RE was considerably more expensive than conventional power in 2010. Demand for RE was
created through the RPO mechanism.

Setting RPO targets
The RPO targets notified by states are set out in Table A1 in the Annexure. As is evident,
states’ RE ambition varies widely, and there was considerable variance between them and
the NAPCC targets. Karnataka, Tamil Nadu, Maharashtra, and Rajasthan set relatively high
targets, while Andhra Pradesh, Bihar, Madhya Pradesh, and Uttar Pradesh set quite low
targets.

Compliance with RPO
The obligated entities can comply with their RPOs through two routes: direct procurement (FiT/competitive bidding) and purchasing RECs from power exchanges. State regulations typically contain provisions for monitoring compliance, which require the obligated entities to submit information to the state nodal agencies, and the nodal agencies are required to file periodic compliance reports with the SERC. The SERC can also initiate suo moto proceedings to verify compliance.

Variance in compliance within states
The MNRE has consistently been urging states to align their RPO trajectories with that of
the Central Government and ensure strict compliance. In August 2019, the MNRE sought
APTEL’s intervention to nudge SERCs to enforce and align RPOs and not to allow any waivers
or carrying forward (MoP 2020a). In 2019–20, some RE-rich states, including Maharashtra,
Gujarat, Tamil Nadu, Rajasthan, and Telangana, fell short of meeting their RPO targets.
Apart from Andhra Pradesh, Rajasthan, Karnataka, and, more recently, Tamil Nadu, no
other state has met their RPO targets (MoP 2020a). Figure 4 compares the RPO compliance
situation across 2015–16 and 2017–18 of Tamil Nadu, Maharashtra, Bihar, and Punjab and is
representative of the compliance situation across the country.

Figure 4
Compliance with
RPOs is uneven
among states and
discoms

Participation in the REC market mechanism
The trading mechanism instituted for RECs in the power exchanges has not led to its uptake,
as there has been a consistently high number of unredeemed RECs (see Figure 5). In addition,
developers installed only around 2266 MW of RE capacity in 2010–2017 under the REC
mechanism.

Figure 5
RECs consistently
remain unsold in the
market

Policy evolution in RE-rich states

The southern and western states of India have a long history of RE development since RE
resources are concentrated in these states (Figure 7). These states attracted investments in
solar and wind energy well before the launch of NAPCC and the NSM. This section recounts
the journey of RE policies in states that have high solar and wind energy potential. The RErich states covered are Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra,
Rajasthan, Tamil Nadu, and Telangana.

Figure 7
RE resource potential
is concentrated in
western and southern
India

Policies pre-2014
In January 2009, Gujarat became the first Indian state to launch a solar power policy (Economic Times 2010). In 2012–13, over 40 per cent of Tamil Nadu’s total capacity was based on wind power (TN Energy Department 2012), well before the Government of India adopted the ambitious target of 175 GW RE capacity by 2022, including 60 GW wind.

Global market developments
Apart from reduced risk perceptions due to stronger institutional mechanisms, developers’
expectation of fall in solar module prices also drove them to place extremely aggressive bids
in the auctions (Deign 2017). Solar module prices witnessed an overall drop in prices (see
Figure 9). However, even small fluctuations in module prices can affect project economics
adversely.

Figure 9
Average module
(multicrystalline)
prices have declined
(2011–2019)

There were short periods when module prices increased during 2017–2020 due to various
reasons such as China slashing its subsidies, reduced polysilicon supply in China, module
suppliers demanding price renegotiation, and supply chain disruptions due to the COVID-19
pandemic (Bridge to India 2017). Excessive reliance on imported modules and largely from a
single country, makes the projects vulnerable to geopolitics and domestic policies intended to
promote domestic manufacturing (Chawla 2020).

2016 onward, SECI’s tendering activity has shifted towards ISTS-connected solar projects.
Between 2016 to 2019, it issued tenders worth 13,000 MW of solar PV capacity (ISTS I to ISTS IX) and 12,600 MW of wind capacity (Tranche I to Tranche IX). Figure 12 shows the deployment progress of solar projects awarded under the ISTS I to ISTS IX tenders by the SECI (as of August 2020).

Figure 12
ISTS-connected solar
PV projects have
poor completion
record

Policy evolution in RE-deficit states

As discussed above, southern and western states in India have abundant RE and land resources to develop large-scale wind and solar power projects. However, the northern states in the Indo-Gangetic plains are densely populated, agricultural states. The mountain regions in the north have excellent solar resources and are sparsely populated but have forest areas and difficult terrains and low transmission capacities. The coal economy is dominant in the eastern states.

Looking back to look ahead

With the evolving policy landscape at the Central and state level, we have seen India’s renewable energy sector grow tremendously. In 2010, the total installed RE capacity was just about 18 GW, which has grown almost five-fold over the decade. As our analysis suggests, there were high and low points in this journey. Every time a roadblock emerged, India has been successful in testing and identifying alternate approaches and solutions. Some of these include bundling solar power with conventional power to counter high tariffs in 2010; introducing solar parks when deployment became slow and tough; increasing RPO targets to create the necessary demand; creating and backing SECI to address counterparty risks; accelerating tendering activity to signal a commitment to creating strong pipelines; encouraging solar–wind hybrid parks to improve utilisation factors; introducing protocols and mechanisms such as market-based economic dispatch, a real-time market, and a green term ahead market to optimise grid integration costs. With economics favouring RE, its share in India’s electricity mix is only expected to grow.

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The Future of Distributed Renewable Energy in India

The Future of Distributed Renewable Energy in India - CPI

India is the world’s third largest carbon emitter, with emissions expected to rise as the economy grows. While this economic growth is important for advancing development objectives, especially in the wake of a likely recession due to the COVID-19 pandemic, it
also poses a challenge as around 600 million people in India are at risk from the impacts of
climate change such as floods, wildfires, and heat waves. Additionally, inaction on this threat
could shave USD 1.12 trillion off the country’s GDP by 2050,2 eroding progress on sustainable
development and poverty alleviation in a country that already struggles with meeting basic
needs.

India has set ambitious targets to increase the share of renewable energy (RE) in its energy mix. The Government of India (GoI) plans to install 175 GW of renewable energy projects by 2022 and 450 GW by 2030. To put that in perspective, total installed energy capacity in India at the end of 2020 was 379 GW, or which 93 GW (25%) was RE. To date, the government’s primary focus of RE expansion has been on large grid-scale solar. However, achieving India’s ambitious RE targets will also require an increase in distributed renewable energy (DRE) projects. If a more favorable regulatory and policy environment is created, such DRE projects, though smaller in size, have greater scalability potential. They also avoid the long lead times and execution bottlenecks associated with public-sector offtake procurement projects.

Figure ES1: DRE annual financing market

Backed by central government incentives, states had initially created a favorable policy environment for DRE. However, in recent years, a number of these incentives have been rolled back. For example, due to RTS subsidy rollbacks, state electricity distribution companies (DISCOMs) are turning hostile towards RTS as they foresee a loss in revenue, an increase in costs, and the longer-term threat of disintermediation. In addition, the COVID-19 outbreak has had a severe financial impact on all stakeholders, leading to a conservative outlook on demand, profitability, and cash flows.

POLICY GAPS AND OPPORTUNITIES

In addition to its current focus on large grid-scale projects, to meet its sustainable energy goals India needs a shift in policy focus towards creating a robust private market for the DRE sector.
A stable policy environment with incentives for all stakeholders is required to accelerate
growth and would help direct more public and private financing, from domestic and international sources, into the DRE sector. Specific examples developed further in this report
include:

• Rooftop Solar: A more holistic demand aggregation model integrated into the GoI’s Phase
II grid-connected RTS scheme would allow DISCOMs to get both a transaction fee for facilitating the installation as well as monthly fee for Operation & Maintenance (O&M),
such that billing/collection would better allow them to stay relevant and eliminate the
threat of disintermediation.

• Distributed Storage: Distributed energy-storage policy should be integrated with the Phase II RTS scheme. Instead of promoting a capital-subsidy based model, the government should create a more favorable environment for operational models with the involvement of DISCOMs.

• Smart Energy Management: Creating incentives for Internet of Things (IoT) based energy efficiency retrofits, that can attach to existing home circuits, will accelerate energy consumption optimization in households and small commercial establishments. This would not only help reduce energy bills and carbon footprint, but could strengthen overall grid resilience. For example, DISCOMs could move more quickly towards Time-of-Day billing as a part of their demand-side management.

• Electric Vehicle Charging Infrastructure: India’s EV-charging infrastructure should be treated as a public good. Policy should support a decentralized approach, with DISCOMs being the implementing agency for a franchise-based model. Allowing commercial establishments that produce excess solar power from RTS to set up retail charging points would be another step in the right direction.

• Solar Agricultural Pumps: The GoI’s KUSUM scheme currently has a centralized tendering process. Allowing state DISCOMs to partner with private installers at a local level should be considered. DISCOMs could facilitate commercial partnerships with solar pump installers and local farmer co-operatives. The DISCOM, through the installer, could pool the excess power generated from solar pumps into a single point of injection into the grid and pay power purchase costs, net of service fees, to farmer co-operatives.

• Solar Cold Storage: The GoI currently offers a 30% subsidy on solar cold storage installation under its broader rural livelihood subsidy scheme. However, considering the importance of cold storage in the agriculture supply chain, it is vital to create a separate solar cold storage program to bring down capital costs.

• Productive Use Appliances: It is imperative to shift the focus of grants from subsidizing
product purchases to providing project development support to entrepreneurs developing
the products. Equipment subsidies limit grant usage to the number of assets that it
can fund, whereas project development support allows entrepreneurs to both defray
technical assessment costs associated with commercial capital raising as well as develop
commercially scalable business models that reduce the cost of products for end-users.

FINANCING GAPS AND OPPORTUNITIES

The RTS and OGS markets are small and fragmented, largely reliant on philanthropy or subsidized private funding. There is currently limited interest from private commercial capital. Supported by stronger financial-sector policy and strategic public investment, the public, private, development and philanthropic sectors have a tremendous opportunity to work in coordination to open significant new DRE market opportunities for India.

