12.4 Renewable energy
8 min read•august 20, 2024
Renewable energy is transforming the global economy, offering sustainable alternatives to fossil fuels. Solar, wind, hydro, geothermal, and biomass sources are becoming increasingly cost-competitive and widely adopted, driving and reducing .
The shift to renewables presents both opportunities and challenges. While initial costs can be high, long-term savings and environmental benefits are significant. Overcoming intermittency and storage issues is crucial for widespread integration into power grids and energy systems.
Overview of renewable energy
- Renewable energy refers to energy derived from sources that are naturally replenished on a human timescale (solar, wind, hydro, geothermal, biomass)
- Harnessing renewable energy involves converting these natural resources into usable forms of energy such as electricity, heat, or fuel
- Renewable energy technologies have advanced significantly in recent years, making them increasingly cost-competitive with traditional fossil fuel-based energy sources
Importance in modern economy
- Renewable energy plays a crucial role in the transition towards a more sustainable and low-carbon economy
- Adoption of renewable energy helps mitigate climate change by reducing associated with fossil fuel combustion
- Renewable energy sector creates new jobs and stimulates economic growth in areas such as manufacturing, installation, and maintenance of renewable energy systems
- Diversifying energy sources with renewables enhances by reducing dependence on finite and often imported fossil fuels
Types of renewable energy
Solar power
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- harnesses the sun's radiation to generate electricity using photovoltaic (PV) panels or (CSP) systems
- PV panels convert sunlight directly into electricity using semiconductor materials (silicon)
- CSP systems use mirrors or lenses to concentrate sunlight, heating a fluid to drive a turbine and generate electricity
- Solar energy can also be used for water heating, space heating, and cooling applications
Wind power
- Wind turbines convert the kinetic energy of moving air into electricity
- Wind turbines typically have three blades mounted on a tower, with the blades rotating a shaft connected to a generator
- capture the strong and consistent winds over oceans and lakes
- is one of the fastest-growing renewable energy sources, with significant installed capacity worldwide
Hydroelectric power
- generates electricity by harnessing the energy of falling or flowing water
- Dams store water in reservoirs, releasing it through turbines to drive generators
- Run-of-river hydropower systems divert a portion of a river's flow through turbines without requiring a dam
- acts as a large-scale energy storage system, pumping water uphill during off-peak hours and releasing it to generate electricity during peak demand
Geothermal energy
- utilizes heat from the earth's interior for electricity generation and direct heating applications
- Geothermal power plants use steam or hot water from underground reservoirs to drive turbines and generate electricity
- Direct use of geothermal energy includes space heating, aquaculture, and industrial processes
- Geothermal heat pumps use the stable temperatures of the shallow ground for efficient heating and cooling of buildings
Biomass energy
- is derived from organic materials (wood, agricultural waste, municipal solid waste)
- Combustion of biomass directly produces heat for industrial processes or electricity generation
- Gasification converts biomass into a combustible gas (syngas) used for power generation or as a feedstock for chemicals
- Anaerobic digestion of biomass produces biogas, a mixture of methane and carbon dioxide, which can be used for heating or electricity generation
- Biofuels (ethanol, biodiesel) are produced from biomass and used as transportation fuels
Advantages vs traditional energy
Environmental benefits
- Renewable energy sources have a much lower environmental impact compared to fossil fuels
- Renewable energy generation produces little to no greenhouse gas emissions, helping to mitigate climate change
- Renewable energy reduces air pollution associated with fossil fuel combustion (particulate matter, nitrogen oxides, sulfur dioxide)
- Renewable energy technologies have a smaller land and water footprint compared to fossil fuel extraction and processing
Long-term cost savings
- While renewable energy often has higher upfront costs, it can lead to significant long-term cost savings
- Renewable energy sources have low or no fuel costs, as the resources (sun, wind, water) are freely available
- Renewable energy technologies have longer lifespans (20-30 years for solar panels and wind turbines) compared to fossil fuel power plants
- Increasing economies of scale and technological advancements continue to drive down the costs of renewable energy
Reduced dependence on fossil fuels
- Renewable energy diversifies the energy mix, reducing reliance on finite and often imported fossil fuels
