source of electricity in theUnited States at 51.65 percent of consumption. Natural gas accounts for16.14 percent of U.S. consumption, and petroleum accounts for a negligible1.63 percent of consumption. Fossil fuels, as a whole, account for a hefty69.42 percent of U.S. electricity consumption.Other sources of U.S. electricity include nuclear at 20.70 percent, andhydroelectric power at 7.21 percent. In the renewable electricity sectorother than hydroelectric, biomass accounts for 1.07 percent of U.S. electricity consumption, geothermal 0.79 percent, wind 0.65 percent, and solarphotovoltaic barely registers at 0.01 percent.Figure 4.7 shows how the fuels used by the U.S. electric power industry have changed over time. The chart shows that coal has been ascendantwith coal usage having more than quadrupled since 1960. Nuclear powerhas been roughly flat since 2000 due to the halt in construction of new nuclear plants in the United States. The use of petroleum as a fuel sourcefor the U.S. electric power industry has generally fallen since 1980. Renewables (mainly hydroelectric power) have been flat for the past decade.Aside from coal, natural gas is the only other source of fuel that has shownsignificant gains in the past decade.Figure 4.8 shows the source of fuels for electricity generation on aglobal basis for 2004 (the latest available data). Fossil fuels accounted for66.1 percent of world electricity generation in 2004, which is just slightlybelow 69 percent in the U.S. Energy Information Administration. The worldrelies heavily on coal, which produces 39.8 percent of the world’s electricity generation. Renewables accounted for only 2.1 percent of world electricity generation in 2004, with most of that coming from geothermal andburning biomass products and very little coming from solar and wind.
66Unaccounted for0.45
ial 3.4
Transportation0.03
2
a Blast furnace gas, propane gas, and other manufactured and waste gases derived from fossil fuels; b Batteries, chemicals, hydrogen, pitch, purchased steam, sulfur, miscellaneous technologies, and nonrenewable waste (municipal solid waste from nonbiogenicsources, and tire-derived fuels); c Estimated as net generation divided by 0.95; d Data collection frame diﬀerences and nonsamplingerror; e Electric Energy used in the operation of power plants, estimated as 5 percent of gross generation; f Transmission and distribution losses (electricity losses that occur between the point of generation and delivery to the customer) are estimated as 9 percentof gross generation; g Use of electricity that is (1) self-generated (2) produced by either the same entity that consumes the power oran aﬃliate, and (3) used in direct support of a service or industrial process located within the same facility or group of facilities thathouse the generating equipment. Direct use is exclusive of station use.
Source: U.S. Energy Information Administration, Annual Energy Review 2006, June 2007, p. 221, http://www.eia.doe.gov/emeu/aer/pdf/aer.pdf
d
DirectUseg0.53
Industr
Residential 4.62
End RetailUse Sales Commercial 4.4413.03 12.51
Net Importsof Electricity0.06
GrossNetGenerationc Generationof Electricity of Electricity14.5613.83
e
Plant Use 0.73fT & D Losses1.31
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Renewable Energy 4.28
Nuclear Electric Power8.21
EnergyConsumedto GenerateElectricity41.27
ConversionLosses26.71
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FIGURE 4.4 U.S. Electricity Flow 2006 (quadrillion Btu; data preliminary)
Other Gasesa0.18
Petroleum 0.69
FossilFuels28.60
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Coal20.66
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Coal
51.65%
Nuclear
20.70%
Natural Gas
16.14%
Hydroelectric
7.21%
Petroleum
1.63%
Biomass
1.07%
Geothermal
0.79%
Wind
0.65%
Imports 0.15%Solar PV 0.01%
FIGURE 4.5 U.S. Electric Power Consumption Share by Source (2006)Source: U.S. Energy Information Administration, Annual Energy Review 2006, June2007, Table 2.1f, http://www.eia.doe.gov/emeu/aer/txt/stb0802a.xls.