MARKET POTENTIAL

The potential of distributed renewable energy in India is huge. In this section, we outline the
sub-segments that have the highest growth potential for meeting government targets for sustainable energy security in the coming years but have fallen short so far on this front.

ROOFTOP SOLAR
Adoption of rooftop solar by several small and medium industries can play a key role in decarbonizing India’s manufacturing supply chain.

Figure 1: Annual capacity addition

SOLAR AGRI-PUMPS
India has traditionally been an agricultural economy with over 160 million households dependent on agriculture for livelihood.6 Access to reliable water remains a challenge as
only ~50% of the agricultural land in India is currently under irrigation.7 This presents a unique market opportunity to provide solar-based irrigation solutions to around 80 million households in India. The Government of India (GoI), under its KUSUM scheme, has targeted a cumulative installed capacity of 1.75 million solar water pumps (around 6% of the total agricultural pumps in the country) by 2024.8 At the current average price of agricultural pumps of around INR 200,000 (USD 2,700), the estimated annual market size would be INR
10,000 crores (USD 1.5 Billion).

Figure 2: Solar water pump installed capacity

SOLAR COLD STORAGE
India’s weak agriculture supply chain results in significant loss in agricultural produce, leading to loss in income for farmers. The government has set itself a target of doubling farm income by 2024, for which having a robust supply cold storage infrastructure is essential.

Figure 3: Solar cold storage market size

DISTRIBUTED ENERGY STORAGE
Energy storage is a crucial tool for enabling the effective integration of renewable energy and
unlocking the benefits of local generation and a clean, resilient energy supply. The technology is valuable to grid operators around the world who must manage the variable generation of solar and wind energy. However, the development of advanced energy storage systems (ESS) has been highly concentrated in select markets, primarily in developed economies.

Figure 4: Lithium-ion battery costs

In India, factors like operational inefficiencies in the state distribution system, crosssubsidization of agricultural and residential customers, and infrastructure development costs to support government schemes (such as rural electrification) have created a huge revenue gap for DISCOMs, leading to an increase in tariffs for commercial and industrial customers.

Figure 5: Tariff structure in India

ELECTRIC VEHICLE CHARGING INFRASTRUCTURE
India has over 200 million registered vehicles – with the number of vehicles increasing by over 20% in just the last five years. This number is expected to go up significantly in the coming years as private motor vehicle penetration in India is only 4% as compared to about 80% in the United States and about 55% in the EU. By 2030, it is estimated that India will have 600 million vehicles. In 2017, electric vehicles (EVs) accounted for less than 0.1% of the total automotive sales in India. With technology development and favorable government policies leading to a fall in total cost of ownership, it is estimated that EVs have the potential to account for up to 30% of the total automotive sales in India by 2030.

LOW AGRICULTURAL FARM INCOMES FROM UNSUSTAINABLE FARMING PRACTICES
Rural farm incomes in India have traditionally lagged non-farm urban incomes by a considerable portion. This has been a major factor in the recurring cases of agrarian distress
in India leading to multiple bouts of farmer suicides. With agriculture becoming increasingly difficult to sustain livelihoods, an increasing number of farmers of newer generations are
migrating towards low-paid informal jobs in urban and semi-urban areas. This trend is likely
to have an adverse impact on the long-term quality of agriculture in India. With this in mind,
the government has created a policy target to double farm incomes by 2022.

WEAK AGRICULTURAL SUPPLY CHAIN
India’s weak agriculture supply chain results in a significant loss in agricultural produce, leading to a loss in income for farmers. The government has set itself a target of doubling farm income by 2022, for which having a robust cold storage infrastructure in the supply chain is essential.

DEVELOPING THE RURAL SERVICES ECONOMY
Access to a reliable grid-based electricity source remains a challenge for agriculture in India. As a result, mechanization in the farm and non-farm sectors remains low. The total addressable market for equipment such as reaper binders, knapsack sprayers, and rice transplanters has been estimated at around USD 40 billion. A multitude of activities exist in the ancillary (non-farm) agricultural sector that can benefit from reliable clean electricity: milk cooling, flour milling, sewing, weaving, tailoring, pottery, jewelry, poultry, vehicle repair, furniture manufacture, restaurants, retail, etc. The total addressable market for such activities has been estimated at around USD 15 billion.

Figure 6: Total addressable rural services market (USD Billion)

While India has reached 100% village electrification per government statistics, villages suffer from intermittent power. In addition, several village economic activities are located away from village electrified areas, increasing demand for solar-powered productive use appliances.

MANAGING PEAK DEMAND AND SUPPLY DEFICITS
The total household energy consumption was 275 TWh in 2018 and is expected to reach 640 TWh by 2030, a CAGR of 7.5%, due to increasing household electrical appliance use. In addition, commercial energy consumption is expected to increase from 95 TWh in 2018 to 200 TWh by 2022, a CAGR of 6.5%, due to increasing commercial building heating, ventilation, and air conditioning (HVAC) demand.

Figure 7: Energy consumption in India

ROOFTOP SOLAR
The GoI’s Phase II grid-connected RTS scheme, which provides a central role to DISCOMs for disbursement of central government subsidy, is a step in the right direction. However, the program only covers the residential segment and links the fiscal incentives for DISCOMs
to annual installed capacity, which would be difficult to achieve unless the C&I segment is
also considered. A more holistic demand aggregation model, which allows DISCOMs to get
both a transaction fee for facilitating the installation as well as monthly fee for Operation
& Maintenance (O&M) and billing/collection would better allow them to stay relevant and
eliminate the threat of dis-intermediation.

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Renewable energy finance: Sovereign guarantees

FFIDB PARA WEB_BAJA

RENEWABLE ENERGY FINANCE SOVEREIGN GUARANTEES

Less than two decades remain for countries around the world to make drastic cuts in
carbon-dioxide emissions. This is necessary to realise the goals of the Paris Agreement,
which calls for limiting the increase in average global temperature to well below 2 degrees
Celsius (°C) and ideally within 1.5 °C above preindustrial levels. The International Renewable
Energy Agency (IRENA) has estimated the total energy investments needed to fulfil the Paris
Agreement amount to USD 110 trillion by 2050, or USD 3.2 trillion per year.

RENEWABLE ENERGY INVESTMENT TRENDS

As renewables have become a compelling investment proposition, global investments in
new renewable power have grown from less than USD 50 billion per year in 2004 to around
USD 300 billion per year in recent years (Frankfurt School-UNEP Centre/BNEF, 2019), exceeding
investments in new fossil fuel power by a factor of three in 2018.

Another defining trend of renewable energy investments has been a geographic shift towards
emerging and developing markets, which have been attracting most of the renewable investments each year since 2015, accounting for 63% of 2018 renewable power investments
(Figure 1). Besides China, which attracted 33% of total global renewable energy investments in 2018,other top emerging markets over the past decade include India, Brazil, Mexico, South Africa and Chile (Frankfurt School-UNEP Centre/BNEF, 2019).Nevertheless, many developing and emerging countries in Africa, the Middle East, South-East Asia and South-East Europe still have a largely untapped renewables investment potential.

Figure 1 Global renewable energy investment (excl. large hydropower), in USD billion, by region, 2004-2018

In addition to the growing technological and geographical diversity, the renewable energy
investment landscape is also witnessing a proliferation of new business models and investment vehicles, which can activate different investors and finance all stages of a renewable asset’s life. Examples include the rise of the green bond market, growing interest in corporate procurement of renewable power and new business models for small-scale renewables such
as the pay-as-you-go model.

WHY SOVEREIGN GUARANTEES MATTER

Bringing a project to financial close requires all risks that the project bears to be allocated,
mitigated or transferred in a way that makes all stakeholders comfortable. This is no less true for renewable energy projects. Yet for projects in emerging countries, the main “residual” risks that few investors are able or willing to take are often related to the country itself. The buyer of the power may not be creditworthy, there is a risk that the legal and tax environment will change over time, or a new government may want to change the tariffs, among others. The “one size fits all” solution that most financial institutions asked for in the past to deal with country risks was a “sovereign guarantee”.

CURRENT ALTERNATIVES TO SOVEREIGN GUARANTEES

1.Guarantees are replaced by “letters of comfort” and “letters of support” The Ministry of Finance can still issue a document that does not have the same strength as a formal guarantee but that provides sufficient comfort to the stakeholders of the project. Some of these documents include strong commitments that can be legally enforced and are reviewed by the Attorney General, while others are more vague.

2. Use of the preferred creditor status of multilateral banks and insurers
Multilateral financial institutions that are majority owned by member countries and that have a
development role include multilateral banks (e.g., the World Bank, the Asian Development
Bank, the African Development Bank) and multilateral insurers (e.g., Multilateral Investment
Guarantee Agency (MIGA), Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), African Trade Insurance Agency (ATI)).

3. Put and call option agreement (PCOA)
Specifically, for PPAs, some countries have sought for a replacement of the traditional termination clauses that explicitly describe the responsibility of the government. Termination clauses come into effect if the IPP, the off-taker or the government fail to honour their obligations under the PPA. The party that is not responsible for the breach of contract can then terminate the contract and ask for compensation for the loss. In the case of a breach of contract by the off-taker, usually the national utility that is owned by the government,
then the government will have to pay the compensation. This is a contingent liability, and
potentially it accrues to the national debt.

4. Bilateral treaties
Bilateral treaties are agreements between two governments where the parties promise that
transactions made by a company from one country will not suffer from political risk events that are caused by the other government. Contrary to the system described under the PCS, the treaty covers all transactions and there is no notification to the government.

Figure 2 Structure of the ADB’s Pacific Renewable Energy Program

RECENT DEVELOPMENTS

1. Initiatives to improve the creditworthiness of the off-taker
In some countries, the fundamental problem is that the off-taker does not have a strong balance sheet for structural reasons. The logical solution is to improve the creditworthiness of the utility by recapitalising it, improving its management and operations, and ensuring that its revenues match its expenses and enable it to make investments in its infrastructure. This requires significant resources and a full commitment from the government. Several initiatives to achieve this exist in Africa, spearheaded by the World Bank, the African Development Bank and the Millennium Challenge Corporation.

