Renewable Energy Development Breaks Records and Leaps Ahead of Fossil Fuels Worldwide

Hands down, 2015 was a record year for global investment in renewable energy. Excluding large hydroelectric projects, the amount of money committed to renewables rose 5%, to $285.9 billion, exceeding the previous record of $278.5 billion reached in 2011.

This happened despite exchange rate shifts that depressed the dollar value of investments in other currency zones, and despite sharp declines in oil, coal, and gas prices that supposedly would protect the supremacy of fossil fuel generation. According to Bloomberg New Energy Finance (BNEF) and the Frankfurt School in their recent report "Global Trends in Renewable Energy Investment 2016," in 2015 the really big financial flows to renewable energy, both for large-scale centralized dispatch as well as small-scale distributed generation, came at the roll-out rather than the technology development stage. In other words, we're way beyond the drawing board now.

Last year was also the fifth consecutive year that investment in renewables exceeded investment in new fossil fuel-based energy.

The amount of generating capacity added in wind and solar photovoltaics (PV) last year came to 118 GW, far above the next-highest annual figure, 2014's 94 GW. Last year was also the fifth consecutive year that investment in renewables exceeded investment in new fossil fuel-based energy. But significantly, for the first time, more money for renewables (not including large-scale hydro) was invested in developing economies than in mature ones.

Worldwide, renewable generation costs continue to fall, particularly for PV. In the second half of 2015, the global average levelized cost of electricity for crystalline silicon PV was $122 per MWh, down from $143 in the second half of 2014. So it's no surprise that renewables, excluding large hydro, made up 53.6% of the capacity of all technologies installed in 2015, the first time it has represented a majority, according to the BNEF report. Based on current trends, according to the International Energy Agency, two-thirds of net additions to power capacity by 2020 will be renewables.

Renewables Leapfrogging Fossil Fuels in Some Regions

According to a Mercatus Energy Investment Management's Global Advanced Energy Insights Report, the $12 trillion flooding into the market over the next few years-mainly into the developing world-is funding an "energy transformation." Based on information about energy projects in various stages of development in 2015, "there's a real opportunity for these markets to leapfrog fossil-fuel dependence," wrote analyst Haresh Patel.

But parallel to these investments are questions about how to create a new grid, and how to standardize development and gauge the amounts of energy already flowing (see sidebar below). In formerly "dark" regions of the world, when new power projects are being built, an immature or inchoate electrical grid often is constructed to reach lucky consumers. But even in developed nations like France, operators are already challenged from a lack of data on how much power is actually flowing over a now bi-directional grid.

Technologies and Policies to Enable Renewables Worldwide

One of the challenges for electrical grid operators, particularly in the developed world, where they are retrofitting to allow more two-way communication, but also in emerging economies, is an overall lack of real-time information. "We have traditionally had a smart high-voltage transmission system and then a dumb low-voltage distribution network," said Jonas Rooze, Bloomberg New Energy Finance's Head of European power and carbon analysis. Now, since there is so much more activity at the distribution scale, "there's a real need to measure and understand what's going on," he continued in an exclusive interview with POWER. Network operators, particularly in distributed systems, don't always know the length of lines running to individual houses or end users. They don't always know how much energy flow is on which lines, let alone what's being generated through smaller systems.

However, as presenters at the G3-PLC Alliance conference held in Paris in April discussed, it's important to standardize enabling technologies from the beginning, when possible. G3-PLC, or third-generation power line communication, is an open-standard power line communications standard for bidirectional grids. In a short time, they have gone from bleeding edge to cutting edge as they provide multi-purpose solutions for public services, "smart grids," and a few "dumb/analog" ones. "There's a lot of boring things that policy-makers and grid providers can do, like adopting technical standards early on," such as installing smart meters and other technologies so that energy flows can be measured and monitored in real time, said Rooze.

G3-PLCs help facilitate high-speed, real-time, two-way communications over the grid. "It's an evolving technology with a backward compatibility," said Marc Delandre, general secretary of the G3-PLC Alliance and Project Director at ERDF in charge of smart grids services development. "The link between data and the G3 PLC is a key point to provide the data for energy policies. The problem is that understanding and receiving data from all over our evolving networks is difficult. The G3 PLC is a good solution to provide the data to manage to manage this energy transition," he explained to POWER. As developing countries build their networks, standardized communication and monitoring systems "will be necessary as they manage them, especially given the incoming storage options," said Delandre.

Other nations, like South Africa, are seemingly using and building two grids simultaneously: one that-though based on fossil fuels-suffers from rolling brownouts and another that's based on new, smaller-scale intermittent renewable generation that is increasingly being fortified with battery storage. Worldwide, grids are rapidly being reenvisioned as the frenetic pace of development increases. (For more on this issue, see "Evolving Roles for the Grid and Generation" in the May issue of POWER.)

