I've written a lot about time lags in the last few weeks, in terms of how long it will take for new forms of energy to come into the system, once we commit to invest in them. I believe the word I used to describe this was "daunting." The key to overcoming these lags, however, is our old friend compound growth. Wind power in Europe provides an excellent example, having reached a milestone figure of over 6,000 MW of new installations last year, a level that apparently wasn't expected to be reached until 2010. That brings total EU wind capacity to over 40 GW, about as much as ten nuclear power plants, after allowing for the intermittent contribution of wind. That still works out to less than 3% of Europe's total electricity generation last year, but it's on its way to becoming much more significant.
The growth rates that have been sustained for a decade have been astonishing. Additions have been growing at over 20% and capacity at over 30%. When you look ahead, though, you have to make some adjustments in your expectation of further growth. For one thing, unless the rate of additions increases, the growth in total wind capacity will gradually slow down. In fact, it will be hard to sustain even the current rate of growth in capacity additions, because of the growing scale of capital and other inputs this would require. Simply put, a big industry rarely grows as fast as a small one, and wind is on its way to becoming big.
For example, if new wind power additions continued to expand at 20% per year, wind's total contribution would grow from 3% of EU electricity generation to 10% by 2014, and to 20% by 2018. At that clip, it would hit 50% in 2024. If that sounds incredible, you're right. However, even if the growth in new wind capacity, i.e. the number of new wind turbines delivered each year, slowed from 20% to 10% by 2008, wind could still be generating 15% of the EU's power by 2020. For comparison, the EU's target for all renewable electricity in 2010 is 22%, but that includes hydropower, which already accounts for about 10%.
I think this example nicely illustrates both the potential for change and the inertia of the status quo. The figures above are on a par with the contribution of nuclear power in the US, which required several decades of development and construction and many billions in public and private funds. But it also shows that even an established technology such as wind, starting from a small but non-zero baseline and growing at double-digit rates, will take decades to make more than a modest dent in our energy problems. A brand new technology, starting from zero, will probably take longer.
I draw several lessons from this. First, it's going to take more than one "killer ap" to change the energy equation, just as we rely on multiple forms of energy today. We need several new energy technologies--growing at these kinds of rates--if we want to see dramatic change in the decade of 2010-2020. Second, the impact of these technologies will grow in much the way that the balance in a retirement account grows: gradually at first, and then faster, as the yearly additions gather steam. So, as I've suggested several times in the last week or so, the only material changes in the next five years or so will have to come from behavioral shifts, not technology. Add it all up and you see that we need policies that simultaneously foster serious conservation, aggressively promote new energy technology, and sustain the growth in conventional energy sources, including oil and gas production, to get us to a point at which new technology can have a material impact.
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