2. Renovar
In this initiative of the Argentinian government, the payment obligations for all renewable energy PPAs are taken over by Renovar, a government institution, taking thus the risk away from the national utility. The payment obligations of Renovar are in turn guaranteed by MIGA, a part of the World Bank Group with an AAA rating. By removing the payment risk this way:
• The government effectively removes the credit risk;
• Transaction costs are reduced as all the IPPs are covered under one single contract between MIGA and Renovar.
This has helped the government of Argentina negotiate low feed-in tariffs.

3. The Regional Liquidity Support Facility (RLSF)
One of the major challenges for an IPP is to guarantee to its lender that even if the off-taker
delays payment, the loan (principal plus interest) will still be repaid on time. The related risk is named “liquidity risk”.

4. The Transparency Tool
This tool was developed as part of the RLSF. All the IPPs of a given country are invited to inform their invoices and their payment records to a webbased platform. The consolidated information is shared with all participating IPPs and with the off-taker. The tool also produces trendlines and other reports that make it possible to assess the experience of an IPP in comparison with other IPPs. The information can be made public from time to time. The objective is to demonstrate that, over time, the off-taker is a reliable payer and thus
there is no need for a guarantee.

5. Partial Risk Guarantees (PRG)
PRGs are on-demand guarantees that are issued by investment-grade multilateral institutions such as the World Bank and the African Development Bank. They can be triggered in case an event that is described in the guarantee letter takes place. In most cases the institution that issues the guarantee requests a back-to-back guarantee from the government (Ministry of Finance).

6. Africa GreenCo
Africa GreenCo is a private initiative that develops an alternative to the off-taker risk in countries covered by the Southern African Power Pool (SAPP). Its objective is to become the official off-taker of renewable energy IPPs. As an official off-taker, it would have the right to sell the power to other participants in the SAPP if the national utility fails to pay. Its creditworthiness would be provided through a mix of strong capitalisation and guarantees issued by investment-grade institutions. In such case, the non-payment becomes a commercial rather than a political risk for the IPP.

7. Push for PPAs in local currency
In many developing countries, the IPPs want to be paid in hard currency (usually US dollars or
euro), since their source of funds and their capital expenditure (“CAPEX”) are usually denominated in these currencies. On the other hand, the off-takers generate their revenue in domestic currency. The depreciation of the domestic currency can thus create a major problem for the off-taker and affect its ability to pay for the power that it purchases. If the PPA is expressed in hard currency but the actual payment is made in domestic currency, but at an agreed exchange rate, the supplier has the risk that it will not be able to make the conversion
in the hard currency. The additional risk is that the IPP will not be able or allowed to transfer its hard currency to a bank account outside the country.

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Renewable energy finance: Institutional capital

Investment in Renewable Energies Drops Globally | Financial Tribune

RENEWABLE ENERGY INVESTMENT TRENDS

As renewables have become a compelling investment proposition, global investments in
new renewable power have grown from less than USD 50 billion per year in 2004 to around
USD 300 billion per year in recent years (Frankfurt School-UNEP Centre/BNEF, 2019), exceeding
investments in new fossil fuel power by a factor of three in 2018.

Another defining trend of renewable energy investments has been a geographic shift towards
emerging and developing markets, which have been attracting most of the renewable investments each year since 2015, accounting for 63% of 2018 renewable power investments
(Figure 1). Besides China, which attracted 33% of total global renewable energy investments in 2018, other top emerging markets over the past decade include India, Brazil, Mexico, South Africa and Chile (Frankfurt School-UNEP Centre/BNEF, 2019). Nevertheless, many developing and emerging countries in Africa, the Middle East, South-East Asia and South-East Europe still have a largely untapped renewables investment potential.

Figure 1 Global renewable energy investment (excl. large hydropower), in USD billion, by region, 2004-2018

In addition to the growing technological and geographical diversity, the renewable energy
investment landscape is also witnessing a proliferation of new business models and investment vehicles, which can activate different investors and finance all stages of a renewable asset’s life. Examples include the rise of the green bond market, growing interest in corporate procurement of renewable power and new business models for small-scale renewables such as the pay-as-you-go model.

INSTITUTIONAL INVESTORS AND RENEWABLES

While the institutional investors analysed in IRENA’s study form a heterogenous group,
operating within different sector-specific and national circumstances, they also face several ommon trends.

Growing assets Their global assets are large and growing. While a broader group including asset managers commands assets of well over USD 100 trillion, the group analysed in IRENA’s report (pension plans, insurance companies, sovereign wealth funds, foundations and endowments) manages around USD 85 trillion (Figure 2), which has been growing at an annual rate of around 4-7% over the past decade.

Figure 2 Assets under management of the institutional investors, USD trillion, 2018-2019 average

Regional shift Markedly faster growth is occurring in emerging and developing markets. This is due to their growing economies, populations and expansion of pension plan and insurance coverage. Double-digit growth rates have been recorded for pension plans and insurance companies in several countries in Africa, Asia and Latin America. Ten out of 20 African sovereign wealth funds were created since 2010 (Quantum Global, 2017). Such local capital can help bridge local infrastructure funding gaps and support long-term sustainable development.

Figure 3 Number of institutional investors with investments in renewable energy
(projects and/or renewable-focused funds), 1990 to Q2 2019

From the sample of over 5 800 institutional investors and their investments for the past two
decades, 37% of institutional investors have made infrastructure investments, 25% have invested in energy-related funds, while 20% have invested in renewable energy-focused funds and only around 1% have made investments directly in renewable energy projects (Figure 3).

Size effect Institutional investors with renewable energy assets are larger than average. Average assets under management for such investors total USD 30 billion, more than double the average assets under management for institutional investors in the whole sample (USD 12 billion). Furthermore, institutional investors with only direct renewable investments are larger than institutional investors with only indirect investments (USD 34 billion of assets under management versus USD 24 billion). As well, the average deal size increases from USD 199 million to USD 434 million when institutional investors are involved. IRENA’s discussions with institutional investors support hypotheses that larger investors have greater internal capacities for investments in relatively new asset classes like renewables, and that larger transactions are more likely to attract institutional investors as bigger ticket sizes lower the per-unit transaction costs.

Investment amount The number of direct renewable energy projects involving institutional investors has increased over time, from as few as 3 recorded transactions in 2009, to 73 in 2018 and 38 for the first two quarters of 2019 (Figure 4). Over the past decade, institutional investors were involved in 231 renewable energy direct financing transactions. However, this represents only 1.8% of all renewable energy projects in the dataset analysed over the same period. The total annual amount financed by institutional investors was nearly USD 6 billion in each of 2018 and 2017 (CPI, 2019). While this marks an increase from around USD 2 billion invested in each of 2016 and 2015, it represents only around 2% of the total renewable project
investments in 2018.

Figure 4 Number of renewable energy projects that involved institutional investors, by technology,
2008 to Q2 2019

Technology preference Around 81% of all renewable power deals in which institutional investors took part over the past decade were in wind and solar technologies. This reflects the global technological trend in the renewable power sector as a whole. However, compared to total renewable power investments over the past decade, institutional investors have favoured wind more strongly. For the 2009-2018 period, global investments in solar projects were around 50% of total renewable energy investments, followed by wind which accounted for
39% (Frankfurt School-UNEP Centre/BNEF, 2019). For the same period, considering only renewable project investments involving institutional investors, wind accounted for 45% and solar for 24% of all transactions. This is most likely because wind is a more established renewable technology with larger transaction sizes that attract institutional investors.
In the sample analysed, the average transaction size for a wind project was USD 211 million, compared to USD 124 million for solar.

Investment stage preference Institutional investors exhibit a strong preference for already-operating assets, which help them avoid early-stage risks associated with the structuring and construction stages. Over 75% of all renewable energy deals involving institutional investors during the 2009 to Q2 2019 period were secondary-stage transactions, i.e., investments in already operating assets not requiring further funding, while around 22% were for the construction of new assets (i.e., greenfield stage), and a small portion went to brownfield projects (already operating assets that require improvement or expansion). Investment
vehicles that help such investors channel their assets into already operating projects are therefore important, as is building internal capacities for earlier-stage investments.

Institutional investors could play a more active role in renewable-sector investments and
become a significant contributor to the global capital shift towards low-carbon solutions. Such
a shift will, however, require combined efforts on multiple fronts with active engagement from all stakeholders: policy makers, institutional investors, providers of public capital, capital markets and others.

Figure 5 Recommended actions to scale up institutional investments in renewable energy

OPPORTUNITIES FOR ENGAGEMENT

As the only international organisation dedicated solely to renewable energy, IRENA is uniquely positioned to support countries in their transition to a sustainable energy future. IRENA provides analytical guidance and develops solutions for market opportunities, successful business models and financial instruments; supports renewable energy projects throughout
their life cycle; leads the global discourse; connects key stakeholders; and provides a global forum for the exchange of best practices.

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Reduce: Non-bio renewables

Biobased Products for a Sustainable (Bio)economy | edX

Introduction Climate change has become one of the greatest threats of this century to environmental, as well as global, security, with adverse impacts on health, wealth and political stability. Over the past decade, energy-related CO2 emissions have increased by 1% per year on average, despite levelling off periodically. If historical trends continue, energy-related emissions will increase by a compound annual rate of 0.7% per year to 43 gigatonnes (Gt) by 2050 (up from 34 Gt in 2019), resulting in a likely temperature rise of 3°C or more in the second half of this century. Governments’ current and planned policies would result in a levelling of emissions, with emissions in 2050 similar to those today, but this would still cause a temperature rise of about 2.5°C. The Paris Agreement establishes a goal to limit the increase of global temperature to “well below” 2°C, and ideally to 1.5°C, compared to pre-industrial levels, by this century. To realise this climate target, a profound transformation of the global energy landscape is essential.

Current Status

This section will show how renewable energy is a proven and available technology by providing the latest figures, trends and market developments in renewable energy deployment worldwide. The strong business case for renewables is demonstrated by their cost, performance and deployment evolution, especially when considering trends in solar PV, wind and other renewable power generation options, along with the growing viability of energy storage technologies. The current innovation landscape for enabling technologies, business models and system operation will also be outlined and discussed.

