Environment International 29 (2003) 105 – 122

www.elsevier.com/locate/envint

Review
Progress in renewable energy
Robert Gross *, Matthew Leach, Ausilio Bauen
Imperial College Centre for Energy Policy and Technology (ICCEPT), Department of Environmental Science and Technology,
Imperial College London, 4th Floor RSM, Prince Consort Road, London SW7 2BP, UK
Received 1 August 2002; accepted 18 October 2002

Abstract

This paper provides an overview of some of the key technological and market developments for leading renewable energy technologies—
wind, wave and tidal, photovoltaics (PV) and biomass energy. Market growth, innovation and policy are closely interrelated in the
development of renewables and the key issues in each area are explored for each of the main types of renewable energy technology. This
enables the prospects for future development and cost reduction to be considered in detail. Key issues for policy are outlined.
D 2002 Elsevier Science Ltd. All rights reserved.

Keywords: Renewable energy; Technological development; Market growth

1. Introduction than 3% of global electricity and 2% of primary energy.

Governments around the world are placing considerable
faith in renewable energy as important technologies for
reducing energy related environmental problems, particu-
larly CO2 emissions. Most OECD countries have ambitious
plans and targets, with particularly strong support in
Europe—recently reinforced by the EU Renewables Direc-
tive and in the policies of several states—and in the US.
There is policy support in several developing countries
(notably China, India and Brazil).
Support is focused upon the so-called ‘new’ renew-
ables such as wind energy, modern1 biomass and solar
photovoltaics (PV). Some of these technologies have
made strong progress—with substantial cost reductions
and rapid market expansion—others are remote from
commercial viability and require more development. But
all are coming from a very low base; excluding large
hydro and traditional2 biomass, renewables contribute less
* Corresponding author. Tel.: +44-20-7549-9324.
E-mail address: Robert.gross@ic.ac.uk (R. Gross).
1
Sustainable biomass resources used for the production of modern
energy vectors such as electricity and a variety of liquid and gaseous fuels,
using advanced technologies.
2
Biomass used for domestic heating and cooking, mainly in developing
countries, based on the collection and combustion of wood and dung in crude
stoves/fireplaces.
There is no doubt that the potential scale of their
contribution is very large, but sustained growth will be
needed, in the face of lower cost and often more con-
venient alternatives.
This paper reviews progress in some key technologies
and considers the challenges for the future. The relationship
between technological progress and policy mechanisms is
discussed and conclusions drawn with a view to policy
priorities for the coming decades.
2. Renewable energy resources and technology options
One of the most notable features of renewable forms of
energy is the diversity of technologies and resources.
There is little doubt that the ultimate size of the renewable
energy resource is large and could, in principle, make a
very substantial contribution to world energy demands—
easily exceeding current world electricity supply for exam-
ple (see Table 2). An overview of the leading resources
and the technologies for harnessing them is provided in
Table 1.
2.1. Current status
Despite the scale of the potential, the current contribu-
tion of renewables to world energy supplies is modest.

0160-4120/02/$ - see front matter D 2002 Elsevier Science Ltd. All rights reserved.
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106 R. Gross et al. / Environment International 29 (2003) 105–122

Renewables are estimated to supply around 17% of world Table 2

Installed capacities and output of ‘new’ renewables
primary energy, but most of this is from large hydroelectric
schemes and the use of traditional biomass and agricultural Capacity Approx. annual
(MW)a outputb (TW h/year)
waste in developing countries—these supply 3% (18% of
electricity) and 14% of primary energy, respectively (IEA, Biomass (modern) 35,000 185
Wind 20,000 50
2000a). Both can lead to considerable local environmental
Geothermal 8200 44
problems and the potential for sustainable expansion of Small hydro 3000 15
both is limited. The ‘new’ renewables such as solar, Solar PV 1200 1
modern biomass and wind power contribute a much Solar thermal 350 0.2
smaller proportion of energy needs at present—around Total 68,550 356
3% of electricity and 2% of primary energy (IEA,
2000a). Current installed capacities and energy outputs Capacity (GW) Output (TW h/year)
are shown in Table 2, which also provides an estimate
Current world electricity 3,000,000 15,000
of current world electricity capacity and supply. Yet these a
Sources: UNDP/WEC (2000) and Wind Power Monthly (2001).
technologies offer large potential for growth and signifi- b
Authors’ estimates, except geothermal UNDP/WEC (2000), based
cant environmental benefits. upon capacity factors of 60% for biomass and small hydro, 60% for solar
thermal, 30% for wind and 10% for PV.
2.2. Regional differences and a diversity of applications
tion in tropical regions 3 times that of temperate latitudes.3
The aggregated figures for both potential and current Marine resources are rather obviously most readily
installations belie considerable regional differences. Solar accessed from coastal regions, with considerable variation
potential varies considerably, with average annual insola- in wave and tidal regimes. Geothermal energy and micro-
hydro are even more location specific. Whilst biomass
resources are more widely available, land use and climatic
constraints result in significant differences in the scale of
the potential resource and the type of application.4 Wind
Table 1
energy is also widely distributed but wind regimes differ
Global renewable energy resources
significantly both within and between regions, and modest
Resource Scale of technical Energy conversion options
variations in wind speed can have a profound effect on
potential (useful energy
output)a (TW h/year) energy output.
As a result, renewables potential tends to be geograph-
Direct solar 12,000 – 40,000 Photovoltaics
Solar thermal power generation ically diverse. Moreover, the diversity of technology options
Solar water heaters for exploiting renewable resources also offers a wide range
Wind 20,000 – 40,000 Large scale power generation of types of application. Renewables are able to provide
(onshore) Small scale power generation energy in various forms—heat, fuels, electricity—and at a
Water pumps
range of scales. In electricity generation this ranges from
Wave 2000 – 4000 Numerous designs
Tidal >3500 Barrage large-scale grid-connected technologies to the provision of
Tidal stream small amounts of power for remote villages or telecommu-
Geothermal 4000 – 40,000 Hot dry rock, hydrothermal, nications. Similarly, the opportunities to use renewable fuels
geopressed, magma (only ranges from small niche markets to large scale blending with
hydrothermalcurrently viable)
conventional fuels.
Biomass 8000 – 25,000 Combustion, gasification,
pyrolysis, digestion, for bio-fuels, The approach here is to focus on key technologies and
heat and electricity their development in leading markets rather than attempting
a
These figures are illustrative of the energy that could be usefully to assess resources and technologies on a region by-region
extracted using known technologies and allowing for physical constraints. or application by-application basis. However, it is notable
Such figures are inevitably approximate and depend upon assumptions that scenarios of future energy supplies suggest that future
about conversion efficiencies, competing land-use and so on. Figures energy systems will be characterised by more renewables
derived from various primary sources cited in UNDP/WEC (2000) and are
based upon conservative estimates of land availability and/or accessibility.
and much greater diversity—both in terms of regional
Where required, the authors have converted data on resource into resource use and scale and type of technology application
technical potential—figures for solar based upon PV at 10% conversion (Shell, 1995).
efficiency, geothermal for power generation at 20% efficiency and for
wave and tidal 20% efficiency. Wind power figure is for large grid
3
connected machines only. Note also that limited data are available on 2500 and 900 kW h/m2, respectively.
4
global wave and tidal resources and these figures could be substantial Oil and sugar-based crops generally better suited to bio-fuel
underestimates. Figures will increase as technology improves. However, production, based on current technology, tend to be more viable in warmer
the resources that are economically viable are much smaller, given the climates, whilst woody fuels currently better suited to electricity generation
current technologies. and heat markets may be grown in a wider range of climatic conditions.
 R. Gross et al. / Environment International 29 (2003) 105–122 107

35
2.3. Key technologies 30
30

Cost US cents/kWh
25
Understanding progress and future potential requires
close attention to the technologies themselves. The technol- 20

ogies that have experienced the most rapid developments 15

9
and/or appear to offer the greatest scope for more extensive 10 7 6 5 5
and widespread utilisation include solar PV, wind power, 5 3

wave and tidal energy and modern biomass technologies— 0

and this paper focuses on these. This is not to suggest that

)
V)

