The Renewable Energy Climate
Climate change, or Global Warming, is one of the biggest challenges facing the world today. The single main cause for the phenomenon is the release of greenhouse gases into the earth’s atmosphere. Coal is dug up from the Earth and burnt to produce energy. This energy is mostly used to turn the turbine that produces electricity. This process releases carbon dioxide and other greenhouse gases which then trap heat with the Earth’s atmosphere leading to a rise in temperatures. One of the steps being taken to curb climate change is switching to renewable energy. While 55 countries of the world came together in the Paris Agreement to vow to combat climate change, here is an insight on what’s really the climate of the climate change scenario.
The good news is that renewable energy now, has come to be cheaper than fossil fuels. Renewable energy is energy created from renewable sources like wind, sun, water among others. The cost of renewable energy, specifically solar energy, has plummeted significantly over the last decade. The reason is a phenomenon called the learning curve. Initially when solar panels were manafactured they were no where near the cost efficiency that fossil fuels provided. Over time as the demand grew the technology evolved and due to the compounding in the R&D, it became progressively cheaper.
The first use of solar technology was done to power satellites. Since there was demand for solar energy even at that expensive price, production increased. To satisfy increasing demand more solar modules got deployed, which lead to falling prices, more effort in R&D and more efficient factories. At these new lower prices the technology became cost-effective in new applications, which in turn meant an increase in demand. With each doubling of the cumulative installed capacity the price declined by the same fraction. Due to this virtuous cycle coming into play, solar energy is more affordable than ever.
Another reason why renewable energy is cheaper, is because the variable costs in terms of raw materials are almost non existent. Wind and solar energy is abundant and always available, contrasting to fossil fuel that has to be dug out of the earth and treated to be put to use.
Now the question arises, if renewable energy is indeed cheaper than fossil fuels, then what is stopping us from making the complete switch? Investment in renewable energy has been increasing steadily since 2001. While in 2017, the total amount invested did drop, it was not a cause for concern since the installed capacity had not dropped, and the decrease in investment was only due to the decrease in prices. However, in 2018, growth in renewable power capacity addition failed to increase year-on-year first time since 2011. And here is why it happened:
- The main reason was a change in policies regarding renewable energy. Sudden change in China’s solar power incentives to curb costs introduced a challenge to achieve more sustainable expansion. The government announced a substantial cut in the feed-in-tariffs (FiTs) in June 2018, and also imposed an installation cap on the solar projects that are eligible to the feed-in-tariff.
A similar situation was seen in India concerning wind power. In 2017–18, the wind power segment witnessed a transition in the tariff regime from FiTs to the competitive bidding route, leading to a temporary slowdown in capacity addition during the year. Following a reduction in wind tariffs under the competitive bidding regime, distribution companies felt that they had been paying very high tariffs for wind power and therefore decided to not sign any further power purchase agreements (PPAs) under the FiT system. In fact, these companies in many states were reluctant to honour the already signed PPAs, which were yet to be approved by the respective state regulatory commissions.
2. Another challenge is the vicious cycle of climate change. With rising temperatures, rainfall is becoming unpredictable, flooding and drought are becoming more common. Cyclones and earthquakes have increased frequency which poses a threat on the electricity systems, especially upcoming ones.
So what can be done?
Favourable policy making is the most crucial reform required to encourage investment in renewable energy. Investments need to be made easy, attractive. Governments need to subsidize where necessary, and contribute to the expansion, as strong public sector will enable a strong private sector. When there is a more enabling environment, that reduces the cost of capital and makes it easier for the private sector to come in. There is a learning curve for investors to be able to compete with conventional power and cope with market risks, and market forces will eventually spur more solar and wind installations with more sustainable financing than relying solely on public sector subsidies.
Moreover, distribution and energy storage facilities need to be brought out. Wind, wave, and solar electricity generation cant be produced centrally or uniformly, due to variations in weather requirements. Policy-makers may need to amend regulations to ensure new, flexible power storage and distribution technology, and ensure adequate investments. This will enhance the ability of grids to absorb more renewable power generation and ensure that the electricity systems remain reliable and resilient.
Way forward
In the Indian scenario, the wind power industry has regained momentum and wind power capacity is expected to be developed over the next couple of years. This can be attributed to the recent positive developments in the segment including the waiver of interstate transmission charges for wind power plants commissioned till March 2022, release of guidelines for competitive bidding based on wind project allocation, and launch of policies for wind-solar hybrids and offshore wind power projects.
As long as countries stand committed to their resolutions to reach net zero, there is hope for the future to be a lot brighter ! However, there are some more challenges to switching to renewable energy, that I shed light on in my next article.