Renewable power generation continues to grow in 2020, despite the COVID-19 pandemic, but new capacity additions in 2020 will be lower than the new record previously anticipated. Nonetheless, renewables steadily increasing competitiveness, along with their modularity, rapid scalability and job creation potential, make them highly attractive as countries and communities evaluate economic stimulus options.

Figure 1. Evolution of LCOE costs for solar PV and wind onshore (2010- 2019)

The share of renewable energy in electricity generation has been increasing steadily in the past years and renewable power technologies are now dominating the global market for new generation capacity. From 2010 to 2018, the renewable electricity generation share increased
from around 20% to nearly 26%, or 18% to 23% without considering bioenergy.

Figure 2. Evolution of renewable energy in the power sector (2010- 2017/2018/2019)

Dramatic shifts are taking place in the way that energy systems operate, driven by increased
digitalisation, the decentralisation and democratisation of power generation, and the growing
electrification of end-use sectors. Indeed, the main driver for the energy transformation is increased use of electricity, such as in the growing electric mobility revolution. Electric vehicle
(EV) sales (both battery-electric and plug-in hybrids) reached 2.2 million units in 2019 (InsideEVs, 2020a), continuing the growth from the previous year.

Renewable technology and carbon reduction outlook

Renewable energy, combined with intensified electrification, is key for the achievement of the Paris Agreement goals. To help enable the necessary transformation of the global energy sector, IRENA has developed an extensive and data-rich energy scenario database and analytical framework, which highlights immediately deployable, cost-effective options for countries to fulfil climate commitments and assesses the projected impacts of policy and technology change.

However, the reduction of carbon emissions is not the only reason why the world should embrace the energy transformation. Figure 4 (below) outlines other important drivers.

Figure 4. Key drivers for the energy transformation

To set the world on a pathway towards meeting the aims of the Paris Agreement, energyrelated carbon dioxide (CO2 ) emissions need to be reduced by a minimum of 3.8% per
year from now until 2050, with continued reductions thereafter.

Figure 5 shows the possible paths of annual energy-related CO2 emissions and reductions as
per three scenarios: the Baseline Energy Scenario (indicated by the orange line); the Planned
Energy Scenario (indicated by the yellow line); and IRENA’s energy transformation pathway, the
Transforming Energy Scenario (indicated by the blue line).

Figure 5. Annual energy-related CO2
emissions and mitigation contributions by technology in the Baseline
Energy Scenario, the Planned Energy Scenario and the Transforming Energy Scenario (2010-2050)

In the Baseline Energy Scenario, energy-related emissions would to increase at a compound
annual rate of 0.7% per year to 43 gigatonnes (Gt) by 2050 (up from 34 Gt in 2019), resulting
in a likely temperature rise of 3°C or more by the end of the century. If the plans and pledges of countries are met as reflected in the Planned Energy Scenario, then energy-related CO2
emissions would increase each year until 2030, before dipping slightly by 2050 to just below today’s level.

Global pathway and decarbonising with renewables
Under current and planned policies in the Planned Energy Scenario, the total share of non-biomass renewable energy in the total primary energy supply (TPES) would only increase from around 5% to 17%, while under the Transforming Energy Scenario it increases to 42% (Figure 6). Renewable energy use in absolute terms, excluding biomass, would increase from 25 exajoules (EJ) in 2017 to 225 EJ in 2050 in the Transforming Energy Scenario. TPES would also fall slightly below 2017 levels, despite significant population and economic growth.

Figure 6. The global energy supply must become more efficient and more renewable

Scaling up electricity from renewables is crucial for the decarbonisation of the world’s
energy system. The most important synergy of the global energy transformation comes from
the combination of increasing low-cost renewable power technologies and the wider adoption of electricity for end-use applications in transport and heat and hydrogen production. To deliver the energy transition at the pace and scale needed would require almost complete decarbonisation of the electricity sector by 2050.

For power generation, solar PV and wind energy would lead the way. Wind power would
supply more than one-third of total electricity demand. Solar PV power would follow, supplying 25% of total electricity demand (Figure 7), which would represent more than a 10-fold rise in solar PV’s share of the generation mix by 2050 compared to 2017 levels. To achieve that generation mix, much greater capacity expansion would be needed by 2050 for solar PV (8 519 GW) than for wind (6 044 GW).

Figure 7. Breakdown of electricity generation and total installed capacity by source, 2017-2050

G20 overview The Group of Twenty (G20) members account for 85% of the global economy, two-thirds of the global population and almost 80% of global energy consumption. The energy mix in G20 economies is quite varied; however, most countries currently rely on a high share of fossil fuels in their total energy supply and thus are responsible for more than 80% of global CO2 emissions. Yet G20 economies have also become leaders in fostering cleaner energy systems, and their energy transition will shape global energy markets and determine both emissions and sustainable pathways globally.

Table 2 presents the evolution of key energy sector indicators in the G20 from today’s levels in the Transforming Energy Scenario (to 2030, 2040 and 2050). The Transforming Energy Scenario
leads to lower levels of supply and consumption of energy in absolute terms. By 2050, 51% of final energy consumption is electrified, with the highest share in buildings at 65%, followed by transport at 45% and industry at 44%. Renewable energy would have a prominent role in the electricity mix, with solar PV and wind (onshore and offshore) leading the way in absolute terms.

Table 2: Evolution of key energy indicators in G20 for 2017 and for the Transforming Energy Scenario in
2030-2040 and 2050

Socio-economic footprint of the G20 energy transition

A true and complete energy transition includes both the energy transition and the socio-economic system transition, and the linkages between them. Therefore, a wider picture is needed that views energy and the economy as part of a holistic system.

The approach analyses variables such as GDP, employment and welfare (Figure 17). The results from the socioeconomic footprint analysis of the Transforming Energy Scenario globally show an additional net 15 million jobs and a 13.5% improvement in welfare by 2050, as well as an annual average boost of 2% in GDP between 2019 and 2050 compared to the Planned Energy Scenario.

Figure 17. Estimating the socio-economic footprint of transition roadmaps

Energy sector and renewable energy jobs in the G20
The energy transition implies deep changes in the energy sector, with strong implications for
the evolution of jobs. While some technologies experience significant growth (e.g. renewable
generation, energy efficiency and energy flexibility), others would be gradually phased out (e.g.
fossil fuels), and all of this happens simultaneously with the evolution of energy demand.

Figure 18 presents the evolution of energy sector jobs in the G20 for both the Planned Energy
Scenario and the Transforming Energy Scenario, by technologies. The Transforming Energy
Scenario leads to a higher number of overall energy sector jobs than the PES, as declines in the
number of fossil fuel jobs are more than offset by increases in jobs in renewable energy, energy efficiency and energy flexibility. By 2050, nearly 71 million people would be employed in the energy sector in the Transforming Energy Scenario, 46% in renewable energy, 25% in energy efficiency and 15% in energy flexibility. About 13% of energy jobs would still be in fossil fuels.

Figure 18. Evolution of energy sector jobs, by technology, under the Planned Energy Scenario and the
Transforming Energy Scenario from 2017 to 2030 and 2050

Gross domestic product in G20
Figure 23 show the yearly evolution of the difference in GDP between the Planned Energy
Scenario and the Transforming Energy Scenario up to 2050, as well as the impact from
the different drivers of the GDP difference. The energy transition brings about a significant
improvement in GDP, with the increase rising to 3% before 2040 and remaining there until 2050.

Figure 23. Dynamic evolution of the drivers for GDP creation from the Planned Energy Scenario and the
Transforming Energy Scenario across the 2019 – 2050 period

Welfare in the G20
The sections above discussed the employment implications of the energy transition. Beyond
employment, other dimensions affect welfare. To capture a more holistic picture of the energy
transition impact, IRENA uses a welfare index with three dimensions (economic, social and
environmental) and two subdimensions in each. Figure 25 presents the results of the welfare index for the G20 in the years 2030 and 2050. The welfare improvement of the Transforming Energy Scenario over the Planned Energy Scenario is very important, reaching 14% in 2050. Social and environmental dimensions, and specifically the health and GHG emissions subdimensions, dominate the overall welfare index results in the G20.

Figure 25. Evolution of the Welfare index for the G20 under the Transforming Energy Scenario

Barriers to the deployment of renewable energy

Despite the powerful factors driving the global uptake of renewable energy, multiple barriers inhibit further uptake in developed and developing markets. These vary based on specific markets and renewable energy technologies. This section outlines the some of the main barriers globally.

Enabling policies

Five years after the historic signing of the Paris Agreement, countries around the world
are struggling to translate their emissions reduction pledges into concrete actions to fight
climate change. IRENA estimates that if all national renewable energy targets in the first round
of Nationally Determined Contributions (NDCs) are implemented, around 3.2 TW of renewable
power capacity would be installed globally by 2030, 59% short of the capacity needed according to IRENA’s Transforming Energy Scenario. In the G20, around 2.8 TW of renewable power capacity would be installed by 2030, 60% short of the 7 TW envisioned in the Transforming Energy Scenario (IRENA, 2019h). Considerable opportunity exists to raise ambitions in a cost-effective way through enhanced renewable energy targets.

price was USD 48/MWh. G20 countries have been leading these trends (Figure 26), with record
low prices achieved on many occasions in Brazil, Mexico and Saudi Arabia.

Figure 26. Weighted average prices of energy resulting from solar and wind auctions, globally and in G20
countries, and capacity awarded each year, 2011-2018

Measures to improve power system flexibility are needed to enable the integration of
higher shares of VRE. Investment must be steered into innovations in all flexible resources
(storage, demand-side management, interconnectors and dispatchable power plants), market
design and system operations.

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SOLAR SUPPLY CHAIN TRACEABILITY PROTOCOL 1.0 INDUSTRY GUIDANCE

Solar manufacturers, utilities and developers back anti-forced labour  pledge - PV Tech

INTRODUCTION
Transparency of supply chains is paramount. Equipment purchasers, electricity end-users, and other stakeholders demand transparency for reasons ranging from sustainability to corporate social responsibility to import compliance. In this environment, manufacturers must have the proper systems in place to meet stakeholder needs and build trust. To assist the industry, SEIA, with the support of Clean Energy Associates (CEA) and Senergy Technical Services (STS), has developed this Solar Supply Chain Traceability Protocol 1.0 (Protocol) to help manufacturers and importers demonstrate the provenance of their products by developing and implementing a traceability program consistent with the general principles herein.