T)
)

er

l
d
ild
re

oa
in

G
(P

ow
ho

bu

C
the other options5 and applications do not have a role to play

C
r

rp
rs

(C
la

w
ea
So

ne

fo

as
(n
or are unlikely to experience further development. But for

r(

G
as
e

a
av

le

om
the most part they either offer more limited scope for

uc
w

widespread application or are closer to technological matur-
ity, or both, and concentrating on a limited number of
technologies allows us to explore the key issues for these
‘exemplars’ in depth. Most of the leading technologies are
suited to a range of applications—fuels, heat and power in
the case of biomass, on and off-grid in the case of wind and
PV. But markets for grid connected electricity from renew-
ables have expanded rapidly in the last 10 years and we
explore these markets in detail.
One of the most important issues for the continued
growth of most renewable options is their relative cost.
Many technologies are currently more expensive than the
least-cost fossil fuel alternative, some markedly so (see
Fig. 16). Costs are intimately bound up with the develop-
ment of markets and technical progress—and hence policy.
In the sections that follow we explore progress with
renewables in terms of the relationship between these
factors.
2.4. Assessing cost reduction potential
Evidence on cost reduction potential for different renew-
able options is discussed below. This is generally based
upon two approaches to the assessment of future costs: the
first may be termed ‘engineering assessment’, the second
the ‘learning curve’ approach.
2.5. Engineering assessment
This approach is based upon detailed expert assess-
ments of technology status and potential for further devel-
opment. Typically, such assessment of technologies may
5
Geothermal, micro-hydro, solar thermal, tidal barrage.
6
Costs for all technologies vary considerably according to local
conditions and resources. Costs for CCGT, wind and coal are ‘average’
costs for countries with well-developed gas grids, good access/infra-
structure for coal and moderate wind regimes. PV costs represent ‘best
case’ in higher insolation countries but neglect offset costs (see below).
Biomass costs are typical of conventional combustion of forestry and
agricultural by-products. Nuclear costs are estimated costs of new build
based upon existing technologies (no new build has taken place in
liberalised markets) and wave costs are projections (sources DTI, 1998;
Pearson and Pena-Torres, 2000; PIU, 2002; Thorpe, 1999; UNDP/WEC,
2000).
Bi
N
Fig. 1. Typical costs for electricity generation.
place them on a spectrum that ranges from ‘mature’ to
‘emerging’. In simple terms, mature technologies are those
that are well established and near the limit of incremental
technological development. Emerging technologies, by
contrast, are those with considerable potential for further
development and cost reduction through innovation.
2.6. Learning curves
The main alternative to engineering assessment for
assessing cost reductions is so-called learning, learning by
doing, or experience, curves. Evidence from a very wide
range of technologies and sectors demonstrates a clear
relationship between production and cost; put simply, in
most cases as cumulative production increases, costs fall.
This relationship has been assessed in depth for energy
technologies (IEA, 2000b; McDonald and Schrattenholzer,
2001; Grubler et al., 1999).
If cumulative production and unit costs are plotted on a
log/log scale the learning curve appears as a straight line,
this gives us the relationship between cumulative production
and cost, which may be presented in a number of ways. The
measure that is often quoted is the ‘learning rate’—the
percentage cost reduction that occurs with every doubling
of cumulative production. Learning rates vary by technol-
ogy and at different stages of development of a given
technology—tending to be ‘faster’ in the early stages.
However, typically, for industrial products, the learning rate
is in the range 10 to 30%, which means that for each
doubling of cumulative production, costs fall by between
10% and 30%.
This ‘simple’ relationship should not be interpreted as
underplaying the complexity of the factors that drive cost
reduction. Learning rates chart only the empirical relation-
ship between market size and cost and do not provide an
insight into the drivers of cost reduction. However, the core
conclusion is that most ‘learning’ and cost reduction come
through production and market experience.
Both engineering assessment and learning curves pro-
vide valuable insights into the potential for continued cost
108
18000
Installed Capacity at year
16000
14000
end (MW)
12000
10000
8000
6000
4000
2000
0 91
19
reduction, and the relationship between this and innovation
and market growth. Learning curves can provide robust cost
reduction projections, where market data are available.
However, engineering assessments are particularly useful
for emerging technologies that have yet to gain sufficient
market experience for the construction of a learning curve.
They can also provide an insight into potential discontinu-
ities in development that imply caution in the interpretation
of past trends. In short, the techniques are complements, and
we therefore use sources that draw upon both.
3. Progress with key technologies
3.1. Wind power
In many respects, wind power is the great success story
of renewables development. Grid connected wind power,
from ‘large’ turbines7 has seen rapid market growth in the
period from 1991. Total installed capacity worldwide has
increased from 2 GW to more than 20 GW (Wind Power
Monthly, 2001) and capacity factor (output per unit of
capacity installed) has also improved. Market growth has
averaged 22% per year in this period, accelerating to
around 30% per year in the period from 1997 and as a
result an important new industry has developed—world-
wide investment in wind energy topped US$4 billion last
year (BTM Consult, 2001). The historical trend in cost
reduction has been similarly impressive.
3.1.1. Historical trends and drivers
The first electricity generation by wind energy was
achieved around the end of the 19th century. The first
7
Today’s designs of commercial turbines for grid connected power
generation have installed capacities in the range 600 kW to 2.0 MW. The
term ‘large’ turbine is used to distinguish such turbines from the much
smaller units of a few kW up to 100 kW used for off-grid and leisure
applications.
R. Gross et al. / Environment International 29 (2003) 105–122
92
93
94
95
96
97
98
99
00
19
19
19
19
19
19
19
19
20
Fig. 2. Growth in world wind turbine installed capacity.
modern AC wind turbine was built in Denmark at the end
of the 1950s. The 200 kW Gedser wind turbine was a three-
bladed, upwind machine, with an electrically operated yaw
mechanism and asynchronous generator. This ‘Danish Con-
cept’ became the blueprint for many subsequent wind
turbine developments.
The OPEC oil price hikes of 1973 and 1979 redoubled
interest in wind power. Large aerospace companies and
electricity utilities designed megawatt turbines, but none of
these research programmes resulted in commercially viable
concepts. At around the same time small developers started
developing and manufacturing much smaller machines,
based on the Danish Concept. These began to go into
commercial application in the 1980s, and developed along
the path of gradual increase in size to what are now the
current commercial megawatt turbines. Over this period
there has been immense achievement:
 Over the last 15 years, the annual energy output per
turbine has increased 100-fold.
 Turbine rated capacity (for typical commercial machines)
has increased from 55 kW to 1 MW or more.
 In the last 5 years, the weight of wind turbines per kW
installed power has halved.
 In the last 3 years, the sound level has halved.
 In the last 10 years, installed capacity has increased 10-
fold.
These factors have played a major role in reducing the
capital costs of wind energy. Wind turbines have become
cheaper to produce, more efficient and more reliable. As the
industry has matured, learning has reduced design, planning
and installation costs and market growth has brought
economies of scale. The perceived risk of investment in
wind power has also decreased, leading to a lower cost of
financial capital (discount rate) and longer amortisation
periods (Wind Power Monthly, 2000).
Progressively larger machines have brought significant
scale economies, in terms of both the cost per unit of
 R. Gross et al. / Environment International 29 (2003) 105–122
25
20
cECU/kWh
15
10
80 8 2 84
19 19 19 19
Fig. 3. Price of electricity from wind, Denmark.
installed capacity ‘at the turbine’ and in terms of balance of
plant and electrical integration. A 500-kW machine is less
than 5 times the cost of a 100-kW machine and costs of
land, electrical connections, installation and maintenance,
often increase little as turbine size and capacity rises. Tools
for optimising turbine location have improved.
Taken together these factors have resulted in a rapid and
sustained fall in the cost per unit of electrical output. Costs
fell fourfold in the 1980s, and halved in the 1990s.
Figs. 2 and 38 illustrate growth in wind installations and
cost reductions in wind generation.9
These figures above are indicative of a trend, rather than
absolute for all installations. Costs are sensitive to wind
speed, discount rate and other variables and there is a wide
range in existing wind farms. It is particularly important to
note that cost falls rapidly with wind speed because power
output from wind turbines rises with the cube of the wind
speed. For this reason, wind farms at the windiest sites are
already close to cost competitive with the average costs of
conventional power.
3.1.2. Future development
There appears to be considerable scope for continued
innovation in site optimisation, blade and generator design
and in grid connection using power electronics (De Vries,
2001). However, it appears possible that the pace of cost
reductions will tend to decline as the technology matures.
According to some assessments, wind energy capital costs
are expected to decrease by 50– 75% in the next 20 years
(EU, 1998), which is probably lower than the historical
trend. Moreover, historical cost reductions were also driven
8 10
Based upon data from EU (1998) and UNDP/WEC (2000).
9
Figures for price reduction for Denmark in the period to 2000 are
used as a proxy for cost reduction, as market and policy conditions have
been relatively stable in Denmark—at least until recently; the impact of
recent changes to the policy environment in Denmark upon costs and prices
are not yet clear.
109
86 88 90 92 9 4 96 98
19 19 19 19 19 19
year
by better siting—despite opportunities for re-powering older
sites with larger, better located turbines, this would also
appear unlikely to be entirely repeatable. In addition, costs
fell due to scale economies as turbine sizes increased
tenfold, this also appears unlikely to be repeatable.
This suggests that cost reductions may be on a declining
trajectory. However, this does not imply that further cost
reductions will not be forthcoming. In fact, wind appears
likely to become one of the lowest cost renewable generat-
ing options. Recent work for the UK government Energy
Review10 suggested costs for onshore wind are likely to fall
to less than 2.0 p (3.0 US$c)/kW h in sites with good to
moderate wind regimes, PIU (2001a). This work, repro-
duced in Fig. 4, combined the evidence of historical learning
and market growth rates with engineering assessment. It
allows both declining market growth rates and a slow-down
in the learning rate for wind energy as the technology
matures.11
Clearly, some market growth must take place if costs are
to fall to levels that will ensure competitiveness with the
lowest cost fossil fuel alternatives. Despite the impressive
progress outlined above, wind energy remains a small player
on the global energy scene. Wind energy generated world-
wide in 2000 was around 37 TW h—equivalent to around
10% of UK electricity supply—with around 9 GW of new
plant installed. By contrast, worldwide electricity generation
was around 15,000 TW h and around 170 GW of new
conventional capacity was installed (FT, 2001). There is, in
principle, very substantial potential for continued onshore
development in many parts of the world. Should market
growth rates seen in the previous 10 years continue for a
The lead author was co-author of PIU (2001a) and undertook the
supporting analysis.
11
Market growth rates were assumed to decline progressively from the
current rate of 25% to 10% by 2015. The historic learning rate for wind of
18% was assumed to decline to 10% once cumulative production reaches
1000 TWhs—likely to occur around 2008.
110 R. Gross et al. / Environment International 29 (2003) 105–122