80%69.4%60%
40%
20.7%20%7.2%2.7%0%Fossil Fuels
Nuclear
Large Hydro
Renewable
FIGURE 4.6 U.S. Electric Power Consumption Share by Type (2006)Source: U.S. Energy Information Administration, Annual Energy Review 2006, Energy Information Administration, June 2007, Table 2.1f, http://www.eia.doe.gov/emeu/aer/txt/stb0802a.xls.
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25
20
Quadrillion Btu
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5
01950
1955
1960
1965
1970
Coal
Natural Gas
1975
1980
Petroleum
1985Nuclear
1990
1995
2000
2005
Renewable*
FIGURE 4.7 U.S. Electric Power by Source 1950–2006Source: U.S. Energy Information Administration, Annual Energy Review 2006, June2007, Table 2.1f. http://www.eia.doe.gov/emeu/aer/txt/stb0802a.xls.* Renewable category includes Hydroelectric, Biomass, Geothermal, Wind, and SolarPV.
Coal
39.8%
Natural Gas
19.6%
Hydro
16.1%
Nuclear
15.7%
Petroleum
Renewables*
6.7%
2.1%
FIGURE 4.8 World Electricity Generation Share by Fuel (2004)Source: International Energy Agency, Key World Energy Statistics 2006 (IEA, 2006),p. 24.* Renewables include geothermal, biomass/waste, solar, and wind.
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FOSSIL FUEL MARKET SIZE: EVEN A NOSEUNDER THE TENT IS WORTH BILLIONSThe previous sections of this chapter have illustrated the world’s heavy dependence on fossil fuel for its energy. The flip side of this reliance on fossilfuels is that there is enormous upside potential for replacing even part ofcurrent fossil fuel energy usage with clean, low-carbon energy solutions. Ithas become obvious that the cost of fossil fuels is not just the price paid forthe fuel itself, but also the external costs paid in terms of greenhouse gasemissions, global warming, geopolitical energy dependence, vulnerabilityto oil supply and price shocks, and health risks. The overall costs of relying solely on fossil fuels to satisfy the huge increase in energy demand incoming decades would be enormous. This provides a huge upside for theclean energy industry.The size of the market targeted by the clean energy industry can be estimated based on the size of the current fossil fuel market, which the cleanenergy industry aims to at least partially replace. The fossil fuel market,which was roughly $2.7 trillion in 2004, will grow to $4.0 trillion by 2030,according to energy unit forecasts by the U.S. Energy Information Administration. Their unit figures were converted to dollar values using recentaverage trading prices for crude oil, natural gas, and coal. The projected$4 trillion size of the fossil fuel market in 2030 does not assume any rise infossil fuel prices.The total fossil fuel market size is calculated by estimating the crudeoil, natural gas and coal markets individually. The value of the world’soil consumption was about $1.740 trillion in 2004 and will grow to $2.470trillion by 2030 according to projections by the U.S. Energy InformationAgency in its International Energy Outlook 2007 and using a crude oilreference price of $60 per barrel.1 The value of the world’s natural gas consumption was about $722 billion in 2004 and will grow to $1.2 trillion in2030 using a recent average trading price of $7 per million Btu.2 The valueof the world’s coal consumption was about $215 billion in 2004 and willgrow to $373 billion in 2030 using a coal recent average trading price of $45per ton.3The size of the fossil fuel markets in terms of final market value isactually much higher. The calculations above were made using the wholesale price of basic fossil fuels, not the value of value-added products suchas gasoline and electricity. For example, the annual revenues of just thelargest 20 U.S.-listed integrated oil and gas companies in 2006 were $2.3trillion. In order to calculate the final market value of all fossil fuel energy,we would need to add the revenues of all other oil companies, coal companies, natural gas companies, and the revenue of electricity power utilityproducers tied to fossil fuel inputs.
