7 green energy challenges that are holding back development
Earlier this year, a U.S. National Renewable Energy Laboratory report claimed that over half of the United States’ energy could come from renewable sources by 2050. While there has indeed been much development in clean energy technology and expansion of its productive capacity, it is important to recognize the challenges that impede international goals for simultaneously reducing carbon emissions and meeting energy demand. Many issues, such as declining investment and cost effectiveness pose serious threats to the sustainability of clean energy within existing business and regulatory models.
Utility Dive looked into some of problems facing the expansion of alternative energy for today’s list feature. Here’s what we found:
1. SUPPLY/DEMAND BALANCE
A recent Green Tech Media report based on GTM Research findings revealed that 180 PV solar panel manufacturers are bound for either closure or acquisition by 2015. It is estimated that the supply of solar modules will exceed demand by 35 gigawatts per year until over half of the existing firms exit the high cost industry.
88 of the companies in question are in North America and Europe, while 54 are Chinese. The report looks closely into the state of solar panel manufacturing in China, where some of the world’s largest suppliers of PV solar panels are either being rescued by the government or are facing absorption into larger corporations. Unless both the government and the private sector can stabilize the gap between supply and demand, the longevity of the PV solar manufacturing industry remains uncertain.
2. GARNERING INVESTMENT
Global investment in clean energy in Q3 dropped by 5% from Q2, suggesting that 2012 may be the first year since 2004 clean energy investment has fallen. Much of this drop can be attributed to decreased investment in relatively established clean energy markets, as investment in the U.S. and China fell from Q2 by 28% and 17%, respectively. The clean energy sectors within these countries face a wealth of issues related to problematic policies and lower share prices that have left investors feeling uneasy.
The investment problems troubling copper indium gallium selenide (CIGS) solar panel manufacturers speak to the barriers encountered by clean energy initiatives struggling to expand. Since receiving over $900 million in venture capital funds in 2008, CIGS companies have seen a dramatic withdrawal of such funds over the last four years, leaving investment at only $95 million in 2012 thus far. Recently, large solar firms in China, South Korea and Taiwan invested in American CIGS companies with the hope to transform the sector into next-generation solar technology. However, industry experts have commented that this venture will be far from profitable, and in the long run CIGS will need to both find a niche within the market and set competitive prices to attract future investment.
3. POLITICAL LEADERSHIP
Economist Nicholas Stern points to the lack of government subsidies in Britain’s clean energy market as a reason for potential market failure within the country’s energy sector as a whole. He argues that such failures occur because the environmental consequences are not included in the cost of using fossil fuels. If markets are desired to increase societal benefit, then there needs to be room for clean energy firms to expand. This can only be done through subsidizing low-carbon energy alternatives and introducing tax incentives to curtail excessive emissions from high carbon sources of energy. Good policies will be needed to successfully implement these measures and correct for market failure, and Stern stresses the role of the government when it comes to leading the cause for expanding clean energy efforts. The absence of this political leadership in Britain can be a lesson to the rest of the world, as the country is still adopting green energy technologies at a sluggish pace compared to other nations.
4. PRODUCTION TAX CREDIT
The U.S. wind energy industry is at risk if the government’s Production Tax Credit (PTC) is allowed to expire by the end of the year. The senate is currently split in its decision on whether to extend the PTC or not, and the two presidential candidates stand at opposing ends of the issue, with Barak Obama favoring its extension and Mitt Romney supporting its termination. The business community has been vocal about its support of the PTC, as signs of hurt have already begun to show within the wind energy sector. The wind turbine manufacturer Vestas, which enjoyed its most expansionary year in 2012, has now been forced to scale back production and lay off hundreds of employees. Industry leaders warned that tens of thousands of employees across the wind energy sector could lose their jobs in the aftermath of PTC's expiration.
5. RATE-OF-CONVERSION PROBLEM
Replacing our current energy infrastructure with renewable alternatives will be a monumental task that will require the extensive use of fossil fuels to develop the necessary technologies. If clean energy is to abate the effects of climate change, it must replace fossil fuels within a very limited timeframe. The problem of having enough clean energy to meet our energy demands before the affects of global warming become severe is known as the rate-of-conversion problem, which Blogger Kurt Cobb discusses in an article for Oil Price. He provides some unsettling figures: At the current rate at which we are producing clean energy, it would take 140 to 210 years to make the full transition to a society satisfied entirely by renewables.
However, the rate at which carbon is currently being emitted into the atmosphere may not allot us that much time. Cobb acknowledges that this problem can be addressed if green energy accelerates expansion and produces at higher capacities, which haven’t passed 50% for many wind farms, solar panels and hydroelectric stations. But as clean energy companies expand, they will need to carefully consider the rate-of-conversion problem and track their fossil fuel usage to ensure long term sustainability.
6. INTERNATIONAL COMPETITION AND LEGALITY
European and American solar companies are in a drawn out dispute with China on fair business practices within the solar energy market. They accuse Chinese solar companies of receiving illegal loans which were either not paid back or were financed by the government, thus allowing them to undercut prices and drive out foreign competition. Solyndra, the Obama-sponsored American solar firm that filed for bankruptcy in 2011, sued three Chinese solar companies for using illegal pricing schemes to undermine its business. The EU and the US have already levied tariffs on Chinese solar exporters, and in light of recent events solar companies want further duties to imposed.
Interpretation of World Trade Organization rules has also proved to be an issue. Canada was recently condemned by the WTO for setting a limit on the number of devices used for solar and wind energy production that could be imported to Ontario, thus limiting foreign access to the province’s clean energy market. As the market for clean energy becomes increasingly globalized, companies will need to be wary of the implications their actions have on international business.
7. COST EFFECTIVENESS
Clean energy is only a viable solution if it can avoid being a financial burden on businesses and individuals. James Smith, Chairman of the Carbon Trust, comments for an edieEnergy article that the costs associated with adopting renewable energies such as solar power still outweigh their benefits. He argues that it will require a major feat in engineering to make solar panels more cost effective and that nuclear, coal and gas should be fitted in the definition of clean energy. When discussing renewable energy options, Smith asserts that costs, as opposed to what “feels cleaner”, need to be taken more into account.
Around the world, urban centers with emerging infrastructures to accommodate clean energy have been confronted with the issue of cost effectiveness. Although Bahrain recently made efforts to adopt clean energy, it still continues policies that subsidize natural gas and develop better techniques for extracting oil, thus leaving less room for renewable alternatives within their energy market. In London, on-site renewables have come under scrutiny in a report by the British Council of Offices (BCO). The BCO analysis concludes that clean energy has been integrated into structures in a way that is unprofitable, and that the true benefits of using on-site renewable need to be more effectively calculated prior to implementation. These cases suggest that the discussion of using alternative energy is going to be increasingly framed in terms of financial cost as opposed to environmental impact.
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