Sunday, June 12, 2011

Renewable Energy and Hybrid Cars. Still Only at 1%.

The emphasis on renewable energy sources for the generation of electricity has a number of similarities with light duty hybrid vehicles (hybrid cars) for transportation.

Flash back to the late 1990s when hybrid vehicles where known to automotive engineers, car aficionados and some environmentalists. The odd looking 4-door Toyota Prius and the rain drop looking 2-door Honda Insight where oddities among mass produced cars. Similarly at the same time there were wind mills and solar panels worldwide, and the Puna Geothermal plant in Hawaii among other renewable energy applications.

Since then both hybrid cars and renewables had an exponential growth, at surprisingly similar pace and for substantially different reasons. Unlike renewable energy mandates, hybrid cars won their market on their merits such as quiet operation, lower maintenance and substantially higher fuel efficiency. To date their worldwide market share is about 1% among light duty vehicle fleets, and in approximate terms, 60% of hybrids are in the US, 18% in Japan, and 8% in Europe. (These change depending on the year of reference.)

Renewable energy power plants on the other hand could not develop a profitable case because of the much lower cost per watt of electricity produced by coal, natural gas and nuclear power plants. Extensive wind (Germany, Denmark) and solar (Spain) developments required major subsidies. Various studies have indicated that they actually caused losses in total national employment (e.g., King Juan Carlos university estimated that each green job cost 2.2 jobs in Spain,) and caused electricity rates to go up. This is a lose-lose outcome.

Recent data, as shown below, indicate that renewables are the fastest growing among energy sources.

Nuclear energy suffered a setback due to the catastrophe in Japan in March 2011. All countries with plans for expansion of nuclear plants will continue except for Germany. Germany has set a goal of de-nuclearization by 2020. The loss in energy generation will be replaced mostly by coal and renewables. This is another lose-lose outcome due to added pollution and the heavy use of new resources to create machines to produce power that was produced by existing nuclear power plants.

Despite governmental mandates for renewables, if their electricity production is converted to equivalent tons of oil, then their share is, much like the hybrid cars, only 1.3% in 2010, as shown below.

Given the high cost of power plants and the even higher sunk cost of the existing power infrastructure, it is likely that renewable energy will take many years to provide substantial global energy generation. China’s, India’s and Germany’s focus on coal, and US’ focus on natural gas do not support a vast expansion of the global renewable share any time soon.

Exceptions will be isolated locations such as Hawaii and Iceland (geothermal), Brazil (biomass and biofuels) and others, based on local source availability and other factors.

Source of Data: The Economist, June 11, 2001, p. 78.