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In any case, these fossil fuel figures are offered, not as an exact potential target size for clean energy, but simply to illustrate that there ispotentially trillions of dollars worth of demand for clean energy solutionsin the coming decades if fossil fuels are legislated away and clean energytechnologies become cheaper than fossil fuels. In any business plan, anentrepreneur wants a potentially massive market to go after, and that iscertainly the case with clean energy.
RENEWABLE ENERGY FORECASTSThe clean energy industry has been growing at double-digit rates for thepast 5 years. In those years, the wind industry has grown at an average annual rate of 24 percent and the solar photovoltaic industry has grown at anaverage annual rate of over 40 percent. Skeptics do not believe that the industry can sustain these strong growth rates and fear a pullback. However,the skeptics are thinking about traditional industry growth rates and arenot thinking about the huge amount of room on the upside for the cleanenergy industry.Solar power usage in the United States, for example, could grow at thevery strong rate of 30 percent every year and it would still account for only1 percent of total U.S. power generation by 2017, 2.4 percent by 2020 and9 percent by 2025. (More details on solar power are presented in Chapter5.) The world is so dependent on fossil fuels that even moderate penetration levels mean literally hundreds of billions of dollars of revenues forclean energy producers.In fact, the International Energy Agency, a group of economists andstatisticians that is not inclined to wild-eyed forecasts, is predicting doubledigit growth for key areas of the clean energy industry for the next twodecades in their Alternative Policy Scenario. The Alternative Scenario, asopposed to the Reference Scenario, is the IEA’s more aggressive forecast based on the assumption that countries around the world “were toadopt a set of policies and measures that they are now considering andmight be expected to implement over the projection period.”4 Figure 4.9illustrates the IEA’s Alternative Policy forecasts for wind, solar, geothermal, and tide/wave power. The chart shows how the IEA expects windenergy to capture a big market share relative to the other technologiesby 2030.The IEA’s projected annual compounded growth rates over the2004–2030 period, as shown in Figure 4.10, are as follows: 17.0 percent forsolar, 13.2 percent for tide and wave, 11.7 percent for wind, and 4.7 percent for geothermal. It is important to realize that these are average growth
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1500
WindTerawatt-hours
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500
SolarGeothermalTide & Wave02004
2008
2012Wind
2016Solar
2020Geothermal
2024
2028
Tide & Wave
FIGURE 4.9 U.S. Renewable Power IEA Forecasts, 2004–2030Source: International Energy Agency, Renewables in Global Energy Supply: An IEA FactSheet, January 2007, p. 12, http://www.iea.org/textbase/papers/2006/renewablefactsheet.pdf.
20%17.0%15%13.2%11.7%10%
4.7%
5%
0%
Solar
Tide & Wave
Wind
Geothermal
FIGURE 4.10 IEA Forecast for Global Renewable Power Annual Growth Rates,2004–2030Source: International Energy Agency, Renewables in Global Energy Supply: An IEA FactSheet, January 2007, p. 12, http://www.iea.org/textbase/papers/2006/renewablefactsheet.pdf.