100000 100.000
mean that turbines can spin faster—which increases output
Cumulative Production (TWh)

10000 for a given size of machine, and reduces blade size and

Cost p/kWh(2000)
10.000
loadings on bearings and structures relative to onshore
1000 machines of similar capacity. Larger turbines, variable speed
DC drives, and improved cabling and forecasting techniques
100 are also expected to reduce costs.
1.000
If potential cost reductions are to be realised, developers
10
must gain economies of scale in the manufacture of dedi-
1 0.100 cated offshore turbines, components and mountings, and the
1990 1995 2000 2005 2010 2015 2020 2025 benefits of ‘learning by doing’ for all aspects of offshore
wind engineering. The successful completion of the plans
Production Lowest cost Highest cost
for the first phase of offshore wind development will be key.

Fig. 4. Projections of wind energy costs based on growth in global capacity 3.1.4. Key issues
with reduced learning as technology matures (source PIU, 2001a).
Wind has demonstrated the potential for innovation and
market growth to reduce costs and is now a proven and
further 15 years, installed capacity would still be less than effective technology with the potential to become a fully
10% of the global technical potential.12
competitive generation option, but continued market growth
However, it appears likely that for several years markets
will be needed to keep driving down costs. The key
will continue to expand most rapidly in OECD countries challenges are to expand the growth of wind beyond its
with supportive policies, notably Europe. There is some traditional ‘homes’ in the US and EU, and to ensure that the
evidence that development in Europe is beginning to be first wave of offshore technology gets built.
affected by availability of suitable sites. As this is the region
that has seen the highest growth in the last 10 years and has 3.2. Photovoltaics (PV)
the most supportive policy environment for wind energy,
continued development is also likely depend upon the
Like wind power markets, PV markets have seen rapid
success of offshore wind.
growth and costs have fallen dramatically. However, mar-
kets for PV, and the total capacity installed, are much
3.1.3. The move offshore smaller than those for wind energy; cumulative installed
To a large extent progress onshore has set the stage for capacity is of the order of 1 GW, with around 250 MW
developments offshore. The technology is now suitable— shipped last year.
large turbines are essential to the economics of offshore PV remains at least 6 –10 times the cost of grid elec-
wind—and there is a skills base and adequately resourced tricity, even allowing for avoided transmission and distri-
industry in place. However, at present very little offshore
bution costs. In locations remote from conventional
wind capacity is installed anywhere in the world. As with
onshore developments during the 1990s, Europe is the lead,
with all of the world’s operating offshore capacity and
ambitious plans for future development (Table 3). A large
resource has been identified (Study of Offshore Wind Table 3
Offshore wind progress and plans in Europe
Energy in the EC. Final Report of Joule I contract JOUR-
0072, 1995 cited in Gaudiosi, 1996; Cockerill, 2001) and Country Built (MW) Planned/proposed
offshore wind is expected to reach around 2 GW installed UK 4 Existing development at Blyth only
capacity by 2005 and grow at around 800 MW/year there- two turbines close to shore; however,
the recently auctioned Crown Estates
after (BTM Consult, 2001).
sites would, if successfully developed,
Offshore wind currently delivers electricity at a cost of 6 lead to 1000 – 1500 MW by 2010
to 9 cents/kW h13—around twice the cost of onshore wind Denmark 52 750 MW by 2008 (utility obligations,
in good sites. Installing wind turbines in the sea obviously four sites), long-term aim 4 GW
incurs additional costs—engineering, installation, power Germany Plans to secure 25% of electricity from
offshore wind by 2030, sites equivalent
connection and maintenance. However, engineering studies
to 10 GW identified. Initial plans
suggest that there is considerable potential for other factors (sites with permits) 3 GW. 500 MW
to offset these costs. Wind regimes are generally higher and expected to come on stream in 2003
more stable offshore and the absence of noise constraints Sweden 22 175 MW under development, long-term
potential f 3 GW
12
Technical potential is>7000 GW, 25% growth per year over 15 years Netherlands 19 1500 MW by 2020, 240 MW well
would result in 570 GW. advanced
13
Based upon projections in DTI (1998) and Danish data for existing Ireland 500 MW+ (plans for farms at Dublin
sites, Danish Energy Ministry (1999). Bay and Arklow Banks)
 R. Gross et al. / Environment International 29 (2003) 105–122
electricity grids, PV is often able to meet modest demands
for electricity at a lower cost than either grid extension or
small-scale diesel generation.
3.2.1. Historical trends and drivers
Photovoltaics have their origins in the US space pro-
gramme and were first utilised in the 1960s to power
satellites. They still fulfil this role. The other early driver
of market expansion was niche applications for very small
amounts of power such as calculators, and remote small-
scale applications such as telecommunications. However,
supportive policies in several countries have played an
important role in expanding markets for PV for both grid
and off-grid electricity supply in recent years. Market
growth in PV shipments has averaged 15% since mid
1980s, in the last 5 years this increased to around 30%
per year, with growth approaching 40% in the last 2 years.
This growth has been associated with the development of
progressively larger dedicated manufacturing plant; PV has
moved from the specialist laboratory to specialised factories.
This has brought economies of scale and increasing auto-
mation and standardisation of the manufacturing processes.
Capital costs of modules have fallen from several hundred
dollars per peak Watt (Wp) in the early seventies, to less than
6 (Anderson, 1998). In addition, the conversion efficiency of
the best commercially available modules has risen steadily,
from under 10% in 1980, to around 14% (Figs. 5 and 6).
3.2.2. Future developments
Manufacturing remains very small scale in comparison
with both other forms of electricity generation and with
many other silicon semi-conductor applications. In addition,
many commercial PV panel designs are currently based
upon modules assembled from a number of individual
crystalline silicon cells. One of the key issues for the future
of PV is the extent to which crystalline silicon will give way
to so-called ‘thin film’ designs for power generation appli-
cations, both on and off-grid.
Production of crystalline silicon cells requires sophisti-
cated techniques and is considered to be inherently high cost.
Assembling modules is also a relatively complex process. By
300
250
Capacity (MW)
200
150
100
50
0
90 92 94 96 98
19 19 19 19 19
year
Fig. 5. World PV module shipments 1990 to 2000 (sources Jackson and
Oliver, 1999; UNDP/WEC, 2000).
111
35.0 16
Efficiency of commercially available
30.0 14
12
25.0
Price (1998 $/Wp)
10
modules (%)
20.0 Price (1998$/Wp)
Efficiency (%) 8
15.0
6
10.0
4
5.0 2
0.0 0
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
Fig. 6. Price and conversion efficiencies for PV modules (source IT Power).
contrast, thin film modules produced by the deposition of a
thin layer of semi-conducting material onto a glass substrate
are likely to offer the potential of inherently lower costs, and
are more amenable to mass production. However, at least
until recently, thin film cells based upon silicon have suffered
from poor long-term reliability as the photosensitive layer
degrades. These problems are now largely solved and thin
film silicon is increasing market share.
In the very long term, a ‘third generation’ of PV
materials, currently at the laboratory stage, may be able to
deliver even more radical reductions in cost—semi-conduct-
ing polymers are one example.
The potential for profound innovation sits alongside
continued improvements and scale economies in existing
module types. Both will yield cost reductions. This makes
the future for PV difficult to read. A direct comparison
between engineering assessments and learning curves
(UNDP/WEC, 2000) found that the historical learning curve
for PV provides less ambitious cost reduction projection
than recent engineering assessments. If PV may soon go
through a technological transition to inherently cheaper thin
film technologies will this fundamentally change the learn-
ing rate? Learning rates of up to 30% are not untypical in the
semi-conductor industries.
The 18 –20% historical learning rate of the last 15 years
may prove conservative14 and projecting costs on the basis
of historic learning rate and market growth rate may under-
state the potential of PV. Nevertheless, the Energy Review
team found that there would be very significant cost
reductions over the period to 2025 if a 20% rate of learning
is extended into the future, and if PV installations continue
to grow at an average 25% p.a. This is illustrated in Fig. 7,
which also shows the assumed growth in installed capacity.
00
20
14
A recent review of learning rates (McDonald and Schrattenholzer,
2001) presents evidence that the rate for PV modules is 20% rather than the
18% reported by the IEA (2000b).
112 R. Gross et al. / Environment International 29 (2003) 105–122
100.00
Module Cost US$(1992)/Wp
10.00
1.00
0.10
1970 1980
Fig. 7. Illustrating the growth in capacity and reduction in costs for solar PV assuming a learning rate of 20% (PIU, 2001a).
It is important to note that the learning curves above are
for installed capacity and reflect capital costs. Costs per unit
of output (kW h) are likely to follow a slightly different
trajectory due to improved conversion efficiencies, efficien-
cies in balance of system components for grid integration,
reduced installation costs and improved siting, as well as
cost reductions in balance of system equipment. However,
allowing for a modest increase in efficiency and neglecting
other additional learning, with a 20-year lifetime and at an
8% discount rate, the projections suggest that PV could
deliver electricity at around 15 cents/kW h by 2020, falling
to 10.5 cents/kW h by 2025 in the UK. In sunnier climates,
these figures are reduced to around 6 cents and 3 cents/kW
h. Additional learning in balance of systems installation and
other costs, if possible, could reduce these figures further.
3.2.2.1. Offset costs? It is possible for PV to replace
conventional cladding materials—building integrated PV
(BIPV) may be designed to form part of the walls, or roof,
of buildings. This can have a dramatic effect on the
economics, as only the incremental costs of PV—over and
above the costs of alternative cladding—need be factored
into the cost equation. A number of purpose designed
products are entering the market; PV roof tiles are already
commercially available for example. In some instances,
where relatively expensive materials are displaced, BIPV
is already at or close to being commercially viable (able to
deliver electricity at less than the cost of grid electricity to
the end user) (ETSU, 1998).
