Opinion: Google, BT help renewables come of age

21 January 2008

When windmills have been used for generating electricity for more than 150 years and for pumping water for millennia, it seems odd that it has taken so long for renewables - in the modern sense - to be appreciated as an increasingly desirable, affordable and necessary part of the world's low-carbon energy mix. In the face of rising demand for (and price of) fossil fuels, a series of positive announcements last year suggests that 2008 might spell a new coming of age for renewables as a viable and popular mass energy source for the 21st century.

The enormous potential of renewable energy is finally attracting attention from some of the world's most innovative and progressive companies.

Google search for savings

Last November Google announced a new initiative to develop electricity from renewable energy sources that will be cheaper than electricity produced from coal. The scheme, known as REC, will focus initially on advanced solar thermal power, wind power technologies, enhanced geothermal systems and other potential breakthrough technologies. Google co-founder Larry Page said: "Our goal is to produce one gigawatt of renewable energy capacity that is cheaper than coal. We are optimistic this can be done in years, not decades."

Although one gigawatt can power a city the size of San Francisco, it is the financial implication of Google's ambition that makes the announcement particularly significant: that clean green energy can be cheaper than coal will remove a major and long-standing market barrier. Google has already invested $10 million into eSolar, a Californian company specialising in solar thermal energy, a type of technology that uses mirrors to concentrate solar energy to drive steam turbines. For an industry with growing energy demands, mainly due to increased data centre capacity, it is not surprising that the organisation wants to secure a sustainable source of power.

BT stays in touch

Closer to home, BT has announced major plans to develop 250 MW of wind energy in the UK by 2016 as part of a £250 million wind power project in Scotland and Cornwall. That's enough to power a city the size of Coventry, or a quarter of BT's energy requirements.

Google and BT are not the only ones making a business case for renewable energy. A coalition of European companies - the Green Power Market Development Group - has already completed more than 100 MW of green power projects and purchases since 2005, providing more than 50 corporate facilities in 16 European countries with green power. The coalition's more established US counterpart has developed more than 700 megawatts of renewable energy since 2000 and is on its way to meet the goal of 1000 MW of cost-competitive green power.

United front

IPOs and mergers are another important bellwether indicating renewable energy is beginning to compete. In December, Iberdrola Renovables completed the world's fourth largest IPO of 2007, raising USD $6.6billion. According to some, it single-handedly boosted the global clean energy's share of total funds raised by the energy industry on the public markets in 2007 to around 17%. Last week, Scottish and Southern Energy (SSE) agreed to acquire renewables firm Airtricity for ?1.8 billion (USD $2.6 billion), increasing SSE's renewable energy generation portfolio by 400 MW of wind in operation, another 200 MW in construction and a 10,000 MW global pipeline of wind projects in various stages of development.

Global ambitions

Rising power

At national level, countries like Germany and the UK are taking big strides to bolster renewable energy demand. Germany's new climate change package includes plans to provide 25% to 30% of the country's energy needs from renewables (up from the current 12%), whilst the UK has backed a major expansion of offshore wind power that aims to bring 33 gigawatts of offshore capacity online by 2020, potentially meeting about a fifth of the UK's electricity needs. China has committed to doubling its renewable energy targets to 20% by 2020, while in the US renewable targets are increasingly being set at state level.

Views on the potential growth of renewables may continue to differ and while the sector is repeatedly beating all forecasts, the scale of the challenge is certainly not for the faint-hearted. Barriers to faster deployment include a poor understanding of the business case (companies often dismiss renewables as being too costly despite evidence to the contrary), lack of resources and technical understanding of renewable energy technologies, and a tendency to conduct "business as usual".

Moreover, setbacks in the form of public opposition to renewable energy projects, not-in-my-back-yard attitude, and a fragmented regulatory framework are making it difficult to get more renewable energy development in the pipeline. Although global investment in clean energy rose by 35% last year to USD $117 billion, this is countered by IEA World Energy Outlook's estimate that a massive USD $22 trillion of investment is needed in energy infrastructure by 2030 if rises in energy demand are to be met.

This low-carbon challenge will require a new level of international leadership and collaboration between governments and companies. What we can celebrate now is that clean green energy is attracting new champions to evidence and lead the economic case.

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