- Reduced dependence on fossil fuels enhances energy security by mitigating the risks associated with fuel price volatility and supply disruptions
- Transitioning to renewable energy helps conserve fossil fuel reserves for other essential uses (petrochemicals, plastics)
Challenges of renewable energy
Initial investment costs
- Renewable energy technologies often require significant upfront capital investments for installation and infrastructure
- High initial costs can be a barrier to adoption, particularly for smaller-scale projects or in developing countries
- Financing mechanisms (government incentives, power purchase agreements) can help overcome initial investment hurdles
Intermittency of supply
- Some renewable energy sources (solar, wind) are intermittent, meaning their output varies based on weather conditions and time of day
- Intermittency poses challenges for grid integration, as electricity supply must match demand in real-time
- (batteries, pumped hydro) and smart grid solutions help manage the variability of renewable energy supply
Storage and distribution
- Storing and distributing renewable energy can be challenging, particularly for large-scale integration into the electricity grid
- Renewable energy generation sites (solar farms, wind farms) are often located far from population centers, requiring extensive transmission infrastructure
- Developing efficient and cost-effective energy storage solutions is crucial for maximizing the use of renewable energy and ensuring grid stability
Economic impact of renewables
Job creation potential
- The renewable energy sector is a significant driver of job creation across various industries
- Renewable energy jobs include manufacturing, installation, maintenance, and support services
- Growth in renewable energy employment often outpaces that of the overall economy
- Renewable energy jobs are often local, providing economic benefits to communities
Effect on energy prices
- Increased adoption of renewable energy can lead to lower and more stable energy prices in the long run
- Renewable energy sources have low marginal costs, as they do not require fuel inputs once installed
- Large-scale deployment of renewables can put downward pressure on wholesale electricity prices
- Renewable energy can act as a hedge against fossil fuel price volatility
Influence on global markets
- The growth of renewable energy is reshaping global energy markets and trade patterns
- Countries with abundant renewable resources (solar, wind) can become energy exporters
- Renewable energy technologies and services create new opportunities for international trade and investment
- The transition to renewable energy is driving innovation and competition in the global clean technology sector
Government policies and incentives
Renewable energy mandates
- Many countries have implemented renewable energy mandates or targets to drive the adoption of renewables
- (RPS) require a certain percentage of electricity to come from renewable sources
- (FIT) guarantee a fixed price for renewable energy generation, providing long-term investment security
- Renewable energy mandates create a stable market demand and encourage private sector investment
Tax credits and subsidies
- Governments offer various tax credits and subsidies to incentivize renewable energy deployment
- (PTC) provide a tax credit based on the amount of renewable energy generated
- (ITC) offer a tax credit for a portion of the capital costs of renewable energy projects
- Subsidies can take the form of grants, low-interest loans, or rebates for renewable energy installations
International agreements
- International agreements and frameworks play a crucial role in promoting renewable energy adoption globally
- The , signed by 195 countries, sets targets for reducing greenhouse gas emissions and increasing the share of renewable energy
- The (IRENA) facilitates international cooperation and knowledge sharing on renewable energy policies and technologies
- Multilateral development banks (World Bank, Asian Development Bank) provide financing and technical assistance for renewable energy projects in developing countries
Businesses investing in renewables
Corporate sustainability initiatives
- Many businesses are setting ambitious goals, including commitments to renewable energy
- Corporate renewable energy procurement, through power purchase agreements (PPAs) or on-site generation, helps companies reduce their carbon footprint and meet sustainability targets
- Renewable energy investments can also provide long-term cost savings and hedge against energy price volatility
- Corporate sustainability initiatives drive demand for renewable energy and encourage innovation in the sector
Partnerships with energy providers
- Businesses are forming partnerships with energy providers to develop and procure renewable energy
- Utility green tariff programs allow businesses to purchase renewable energy directly from their utility provider
- Virtual power purchase agreements (VPPAs) enable businesses to contract for renewable energy from off-site projects