3.2.3. Key issues
Policy support for PV is both ambitious in several
countries and, on a per kW h basis and compared to other
renewables, expensive. In Germany, for example, the rate at
which legislation obliges local utilities to buy output from
small-scale PV installations is around US$0.50/kW h—
1000
100
Installed Capacity (GW)
10
1
0.1
0.01
0.001
0.0001
1990 2000 2010 2020 2030
Cost Capacity
around 5 times the cost of electricity supplied to domestic
consumers. This is in addition to 50% capital subsidies for
purchase of PV equipment.
Clearly the purpose of such policies is to rapidly reduce
costs by expanding markets vigorously. Some analysts have
argued that a ‘step-change’ in manufacturing capacity is
required in order to reduce costs and create a virtuous circle
of expanding markets and further reduced costs (KPMG,
1999). The danger with this approach is that it could entail
‘lock-in’ to current module technologies and hinder inno-
vation and cost reduction in the longer term.
The challenge for policy is to continue to drive market
expansion whilst minimising this risk. Offset costs may prove
highly significant to growth in the use of BIPV, particularly in
the commercial building sector where there is significant
potential for expensive cladding to be replaced with PV.
3.3. Wave and tidal stream energy
By comparison to wind and PV, wave energy and tidal
stream are very much in their infancy. Currently, around 1
MW of wave energy devices is installed worldwide, mainly
from demonstration projects. There is currently no large-
scale tidal stream capacity operating, though prototypes are
planned for the near future (DTI, 2002).
However, the potential resource world-wide is very large
as the energy per metre of wave front is substantial along
large reaches of oceanic coastline and wave energy machines
are typically able to convert 60 – 80% of available wave
power into useful energy (Thorpe, 1999). A great deal
depends upon assumptions about site availability, and the
global technical potential has not been studied in great detail.
More detailed studies have explored some regions; the
accessible resource (which takes account of constraints on
available sites for a wide variety of reasons) in the waters
around the UK for example is very large—700 TW h/year,
 R. Gross et al. / Environment International 29 (2003) 105–122
almost double electricity consumption. The extent to which
this will prove practical to harness will depend upon suc-
cessful development of both nearshore and deep water
technologies, as a result technical potential is more difficult
to estimate—a range of perhaps 70– 140 TW h, representing
10 –20% of the accessible resource, would appear reasonable
as prima-facie estimate, but this is highly speculative at
present. There are very limited data on global tidal stream
potential.
Though intermittent, electrical output from wave energy is
more predictable than wind power output, as sea states
(waves) are inherently more predictable than wind. This is
because waves, once created, continue to transmit energy for
some time and distance—around 8 h is the typical period of
certainty within which sea state can be predicted accurately.
Tidal currents flow according to a predictable diurnal pattern.
3.3.1. Historical trends and drivers
The first patent for a wave energy device was filed in
Paris in 1799, and by 1973 there were 340 British patents
for wave energy devices. The number continues to rise.
Considerable research and development was initiated in
several countries following the second oil price shock and
numerous prototype devices have been developed. How-
ever, enthusiasm gave way to some skepticism because of
the high cost estimates associated with early prototypes.
Despite this, considerable progress was made during the
1990s. Several companies are developing and deploying
new devices that represent a significant improvement over
older concepts. Projected costs of leading designs have
fallen considerably in recent years and installed capacity is
widely predicted to grow exponentially over the next few
years, rising to around 6 MW by around 2005. To date,
however, the only truly commercial success has been wave
power for navigation buoys.
Wave and tidal energy is largely at the R&D and
prototype stage. A very large number of designs for wave
energy devices have been proposed. A much smaller num-
ber appear promising at present, but the ‘best’ device is yet
to be identified. Devices can be classified as shoreline,
nearshore and offshore. They may be further classified by
generic technology type, though there is some overlap
(Duckers, 1998). The classifications include:
n pneumatic devices, such as the oscillating water column
(OWC), which use wave motion to compress and decom-
press air, from which energy is extracted;
n float-based devices which utilise a buoyant float moving
with the waves, reacting against a reference point such as
a sea bed anchor in order to harness energy;
n spillover devices which utilise wave height to replenish a
reservoir of sea water which then runs a turbine;
n raft type devices which use the relative motion of adjacent
rafts or pontoons to harness wave energy;
n moving body devices which actually articulate in the
water in some way, inducing motion which may be used
113
to drive a hydraulic motor in order to extract wave
energy.
Some of leading designs are listed in Box 1.
Box 1. Some wave and tidal energy designs and
devices.
Shoreline OWCs (Oscillating water column)
. Limpet (UK) other devices in Sri Lanka, Australia,
China, India, Japan, Norway
Nearshore OWCs
. Osprey(UK), Sperbouy (multi-chambered) (UK),
Mighty Whale (floating) (Japan)
Spillover devices
. Tapchan (Norway), Wave Dragon, Wave Plane
(Denmark) and Floating Wave Vessel (Sweden)
Pneumatic devices
. Sea Clam pneumatic bag-type device
Float-based devices
. Danish Wave Power Device (Denmark), Bristol
Cylinder (UK) Hosepump (Sweden), Archimedes
Wave Swing, IPS Buoy (Sweden) Sloped IPS (UK)
Moving body devices
. McCabe Wave Pump (UK), Pelamis (UK)
. Edinburgh Duck (UK), PS Frog (UK)
Tidal stream
. Marine current turbines (UK)
. RV Venturi (UK)
3.3.2. Cost estimates
Commercial scale wave energy is yet to become a reality
and as such empirical evidence on costs does not exist.
Nevertheless, wave energy devices under development in
the UK have been subject to rigorous and independent
assessments of probable capital and generation costs should
commercial scale development be realised (Thorpe, 1999),
these are explored below. It has not been possible to secure
data on devices under development in other countries,
however there is no reason to presume that costs and trends
differ substantially.
Of those devices that have been deployed, for the most
part near-shore and shoreline devices, costs are in the region
of 7 – 9 cents (4.5 – 6 pence)/kW h. As a result several
devices are economically viable with the relatively modest
support offered by renewables support schemes. The Lim-
pet, OSPREY and Pelamis have secured support from the
Irish and Scottish renewables obligations, but most devices
will require considerable further development before reach-
ing this stage.
3.3.3. Future development
Learning curves cannot be used to assess wave and tidal
energy as there is little or no market experience and hence
114
100
Cost of Electricity (p/kWh)
10
1 electricity. This variety of uses and technologies is illus-
1980 1985 1990
Year of Design
Edinburgh Duck
SEA Clam
McCabe Wave Pump
Fig. 8. Evolution of predicted electricity costs for offshore devices (Thorpe,
1999).
no data. Engineering assessments provide some indication
of the likely range of future costs, at least for wave energy—
upon which we concentrate in this subsection. A parametric
cost estimation model has been developed for the UK
government (Thorpe, 1999). The latest estimates suggest
that once commercial scale deployment is achieved, costs of
offshore devices are likely to lie in the range 7 –12 cents/kW
h, with some of the nearshore devices likely to be below 7.5
cents/kW h (Thorpe, 1999).15
Figs. 8 and 9 illustrate how projected costs have fallen in
successive costing studies, as designs have improved. As yet
it is not clear how long it will take for such costs to be
realised—if at all in some cases. In general, it appears likely
that the nearshore options will achieve these kind of cost
levels in the near future (within 5 years or so), whilst a great
deal more uncertainty surrounds the offshore devices.
As the number and variety of full scale demonstration
schemes increases, confidence in cost estimates will
improve. The UK Government has recently signalled an
increased willingness to support wave and tidal schemes
through the demonstration phase that precedes the ‘pre-
commercial markets phase’ where renewables become com-
mercially viable through generic renewables support poli-
cies (such as the UK’s Renewables Obligation) alone (DTI,
2002; PIU, 2001b).
3.3.4. Key issues
Overall, there is considerable uncertainty surrounding the
economics of wave energy, reflecting the relatively immature
status of the technology and market. Nevertheless, there is
clear evidence that the (theoretical) economics are steadily
improving as RD&D progresses, and significant cost reduc-
tions have been achieved. Wave is now leaving the laboratory
and entering a large-scale demonstration phase. Active and
well-targeted policies are likely to be central to success.
15
Figures based upon 8% discount rate.
R. Gross et al. / Environment International 29 (2003) 105–122
3.4. Biomass
Energy from biomass resources presents, in many
respects, a more complicated picture than the technologies
discussed above. This is because there are a wide variety of
feedstocks and conversion technologies, and progress has
been more pronounced in some areas than others. Biomass
may also provide energy for a diversity of applications,
including domestic and industrial heat, transport fuels and
1995 2000 trated in Fig. 10.
Space does not permit us to do full justice to develop-
ments in the plethora of biomass feedstocks, or indeed to
Bristol Cylinder
discuss conversion technologies in detail. For this reason,
PS Frog
we confine ourselves to an overview of developments in
Sloped IPS Buoy
markets, in the leading conversion technologies and of some
of the issues for the future of biomass.
3.4.1. Historical trends and drivers
Current biomass use for energy is estimated to be around
14% of world primary energy, most of this is used in
developing countries, where biomass accounts for up to 1/
3 of energy needs (Bauen and Kaltschmitt, 1999). By
contrast, biomass provides at most 3% of energy in indus-
trialised countries. The current utilisation of biomass com-
pared to an estimate of practical sustainable potential is
illustrated in Fig. 11.
As Fig. 11 illustrates, the amount of biomass utilised
around the world is much lower than its potential in most
regions. However, use appears to exceed sustainable con-
sumption in some regions, notably Asia. Expanding the
utilisation of modern biomass therefore has two major
drivers:
– in developing countries, efforts need to be directed to
more modern and sustainable biomass uses;
Fig. 9. Evolution of predicted costs for OWC Devices (Thorpe, 1999).
 R. Gross et al. / Environment International 29 (2003) 105–122 115

