3 Ways To Keep Solar and Wind Booming

Extending imperiled subsidies for renewable energy may not be the best way to maintain the revolutionary growth of solar and wind, the International Energy Agency's policy honcho said in Washington D.C. Friday.
Technologies benefit from different forms of support at different stages of their development, said Jean-François Gagné, head of the International Energy Agency's Energy Technology Policy Division—and solar and wind energy have matured enough that subsidies are no longer what they need most.
"When we look at the progress of renewable energy technology, we see that costs have come down drastically in the last 10 years, even faster than we ever would have predicted," Gagné said at the Center for Strategic and International Studies.
"So we do see the progress happening, but what we need now is for the focus to go from technology development to looking at the market barriers."
Now that solar and wind are cost competitive with fossil fuels in many markets, the market barriers hinge on their ability to attract investment and their inability to deliver power consistently, Gagné said.
Those barriers are best overcome, he said, by stable policies and complementary technologies.
"Just looking at subsidies to push these technologies out is really insufficient for these technologies to become a mainstream solution. You have to take your view away from the single-technology support to a whole systems approach, and you have to start looking at other technologies that can help improve the business case for these low-carbon technologies."
Gagné outlined approaches he thinks necessary for the world to develop renewables fast enough to keep global warming from becoming dangerously disruptive:
1. Stabilize Renewables Policy
"The biggest issue right now with renewable energy is the uncertainty associated with policy support," Gagné said.
The solar tax credit is set to expire in the United States at the end of 2016. Whether or not the credit is extended, investors everywhere need to know what to expect. Uncertainty increases risk. And risk increases financing costs.
"Since these technologies are very capital intensive with low operating cost, the business case is really dependent on the cost of capital," Gagné said. "And when you don't know what reward you're going to get in the long run from investment in renewable energy, it makes your capital flow very risky and therefore very expensive."
In December, IEA executive director Maria van der Hoeven scolded the U.S. for waffling on its wind tax credit.
"The durability of some existing federal incentives such as its Renewable Energy Production Tax Credit for wind remains a persistent uncertainty,” van der Hoeven said. ”Yet another short-term extension of the PTC undermines investor confidence and contributes to the volatile pattern of annual wind growth.”
2. Grease The Battery Rollout
In the last three months, the cost of utility-scale battery storage has dropped enough to make storage economically viable at the utility scale. Storage provides what Tesla's Elon Musk has called "the missing piece," supplying reliability that variable power sources, like solar and wind, cannot provide on their own.
But technological innovation, with its downward pressure on costs, is only the first phase of a technology's development.
"In terms of energy storage, while we don't see the rollout progress that we need, looking at the multiple benefits energy storage can provide, we do see in terms of technology improvement quite drastic cost reductions that we hope can help storage play a big role if the right policy frameworks come into place."
Many of the benefits storage provides—reliability, power quality, energy security and efficiency gains—have no means of being compensated in the market under current regulations, the IEA noted last year.
"In liberalized electricity markets, energy storage cannot receive direct payments for many of the benefits it provides," the IEA stated. "Unless compensation for energy storage systems is provided—or reliable cost recovery mechanisms are in place—high levels of deployment will be difficult to achieve."
3. Innovate Supportive Policy & Tech
Battery storage is not the only technology that can offset the variability of renewables. Gagné suggested governments support flexible forms of thermal power generation, a category that could include combined cycle gas turbines or coal plants that can start quickly when the wind stops or the sun goes down. Gagné did not name favorites. Small modular nuclear reactors might also be employed in this role—supplying electricity when electricity is needed and when it's not, manufacturing hydrogen. Pumped hydropower storage could also back up renewables.
On the policy side, Gagné urged governments to pursue policies that develop the smart grid, which will help renewables contribute effectively. The IEA report also urges policies that ease demand-side integration of renewable energy sources, which could mean alternative pricing structures, incentive programs, outreach campaigns, or new codes and standards.
When the IEA released its "Energy Technology Perspectives 2015" report in May, two statements in the report dominated headlines:
1. For the first time since IEA began tracking renewable energy, renewables were not growing fast enough. Despite growing at a record pace, they were nonetheless falling short of the pace required to fulfill the IEA's 2-Degrees Scenario (2DS), which foresees a world in which global warming is held to 2 degrees Celsius or less.
"None of the energy technologies we tracked were actually meeting the objectives we could set them in our 2DS scenario," Gagné said Friday.
2. Secondly,IEA said the world would have to triple its investment in renewables to achieve the growth necessary.
The IEA calculates that a $40 trillion investment over the next 40 years will transform the energy system and return $110 trillion in fuel savings, Gagné said Friday.
"When you're actually reaching that market saturation, or really becoming a mainstream player, then you have to move your views from a specific technology view to an entire energy system view," he said. "You need to evolve the entire energy system, including regulatory frameworks and market structures, to be able to have these technologies play their role in the most effective way in a completely redefined energy system."