- Collaborative initiatives (Renewable Energy Buyers Alliance) bring together businesses to aggregate demand and negotiate favorable renewable energy contracts
Opportunities for innovation
- The transition to renewable energy creates opportunities for businesses to innovate and develop new technologies and services
- Innovation in areas such as energy storage, grid management, and can complement renewable energy deployment
- Businesses can leverage their expertise and resources to develop and commercialize new renewable energy solutions
- Collaboration between businesses, research institutions, and governments can accelerate innovation and bring new technologies to market
Future of renewable energy
Projected growth and adoption
- Renewable energy is expected to continue its rapid growth in the coming decades
- The International Energy Agency (IEA) projects that renewable energy will account for nearly 30% of global electricity generation by 2040
- Falling costs, supportive policies, and increasing public awareness will drive further adoption of renewable energy technologies
- Developing countries are expected to play a significant role in the growth of renewable energy, as they seek to meet rising energy demand sustainably
Emerging technologies
- Advancements in renewable energy technologies will shape the future of the sector
- Next-generation solar cells (perovskites, organic ) promise higher efficiencies and lower costs
- Floating wind turbines and advanced blade designs will enable the expansion of offshore wind energy
- Energy storage technologies (solid-state batteries, flow batteries, hydrogen) will enhance the integration and dispatchability of renewable energy
- Smart grid technologies (advanced metering, demand response) will optimize the management and distribution of renewable energy
Role in combating climate change
- Renewable energy plays a critical role in mitigating climate change by reducing greenhouse gas emissions
- The Paris Agreement and other international climate frameworks emphasize the importance of renewable energy in achieving global emission reduction targets
- Transitioning to renewable energy can help countries meet their nationally determined contributions (NDCs) under the Paris Agreement
- Renewable energy, combined with energy efficiency measures and electrification of end-use sectors (transport, heating), is key to decarbonizing the global energy system and limiting global temperature rise
Key Terms to Review (30)
Biodiversity preservation: Biodiversity preservation refers to the efforts and practices aimed at maintaining and protecting the variety of life on Earth, including the ecosystems, species, and genetic diversity. This is crucial not only for ecological balance but also for supporting human survival and well-being, as diverse biological systems provide essential resources such as food, clean water, and medicinal products. The preservation of biodiversity is closely linked to sustainable practices and renewable energy, as these sectors can either contribute to or mitigate the impacts on ecosystems and species.
Biomass energy: Biomass energy is a renewable energy source derived from organic materials, such as plant and animal waste, which can be converted into usable forms of energy like heat, electricity, or biofuels. It plays a crucial role in sustainable energy production by reducing reliance on fossil fuels, decreasing greenhouse gas emissions, and providing an alternative to conventional energy sources.
Carbon credits: Carbon credits are permits that allow the holder to emit a certain amount of carbon dioxide or other greenhouse gases. One carbon credit is equivalent to one metric ton of carbon dioxide emissions. The concept of carbon credits is essential in the context of fighting climate change and promoting the use of renewable energy sources, as it creates a financial incentive for reducing greenhouse gas emissions.
Carbon emissions: Carbon emissions refer to the release of carbon dioxide (CO2) into the atmosphere, primarily from burning fossil fuels like coal, oil, and natural gas. These emissions are a significant contributor to climate change and global warming, as CO2 traps heat in the atmosphere. Addressing carbon emissions is crucial for reducing environmental impact and transitioning to sustainable energy solutions.
Concentrated solar power: Concentrated solar power (CSP) is a technology that uses mirrors or lenses to focus sunlight onto a small area, generating heat that can be used to produce electricity. This approach allows for the efficient conversion of solar energy into usable power, making it an important part of the renewable energy landscape.
Decarbonization: Decarbonization refers to the process of reducing carbon dioxide (CO2) emissions associated with energy production and consumption. This is a crucial strategy in combating climate change, as it aims to transition economies away from fossil fuel reliance toward cleaner, renewable energy sources. By decreasing the carbon footprint, societies can work towards achieving sustainability and mitigating the adverse effects of global warming.