Bi om as s

Storage, T ran sp ort, Pre-treatm en t

Thermo-chemical conversion Physico-chemical conversion Biological conversion

Charcoal Pressing/Extraction Fermentation/ Anaerobic

Combustion Pyrolysis Gasification
production Hydrolysis digestion

Esterification

Solid fuel Liquid fuel Gaseous fuel

Transport fuels

Boiler Engine, gas turbine Fuel cell

Heat Steam turbine

Electricity

Fig. 10. Biomass feedstocks and conversion technologies.

– more modern and sustainable biomass uses can alleviate – furthermore, in both developing and industrialised
local environmental problems—including the severe countries, modern biomass can bring numerous envi-
health implications of exposure to biomass combustion ronmental and other benefits, these are summarised in
products; Box 2.

Fig. 11. Biomass use and potential around the world (Bauen and Kaltschmitt, 2001).
116 R. Gross et al. / Environment International 29 (2003) 105–122
Despite the potential, there are a number of issues that
need to be addressed in the development of biomass to
energy fuel cycles. Biomass is often perceived as a fuel that
is inconvenient, requires excessive land-use, leads to high
energy costs and is questionable in terms of environmental
benefits. Whilst these issues have more to do with percep-
tions (or misconceptions) of modern biomass, the technol-
ogies and practices discussed below, together with good
management of biomass resources, do much to ameliorate
many concerns.
Box 2. Benefits of biomass fuels.
 biomass is far more widely available than fossil
fuels, and a variety of wastes (e.g. forest and agro-
industry waste) can provide a significant short-term
biomass resource often in need of disposal
 biomass provides a renewable source of fuel
provided good management practices are followed
 there are good prospects for biomass to be
economically converted to a variety of energy
carriers (e.g. heat, electricity, methanol, ethanol,
hydrogen) in an environmentally viable manner
 the conversion of renewable biomass results in no
net CO2 emissions to the atmosphere, and modern
biomass fuel chains may present other environ-
mental benefits compared to fossil fuel chains
 social benefits (of particular significance to devel-
oping countries) include:
 reduced fuel imports
 diversification in agricultural activities
 enhanced rural development and employment
 incentive to recover deforested and degraded
lands
Modern biomass for heat and electricity production
contributes around 4% of US primary energy, 11% in
Austria, 20% in Finland, 17% in Sweden. Biomass for
district heating and CHP is also well established in Den-
mark and Germany (UNDP/WEC, 2000; Bauen, 2001).
Cumulative electricity production from commercial bio-
mass is in excess of 100 TW h—biomass already has
significantly more market experience than any other
emerging renewable option (IEA, 2000b). Its use has
expanded considerably in several countries in the last
decade, largely as a result of supportive policy frame-
works. The production of biomass liquid fuels for blending
with conventional vehicle fuels is well established in
Brazil and the US (UNDP/WEC, 2000).
The main technologies for biomass conversion are out-
lined in Box 3. The issues facing each are different and
complex, both in terms of technology and market drivers. To
illustrate some of the issues, and to enable comparison with
the other renewable technologies, the focus of the rest of this
section is on biomass combustion and gasification technol-
ogies for electricity generation.
Box 3. Biomass conversion options.
Biomass direct combustion
Biomass can be burned in small-scale modern boilers
for heating purposes, or in larger boilers for the
generation of electricity or combined heat and power
(CHP). Most electricity generation is based on the
Rankine (steam turbine) cycle.
Biomass combustion systems are in commercial use
around the world, using disparate technology. Dedi-
cated combustion plants can burn a wide range fuel,
including wastes. Co-combustion of biomass and coal
using pulverised fuel (PF) and (circulating) fluidised
bed ((C)FB) conversion technologies may also be an
option.
Biomass gasification
Biomass gasification converts biomass to a low to
medium calorific value gaseous fuel. The fuel can be
used to generate heat and electricity by direct firing in
engines, turbines and boilers after suitable clean up.
Alternatively, the product gas can be reformed to
produce fuels such as methanol and hydrogen, which
could then be used in fuel cells or microturbines, for
example. Gasification-based systems may present
advantages compared to combustion in terms of econo-
mies of scale and clean and efficient operation.
Hundreds of small-scale fixed bed gasifiers are in
operation around the world, in particular in developing
countries. Recent gasification activities, in industrial-
ised countries in particular, have focused on fluidised
bed systems, including circulating fluidised bed sys-
tems. Larger systems coupling combined cycle gas and
steam turbines to gasifiers (biomass integrated gas-
ification combined cycle, BIG/CC) are at the demon-
stration stage. BIG/CC systems could lead to electrical
efficiencies of about 50%.
Gasification is becoming an increasingly popular
means of treating municipal solid waste, and a signifi-
cant part of new waste-to-energy plants will be based
on gasification technology.
Biomass pyrolysis
Biomass pyrolysis produces a liquid fuel which can be
transported and stored, and allows for de-coupling of
the fuel production and energy generation stages. The
fuel can be used to generate heat and electricity by
combustion in boilers, engines and turbines. Products
other than liquid fuels can be obtained from pyrolysis;
such as charcoal and fuel gas.
 R. Gross et al. / Environment International 29 (2003) 105–122
Box 3 (continued)
Anaerobic digestion
Anaerobic digestion is a biological process which
converts solid or liquid biomass to a gas. The gas
consists mainly of methane and carbon dioxide and
contains various trace elements.
Anaerobic digestion is used in the treatment of wastes
of industrial, agricultural and domestic origin. It is also
used in sewage treatment plants to reduce sludge
volumes and produce a gas for heat and electricity.
Farm-based facilities are common, in particular in
countries such as China and India, at household or
village-scale, for cooking, heating and lighting. Over
600 plants treating farm wastes, and often co-digesting
wastes from a variety of sources, are in operation in
North America and Europe. Anaerobic digestion is
increasingly used in sewage treatment facilities, in
treating the organic fraction of municipal solid waste
(MSW) and in treating industrial organic waste. The
solid and liquid residues from the anaerobic digestion
process can be used as compost and fertilisers.
Landfill gas
Landfill gas (LFG) is a product of anaerobic and
aerobic digestion processes and generally consists of
up to 50% methane. Only 30-40% of the landfill gas is
normally collected, with the remainder of the gas
escaping to the atmosphere. The collected gas can be
cleaned and burned in engines or turbines to produce
heat and electricity.
Physical– chemical conversion
The physical – chemical conversion route applies to
biomass from which vegetable oil can be obtained,
and consists of pressing and extracting oil from the
biomass. Vegetable oils can be used in special engines
or in diesel engines after an esterification step to the
produce oil methyl ester. Biofuel from oilseed rape is
produced in several European countries, the largest
production being in Germany.
Fermentation and hydrolysis
Ethanol production from biomass provides a high qual-
ity fuel for transport. The bioethanol production process
depends on the type of biomass considered. Sugars can
be fermented by various organisms. Starch and cellulo-
sic biomass need first to be broken down by acidic or
enzymatic hydrolysis. Progress is being made in the
development of technologies aimed at efficiently con-
verting cellulosic biomass. Breakthrough in this field
would provide greater opportunities for ethanol because
of increased efficiency and feedstock flexibility.
3.4.2. Future developments in biomass electricity and
combined heat and power (CHP)
Considerable expansion of biomass electricity (primarily
CHP) is planned in Denmark, Finland, Sweden and the USA
117
(UNDP/WEC, 2000), and expansion is envisaged in several
other OECD countries, including the UK. Cost reductions
and the continued development of biomass electricity is
closely related to technological developments, in both crops
and combustion technologies.
Conventional combustion technologies for biomass fuels
are closely related to coal fired combustion technologies and
as such the technology may be considered ‘mature’. State of