SCOPE
The Protocol is intended to have universal application across product lines intended for export to the U.S. market.Key adopters of the Protocol will include:
• Equipment manufacturers; and
• U.S. importers.
While the Protocol focuses on the provenance of material inputs, it also recognizes the importance of independent, third-party audits and a strong corporate social responsibility and import compliance platform. In assessing conformance, auditors shall apply a holistic approach which recognizes an organization’s unique business processes. No single factor will be dispositive.

TERMS AND DEFINITIONS
Accountability – State of being answerable for decisions and activities to the organization’s governing bodies, legal authorities, and, more broadly, its stakeholders. Documentation – Documents and attestations sufficient to generally establish place and date of manufacture
and/or transfer of goods. Due diligence – A comprehensive, proactive process to investigate, appraise, or evaluate a product or organization. Due diligence is conducted to identify the actual and potential consequences of an organization’s decisions and activities over the entire life cycle of a project or organizational activity, with the aim of avoiding and mitigating negative impacts.

DRIVERS FOR TRANSPARENCY IN THE SUPPLY CHAIN GENERAL
The motivations of organizations for practicing transparency in the supply chain differ depending on the type of organization and the context in which they operate. Drivers for transparency should be analyzed to help define the transparency objectives and goals for the supply chain and to aid internal communication. This section provides examples of drivers for the implementation of a transparency system in the supply chain.

MANAGEMENT OF TRANSPARENCY IN THE SUPPLY CHAIN RISK APPROACH
One key to establishing a robust supply chain transparency system resides in addressing risk – both internal and external. Risk management should therefore be integrated in the decisional and operational activities and conducted in a dynamic, iterative, and responsive manner.

The organization should identify, prioritize, and address risks to increase its resilience to events which can impede product traceability. This includes considering how suppliers are capable of meeting traceability requirements such as monitoring and auditing. It is recommended that the organization conduct an initial review to create a baseline of the risks and opportunities in relation with its products’ traceability.

INTEGRATION OF TRANSPARENCY INTO MANAGEMENT SYSTEMS CONTEXT
The organization should consider product traceability as a priority issue, internally and externally, in its contextual analysis. Stakeholders should be identified and engaged, and information relevant to material provenance monitored and reviewed.

INTEGRATION OF TRANSPARENCY INTO OPERATIONAL PROCESSES PRODUCT DEVELOPMENT
The organization should factor traceability considerations into the product design process.

SUPPLY CHAIN MAPPING
The organization should be able to present a description of the entities involved in creating the product that is being imported. This description can include an illustration of the links in the supply chain in a step-by-step flow from raw materials to finished goods, i.e., supply chain map. While the map can take many forms, the essential elements of a map are illustrated here:

The map should identify individual steps in the process and each step should include information about that step’s entity, such as the item being produced, a description of the overall manufacturing process(es) being employed, the name of the producer, and the location of production. In the case of multiple suppliers of the same item, the map would indicate multiple entities. In the event there are multiple production locations for an entity that are in the supply chain for the final product, the relevant locations should be identified.

Each time there is a transaction between steps in the supply chain, the importer should disclose the nature of the document that codifies the transaction, i.e., a purchase order, supply contract, etc., as well as identify the business unit of the individual who places the order.
Complex products and products with many components or suppliers can lead to complex supply chain maps. These can be simplified by addressing raw materials or intermediate items that are of particular importance, either because of location, cost, uniqueness of the time, or other factors. A more detailed map is illustrated here:

If wafers from different logs are combined, then a new and unique identifier should be assigned to the mixed batch and the provenance of the wafers in the batch should be linked to the batch identifier.

In short, for a pallet of wafers, perhaps identified only by a unique pallet number, the purchaser of the wafers should be able to trace the provenance back to a specific ingot or ingots.

RELEASE OF PRODUCTS
The organization should integrate traceability and security requirements into its product releasing process. The release process should include, as a minimum:
• Availability of traceability information for the products to be shipped;
• Correct identification of the product;
• Where applicable, serialization of the materials;
• Integrity of the products packaging;
• Presence and condition of security elements, including where applicable, transportation seals; and
• Documentary review of logistic documentation including bill of lading and transportation information.
The organization should have documented procedures to prevent shipment of products that have not passed through the release process. Releasing process shall be conducted by qualified personnel having received supply chain security training.

SOLAR WAFER
Poly-Si inputs for production of monocrystalline silicon wafers destined for use in solar modules should be delivered in designated and uniquely identifiable shipping units, e.g., lot or batch number. The logistics documents associated with each shipping unit should preserve the upstream provenance of the input material and that information should be linked to the output product.

The manufacturing processes of solar wafers should include, when necessary, rigorous controls to prevent mixing of input poly-Si from different sources. Additionally, there may need to be rigorous controls to prevent mixing of intermediate products on the production floor. Each intermediate product generated during solar wafer production should be tracked with a Manufacturing Execution System (MES) that can link each intermediate product to its parent product and resulting product(s).

Solar wafer output material should be boxed in defined and easy to handle amounts, e.g., 100 wafers per box. Each shipping unit above should have a unique serial number that can be used to trace the input poly-Si material.

Where material inputs from different sources are mixed or blended together, the manufacturing process should include rigorous controls to maintain provenance, e.g., the source of both inputs travels across the supply chain. Each intermediate product generated during solar cell production, should be tracked with a Manufacturing Execution System (MES) that can link each intermediate product to its parent product and resulting product.

Solar cell output material should be boxed in defined and easy to handle amounts, e.g., 100 wafers per box. Boxes of cell may be combined into larger boxes which are then combined on a pallet. Each shipping unit should have a unique identifier, e.g., unique box number, that can be used to trace the input solar wafer material. When necessary, manufacturers should also maintain an auditable process for keeping material from different sources physically separated at each intermediate step in the solar cell manufacturing process.

SOLAR MODULE
Solar cell inputs for production of solar modules should be delivered in designated, serialized shipping units. The logistics documents associated with each shipping unit should preserve the upstream provenance of the input material and that information should be linked to the output product.

The manufacturing processes of solar modules should include rigorous controls to prevent mixing of input cells from different sources. Additionally, there must be rigorous controls to prevent mixing of intermediate products on the production floor. Each intermediate product generated during solar module production should be tracked with a Manufacturing Execution System (MES) that can link each intermediate product to its parent product(s) and resulting product(s).

Solar module outputs should be palletized in defined amounts, e.g., 20-30 modules per pallet. Each pallet should have a unique serial number that can be used to trace the input solar cell material.

ANNEX B: GUIDANCE ON RISK MANAGEMENT RISK FACTORS
Supply chain risks can be associated with the following:

RISK MANAGEMENT PROCESS
Risk management processes shall follow an improvement cycle based on the inputs gathered.

RISK IDENTIFICATION
In the risk identification phase, the organization should create an objective list of the risks taking into consideration a variety of factors, such as the nature of risk and changes in risk profile. The organization may use different techniques such as interviews, surveys, and auditing to increase reliability in the characterizations of the risk.

IMPLEMENTATION OF THE DUE DILIGENCE PROGRAM
OVERVIEW OF DUE DILIGENCE PROCESS
The implementation of the due diligence process will consist of the repetition of individual due diligence activities, combined and summarized to provide an overview of the whole supply chain in the scope of the due diligence program.

INITIATING DUE DILIGENCE ACTIVITY
The audit team should first establish a dialogue with the organization’s compliance department and confirm communication channels, including:
• Confirm authority to conduct due diligence activity;
• Provide relevant information on the due diligence process (e.g., scope, criteria, methods, teams, schedule);
• Request access to relevant information to conduct due diligence activity;
• Determine applicable statutory and regulatory requirements;
• Confirm management and treatment of information, especially the management of confidentiality;
• Confirm arrangements including schedule, access, health and safety, and security;
• Confirm attendance of observers where applicable;
• Determine relevant areas of interest or concern with the organization subjected to due diligence activity

NONCONFORMITY MANAGEMENT
In this section, nonconformity refers to findings identified during the due diligence process or to a nonconformity arising from the process itself. Nonconformity arising from the process itself may include:
• Failure to perform due diligence as agreed;
• Unresolved diverging opinions on the outcome of the due diligence process;
• Reported Impartiality or ethical issues occurring during due diligence;
• Competences issues identified during the diligence process; and • Breach of confidentiality or information security occurring the due diligence process.
The organization should establish a process, including reporting, investigating, and taking actions to determine and manage nonconformities. When a nonconformity occurs during due diligence, the organization should as applicable:
• React timely to control the nonconformity;
• Take actions as applicable to correct the nonconformity and deal with the consequence; and
• Take actions to prevent reoccurrence of the nonconformity.

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Global Renewables Outlook: Energy transformation 2050

A WIDENING GAP BETWEEN RHETORIC AND ACTION

The gap between aspiration and the reality in tackling climate change remains as significant as ever, despite mounting evidence of the harm that climate change is causing. Negative effects of climate change are becoming more evident year by year (NASA, WMO, 2020). Yet global energy-related CO2 emissions, despite levelling off periodically, have risen by 1% per year on average over the last decade.

The changing nature of energy and fossil-fuel use
Energy-related CO2 emissions, energy demand and fossil-fuel outlook

PLANNING FOR THE LONG TERM
To achieve the Energy Transformation Scenario, energy-related CO2 emissions need to fall by 3.8% per year on average until 2050. Annual energy-related CO2 emissions would need to decline by 70% below today’s level by 2050. In the Transforming Energy Scenario by 2050, over half of the necessary reductions in emissions come from renewable energy (both power and end use), followed by around one-quarter coming from energy efficiency (see Figure S.7). When including direct and indirect electrification (such as green hydrogen and technologies like EVs), the total reductions increase to over 90% of what is required. The Deeper Decarbonisation Perspective then describes how reducing the remaining emissions to zero – over two-thirds of which come from challenging sectors such as aviation, shipping and heavy industry – will require additional renewable energy, electrification (both direct use and green hydrogen), energy efficiency, carbon management, and other structural and habit changes. Outside the energy sector, efforts also are needed to reduce emissions from non-energy use, emissions from land use, land-use change and forestry (LULUCF), and fugitive gases in the coal, oil and gas industries.

