BNP Paribas Fortis renewable energy monthly - Virtual Metals

6 | BNP Paribas Fortis renewable energy monthly | December 2009 BNP Paribas Fortis/VM Group
Technological challenges
The falling cost of solar power and the emergence of more reliable wind-power
technology will be two key factors in supporting the wider use of these types of
renewable energy in the years ahead. During 2009, the price of a standard solar
module, as measured by the Solarbuzz Module Retail Price Index, fell by about
10% to €4.23/Watt ($6.28) in Europe and to $4.31/Watt in the US. Part of the
downward pressure on prices resulted not only from uncertain market conditions
but also from a surplus in production capacity, which some estimates had
suggested would depress prices by as much as 25%.
Wind-power technology is now developing rapidly with onshore turbines
frequently rated between 2 MW-3 MW each. In offshore windfarms, economies
of scale and maintenance problems dictate that even higher ratings will become
the norm, but there are physical limits as to how heavy these 4 MW-6 MW units
can be. The urgency of the problem has already been identified in the US where
Energy Secretary Steven Chu announced in late November the creation of a
$45m program to design the next generation of wind turbines, which followed
hot on the heels of a $24m wind-power research program unveiled in mid-
October.
The rapidly expanding US wind-power market means that the life-span of a
turbine is decreasing, up to the point that three or perhaps four generations of
wind-power technology can be expected to be installed on a site during the
course of a 25-year lease. Colorado-based wind consultants Pike Research
attempted in October to quantify this turnover of wind units, by calculating that
over the next five years there will be 40,000 new onshore turbines installed in
the US. Of this eye-watering number, an estimated 45% will be replacement
units at existing windfarms, as developers replace aging equipment and install
larger units that require less maintenance downtime.
Technical breakthroughs are also expected next year among ethanol producers,
with Sioux Falls-based ethanol group Poet announcing in mid-November that it
has cut production costs of cellulosic ethanol from $4.13/gallon to $2.35/gallon
in the past 12 months, principally by reducing energy consumption and
controlling its enzyme and raw material costs more efficiently. Poet’s $8m pilot
cellulosic plant in Scotland, South Dakota, which produces 20,000 gallons of
fuel annually, using corncobs as a feedstock, is a test-bed for a proposed $200m
commercial-scale plant that will begin production in 2011. This scaled-up plant
is expected to cut the price of cellulosic ethanol to below $2/gallon, compared
with an industry average for ethanol produced from more expensive corn kernels
of $1.50-$1.70/gallon.
The emergence of any new technology is a constant accretion of minor
improvements that may cut costs or substitute raw materials. Occasionally, a
flash of brilliance will overturn all the previous equations and set things on a
completely new track. As billions of dollars, yuan and euros are poured into
renewable energy research programmes globally, these flashes of genius will
occur more frequently, and the world in which we live will become less
dependent on fossil fuels. But in the meantime, brace yourself for a turbulent but
profitable year ahead.