Wednesday, 27 October 2010

Going Local with 'Home-Grown' Power

This article was originally published on 20 September 2010, in issue 104 of the IEMA journal 'the environmentalist'.

A shift from large-scale energy production overseas to smaller local energy supply and distribution is underway in the UK and US.  In the UK, one of the main drivers for this change has been the establishment of a set of five-year national ‘carbon budgets’ intended to achieve a 34 per cent reduction in greenhouse gas emissions by 2020.

In the US, meanwhile, the overarching driver has been a move towards more secure domestic energy sources, which tend to have more immediate financial benefits and fewer associated environmental and economic risks than imported fossil fuels.

Despite these differing rationales, households, businesses and communities adopting local renewables stand to  reap similar types of benefits:

  • reduced fossil fuel consumption and therefore reduced dependence on imported resources;
  • improved security of supply and consequently less vulnerability to price shocks;
  • more local job creation than with large-scale power plants;
  • cleaner energy from renewable sources and less environmental damage, and in particular a reduced carbon footprint; and
  • financial benefits to households, companies and other adopters due to reduced electricity bills, government subsidies and feed-in tariffs.

Tipping point
More people are realising that the costs and benefits of renewable energy are not only financial. Indeed, recent events have highlighted the increasing costs of our continued reliance on non-renewable fossil fuels.

This past summer, extreme weather events have occurred across the planet. Temperatures in Moscow reached 40 degrees Celsius for the first time, resulting in thousands dead and widespread forest fires. The heatwave decimated wheat crops and sent global cereal prices soaring. Meanwhile, the Indus River reached its highest level in 110 years causing catastrophic flooding in Pakistan. The misery in Pakistan coincides with major flooding in China, North Korea, Niger, Sudan, Ethiopia and Guatemala.

While no single event can be directly attributed to climate, their occurrence is consistent with the predicted impacts of global warming. The World Bank estimates that developing countries will need between US $70-$100 billion each year to adapt to anticipated climate change impacts on agriculture, infrastructure and human health between now and 2050. When coupled with increasing international competition for limited global petroleum and gas reserves, it becomes abundantly clear that the model for economic development based on fossil fuel consumption is unsustainable.

Betting on renewables price stability
One of the main obstacles to increased use of renewables – high upfront costs despite low to zero cost for the fuel – is increasingly one of the technology’s main attractions. The economics of oil – uncertain and unpredictable – are making renewables a safer bet for many end users. OPEC spot prices spiked in July 2008 at $137.18 per barrel before plunging to $35.48 in January 2009, only to start creeping up to $76.91 by December 2009. This extreme volatility makes it difficult for households, companies and governments to set long-term budgets, and increases financial uncertainty in the midst of a severe economic downturn. For those who can afford the initial investment, renewables can offer the reassurance of long-term price stability needed to plan for the future.

Not only climate change, oil prices and the prospect of dwindling supplies dampened enthusiasm for fossil fuels, but also, in recent months, more immediate environmental and safety risks. The recent BP Deepwater Horizon oil spill was splashed across front pages around the world. This oil spill, surpassing the Exxon Valdez as the worst in US history, ensured increased attention to spills from the coast of Indonesia to the Niger Delta. This negative media attention has helped spur the search for local energy alternatives.

Local power generation – then and now
In the past, electricity generation at the household or building level has generally meant running a diesel or petrol (gasoline) generator. These generators tend to be noisy, polluting, and more expensive than simply buying electricity from an electric utility. As a result, they tend to be kept on standby and used only in emergencies. The recent growth in local generation comes from renewable energy technologies – especially wind, geothermal, biomass, solar thermal and solar photovoltaic (PV).

While small petrol and diesel generators tended to produce more pollution per unit of electricity than utility power plants, most renewable technologies are significantly cleaner, producing (with the exception of biomass) practically zero ambient air pollution at source.

Renewables and regional recovery
Local clean energy is seen as potential source of recovery from the current economic recession. Rebuilding the economy by creating a new energy system is widely predicted to create more jobs. A 2009 report found that renewable energy investments are estimated to generate roughly three times more jobs than an equivalent amount of money spent on fossil fuels.(2)

As Greg Barker, UK Climate Change Minister, commented last month, “Our homes, businesses and communities can become dynamic players in the new energy economy by producing their own green electricity and selling it back into the national grid. New feed-in tariffs – a system of financial incentives to encourage households and communities to produce their own electricity – are at the heart of our efforts to ‘green’ Britain and empower consumers and to create a more local, decentralised energy system.”(3)

While job creation tends to be a lagging economic indicator, the British and American governments have made financial incentives available directly to UK households, companies and other renewable energy adopters  through government subsidies and feed-in tariffs. In the UK, the feed-in-tariff system introduced in April 2010  guarantees a payment of up to £0.42 per kilowatt-hour for renewably generated electricity. A PV installation for a moderately-sized household in London might cost £15,000. Thanks to reduced utility bills and payments from the government feed-in tariff, this investment would produce over the next 20 years a guaranteed annualised return of approximately nine per cent. Few other investments available to households in this economic climate could do as well. Lured by the feed-in-tariff, a number of firms are now offering to provide and install solar panels for free; the firm claims the feed-in-tariff and the property occupant benefits from a lower electricity bill. And as electricity prices are predicted to rise in the near future, the financial benefits only increase.

Planning for renewables
While world leaders from India and China to the US have trumpeted the macroeconomic benefits of renewables, local issues regarding land-use planning can still be a concern. NIMBYism has not gone away, and residents continue to protest against large wind farms ‘in their backyards’. However, the smaller scale and partnership approach employed by local renewables projects can increase acceptance. Moreover, local companies (rather than distant multinationals) are more likely to get community buy-in with ‘home-grown’ and power projects that provide energy at the local level.