Figure S.7. The bulk of emission reductions: Renewables and efficiency
Energy-related CO2 emissions, 2010-2050

Drivers for the energy transformation
Climate change has become a major concern of this century. The urgent response to
that concern is an energy transformation that swiftly reduces the carbon emissions
that cause climate change. The Paris Agreement establishes a clear goal to limit the
increase of global temperature to “well below” 2 degrees Celsius (°C), and ideally to
1.5 °C, compared to pre-industrial levels, by this century. To realise this climate target,
a profound transformation of the global energy landscape is essential.

Pressing needs and attractive opportunities
Key drivers for the energy transformation

A widening gap between reality and what is needed
To set the world on a pathway towards meeting the aims of the Paris Agreement, energy-related carbon dioxide (CO2) emissions need to be reduced by a minimum of 3.8% per year from now until 2050, with continued reductions thereafter. However, trends over the past five years show annual growth in CO2 emissions of 1.3%. If this pace were maintained, the planet’s carbon budget would be largely exhausted by 2030, setting the planet on track for a temperature increase of more than 3°C above pre-industrial levels. This case cannot be considered as a climate-compatible scenario, as many governments, by signing the Paris Agreement in 2015, committed to reducing their emissions. Figure 1.4 shows the possible paths of annual energy-related CO2 emissions and reductions as per three scenarios: the Baseline Energy Scenario (BES) (indicated by the orange line); the Planned Energy Scenario (PES) (indicated by the yellow line); and IRENA’s energy transformation pathway – the Transforming Energy Scenario (TES) (indicated by the blue line).

Renewables, energy efficiency, electric vehicles and hydrogen can
provide bulk of necessary emissions reductions by 2050
Annual energy-related CO2 emissions in the Baseline Energy Scenario,
the Planned Energy Scenario and the Transforming Energy Scenario, and
mitigation contributions by technology in the three scenarios, 2010-2050

STEPPING FORWARD TO A DIGITALISED AND INTERCONNECTED WORLD
Digitalisation is a key amplifier of the power sector transformation, enabling the management of large amounts of data and optimising increasingly complex power systems. Our increasingly digitalised world is becoming ever more interconnected. The growing importance of digitalisation in the power sector is partially a consequence of increasing decentralisation (e.g., increased deployment of power generators at the distribution level) and electrification (e.g., the emergence of EVs, heat pumps and electric boilers). Recent analysis from IRENA shows how all these new small and distributed assets on the supply and demand sides are adding complexity to the system and making monitoring, management and control crucial for the success of the energy transition.

Internet of Things (IoT) as a driver for power system transformation
Internet of Things in context: Smart grids connecting smart devices from both the demand
and supply sides

Outlook for 2030 and NDC formulation
National Determined Contributions (NDCs) are the backbone of the Paris Agreement, signed by the 197 member states of the United Nations Framework Convention on Climate Change (UNFCCC) in 2015. NDCs include mitigation actions, and in most cases adaptation actions as well, that a country can put in place to stay in line with the agreement. The year 2020 represents a significant milestone in global efforts to cut energy-related CO2 emissions. As countries review and update their NDCs, they could simultaneously raise their ambitions to scale up renewable energy. The new NDC round offers an important chance to strengthen targets for renewables in the power sector and beyond. Present NDC pledges are far from sufficient to meet climate goals. For example, within the power sector, current NDC power targets overlook 59% of the potential for renewable electricity deployment in line with the Paris Agreement by 2030. For a climate-compatible transformation, more extensive deployment of renewable generation capacity, amounting to 7.7 terawatts (TW) (or 3.3 times current global capacity), could be achieved cost effectively and would bring considerable socioeconomic benefits (Figure 1.18).

Figure 1.18 Nationally Determined Contributions: Currently insufficient
to meet Paris Agreement climate goals
Renewable energy installed capacity in different scenarios

GLOBAL SOCIOECONOMIC IMPACT

Renewable energy technologies are at the heart of the needed energy transition. The roadmap for the transition points to a more sustainable energy system and lays the foundation for achieving socio-economic development. The energy transition discourse has thus far been largely technology-oriented and disconnected from the socio-economic aspects upon which it is built and its long-term sustainability depends. A true and complete transition includes both the energy and the socioeconomic system transition, and their interlinkages. Therefore, a wider picture is needed, viewing energy and the economy as part of a holistic system.

Close interplay between the energy sector and the economy
Sketching the socio-economic footprint of the transition

Gross domestic product
GDP is the most commonly used indicator for income and growth. In line with earlier IRENA estimates (IRENA, 2019a), the Transforming Energy Scenario boosts global GDP in 2050 by 2.4% over the Planned Energy Scenario. The cumulative gain from 2019 to 2050 amounts to USD 98 trillion.4 The gain is influenced by several drivers in the global economy and is illustrated in Figure 2.8. The investment driver contributes most heavily to the gain during the first years of the transition, remaining positive but with a relatively low impact thereafter. The trade driver makes marginal contributions to global GDP gains over the Planned Energy Scenario, given the intrinsic requirement of global trade being balanced in normal terms. The largest share of the positive global GDP results is explained by changes in consumer spending in response to changes in fiscal policy considered in this analysis.

Figure 2.8 Transforming Energy Scenario will boost global GDP
Difference in global GDP between Transforming Energy Scenario
and Planned Energy Scenario

REGIONAL ENERGY TR ANSFORMATIONS: TECHNO-ECONOMIC CONTEXT

These regions were defined based on geographical grouping, without consideration of socio-economic, political or cultural aspects. Any regional split tends to be somewhat arbitrary and could hide important differences among countries that affect the implications of the energy transformation in each case. Even so, examining IRENA’s energy transformation results at the regional level can offer valuable insights. As the sections that follow demonstrate, important distinctions exist between regions.

Context and characteristics

World population growth: From 7.5 billion today to over 9.7 billion by 2050
Expected population trends from 2018 to 2050

Priorities and drivers
Figure 3.9 outlines key indicators showing the status of the energy transition in each region. The indicators reveal how each region has drivers for embracing the transformation, ranging from energy security, to emissions reductions and better air quality, to universalisation of energy access and economic development. This section provides more detail about the characteristics of three clusters of regions and some of the measures, technologies and changes that are needed to accelerate the energy transformation.

Figure 3.9 Planned Energy Scenario: Different prospects for each region
Status and key indicators for the energy transition in different regions in the Planned
Energy Scenario

REGIONAL SOCIO-ECONOMIC IMPACTS

Socio-economic footprints provide essential insights for transition planning and policy making at the global level (Chapter 2), at the regional level (Chapter 4) and the country level (IRENA, 2020a and forthcoming country studies). This chapter presents socio-economic footprints of the world’s ten regions analysed in Chapter 3. The first section briefly describes the socio-economic context underlying the analysis. The second presents the results of the socio-economic footprint of the energy transition for each region. Some of the policy implications are presented in the concluding section, but also in Chapter 6, where the contours of a policy framework for a just energy transition are considered as part of a broader discussion of the
transformative decarbonisation of societies. GDP, employment and welfare effects are determined macro-econometrically, using the E3ME simulation model.1 The main socio-economic variables used to contextualise the analysis include the regional distribution of population, employment and GDP at the beginning of the transition, as well as the evolution of each variable over time. Figure 4.1 shows the regional distribution of population, economy-wide employment and GDP, ranked in decreasing order of population. More than half of global GDP arises from the European Union and North America. Sub-Saharan Africa, Southeast Asia, and Oceania each account for small shares of global GDP. Shares of jobs in global employment are highest in Asia, which also account for the highest share of population.

Figure 4.1 Some regions feature prominently in population and job distribution,
others in GDP distribution
Regional shares of global population, economy-wide employment and GDP in 2019

Socio-economic indicators of the energy transition: Jobs
The energy transition affects different sectors and supply chains of the economy, induces technological changes and shifts investment – all with significant effects on employment, and hence on people’s livelihoods. The most obvious changes will occur in the energy sector, with more jobs in renewables, energy efficiency and energy flexibility, and fewer jobs in fossil fuels. Here, the regional distribution of natural resources, both conventional and renewable, plays a role as important as that of manufacturing capacities and services.

Renewable energy jobs
About 42 million people will work in manufacturing, installing, operating and maintaining renewable energy systems in 2050 under the Transforming Energy Scenario, most in solar energy, followed by bioenergy and wind energy (see Figure 4.7). The greatest number of these jobs will be created in Asia: East Asia (36%), Southeast Asia (16%) and the rest of Asia (12%). The Americas rank second (15%), evenly split between North America and Latin America and the Caribbean. Europe holds a 10% share (with the European Union accounting for 6% and the rest of Europe for 4%). The shares for Sub-Saharan Africa and the MENA region are 5% each.

Figure 4.7 An estimated 42 million jobs in renewables: Regional distribution
Renewable energy jobs in 2050 under the Transforming Energy Scenario,
by region (in millions)

GETTING TO ZERO

Ensuring that global temperatures stop rising will require that, by the second half of this century, emissions eventually reach zero, or net zero. Additional mitigation measures will therefore be needed beyond what was presented earlier in the Transforming Energy Scenario. This chapter considers these increased mitigation needs and, with the Deeper Decarbonisation Perspective (DDP), presents enhancements to that scenario showing what more could be done.

Getting to zero: Technology options and costs
Carbon dioxide emissions represent three-quarters of greenhouse gas emissions with energy related CO2 (combustion of fossil fuels) and industrial process emissions making up over 80% of CO2 emissions and the remainder coming from land use, landuse change and forestry (LULUCF). Efforts are therefore needed across the energy, industrial and land-use sectors to reduce emissions. Significant efforts are needed in certain sectors, such as in industry and transport, that are sometimes referred to as hard-to-decarbonise” or “hard-to-abate” sectors.

Industry and transport: The bulk of remaining emissions in 2050
Energy-related and industrial process CO2 emissions in the Transforming
Energy Scenario, 2050

There are two general approaches to reducing emissions to zero: completely decarbonising all energy and industrial processes so that no CO2 is emitted at all (the “zero” emissions approach), and offsetting any remaining emissions through the use of CDR to achieve net-zero emissions (the “net-zero” emissions approach). Examples of CDR include reforestation, afforestation, direct air capture, enhanced weathering and bioenergy CCS.