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rates over the period. What is likely to happen is that growth rates willbe much faster earlier in the forecast period when growth is easier toachieve from low base levels and that growth rates will be slower laterin the forecast period when growth is more difficult to achieve from higherbase levels. Wind power is starting out from a significantly higher base thanthe other technologies and can therefore reach a higher installed base by2030. Wind power’s base in 2004 was 82,000 gigawatt-hours versus 56,000gigawatt-hours for geothermal and only 4,000 gigawatt-hours for solar andless than 1,000 gigawatt-hours for tide/wave.Over the 26-year period of 2004 to 2030, the IEA in its Alternative Policycase is forecasting that wind power will grow by 18 times over, solar powerwill grow by 60 times over, geothermal will grow by more than 3 timesover, and that tide/wave power will grow by 46 times over. There are notmany industries in the global economy that even have a remote chance ofachieving these growth rates. Moreover, the IEA is not going out on a limbwith these predictions and the actual outcome could actually be stronger ifgovernment support measures are stronger than expected, if crude oil andelectricity prices rise significantly, or if clean energy costs fall more rapidlythan currently expected.Even with these relatively strong forecasts for clean energy growth,fossil fuels would still account for a dominant 77 percent of primary energy demand by 2030 in the IEA Alternative Policy forecast.5 This indicatesthere would be plenty of room for additional growth in renewable energyin the decades after 2030.Estimating the current size of the global clean energy industry is a difficult task because of the wide variety of technologies and industries involved in the sector, the large number of companies involved, the difficultyof identifying companies in other countries where clean energy is a biggerbusiness than in the United States, and because it is difficult to separateout clean energy revenues at large companies such as GE. One group thathas tried is Clean Edge, Inc. (see www.cleanedge.com). In its Clean Energy Trends 2007 study, which is available to the public on the Clean EdgeWeb site, global clean energy industry sales in 2006 were pegged at $55.4billion, up 39 percent from $40 billion in 2005.6 Clean Edge is projectinga compounded annual growth rate over the 10-year period of +15.1 percent, leading the clean energy industry to projected sales of $226.5 billionby 2016. That forecast is just for the biofuel, wind, solar, and fuel cell business, and does not include other clean energy subsectors such as powerefficiency, hybrid vehicles, or cleaner fossil fuel technologies.While it is difficult to produce forecasts for an industry that is growingso fast and is in such a state of flux, it is safe to say that the entire cleanenergy industry will see double-digit growth rates over at least the next twodecades. The biofuels industry is likely to show an average annual growth
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rate of 10 percent to 15 percent over the next 10 years (assuming cellulosicbased ethanol comes on line within five years), wind power is likely toshow an annual growth rate of at least 15 percent to 20 percent over thenext 10 years, and the solar industry, which is starting out from a lowerbase, will likely show an annual growth rate of at least 25 percent to 30percent over the next 10 years. The growth rates are likely to be higher thanthe 10-year average annual rate in the first half of the 2007–2017 period andthen taper off a bit in the second half of the period as the base levels climband make high year-on-year growth rates harder to achieve.
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CHAPTER 5
Solar PowerThe Sky Is the Limit
he energy from the sun that hits the earth every day is sufficient tomeet the energy needs of the earth’s 6.6 billion inhabitants for 27years according to the U.S. National Renewable Energy Laboratory.1Clearly, there is no shortage of energy available from the sun. The missionis to capture this energy and convert it into electricity at a reasonable cost.The fuel for solar power, sunlight, is free. The cost comes in manufacturingand operating the equipment that converts the sunlight to electricity.There are two main ways to convert energy from the sun into electricity: (1) thermal solar power, and (2) solar photovoltaic power (or solarPV). Thermal solar power uses the sun’s energy to heat fluids, whereas solar photovoltaic power uses semiconductor materials to convert the sun’senergy directly into an electrical current. Solar thermal power has the advantage of being less expensive than solar PV but otherwise the advantagesand disadvantages of the two types of solar power are similar.
T
SOLAR THERMAL POWERWithin the category of thermal solar power there are two subcategories:(1) solar hot water/heat, which involves using hot water or air generatedby the sun’s rays to provide hot water to a building, to heat to a building, or to heat a swimming pool, and (2) concentrating solar power (CSP),which is a utility-scale system that concentrates the sun’s rays to createhigh-temperature water or other liquid, which in turn run turbines to generate electricity.75
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Glazingframe
Glazing
Flow tubesOutletconnection
Inlet connectionEnclosureAbsorber plate
Insulation
FIGURE 5.1 Solar Thermal Hot Water PanelSource: National Renewable Energy Laboratory, “A Consumer’s Guide: Heat Your Water with the Sun,” US Department of Energy, Energy Eﬃciency and Renewable Energy,Dec 2003, p. 5. http://www.nrel.gov/docs/fy04osti/34279.pdf.