Energy efficiency: Energy efficiency refers to the ability to use less energy to provide the same service or achieve the same outcome, which helps reduce energy consumption and environmental impact. This concept is crucial in minimizing waste, lowering costs, and supporting sustainability initiatives. By optimizing the use of energy in various applications, energy efficiency plays a vital role in harnessing renewable resources and advancing technological innovations, such as smart systems and electric vehicles.
Energy security: Energy security refers to the uninterrupted availability of energy sources at an affordable price. This concept is crucial for maintaining economic stability and growth, as it encompasses a country’s ability to access energy resources, manage supply risks, and ensure a diverse mix of energy sources. Renewable energy plays a significant role in enhancing energy security by reducing dependence on imported fossil fuels and promoting sustainability through cleaner energy alternatives.
Energy storage technologies: Energy storage technologies are systems that capture energy produced at one time for use at a later time. These technologies are crucial for balancing supply and demand, especially with the increasing reliance on renewable energy sources like solar and wind, which can produce variable energy outputs depending on environmental conditions.
Energy transition: Energy transition refers to the global shift from fossil fuel-based energy systems to renewable and sustainable energy sources. This shift is driven by the need to reduce greenhouse gas emissions, combat climate change, and promote environmental sustainability, leading to innovations in technology and infrastructure.
Feed-in tariffs: Feed-in tariffs are policy mechanisms designed to promote the adoption of renewable energy sources by guaranteeing fixed payments to energy producers for the electricity they generate and feed into the grid. These tariffs create a stable financial environment for investors and developers, encouraging the growth of renewable energy projects such as solar, wind, and biomass. By ensuring a long-term price for renewable energy, feed-in tariffs help to lower the barriers to entry for new technologies and increase the overall share of renewables in the energy mix.
Geothermal energy: Geothermal energy is the heat that comes from the Earth's interior, which can be harnessed for various purposes, including electricity generation and direct heating applications. This renewable energy source utilizes the constant temperature beneath the Earth's surface, making it a reliable and sustainable alternative to fossil fuels. The use of geothermal energy helps reduce greenhouse gas emissions and dependence on non-renewable resources.
Green bonds: Green bonds are fixed-income financial instruments specifically earmarked to raise funds for projects with positive environmental impacts, such as renewable energy, energy efficiency, and sustainable infrastructure. They provide investors with a way to finance eco-friendly initiatives while also generating returns, thereby encouraging the growth of sustainable practices in various industries.
Greenhouse gas emissions: Greenhouse gas emissions refer to the release of gases such as carbon dioxide, methane, and nitrous oxide into the atmosphere, which contribute to the greenhouse effect and global warming. These emissions result from various human activities, including burning fossil fuels for energy, industrial processes, agriculture, and deforestation. The increase in greenhouse gas concentrations in the atmosphere is a significant driver of climate change, impacting weather patterns, ecosystems, and economies worldwide.
Hydropower: Hydropower is the generation of electricity by harnessing the energy of flowing or falling water. This renewable energy source is widely recognized for its ability to produce large amounts of energy without emitting greenhouse gases, making it an important part of sustainable energy strategies worldwide.
International Renewable Energy Agency: The International Renewable Energy Agency (IRENA) is an intergovernmental organization that promotes the widespread adoption and sustainable use of renewable energy worldwide. IRENA supports countries in their transition to renewable energy, offering policy advice, technology transfer, and capacity-building services. By fostering collaboration among nations, IRENA aims to enhance energy security, mitigate climate change, and promote sustainable development through renewable energy solutions.
Investment Tax Credits: Investment tax credits are tax incentives that allow businesses to deduct a certain percentage of their investment costs from their taxable income, thereby reducing the overall tax burden. These credits are particularly significant in promoting capital investment in specific sectors, such as renewable energy, by encouraging companies to invest in projects that align with public policy goals, like reducing greenhouse gas emissions and transitioning to sustainable energy sources.
Job creation: Job creation refers to the process of generating new employment opportunities within an economy, which can arise from various sources like new businesses, investments, or technological advancements. It plays a crucial role in economic growth and development by increasing the workforce and enhancing productivity. When jobs are created, it can lead to increased consumer spending, improved living standards, and reduced poverty levels.