Challenging sectors: Transport
Transport accounts for around one-quarter of global energy-related CO2 emissions. The path forward to provide transport services while reducing CO2 emissions is becoming clear for some, but not all, transport modes. For light-duty vehicles (cars, sport-utility vehicles and small trucks), battery electric vehicles have shown dramatic improvements in range (kilometres per charge), cost and market share. The path forward here is clear: electrify the light-duty vehicle fleet and provide that electricity from renewable sources. For other modes, the path is less clear, although there is significant untapped potential for sustainable liquid biofuels. Additional solutions will be needed for road freight transport, aviation and shipping. Potential solutions in
these transport modes are described in the following sub-sections.

TOWARDS THE TR ANSFORMATIVE DECARBONISATION OF SOCIETIES

A transformative transition
As countries around the world grapple with the challenge of transforming an energy system – and by extension a global economy – that relies on polluting conventional energy resources, notions of a “Green New Deal” are receiving growing attention. Both the name and the underlying intent are inspired by the massive mobilisation of resources and institutional capacity that took place under the New Deal launched by U.S. President Franklin Delano Roosevelt in the 1930s. The original New Deal entailed fiscal, monetary and banking reforms; public works; and a series of regulatory measures adopted in response to the devastating global financial crisis known as the Great Depression.

The global Green New Deal: At the heart of solutions to achieve social,
economic and environmental objectives
The broader objectives of a Green New Deal

Overcoming challenges
Done right, the energy transition not only avoids the use of polluting fuels but creates a vibrant, climate-resilient economy with benefits for all. IRENA’s analysis shows that its transition pathway offers strong employment and welfare gains. Despite positive outcomes at the global level, IRENA’s analysis also indicates that the energy transition will generate highly diverse outcomes for regions and countries (see Chapter 4). Individual countries embark on the transition from different starting points defined by their existing socio-economic structures. Their pathways are also strongly influenced by their level of policy ambition. Two sets of conditions influence the ability of countries to derive benefits from the energy transition: (1) the depth, strength and diversity of their national supply chains; and (2) varying degrees of dependency on fossil fuels and other commodities, technologies and trade patterns (see Figure 6.2).

Figure 6.2 Diverse energy transition outcomes for regions and countries
Structural elements that shape the outcomes of the energy transition

Foundations for success: Financial mobilisation, policy cohesion and international co-operation
The global energy transition requires an unprecedented mobilisation of financial resources, driven by the unwavering commitment of governments, the private sector and civil society. Governments must adopt a wide array of policies to strengthen public resolve and ensure that no one is left behind. As the massive financial resources mobilised to counter the 2008 economic crisis demonstrated, countries and societies are collectively capable of such ambitious undertakings. The uncharted territory of COVID-19 and its aftermath presents now another test of our shared resolve for a better future.

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COAL COST CROSSOVER 2.0 – New solar and wind cheaper than 80% of existing coal in the US, report finds

EXECUTIVE SUMMARY
Coal generation is at a crossroads in the United States, or more precisely at a “cost crossover.” Due to rapid recent cost declines for wind and solar, the combined fuel, maintenance, and other costs of most existing coal-fired power plants are now higher than the all-in costs of new
wind or solar projects. This report compares the economics of each coal plant in the U.S. against the expected economics of potential new wind and solar plants nearby, using publicly available data. In 2019, 239 gigawatts (GW) of coal capacity was online in the U.S. Our research finds that in 2020, 72 percent of that capacity, or 166 GW, was either uneconomic compared to
local wind or solar or slated for retirement within five years. Out of the 235 plants in the U.S. coal fleet, 182 plants, or 80 percent, are uneconomic or already retiring.

In the last two years, the cost of renewables has fallen even faster than the National Renewable
Energy Laboratory’s forecast in its 2018 Annual Technology Baseline, and faster than predicted in the original “Coal Cost Crossover” report, which was prepared in partnership with Vibrant Clean Energy in 2019. In other words, the coal cost crossover trend continues to accelerate.
As pressure on the existing coal fleet continues to build, policymakers should seize the opportunity today to improve consumer, public health, and climate outcomes. Policies informed by cost analysis of coal and renewables and focused on competitive procurement and coal asset securitization can enable a transition that more effectively balances utility, consumer, environmental, equity, and community interests. Immense savings are available across the country, with ample opportunities to reinvest regionally in replacement clean energy portfolios.


WIND AND SOLAR LCOE
We reviewed onshore wind and utility-scale solar resources using outputs from the Regional Energy Deployment System (ReEDS) model, developed by NREL.2 ReEDS provides a detailed look at the North American electric power sector, including generation, transmission, and end-use technologies. Using ReEDS, we generated LCOE values (which are all-in estimates of the cost of energy output in megawatt-hours, taking into account the entire capital expenditure, operations, and maintenance costs) for onshore wind and utility-scale solar.3 We also used the 2020 values from the 2020 edition of the NREL Annual Technology Baseline to gather inputs for the ReEDS model, including capital cost and performance.4 Our LCOE values are evaluated within ReEDs regions, which we describe in greater detail below. After providing context for the geographic regions we assessed, we lay out how we calculated LCOEs and coal going-forward cost, and how we determined whether solar or wind could entirely displace annual coal generation at a given plant cost effectively.

UNDERSTANDING WIND AND SOLAR REGIONS
Within the contiguous U.S., ReEDS defines 134 “balancing areas.”i Within those balancing areas, there are 356 further subdivided regions, called resource supply regions, which characterize the wind resource quality and supply. Balancing areas never cross state lines nor straddle multiple regional transmission operators, and they roughly (but not completely) correspond to existing utility service territories and balancing area authorities.ii The utility-scale photovoltaic solar resource information is available at the “balancing area” level, and the utility-scale onshore wind resource information is available at the “resource supply region” level. The differing spatial resolution of these two categories is intended to reflect the granularity of the quality and quantity differences of specific resource supplies.

COAL GOING-FORWARD COSTS
We developed an estimate of the going-forward costs of running U.S. coal plants using publicly available data from the U.S. Department of Energy’s Energy Information Agency (EIA), the Federal Energy Regulatory Commission (FERC), and the U.S. Environmental Protection Agency (EPA). We compiled a list of 235 U.S. coal plants operated by utilities and independent power producers, excluding plants used for combined heat and power, with a tiered system indicating our degree of confidence in each plant’s particular estimate. The going-forward cost estimate for each coal plant in our master list is the sum of three principal components: cost of fuel, operations and maintenance costs, and going-forward costs for capital investments needed to continue operating the plant.

COMPARING RENEWABLES LCOE TO COAL GOING-FORWARD COSTS
Using the calculated plant-level weighted average LCOEs for wind and solar and plant-level goingforward coal cost, we compare the three values to determine to what extent the U.S. coal fleet is currently “uneconomic.” We use “uneconomic” in the sense that it would be more costly to continue operating existing coal plants compared to building new nearby wind or solar plants to fully displace the current annual generation from those coal plants.

COAL TO RENEWABLES COST CROSSOVER FINDINGS RENEWABLES AND COAL COST COMPARISON
Our top-level findings include:

  1. Of existing U.S. coal capacity, 72 percent is more costly to operate than new nearby wind
    and solar, or is slated to retire by 2025.
  2. Of existing U.S. coal plants, 80 percent are more costly to operate than new nearby wind
    and solar, or are slated to retire by 2025.

have worsened substantially since our original analysis, which found that, as of 2018, 62 percent of coal capacity was uneconomic compared to local wind or solar. In addition, an estimated 16 GW of coal capacity has retired since the 2018 analysis. Our original analysis projected uneconomic coal capacity in the U.S. to be 77 percent by 2025—a pace that was almost reached in 2020.

Our current analysis focused on whether solar or wind could entirely displace annual coal
generation at a given plant cost effectively. The maps below show how, in many cases, solar and wind are both economically competitive options, although there can still be large cost differentials between the two clean resources even when they both beat coal on cost. That said, to displace uneconomic coal, policymakers should consider a portfolio of clean resources, including storage and demand-side resources, that is more varied than either entirely utility-scale solar or entirely utility-scale onshore wind projects.

PUBLIC HEALTH & CLIMATE IMPACTS
Coal plants emit a host of emissions. We collaborated with the Catalyst Cooperative to match plant boilers with the coal plant generators included in each coal plant in our dataset. We then collected emissions data from EPA’s 2019 eGRID database for each boiler and aggregated these figures at the coal fleet level.6 The database isn’t comprehensive, but it does provide detailed information on carbon dioxide (CO2), nitrogen oxides (NOx), and sulfur dioxide (SO2) emissions.

Modeling from RMI indicates that, more often than not, replacing coal energy with wind or solar is unlikely to negatively affect system reliability. More than 50 percent of coal plants in RMI’s 2021 analysis could be economically replaced by renewables, allowing the balancing authority to still meet its reserve margin.14 Almost half the plants in our analysis, representing 39 percent of the megawatt-hours, had a going-forward cost more than 25 percent greater than wind or solar LCOEs, indicating room to complement these resources with storage, demand response, and energy efficiency to amplify their contributions to reliability.

The wider the gap becomes between the marginal economics of coal versus wind and solar, the more coal plants will have to depend on their perceived capacity value to recover costs. Their capacity factors may drop even more, widening the gap and opening a window for dedicated resources like demand response, storage, and existing flexible resources to fill their niche. We are already seeing combined renewables-plus-storage plants win competitive solicitations and capture some of this value in high solar- and wind-potential regions (empirically,this appearsto add roughly $4-8/MWh to renewable energy costs). 15 We expect the trend to continue as battery prices slide down the learning curve.

POLICY RECOMMENDATIONS
Coal generation has been on a secular downward trend, declining 50 percent since its peak in 2011. Simultaneously, renewable energy costs are plummeting. Our analysis indicates that the coal decline will continue and policymakers should seize this opportunity for consumers, public health, and climate. Policies informed by cost analysis of coal and renewables and focused on competitive procurement and coal asset securitization can enable a transition that more effectively balances utility, consumer, environmental, equity, and community interests.