the art combustion plants for biomass electricity generation,
running on agricultural and forestry wastes, currently deliver
energy at around 5 to 6 cents/kW h (UNDP/WEC, 2000).
The learning rate for electricity production from biomass
(using conventional combustion) has been estimated at
around 15% (IEA, 2000a).
Although a learning rate for biomass electricity produc-
tion using conventional combustion is available, detailed
cost reduction projections based upon this learning rate, for
conventional combustion technologies alone, are not appro-
priate. The reasons for this are as follows:
 Development of larger and more efficient replacement
plants underpins some of the 15% learning rate seen in
recent years. Whilst this is an important aspect of
learning and the trend towards larger plant may continue,
modern conventional combustion plants are already
approaching theoretical limits on conversion efficiency.
 Potential for continued efficiency gain is a key driver of
interest in gasification technologies and it would seem
inadvisable at this stage to assume that the historic
learning rate for conventional combustion technologies
can be applied to gasification technologies—for reasons
discussed below.
 Whilst considerable expansion of biomass electricity
(primarily CHP) is planned in Denmark, Finland, Sweden
and the USA (UNDP/WEC, 2000), technology-specific
detailed market growth data are not available.
 Biomass fuel costs may be expected to continue to fall.
However, the potential for this is uncertain (see below)
and fuel cost reduction alone is unlikely to be sufficient
to sustain a 15% learning rate.
All these factors suggest that overall cost reduction
potential in biomass combustion technology over the time
horizon of interest here cannot be assessed without
attention to advanced conversion technologies, and to
fuel costs.
3.5. Biomass integrated gasification combined cycle
Gasification of biomass feedstocks offers the potential of
higher conversion efficiencies and reduced atmospheric
emissions compared to conventional combustion technolo-
gies, as well as a reduced dependency on economies of
scale. Integrated gasification and combined cycle gas tur-
bine plants (BIGCC) offer high efficiencies at a relatively
small scale (f 30 –50 MW), which makes them suitable for
118 R. Gross et al. / Environment International 29 (2003) 105–122
decentralised generation—of particular interest due to the
distributed nature of biomass crops and the relatively high
costs of transporting biomass material. In the longer term it
is possible that BIGCC will give way to gasification for use
in fuel cells.
BIGCC is currently at the pre-commercial demonstration
stage. Pilot projects are operating and being developed in
the UK, Sweden, the US and Brazil (UNDP/WEC, 2000).
With such a small number of operating projects, learning
rates are not available. However, detailed engineering cost
assessment of the Swedish and UK plants has been under-
taken (Bauen, 2000). The Swedish plant (a CHP scheme)
delivers energy at a cost of around 7 cents/kW h and the UK
plant (electricity only) at around 11.5 cents/kW h.16 Engi-
neering assessment suggests that capital costs could be
reduced by half through replication and economies of scale
once BIGCC plants enter early commercial application
(Bauen, 2000), this would reduce energy costs to 2.3 to
4.5 and 5.2 to 9 cents/kW h for the Swedish and UK plants,
respectively.17
It should be noted that these costs are estimates of the
first ‘commercial’ applications—that is where the technol-
ogies move beyond one-off demonstration projects plants
and begin to be installed in larger numbers. Further cost
reduction would be expected as market size expands. How-
ever, it is notable that the gasification process accounts for
just 19% of total capital costs, whilst combustion technol-
ogy costs account for around 35% (Bauen, 2000). It is not
clear how much scope for cost reductions in turbines—a
much more mature technology—may be expected. Learning
rates for CCGT technologies are less than 10% (IEA,
2000b), and turbines for BIGCC application would repre-
sent only a very small amount of existing turbine markets.
Overall, whilst it is clear that considerable cost reduction for
BIGCC should be expected once the technology progresses
beyond the early pilot stage, the long-term trajectory of cost
reductions is uncertain.
Once capital costs are reduced to ‘early commercialisa-
tion’ levels, sensitivity to fuel cost and capital cost reduc-
tions become largely the same—energy costs are reduced by
10% for each 20% reduction in fuel costs or capital costs
(Bauen, 2000). If capital costs are reduced further then
sensitivity to fuel costs will increase. Considerable uncer-
tainty surrounds the potential to lower fuel costs—partic-
ularly in dedicated energy crops. Agricultural and forestry
wastes offer a low cost fuelling option (Bauen and Kaltsch-
mitt, 2001)—but this is limited to those countries with
sufficient forestry and/or appropriate agricultural activity.
In the UK, for example, this resource is relatively small
(DTI, 1998).
16
Bauen quotes costs in 1995 Euros, all costs have been converted at
1995/Euro exchange rate (0.83) and inflated to 2001 prices (2.5% PA
inflator) and converted into dollars at current 2002 rates. The lower cost of
the Swedish plant results largely from the utilisation of heat energy
available through CHP mode operation, raising overall efficiency.
17
The cost range reflects sensitivity to discount rate (8% and 15%).
There is some evidence that the infrastructure and exper-
tise for growing and marketing dedicated energy crops is a
long way from maturity at present. Confidence building
measures may be required in order to bring growers and
generators together in an effective marketplace (PIU, 2001b).
The PIU team explored these issues using several sce-
narios for market growth and learning in both capital and
fuel costs. The analysis suggests that biomass electricity-
based upon BIGCC could deliver energy in the cost range
2.5– 4.0 p (3.75 – 6.0 cents)/kW h in within a 20-year time-
frame (PIU, 2002).
3.5.1. Key issues
There are many challenges and obstacles to the develop-
ment of biomass fuels for different applications and in
different parts of the world—it is not possible to do full
justice to all of these here. However, the key challenges
facing biomass for electricity generation are to commercialise
high efficiency generating plant and to secure sustainable
supplies of relatively low cost fuel. This is likely to require
more extensive demonstration of gasification technology and
support for the development of energy crop markets.
3.6. Grid and electrical integration issues
Renewable sources of energy give rise to a number of
differences in the way in which power is fed into existing
electricity networks and in which networks are operated,
compared to the current approach, which is dominated by
large and often remote ‘central station’ power generation
feeding directly into the high voltage grid.
Renewables provide three important challenges for elec-
tricity system operators:
– Intermittency,
– Decentralisation of generation,
– Remoteness of some generation options.
3.6.1. Intermittent generation
With the exception of biomass, renewable generation is
both intermittent and, to a greater or lesser extent, unpre-
dictable. The technical issues for well-developed grid sys-
tems in absorbing intermittent generation were explored by
utilities in several countries, and by independent analysts, in
the early 1990s (see PIU, 2001c) for an overview). Inputs to
the UK Energy Review from the UK’s grid operator, NGC,
supported these conclusions from the UK perspective.
This work suggests that:
 intermittency is unlikely to require major changes to the
operation of the grid (such as building additional storage
capacity, upgrading transmission lines) until the pene-
tration of intermittent renewables approaches 20% of
peak supply;
 at low penetrations (around 5%) intermittents are
essentially invisible to the system operator, because their
 R. Gross et al. / Environment International 29 (2003) 105–122
output fluctuations are insignificant compared to the
normal fluctuations in demand;
 in the 10– 20% region it will be necessary to schedule
small amounts of additional spinning reserve, but the cost
impacts of this will be very small as a proportion of
generating costs (PIU, 2001c).
Analysis undertaken for the Review also came to the
conclusion that the costs of building additional storage or
peaking plants to enable penetration of renewables above
20% and up to 50% would remain small compared to total
generation costs (PIU, 2001c, 2002).
These conclusions are based upon the assumptions that
renewables are spread over a wide geographical area (such