“Planning is the big unknown in renewable,” says Ryan Law, founder of Geothermal Engineering Ltd (GEL). “Communities object to mega-projects which supply the whole country, but if people realise they can have a direct stake in local schemes I think this is the key to it. Geothermal is Cornwall’s resource, not a project dumped on the county from outside,” said Law.(4)  After two years of planning with Cornwall County Council, GEL has been granted planning permission to develop the UK’s first commercial geothermal power plant at its Redruth site.

The challenge
The extent to which governments can continue to prop up their economies with large renewable energy  investments remains to be seen. The cost to governments will start to add up quickly as more and more companies and households take advantage of generous tax credits and feed-in tariffs. Most governments have anticipated this issue by gradually reducing the amount the feed-in-tariffs will pay to new adopters in subsequent years.

There are also technical challenges as large numbers of small generators are linked to the grid of electric utilities. While the overall generation from baseline power plants may go down as local power generation rises, utilities will have less control over when and how much electricity will be available, necessitating an investment in additional back-up generation capacity from more expensive power plants. On the positive side, a technical fault or downed power line in one location will not necessarily plunge an entire region into darkness. The more technologically and geographically diverse the local generation systems in place, the less the utilities should need to bring their back-up systems online.

On balance, the benefits appear to outweigh the challenges. There are synergies across the various benefits that extend from the local to the national level via job creation, diversification, and financial savings which could lead to greater spending and investment in the local economies instead of purchasing imported fossil fuels. As we noted in a previous 'Energy and Business' article (‘From credit crisis to carbon crisis’, Issue 68), governments were quick to step in when the global financial system was on the brink of meltdown.

All in all, these investments in renewables should lead to greater energy security and reduced climate change risks in an uncertain world. Given these benefits, local renewables need more – not less – support.

Suzy Hodgson AIEMA is a Principal Consultant and Jamal Gore MIEMA, CEnv is Managing Director at carbon management company Carbon Clear Limited.

Tuesday, 26 October 2010

Don't Be Afraid to Think Big

Last month the World Meteorological Organization and the United Nations Environment Programme jointly announced that the ozone hole has stabilised.  More specifically, the thinning observed since the 1970s in the high altitude layer of ozone that protects us from ultraviolet radiation has stopped and the hole is beginning to recover.  The ozone layer outside of polar regions is expected to return to pre-1980 levels before 2050, with the polar regions recovering a few decades later.

The story earned a few newspaper headlines the day after it was announced, and then disappeared without a trace.

In reality, this is tremendous good news.  Policy makers and environmental advocates should be shouting from the rooftops.  After all, how often do we get to report that an environmental problem is getting better?

There's another encouraging story here.  It's that concerted global action to tackle environmental challenges works.

In 1987 the nations of the world came together to enact the Montreal Protocol. The Montreal Protocol  represented an historic attempt to phase out entire classes of industrial gases- chloroflourocarbons (CFCs), halons, and methyl bromide - used in everything  from refrigerators and fire extinguishers to hairspray and pesticides.

Wealthy industrialised nations agreed to strict targets for the phaseout, while developing countries were given more leeway before their cuts began.  At the time, industry lobbyists argued against the science of the thinning ozone and complained about the cost of compliance.

But we held firm.  All 196 nations ratified the treaty, and the Montreal Protocol came into force.  There was no economic catastrophe - the costs of transitioning to less harmful gases were much lower than anticipated.  And the ozone layer has begun to recover.  Without the Montreal Protocol unabated destruction of the ozone layer was projected to result, in the words of UNEP Executive Director Achim Steiner, "...up to 20 million more cases of skin cancer and 130 million more cases of eye cataracts, not to speak of damage to human immune systems, wildlife and agriculture."  Fortunately, that threat seems to be receding.

This isn't the first time that we've come together across boundaries to solve major environmental problems.  In the 1970s and 1980s, SO2 emissions from power plants and factories caused acid rain and damaged forests  and waterways in North America and Europe.  Regional trading progammes were launched with strict emissions caps - again over the protests of vested interests who argued that the rules would be unaffordable and cost  thousands of jobs.  The cap and trade programme designers argued that their scheme would achieve  environmental targets at the lowest possible cost to the environment.

And it worked.  Acid rain is largely a thing of the past in industrialised countries, and the cost of compliance was only a fraction of what industry has predicted.

The Montreal Protocol and the regional SO2 trading schemes show what can be accomplished when we're not afraid to think big.  The Kyoto Protocol, national cap and trade legislation in the United States and Australia, and the erstwhile Copenhagen conference last December represented similar efforts.

But we seem to have lost our courage.

The Kyoto Protocol expires in 2012, and prospects for its replacement seem uncertain.  Christiana Figueres, the UNFCC head with whom I worked back in the 1990s, says there won't be a single big agreement to replace Kyoto - the parties simply can't agree. Meanwhile, legislators admit that US climate change legislation is dead in the water, and the Australian government is rapidly backtracking on their climate change plans.  Opponents, sensing blood in the water, are now attacking regional and state-level climate change initiatives in the United States, arguing that fighting climate change will cost jobs.

Big problems call for ambitious solutions.  We took bold, concerted action when CFCs and other chemicals threatened the ozone layer.  We took similarly bold action when acid rain threatened our lakes and streams.  Climate change is an even bigger problem than either of these and yet we fret about the cost and struggle to come to agreement.

When did we become so timid?  How did we become afraid to think big?

We know the nature of the challenge facing us, and we know what needs to be done.  It's time to face our  fears, roll up our sleeves, and get started on the path on the road to a low carbon economy.

(Carbon Clear homepage)