1. NS4054 Fall Term 2015 Prospects for Alterative Energy

2. Overview Oxford Analytica, “Prospects 2015: Alternative Energy,” November 21, 2014 Main idea Alternative energy although a minority in overall global energy supply will expand in next two decades For climate targets set by China and the United States to be met, alternative energy must provide a much larger proportion of energy supply In U.S., political fighting between White House and Congress will delay major investments in and assistance to alternative energy. 2

3. Renewable Energy I Renewable energy technologies, although representing 12% of total U.S. power generation are the fastest source of electricity Wind, solar, geothermal and biomass are becoming increasingly cost competitive with hydrocarbons in certain regions even as green subsidies and tax credits expire Trend looks to continue Given that many companies and labs are investing in new areas of research, and Developers are laying the groundwork for large, utility scale projects 3

4. Renewable Energy II Elsewhere in the world renewable energy has large potential even if much of that is untapped In Latin America outside of Brazil, renewable energy provides less than 5% of electricity Technologies based on the use of biomass have been expanding rapidly due to availability of wastes produced from forest industries In Europe, Germany has invested heavily in its renewable sector after decision to close nuclear plants 4

5. Renewable Energy III Price competitiveness Cost of energy from new utility-scale wind power plants is increasingly competitive with conventional electricity fuels. Technological improvements are rapidly making turbines more productive, while Transport costs that represent up to 20% of a wind farm’s cost have dropped considerably The US DoE reports that the cost of wind energy has declined by 43% over the last four years. Solar remains significantly more costly than its competitors -- although The relative cost of utility-scale solar power has declined the most among all resources Average price of solar panels has dropped 80% since 2008 5

6. Renewable Energy III Long-Term Economies In the long run, wind and solar technologies are expected to decrease in cost and eventfully reach grid parity. While total per country greenhouse gas (GHG) emissions continue to increase, GHG per unit of GDP are decreasing, indicating increasing efficiency and renewable energy On a per capita basis, the GHG emissions of developed nations are steadily falling while those of developing countries continue to rise, particularly China The main barriers to transferring new technologies to the developing world are the high costs of these technologies 6

7. Renewable Energy III Oil Price Decline Impact In the U.S. power sector, immediate climate targets favor a shift to natural gas plants Historically, due to the capital-intensive nature of alternative energy projects, renewables only became competitive when oil and natural gas prices are high. However, in the US electricity sector, oil and renewables hardly compete. For solar and wind power, lower oil prices will have little impact – gas prices are more relevant. Lower oil prices may slightly boost renewable investment since they threaten the viability of some shale developments However, if prices stay low, the US export ban on petroleum products persists, companies will likely slow their investments in shale. 7

8. Renewable Energy III Technical Advancements Vibrant research and development activity in the renewables sector VolturnUS, a prototype floating wind turbine off the coast of Main launched in 2013 In wake of its success the DOE recently signed an agreement to build tow full-scale models, to be put in the water by 2018 Firms working to make crystalline silicon parts more efficient for solar PV sells Other efforts explore potential of thin-film cells of different materials Although silicon remains more efficient and durable, thin- film offers some advantages over conventional crystalline cells lower manufacturing costs, lighter weight 8

9. Renewable Energy III With political divides in Washington, several US renewable energy incentives are likely to lapse – wind production tax credit and the investment tax credit. The investment tax credit, which covers 30% of a renewable energy project’s capital costs due to expire in 2016 However USEPA will still play an important role in Setting transportation standards and Otherwise regulating carbon dioxide as a pollutant Achieving the US goals will also require continuing support at the state level Currently 29 states have renewable energy portfolio standards in place and California and the North-East have cap-and-trade systems 9

10. Renewable Energy III The Chinese renewable energy commitment translates to installing 1,000 gigawatts of non-fossil energy capacity Equivalent of installing one 7.5 megawatt wind turbine every hour until 2030 In addition to adding capacity, China will need to upgrade its grid and adapt its contract structure with energy production facilities to create the grid flexibility required for he oncoming addition of renewable energy 10

11. Summing - Up In the short term political and economic forces will favor conventional energy sources. In the U.S. the wind production tax credit and the investment tax credit are likely to lapse Low oil and gas prices will place competitive pressures on renewable energies However the long-term trends remain encouraging for alternative energy The cost of electricity for solar and wind power is decreasing dramatically Climate targets will encourage higher rates of efficiency and lower carbon emissions per unit of GDP Will require heavy investments in renewable energy 11