Solar Hot Water/HeatA simple solar hot water collector unit is made up of a series of thick panels containing water tubes or air baffles under a sheet of blackened, heatabsorbent material. These panels are oriented toward the sun so that theyreceive the maximum amount of the sun’s rays. The water or air absorbsthe heat and the heated water or air is then piped to where it is to be used.The panels used for hot water and space heating are usually set in a frameand covered by glass. When used for hot water, the solar hot water systemcan have an electric backup for use at night when the sun is not shiningand is not producing hot water.The utility bill for consumers with solar water heaters is 50 percent to80 percent lower than for consumers who have traditional electric waterheaters, according to the U.S. Department of Energy.2 Regarding capitalcosts, a solar heating system for a pool, for example, usually costs $3,000to $4,000 and has a payback of 1.5 to 7 years, depending on the intensityof the sun and cost of electricity in the area.3 Researchers at the U.S. Solar Technology Program have set a goal of cutting the cost of solar waterheaters in half by using more advanced materials and collectors.4Solar hot water heating is a significant source of renewable energyworldwide. In 2005, solar hot water capacity increased by 14 percentto reach 88 gigawatts-thermal.5 Most of the solar hot water capacity isin China, which accounts for 63.1 percent of installed world capacity.Europe accounts for 12.7 percent of world capacity, whereas the UnitedStates accounts for only 1.8 percent of world capacity where it is mainlyused for heating swimming pools.6 Solar hot water heating in Europe grew
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26 percent in 2005 versus the previous year to 1.4 gigawatts-thermal of solar thermal capacity.7
Concentrating Solar SystemsConcentrating solar power (CSP) systems are utility-scale systems thatuse mirrors to concentrate solar energy by 50 to 10,000 times on the solarthermal panels, thus creating fluid temperatures high enough to generatesteam for turbines that in turn run electricity generators. There are threedifferent types of mirror configurations: trough systems, dish/engine systems, and power towers.8Trough System. The most common CSP solar thermal system is thetrough system, which uses long parabolic shaped mirrors to concentratethe sun’s rays on a tube that runs down the center (focal point) of the mirror as seen in Figure 5.2. The tube is filled with a liquid that is heated to
FIGURE 5.2 Concentrating Solar Power System: Trough Style, Mojave Desert,CaliforniaSource: U.S. Department of Energy, Oﬃce of Energy Eﬃciency and Renewable Energy,Concentrating Solar Power, Mojave Desert,. http://www1.eere.energy.gov/solar/csp.html.
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temperatures high enough to create steam. The liquid is often a type of oilso that a heat exchanger is needed to transfer the heat to the water, butdevelopment work is being done to use water in the tube so as to createsteam directly. The whole trough can rotate so that it remains orientedtoward the sun for maximum heat absorption during the day.9Dish System. The dish system uses mirrors mounted on a largeparabolic dish, similar to a satellite television dish, to concentrate the sun’srays on a single focal point above the dish as seen in Figure 5.3. The system
FIGURE 5.3 Concentrating Solar Power: Dish SystemDOE photo caption: Dish Stirling solar power system at Arizona Public Service SolarTest and Research Center. This solar technology, capable of producing 25 kilowattsof electricity, uses mirrors to focus sunlight onto a thermal receiver. The heat is usedto run a Stirling heat engine, which drives an electricity generator.Source: U.S. Department of Energy, Image ID 2010501, www.doedigitalarchive.doe.gov.