Commitments to renewables in the developed world slowed last year, slipping 8%, to $130.1 billion. Investments in these nations have been on a downward trend, more or less consistently, since 2011, when they peaked at $191 billion-some 47% higher than in 2015. Investment in Europe slipped 21%, to just $48.8 billion. Overall, allocations there have fallen over 60% since 2011, according to the BNEF report.

However, the "big three" developing nations of China, India, and Brazil saw investment in renewables rise 16%, to $120.2 billion last year. Other developing economies enjoyed a 30% bounce to $36.1 billion. The BNEF report highlights South Africa, which saw a 329% increase in investments in renewables as more than $4.5 billion flowed into projects. In fact, the entire continent of Africa looks to become one of the most promising markets for renewable energy over the next 10 to 20 years.

But it's important not to think of African investments monolithically. Though the continent shares a growing population, an urgent need for new generating capacity, and a lack of electricity access in remote areas, investment and development paradigms are vastly different in northern Africa than in both Sub-Saharan and South Africa.

Even though Africa has immense natural resources in terms of sunshine, wind, biomass, and geothermal possibilities, there's also something else many of these regions have to offer: a relatively blank slate when it comes to grid development. "In many regions, countries are leapfrogging the large, centralized fossil plant step, going straight to having more renewables projects commissioned at an ever-larger scale," said Nico Tyabji, a senior associate at BNEF, covering on-and off-grid solar, with a focus on Africa in an exclusive interview with POWER.

Must Go Faster: Why Operators Increasingly Choose Renewables

Despite all the "green" aspects of renewables, as well as falling development costs, another advantage renewables offer is a shorter project completion timeline than traditional options.

Investors have seen billions wasted as large-scale coal and nuclear projects in particular stagger toward completion or are cancelled before making an investment return. But wind farms can be built in nine months or so. Solar parks can start generating electricity in three to six months. Generating electricity means generating money. One only has to look at the long-under-construction 4,760-MW Medupi coal plant that South African power provider Eskom has been building for years to see how fossil investments are dragging along. Savvy developers are increasingly bypassing the old and "messy" legacy electricity infrastructure in favor of clean, smart microgrids, choosing less capacity for more speed. (See "U.S. Microgrid Market Development" for details on the role of microgrids in developed nations.)

On Aug. 30, 2015, South African utility Eskom inaugurated the first 780-MW unit of the 4.8-GW Medupi power station under construction in the country's coal-rich Limpopo region. Construction on the project began in 2007, but the plant will not be fully completed until 2019. Courtesy: Leita Steel Construction

The supposed "holy grail" in energy development is battery storage as an adjunct to solar and wind projects. In 2015, some 250 MW of utility-scale electricity storage (excluding pumped hydro and lead-acid batteries) were installed worldwide, up from 160 MW in 2014. (See "THE BIG PICTURE: Leading the Charge" for an infographic on where 23.9 GW of energy storage can be found in the U.S.) Announced projects reached 1.2 GW. The potential for storage to help balance variable renewable electricity generation, in both developed countries and remote developing country locations off the grid, is this year's "X."

According to a recent piece in The Africa Report by Nicholas Norbrook, Zimbabwean telecoms tycoon Strive Masiyiwa, speaking at a recent investor conference, said that today, "Africa has an opportunity to lead the world and leap to a totally renewable energy base, in the same way as the continent has leapfrogged from fixed-line telephony straight to mobile communications." International law and investment advisor Linklaters estimates that renewable energy production in Africa could expand five-fold between now and 2030, to 128 GW.

International development-finance institutions like Germany's KfW's GET FiT program are now getting involved in subsidizing tariffs for green power projects too. KfW is helping pay the tariff difference on a new 10-MW solar project in northern Uganda, allowing Dubai-based project developer, Access Power, to sell electricity to the Uganda Electricity Generation Co. at a competitive $0.11/kWh. Perhaps most notable about this small-scale project is the rapid 10-month signature-to-development-and-construction cycle. Developers plan on generating electricity, and getting a return on their investments, starting in July this year, when the plant is scheduled to be switched on. "We have set a precedent in Africa," said Access Power Chairman Reda El Chaar in The Africa Report.

As many developers have learned, integrating small-scale solar projects into national grids is increasingly easier than building a huge new thermal plant because there are seldom grid upgrades or other connection constraints. The 10-MW Access Power project will supply sufficient power for 40,000 local homes-next is the challenge of distributing that power. But the company's Ugandan project is also easily replicable, with both partners developing other projects across the continent.