that short-term and rapid fluctuations, e.g. in wind-speed,
are evened out for the aggregated renewable input), with a
well-developed and geographically dispersed grid, and that
renewable output and demand are not inversely correlated
(such that maximum demand always occurs at minimum or
zero renewable output). Many of the studies considered
well-dispersed wind generation.
If these conditions are not met, then the problems caused
by intermittency may be more severe at lower penetrations.
Conversely, if the conditions are right, these thresholds may
be increased.
The following can reduce costs and/or increase the
capacity of a network to cope with intermittency:
– Increased interconnection and/or larger geographical size
of grid areas. Denmark is able to cope with large
penetrations of renewables (up to 50% in places) by
making extensive use of high capacity interconnection
with other Scandinavian countries and Germany.
– Larger geographical dispersion of intermittent inputs and
lower correlation between variations from different
renewable sites.
– A diversity of types of intermittent generation with output
that varies independently. It can be shown that inter-
mittents that vary independently of one another increase
system resilience to variations (Grubb, 1991).
The following add to costs:
– Large penetrations in small geographical areas, what holds
for the grid of an entire country may mask considerable
localised difficulties.
– Localised grid limitations. Large penetrations of wind
energy have already required the upgrading of local grid
infrastructure in some regions, notably in Spain (Wind
Power Monthly, 2000).
– Strong inverse correlation between high demand and
low renewable output. For example, large penetrations
of PV in a country like the UK, where peak demands
occur in winter and at night, would be expected to
require more substantial changes to system (such as
more storage).
119
Of course, the interaction of these manifold factors is
complex and it is not appropriate to conclude either that
intermittency poses an insurmountable obstacle or is never a
problem in every case.
Finally, it is important to note that the technical costs of
dealing with intermittency may be at some variance with
commercial considerations when despatch of power is
managed through a competitive bidding arrangement, as is
the case in most liberalised systems. The extent to which
such systems can ‘unfairly’ penalise intermittency (because
price signals are not cost reflective) has been the subject of
some debate and many argue that the system recently
introduced in the UK does indeed introduce unfair penalties.
However, unless renewables are completely exempted
from conventional competitive arrangements for despatch,
intermittency is important to potential competitiveness. This
is because the prices paid for electricity vary widely
according to what point on the electricity demand curve
suppliers are able to bid into. Prices paid for baseload
generation are around 1 US cent per kW h, whereas at peak
demand prices rise to up to 15 cents. In most instances
intermittent generators cannot bid in at the premium end of
the market. As a result, low cost storage or peaking plant
could make a big difference to the commercial proposition
offered by renewables. The advantage of storage technolo-
gies in this respect is obvious—external fuel inputs are not
required and ‘excess’ renewable generation may used more
efficiently—this has the potential to improve both the
economics and the environmental performance of renewable
energy.
Overall, and given the current small contribution of
intermittent renewables to generation in almost every coun-
try, intermittency is in general unlikely to present a problem
in the immediate future. However, as (and if) the penetration
of intermittent renewables expands, and in regions with less-
developed grids, it appears likely that the potential for
renewables will come to depend increasingly upon the costs
and viability of a range of options for coping with inter-
mittency—increased interconnection, demand management
techniques, peaking plant and storage technologies.
3.6.2. Decentralisation
Several important options, most notably BIPV, but also
smaller wind developments and biomass generation, are
small scale and decentralised. They supply power direct to
local distribution networks, close to demand. Large numbers
of such generating units would fundamentally change the
way in which electricity networks have been operated for
many decades in most countries—where power flow is ‘one
way’ from large generating stations through a high voltage
grid down to the multiple and varied loads connected to the
local distribution network. Increased amounts of decentral-
ised generation would require much more active manage-
ment of local networks, to ensure that demand and supply
remain in balance, and may require the development of new
control techniques.
120 R. Gross et al. / Environment International 29 (2003) 105–122
Renewables are not the only emerging technologies
likely to increase the proportion of generation from decen-
tralised sources—the economic proposition offered by
micro-turbines and fuel cells for combined heat and power
(CHP) is also improving rapidly. Many analysts predict a
significant move away from the proportion of electricity
supplies that are provided by centralised generation.
3.6.3. Remote options
Renewables do not just have implications for a decentral-
isation of generation. However, the offshore options in
particular are both potentially large scale and remote from
both existing grid infrastructure and demands. This is likely
to result in an increasing requirement for the development of
new transmission capacity; the issues may be well illustrated
with reference to the UK.
Offshore wind resources are well distributed around
the UK coast, and this means that it is feasible, at least at
first, to develop resources that are in close proximity to
areas where local distribution networks are well devel-
oped and robust. In addition, it is feasible for offshore
power to be landed at existing grid supply points—
feeding energy straight into the high voltage grid. The
sites recently auctioned by the UK government fit this
pattern. However, in the longer term it appears likely that
substantial resources in more remote areas—particularly
relatively shallow waters to the north east of Scotland—
could not be exploited without substantial improvements
to local networks and the capacity of the system to
deliver power from north to south.
If the development of wave and tidal energy devices is
successful, infrastructural changes considerably more pro-
found than those for offshore wind will be required. The
best resources are to the far west and northwest—where, in
Scotland at least, there is currently no high voltage grid at
all. The UK’s recent investigation of an offshore power line
illustrates the range of options for how such problems could
be tackled based upon conventional electricity transmission.
Another long-term option would be to use some vector other
than electricity to transport the energy—the possibility of
using marine renewables to make hydrogen from seawater is
an oft-cited example.
4. Policy and progress
The relationship between policy and progress to date is
unquestionable—policy is key to the successes above and is
likely to remain so. Those countries with the most suppor-
tive policies are more successful in exploiting their renew-
able resources and in developing new industries. But it is
also clear that policy environments differ substantively
between countries and that some measures have been a
great deal more successful than others. Moreover, different
technologies and applications require different kinds of
policies.
4.1. Principles and mechanisms
A number of considerations provide a basis for policy
support, and this is reflected in the policies of many
countries. The main reasons often cited include:
 Environmental considerations; renewables provide low
pollution energy which can help meet international
commitments.
 Market and technology development which promise cost
effective low pollution energy in the future, for which
policy support can provide the stimulus.
 Security of supply; most renewables are an ‘indigenous’
resource.
 Employment and rural development; renewable energy
may create jobs, often in rural regions.
In most parts of the world electricity supply is being
privatised and liberalised to a greater or lesser extent and in
a variety of ways. Direct state investment through national-
ised utilities is therefore excluded from further considera-
tion. The extent and nature of privatisation and liberalisation
also affects who may benefit from policy intervention (for
example independent power producers rather than regional