Levelized Cost of Energy: The levelized cost of energy (LCOE) is a metric used to compare the cost-effectiveness of different energy generation technologies over their lifetimes, calculated as the net present value of total costs divided by the total energy produced. This concept helps in evaluating renewable energy sources by providing a standard measure to assess their economic viability against traditional fossil fuel sources, incorporating factors like initial investment, operational costs, and the lifespan of the energy systems.
Market penetration: Market penetration refers to the strategy of increasing a company's share of existing markets by selling more of its products or services to current customers or attracting new customers. This concept is crucial for businesses aiming to grow in competitive sectors, often through tactics such as price reductions, improved marketing, or enhanced product features. Effective market penetration can lead to increased revenue and a stronger market position, especially in fast-evolving fields like renewable energy and autonomous vehicles.
Offshore wind farms: Offshore wind farms are renewable energy installations located in bodies of water, where wind turbines are used to harness wind energy to generate electricity. These farms take advantage of stronger and more consistent winds found at sea compared to on land, making them an important component of renewable energy strategies aimed at reducing carbon emissions and combating climate change.
Paris Agreement: The Paris Agreement is a landmark international treaty adopted in 2015 that aims to combat climate change by limiting global warming to well below 2 degrees Celsius above pre-industrial levels. It involves commitments from countries to reduce greenhouse gas emissions and to enhance their efforts over time, promoting a shift towards more sustainable practices and renewable energy sources.
Photovoltaics: Photovoltaics refers to the technology that converts sunlight directly into electricity using semiconductor materials. This process relies on the photovoltaic effect, where certain materials generate an electric current when exposed to light. Photovoltaics plays a crucial role in the renewable energy landscape as it provides a clean, sustainable source of power while reducing reliance on fossil fuels.
Production Tax Credits: Production tax credits are financial incentives provided by the government to encourage the production of renewable energy. These credits allow energy producers to receive a tax reduction based on the amount of energy they generate, effectively lowering their overall operational costs and making renewable projects more financially viable. By supporting the development of renewable energy technologies, these credits aim to reduce reliance on fossil fuels and promote a cleaner environment.
Pumped storage hydropower: Pumped storage hydropower is a type of energy storage system that uses two water reservoirs at different elevations to generate electricity. During periods of low electricity demand, excess energy is used to pump water from the lower reservoir to the upper one, storing energy as potential energy. When demand increases, water is released back down to the lower reservoir, passing through turbines to generate electricity. This technology plays a crucial role in balancing supply and demand in renewable energy systems.
Renewable Portfolio Standards: Renewable Portfolio Standards (RPS) are regulatory mandates that require utilities to obtain a specific percentage of their energy from renewable sources. These standards are designed to encourage the development and integration of renewable energy into the power grid, thereby reducing reliance on fossil fuels and lowering greenhouse gas emissions. RPS play a critical role in promoting renewable energy technologies like solar, wind, and biomass.
Smart grids: Smart grids are advanced electrical grid systems that use digital technology to monitor and manage the transport of electricity from all generation sources to meet varying electricity demands. These grids enhance the efficiency, reliability, and sustainability of electricity distribution, making it possible to integrate renewable energy sources more effectively and respond to energy usage patterns in real time.
Solar energy: Solar energy is the energy harnessed from the sun's rays, which can be converted into electricity or heat for various applications. This form of renewable energy is pivotal in reducing greenhouse gas emissions and dependency on fossil fuels, playing a significant role in the transition to a sustainable energy future.
Sustainability: Sustainability refers to the ability to meet present needs without compromising the ability of future generations to meet their own needs. It emphasizes a balanced approach to economic growth, environmental stewardship, and social equity, creating a framework for responsible decision-making across various sectors. Sustainable practices aim to minimize environmental impact while fostering economic and social development, making it crucial in discussions about corporate responsibility, energy use, manufacturing, and biotechnology advancements.
Wind power: Wind power is the process of harnessing the kinetic energy of wind to generate electricity using wind turbines. This renewable energy source is considered one of the cleanest and most sustainable forms of energy production, as it produces no direct greenhouse gas emissions during operation. Wind power contributes significantly to the global effort to reduce reliance on fossil fuels and combat climate change.