South Africa's Rapidly Growing Renewables Market

Unique in Sub-Saharan Africa, South Africa already has a large, albeit often dysfunctional, electrical grid infrastructure. With massive coal reserves, the nation relies heavily on coal not just for generating electricity but also on creating diesel fuel for transportation. Paradoxically, because South Africa has the largest established grid in the region, it has now become the only utility-scale renewable market in the region, attracting serious international capital.

From a total investment of a few hundred million rands in the sector in 2011, investment in renewable energy has reached almost 5% of gross domestic product. "It is one of the only sectors outside the mineral-energy complex that is actually creating jobs, and it attracts huge inflows of foreign direct investment," according to an article in Investors Monthly Business Day Live.

South Africa, with three recent deals for new wind farms, is an example of how renewables are simply moving around fossil investments. At the same time as more wind and solar are coming on in South Africa, its fossil fuel project plans are unraveling. Eskom, the national utility, in late April decided to review its plans for closing older coal-fired plants as new ones came online because of cost and time overruns at the replacement facilities.

A consortium led by Mainstream Renewable Power ordered 157 Siemens SWT-2.3-108 wind turbines for three projects in South Africa in February 2016. The 140-MW Khobab wind farm and the 140-MW Loeriesfontein 2 wind farm are both located in the Namakwa District Municipality, and the 80-MW Noupoort wind farm is located in Umsobomvu Local Municipality. Courtesy: Siemens

The huge Medupi and Kusile coal-fired power plants are years overdue, tens of billions of rands over budget, and may not have sufficient supplies of water to operate at full capacity if and when they are completed in the early 2020s. Because of this, the board of Eskom may be forced to extend the life of 10,000 MW of older coal plants they were supposed to replace, stranding more assets and, in a way, prompting even more renewable energy development.

As these huge centralized fossil fuel power projects stagnate, people are powering up just the same. And though big green projects are coming online slowly, some have already taken measures into their own hands to ensure continuity of supply. Since South Africa's grid is at best uni-directional, all the activity is happening behind the meter. Whoever can afford it already has diesel generator backup. "There's also potential for the use of batteries at the household level for backup for unreliable grids. Some people in developing countries already use car batteries for this, but we haven't seen quality offerings take off yet,"said Tyabji.

But Tyabji and BNEF now see the beginnings of a larger, integrated PV-plus-storage market coming together. Though what's holding it back is the same as in developed regions-storage still being too expensive-some trials are now coming in. ENEL, the Italian energy producer that engages in a lot of emerging market activity and development, is shipping Tesla Powerwalls to South Africa. Not only can you combine rooftop PV with the Powerwall, but you also can use your Powerwall when blackouts come. "ENEL is coordinating with system operators, so that Powerwall owners can be notified ahead of time that there will be a power cut and then charge up. We are at the cusp of this wave," said Jonas Rooze, London-based analyst at BNEF and expert on European systems in an exclusive interview with POWER.

Tesla's 10-kWh Powerwall is designed for home use in conjunction with rooftop solar. This photo shows a two-unit system; up to nine can be paired together. Source: POWER/Tom Overton

Though the idea of embracing renewables to extend and prop up the small grid systems throughout most of Sub-Saharan Africa sounds exciting and certainly has potential, the idea hasn't yet become reality. But Tyabji thinks this is just a matter of time. "There's a lot of development interested. We are in the final proving stages. There is more finance available for this than there are projects in the pipeline," he said.

"We do see the emergence of natural markets for off-grid PV on a home system level. This is for people with no kind of electricity at all. There are options provided by entrepreneurs, start-up PV-plus providers, that can in stages be scaled from 10 watts to a few hundred. These systems can now be licensed and franchised. The installations can supply electricity for serious electronics like TVs and refrigerators," said Tyabji.

But even with incentives, loans, and large investments, it's unlikely that small homes and isolated villages will get linked up quickly, if at all, to an emerging national grid network. "But instead of waiting for the high-voltage backbone to come along-and in many cases it just won't because of poor, dispersed rural populations-you can install your mini-grids in a way that becomes a modular network that hooks up electronically," said Tyabji.

Interestingly, the pico-solar market, for systems that generate tiny amounts of power, has emerged completely unregulated. Though the economics work really well, in many cases, local governments still have no idea what's happening.

Renewables "Inevitable"

Renewables-in particular solar-just keeps on getting cheaper. "Subsidy or no subsidy, it's still going to happen. Rooftop solar is something in particular you have to start putting some strong anti-rooftop policies in place to stop, which is quite different than enabling it in terms of public policy." Swimming against the current is never easy, "the cost trends suggest that the shift to renewables is becoming inevitable," said BNEF's Tyabji.

-Lee Buchsbaum (www.lmbphotography.com), a former editor and contributor to Coal Age, Mining, and EnergyBiz, has covered coal and other industrial subjects for nearly 20 years and is a seasoned industrial photographer.

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