utilities). A number of general options exist to support the
development of renewable energy, these include:
 Public funding for R&D and dissemination programmes
 Public Procurement
 Direct state subsidy—this may target either capital
investment in renewable plant, through direct subsidy
for investors, or electrical output, where generators and/
or utilities/suppliers receive a subsidy based upon the
quantity of electricity supplied/purchased from wind
generators. Few countries continue to use public funds
for direct subsidy of renewable energy.
 Fiscal incentives—again these may target either capital
investment in plant—for example through accelerated
depreciation or other tax relief on investment—or be
based upon the quantity of electricity supplied/purchased
from renewables generators—for example through rebate
of carbon taxes. Incentives on capital investment alone,
which fail to incentivise production, have caused prob-
lems. In California in the 1980s, and more recently in
India, this has contributed to the development of poorly
designed and unproductive wind farms (Rajeskar et al.,
1999).
 Statutory obligations on electricity suppliers—this type
of mechanism may take a number of forms, all of which
differ substantively. A number of variations on this theme
have been utilised with considerable success, particularly
in Europe and the USA. Details differ, but a number of
key options may be identified:
– ‘Fixed price plus obligation to buy’, often referred to
as ‘feed-in laws’: An obligation is placed upon utilities
to accept all renewably generated power, provided
 R. Gross et al. / Environment International 29 (2003) 105–122
technical criteria are met. The power producers are
paid a guaranteed price for their power-fixed accord-
ing to technology type. This may be financed through
subsidy, a levy on electricity, or borne by the utility
and passed onto consumers. This system has proved
highly effective as a market stimulus, but provides
limited incentives for driving down price. It is also,
arguably, anti-competitive in the context of growing
international trade in electricity, as it favours domestic
suppliers.
– ‘Competitive bidding’, or ‘NFFO type18 schemes:
Renewable energy developers are invited to bid for
contracts to sell electricity at a fixed premium price for
a fixed term. The premium price emerges from the
competitive bidding process—the most competitive
bidders being awarded contracts. In the schemes run in
the UK and Ireland, the price premium was funded
through a levy on conventional generation. The
NFFO’s competitive nature appears to help drive cost
reductions. Unfortunately, in the UK at least, it has
proved much less effective in driving market growth;
whether this is attributable to the system itself or to
other factors specific to the UK is less clear.
– ‘Renewables Portfolios Standards’ (RPS) or obligation
based schemes: A number of countries19 are moving
away from the above two schemes in favour of a
simple obligation on electricity suppliers to source a
proportion of their power from renewables. This
involves a target level of renewable generation, to be
met at some point in the future, usually combined with
tradable certificates for green electricity. Tradable
certificates allow flexibility on the part of suppliers to
either directly purchase/generate renewable electricity,
or to purchase the equivalent certificates—which
creates a competitive market for renewable power.
4.2. Issues for policy
Overall, a supportive policy environment looks set to
continue for the foreseeable future. Most existing schemes
guarantee a supportive framework for investors for at least
5 –10 years and many governments have targets for the next
10 –20 years. It appears probable that policy support will
move towards ‘RPS’ schemes, already being adopted in
many countries, and generally considered to be more
amenable to moves to open up markets to international
competition.
In the longer term, it appears likely that policies to price
carbon emissions will come into operation, particularly
through the Kyoto Protocol, most likely in the form of
tradable carbon ‘permits’. The trends and projections dis-
18
Non Fossil Fuel Obligation, the UK scheme introduced in the mid
1990s, now superseded by the Renewables Obligation, an RPS scheme (see
main text below).
19
E.g. Denmark, the Netherlands, the UK, the US.
121
cussed above suggest that some of the renewables offer
good prospects for becoming a cost-effective way to reduce
carbon emissions and gain carbon permits, and hence may
no longer need more targeted support. However, those
options further from commercial viability may well continue
to need additional support—both financial and institutional.
The main reason for continued additional support for renew-
ables is to create new low carbon options for the long term;
investment does not just deliver emissions reductions in the
short term but also has an ‘option value’, helping to drive
innovation and deliver new options for reducing emissions
in the long run. As discussed above, renewables also have a
number of non-carbon related benefits which may justify
additional support.
The relationship between innovation, product develop-
ment and market structure is complex and multifaceted
(Utterback, 1997). Understanding the relationship between
the innovation process and policy is also far from straight-
forward. In addition to price support, it is important that
policy targets a variety of market barriers and structural
issues that can impede the development of promising new
technologies (Anderson et al., 2001).
5. Conclusions
Wind power is well-developed, with a rapidly expanding
global market and substantial technological advances over
the last decade. As a result, costs at the best sites onshore are
already close to competitive with fossil fired alternatives.
There is some evidence to suggest that the rate of cost
reduction could slow down over the next 10 –20 years, but
considerable further cost reductions are widely predicted.
The key challenge for policy is to facilitate continued
market expansion and ensure that cost reductions are deliv-
ered. If this succeeds then there is good reason to expect that
wind will indeed converge with fossil fuelled alternatives,
but this is likely to require both developments offshore and
considerable expansion into parts of the world that have, as
yet, seen little wind energy deployed.
Photovoltaics are well established in a number of
important niche markets, many of which are likely to
continue to expand. Policy support for grid connected,
building integrated PV has provided one of the most
important areas for growth. As yet this support is rela-
tively high cost, reflecting the substantial cost differential
between PV and grid electricity. PV appears to offer
tremendous potential for long-term cost reduction through
market growth and innovation over the next 10 –20 years
and there is good evidence to suggest that the number of
applications where it will become cost competitive with
conventional options will expand considerably. Within this
timeframe, PV is likely to become cost competitive in
grid connected applications where solar insolation is high
and/or where it can offset the costs of building materials.
The challenge for policy is to help provide the niche
122 R. Gross et al. / Environment International 29 (2003) 105–122
markets that allow rapid learning by doing as well as
supporting more research driven R&D activity into new
materials, etc.
Wave and tidal energy are very much in their infancy,
with many competing designs and, as yet, little large scale
demonstration. However, these technologies are now leav-
ing the laboratory and entering full-scale trials in several
countries. The key challenge for policy is to provide for
proving and testing (and in some cases failure) of promising
designs.
Biomass energy faces multiple challenges—reflecting the
diversity of fuelling options and applications around the
world. Biomass for electricity generation illustrates some of
the issues; policy is likely to be required that supports both
advanced conversion technologies and the development of
appropriate expertise and market infrastructure in dedicated
energy crop production.
Overall, renewable technologies are diverse in terms of
both commercial and technological maturity. Some are close
to competing with fossil fuels and may be cheaper if
environmental externalities are included, but others are
much further from market viability. Appropriate policies
are needed that allow those options and applications that are
close to commercial viability to flourish, whilst ensuring
that options which hold promise for the longer term are
nurtured through their early stages.
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