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produces a higher concentration of the sun’s rays than the trough system,which means that much higher temperatures can be reached. The sun’srays heat a liquid, which in turn is used to generate steam and drive a turbine. The dish has a motor to keep it oriented toward the sun throughoutthe day. The dish can be linked to a Stirling engine—made by Stirling Energy Systems, Inc. (see www.stirlingenergy.com)—that is mounted at thefocal point of the dish. The sun’s rays heat a gas inside the Stirling engine’sheater head, which then converts the heat directly into mechanical motionto run an electric generator.10There are several companies that work individually or in teams on dishsystems: Science Applications International Corp., STM Corp., Boeing, Stirling Energy Systems, WG Associates, and Sunfire Corporation, according tothe National Renewable Energy Laboratory.11CSP Power Tower. The CSP “power tower” is a solar thermal systemthat uses a large field of mirrors built on the ground around a tower (seeFigure 5.4). The mirrors track the sun during the day so as to keep thesun’s rays focused on a focal point on the tower. At that focal point onthe tower, a liquid is heated and then passed through a steam turbine togenerate electricity.Existing and Planned CSP Plants. Concentrating solar power(CSP) power plants have been operating in the southwestern United Statesfor over two decades. There are nine parabolic trough plants with capacity of 354 megawatts that have operated in California since the 1980s
FIGURE 5.4 Concentrating Solar Power: Power TowerSource: U.S. Department of Energy, “Solar Two” 10-megawatt pilot system built in1990s.
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according to the National Renewable Energy Laboratory of the U.S. Department of Energy.12 Prototype dish/Stirling systems are operating inNevada, Arizona, Colorado, and Spain.13 Two pilot power tower systemswere developed in the 1980s and 1990s (“Solar One” and “Solar Two”) nearBarstow, California, under a U.S. Department of Energy program. The technology lessons from those pilots are being used to build a full-scale systempower tower in Spain.14 The Department of Energy is currently workingon a plan with the Western Governors’ Association to build up to 1 to 4gigawatts of CSP power by 2015.15A major CSP project that was just completed in June 2007 is NevadaOne, a 64-megawatt solar thermal electricity generating plant near BoulderCity, Nevada. The plant is a trough-style system. The plant is the world’sthird largest CSP plant and will provide enough power for 18,000 homes.16The plant cost about $220 to $250 million to build and will produce electricity at a cost of about 15 to 17 cents per kilowatt-hour according toRenewableEnergyAccess.com.17 The electricity generated by the plant isbeing sold to Nevada Power Company and Sierra Pacific Power Companyon long-term power purchase contracts. The power purchase will helpthose Nevada power utilities meet Nevada’s Renewable Standards Portfolio requirement that 20 percent of electricity must come from renewablesources by 2015 and that one-fourth of that electricity must come from solar power.The Nevada One plant was built by Solargenix Energy and AccionaSA (Spain: ANA SM), which purchased a 55 percent ownership interest in Solargenix in February 2006. This book’s companion Web site atwww.ProfitingFromCleanEnergy.com has a link to a video tour of theNevada Solar One power plant. Solargenix, a private company based inRaleigh, North Carolina, specializes in manufacturing and installing solarthermal systems (see www.solargenix.com). Acciona SA is a large construction and renewable company based in Spain (see www.acciona.com)with about 35,000 employees and 2006 revenues of 6.3 billion euros.Another major player in building the Nevada One CSP trough plantwas the German glass-specialist Schott AG, which supplied about twothirds of the 18,240 parabolic receivers used in the project. Schott’s Chairman, Professor Dr. Udo Ungeheuer, said of CSP: “We are convinced thatparabolic trough power plants are on their way to achieving a global breakthrough, thanks to Nevada One. The technology has already proven itselfand the costs of generating electricity will soon be competitive.”18 Schottis a major player, not just in solar thermal, but also in solar PV. Schott(www.schott.com) is a large private company with about 17,000 employees worldwide and 2006 revenues of about 2 billion euros.CSP Costs. The cost of the electricity produced by trough-based CSPpower systems, such as the one seen in Figure 5.5, that are currently
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FIGURE 5.5 Nevada One CSP solar plant built by Solargenix Energy Inc. andAcciona SASource: Acciona Solar.
operating in the southwestern United States is 12 to 14 cents per kilowatthour, which is about double the cost of electricity generated by coal-firedor nuclear plants.19 However, a DOE-sponsored study concluded that CSPtechnologies could reach production costs of 6 cents per kilowatt with onlymodest production volumes.20 A report