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Energy subsidies: Evolution in the global energy transformation to 2050

SUBSIDIES, PRIVILEGES, UNPRICED EXTERNALITIES AND THE ENERGY TRANSITION

In order to meet the Paris Agreement objective that the global temperature rise be kept to “well below 2 °C”, the global energy sector requires nothing short of a complete transformation, during the coming decades. At the same time, while the political will to avoid
dangerous climate change demonstrated by the countries of the world in signing the Paris Agreement is welcome, as the IPCC Special Report on “Global Warming of 1.5 °C” makes clear, time is of the essence.

Global energy sector carbon-dioxide emissions in the Reference and REmap Cases,
2010–2050

The IRENA analysis demonstrates that renewable energy technologies are increasingly cost-competitive in many geographies and markets and that the energy transition will yield significant economic benefits New-build renewable power generation technologies, increasingly without subsidies, will even displace existing coal, or nuclear power plants. This is because their total lifetime costs are lower than these older plants’ variable operating costs. This trend implies that the energy transition is both ecologically and economically sustainable.

WHAT PURPOSE DO SUBSIDIES SERVE AND HOW TO DEFINE THEM?
Subsidies can arise as the result of deliberate interventions by governments, or as the unintended consequences of policy decisions, or from market failures. Energy subsidies are not necessarily bad per se, but this depends on how and why they are being implemented.2
What matters are the objectives being pursued and how the subsidies may interact with other
policy priorities.

Negative externalities and their impact on supply and deman

Unfortunately, there has been little progress in ensuring that fossil fuels pay the full cost of their negative externalities, whether from local or global pollutants. In the absence of taxes or quotas set at optimal levels (to create a market), policy makers have often looked for alternative options to deploy renewables to address market failures in the energy sector
and unlock the dynamic economies of scale many renewable technologies exhibit. The use of subsidies in this context can be seen as governments trying to ensure that the market operates more efficiently than today.

Different definitions of energy subsidies Today, there is no systematically applied, standardised
definition of what an energy sector subsidy is, despite the prevalence of subsidies in the energy system. Even without this uncertainty around definitions, given the breadth and complexity of support given to different energy sub-sectors or fuels, calculating subsidy levels
or unpriced externalities can be difficult (Sovacool, 2017).

Different definitions of energy subsidies and their strengths and weaknesses

Expanding on definitions: Categorising and calculating subsidy levels
Although the differences in definitions can explain some of the differences in subsidy estimates, what is clear is that the focus of different institutions can not only affect their decision about what methodology to use in the calculation of subsidies, but also what types
of policies are included in their analysis. This can be due to:
• The policy question being addressed by the institution.
• Fundamental differences in the conception of what policies represent energy sector subsidies.
• Data limitations, or limits in the institutional resources available for subsidy analysis.

A typology of global energy subsidies

ENERGY SECTOR SUBSIDY ESTIMATE

The present part of the analysis examines the levels of energy sector subsidy estimates made by some of the major institutions that have produced reports on global subsidy levels. The focus is on comprehensive studies that look at global subsidy levels. This is in order to ensure that the numbers presented are as comparable as possible. There are, however, a number of important regional subsidy estimates, particularly for fossil fuels, that can in some cases provide useful detail to complement or inform these global estimates. Notable examples
include fossil and renewable energy subsidies in Europe (Trinomics, 2018; and Gençsü and Zerzawy, 2017), fossil-fuel subsidies in Asia (ADB, 2016), and federal tax subsidies in the United States (CBO, 2016; and CRS, 2017). There is also a significant body of analysis and data at a country level compiled by the International Institute for Sustainable Development’s Global Subsidies Initiative.

RENEWABLE ENERGY SUBSIDIES
To-date, analysis of energy sector subsidies at a global level has predominantly focused on environmentally harmful subsidies to fossil fuels,13 given their dominance in the global energy system and total energy subsidies. There are therefore fewer estimates of the financial support given to renewables, calculated on a comprehensive and comparable basis. As a result, available data are often partial, collected on a different basis and difficult to compare. The exceptions are the data in the IEA’s World Energy Outlook, which takes a price-gap approach to estimating renewable energy subsidies, and the analysis.

Selected country and regional estimates of renewable energy subsidies in 2017

To give a few examples, data is available for: the German electricity surcharge that funds the deployment of renewable power generation 14 (calculated using a price-gap methodology that also includes some administrative aspects); the United Kingdom’s Renewables Obligation Certificates, Feed-in-Tariffs (FiTs), Contracts for Differences (CfDs) and Renewable Heat Incentive (BEIS, 2016 and 2018); and the United States’ support through the production and investment tax credits for wind and solar (Congressional Research Service, 2017). There are also the regional subsidy estimates that have been mentioned. All of these sources usually apply either a price-gap or inventory of programme costs methodology, making comparability
and completeness an issue. For attaining an order of magnitude of what total subsidies may look like globally to renewable energy, however, this is a useful starting point.

The price-gap approach has the advantage of capturing the subsidy rate required to bridge the gap between a renewable technology and the incumbent. Its accuracy depends, however, on choosing the right reference price and in being able to accurately calculate the cost of energy or service delivered by the 27 For instance, by 2015 state-level rebates for solar PV systems had fallen from between USD 1 to USD 4/W by state in 2010 to between USD 0 to USD 0.8/W in 2015 (LBNL, 2018). renewable technology. Neither of these tasks are trivial,
particularly for renewables, given that site-specific factors can greatly impact costs. As a result, the price gap approach is at best an imperfect measure, but is a useful and efficient way of trying to capture policies that reduce the price required for a renewable project to be competitive.

Figure 4: IRENA’s global subsidy estimates for renewable power generation and biofuels by
country/region, 2017

On this basis IRENA has estimated the supply-side subsidies for renewable energy to have been around USD 167 billion in 2017, with total subsidies to renewable power generation of around USD 128 billion in 2015 and transport sector subsidies of USD 38 billion (Figure 4).

Figure 5: IRENA subsidy estimates for renewable power generation by
country/region and technology, 2017

Focusing on the renewable power generation technologies receiving support by country/region (Figure 5) reveals that in 2017, Japan had the highest share (77 %) of support going to solar PV (which is also the highest share for one technology). This reflects the overwhelming dominance of solar PV in recent deployment (IRENA, 2018b). Of the EU’s USD 78 billion subsidies for renewable power generation in 2017, 40 % supported solar PV, 23 % supported onshore wind, 22 % went to bioenergy power generation, 7 % to offshore wind, 5 % to “hydropower, geothermal and others” and 3 % to CSP.

Figure 6: IRENA subsidy estimates for biofuels for transport by country/region and fuel, 2017

Subsidies for biofuels are less concentrated in one region than those for power generation. The United States, with an estimated USD 14.1 billion in subsidies for biofuels, accounted for 37 % of total biofuels subsidies in 2017. As the EU accounted for around 30 % (USD 11.4 billion), the United States and the EU combined therefore accounted for around two-thirds of the total, while India accounted for 2 % (USD 0.9 billion) and China and Japan for 1 % each. The
rest of the world accounted for 30 % (USD 11.4 billion).

Methodology matters: Fossil-fuel subsidies in Germany
The latitude for interpretation in some subsidy definitions, in combination with the different possible calculation methodologies, can have a large impact on country-level subsidy estimates. Subsidy estimates must therefore be clearly documented to allow comparisons to be made.

Figure 7: Subsidies to fossil fuels in Germany from different sources, 2014/2016

This is not the largest estimated of fossil-fuel subsidies in Germany, however. Separate analysis conducted for Greenpeace identified the even higher 2016 level of USD 53 billion (Zerzawy, 2017). Most of the difference results from the inclusion of value added tax exemptions for international flights and tax deductions possible by individuals for travel to work by vehicle.
Finally, the IMF estimates Germany’s “pre-tax subsidies and forgone tax revenue” at USD 10.8 billion in 2015, similar to the German self-assessment, but with total subsidies of USD 74 billion. The vast majority of these subsidies come from externalities, with global warming
accounting for USD 22 billion and local air pollution for USD 34 billion.

NUCLEAR POWER SUBSIDIES
Comprehensive global estimates of the subsidies received by the nuclear power sector are currently missing from the total energy sector subsidies debate for incumbent technologies. Indeed, if the situation in terms of cataloguing global fossil-fuel subsidies still leaves much to be desired, the state of knowledge about nuclear is even worse. In part, this is because many nuclear power subsidies are more obscure and indirect than for renewables and fossil fuels and the absence of direct cash transfers makes it harder to estimate their value.

Table 7: Subsidy categories and sources for nuclear power

TOTAL ENERGY SUBSIDIES IN 2017 AND THEIR EVOLUTION TO 2050: THE REMAP CASE

This section brings together the IRENA estimates for subsidies for renewables and the adjusted combined IEA/OECD fossil-fuel subsidies, as outlined in the previous sections. Combining the estimates of fossil fuel, renewable and nuclear power subsidies yields an estimate of total direct energy sector subsidies for 2017 of USD 634 billion (Figure 10). The total is dominated by the subsidies received by fossil fuels, which account for 70 % (USD 447 billion). Subsidies
to renewable power generation technologies account for around 20 % of total energy sector subsidies (USD 128 billion), biofuels for 6 % (USD 38 billion) and nuclear for at least 3 % (USD 21 billion), but potentially more, as already noted.

Figure 10: Total energy sector subsidies by fuel/source, 2017

TOTAL ENERGY SECTOR SUBSIDIES TO 2050
IRENA has used the analysis in the REmap Case (IRENA, 2019a), in conjunction with the current
estimates of total energy sector subsidies in 2017, to analyse how total energy sector subsidies out to 2050 might evolve if the world is to stay on track to achieve the Paris Agreement climate goal of restricting global warming to 2 °C or less.

Figure 12: Key energy sector indicators in the REmap Case to 2050

Figure 12 provides an overview of the evolution of some of the key energy sector indicators out to 2050 in the REmap Case that are part of the underlying drivers of the evolution in energy sector subsidies outlined. Although subsidies may provide only one metric by which the transition can be measured, policy makers could benefit from understanding how subsidy needs in the energy sector could evolve over the period until 2050.

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