Renewable Energy Development

As mentioned in Section 15.2.1, renewable energy sources have been developed to enhance energy security and emission reduction. European countries are at the forefront when it comes to improving efficiencies and using renewable energy. Also, tax policies have been applied by these countries in order to reduce liquid fossil fuel consumption. It is expected that liquid fuel consumption in the Organisation of Economic Co-operation and Development (OECD) countries will be 14.0 million b/d (barrels per day) in 2040 which is 0.8 million b/d lower than the 2010 level (EIA 2014). The importance of developing renewable energy has been highlighted by climate change and energy security issues through the excessive consumption of fossil fuels, political instabilities in the Middle East, and uncertainty around supply disruptions due to political disputes in Ukraine. Germany is considered to be the forerunner when it comes to generating renewable energy, because it was able to raise the share of renewable energy sources in its fuel-mix to more than 10 per cent in 2014.

Renewable energy has been developing rapidly in recent years. Reductions in costs due to economies of scale and use of advanced technologies have made it possible for countries to generate renewable energy more efficiently and cost-effectively. Table 15.1 compares power generation costs and cost outlooks based on different sources of energy over the period 2000-15 and 2015-50, respectively.

Table 15.1. Power generation costs (2000-15) and cost outlook (2015-50) based on sources of energy, US$ per megawatt hour

Notes: CCGT=combined cycle gas turbine; OCGT=open-cycle gas turbine; CCS=carbon capture and storage; CSP=concentrated solar power; PV=photovoltaic; NA=not available; US=United States.

Source: Adapted from EI (2015).

As can be seen in Table 15.1, Solar PV accounted for the largest reductions in costs during the last decade. Renewable technologies may not be compatible with conventional fuels due to unit costs, but they could be feasible if we were to consider associated externalities such as carbon emissions and social effect.

Also, economies of scale are crucial for reducing unit costs. Bohi and Toman (1993) studied energy security by looking at externalities and policies. Table 15.1 shows that Solar PV is expected to be the least expensive power- generation technology by 2050. The unit cost for this technology reduced by 74 per cent during 2000-15 and it is forecast that this will reduce further by another 62 per cent over 2015-50. Therefore, Solar PV could be considered as an alternative source of energy in decent sunlight conditions, for example, in Central Europe.

Currently, nuclear power is being considered as an alternative to fossil fuels in European countries, but these countries are also coming under pressure to stop the operation of existing nuclear power plants. There has been a de facto moratorium on the construction of new nuclear power plants, with phase-outs announced by Sweden, Germany, Switzerland, Spain, Belgium, and the Netherlands (Asif and Muneer 2007). Additionally, high primary energy prices combined with energy support policies have been the main driver in enhancing renewable energy sources. Many OECD countries have enacted national policies to support sustainable development through clean technologies. These policies deal with a wide range of objectives such as energy security, market competition, and environmental protection. Economic feasibility is at the core of renewable energy development. Without this essential parameter, renewable energy technologies will not be able to compete with conventional fossil fuels. Table 15.2 shows the growth rates of wind and solar energy consumption as the main renewable energy sources, based on region, over the period 2010-14.

Based on the figures presented in Table 15.2, we see a rapidly increasing trend (as high as a 3-4 digit growth rate) during 2010-14 for wind and solar energy consumption. In parallel with non-oil and gas producing countries, even countries located in the Middle East are determined to develop solar energy for environmental reasons. Among individual countries, the US had

Table 15.2. Wind and solar energy consumption in 2010-14, in terawatt hour (TWh)

Note: ‘a’ indicates less than 0.05 level of significance.

Source: Authors’ calculations based on BP Statistical Review of World Energy (BP 2015a).

the highest consumption of wind energy (183.6 TWh), which was more than the total consumption in the top five consumer countries in Europe (171.1 TWh); the US also accounted for 26 per cent of the total global consumption of wind power (BP 2015a). Europe had a lower growth rate than North America, but it ranked first in relation to total wind and solar energy consumption. In other words, developing renewable energy sources has already reached a high level in Europe.