Renewable Energy Projects Handbook APRIL 2004 RENEWABLE ENERGY PROJECTS HANDBOOK Copyright  2004 World Energy Council All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, electrostatic, magnetic, mechanical, photocopy, recording or otherwise, without prior permission of the copyright holder. Published April 2004 by: World Energy Council 5th Floor, Regency House 1-4 Warwick Street London W1B 5LT United Kingdom www.worldenergy.org ISBN 0 946121 12 5 ACKNOWLEDGEMENTS WEC wishes to express gratitude to Mr Michael Lax who drafted this Handbook based on research and analysis carried out by the WEC Renewables Committee over the last two years under the guidance of Dr Chris Morris, the Committee’s Chairman, as well as Ms Elena Nekhaev. All Committee Members are thanked for their input and comments. Special thanks go to Mrs Ida Hurwitz of ORMAT, who contributed greatly to the typing and editing of this document. iii Officers of the World Energy Council Antonio del Rosario Norberto de Franco Medeiros Chair World Energy Council Chair Programme Committee Philip Aiken Shige-etsu Miyahara Vice Chair Sydney 2004 Vice Chair Asia François Ailleret Kieran O’Brien Chair Studies Committee Vice Chair Europe Asger Bundgaard-Jensen Fred Phaswana Vice Chair Finance Vice Chair Africa John Derrick Carlos Pierro Vice Chair North America Vice Chair Latin America/Caribbean Alioune Fall Gerald Doucet Vice Chair GEIS Initiative Secretary General Member Committees of the World Energy Council Algeria Guinea Paraguay Angola Hong Kong, China Peru Argentina Hungary Philippines Australia Iceland Poland Austria India Portugal Bangladesh Indonesia Romania Belarus Iran (Islamic Rep.) Russian Federation Belgium Ireland Saudi Arabia Bolivia Israel Senegal Botswana Italy Serbia & Montenegro Brazil Japan Singapore Bulgaria Jordan Slovakia Cameroon Kenya Slovenia Canada Korea (Rep.) South Africa China Latvia Spain Congo (Dem. Rep.) Lebanon Sri Lanka Côte d’Ivoire Libya/GSPLAJ Swaziland Croatia Lithuania Sweden Czech Republic Luxembourg Switzerland Denmark Macedonia (Rep.) Syria (Arab Rep.) Ecuador Mali Taiwan, China Egypt (Arab Rep.) Mexico Tanzania El Salvador Monaco Thailand Estonia Mongolia Trinidad & Tobago Ethiopia Morocco Tunisia Finland Namibia Turkey France Nepal Ukraine Gabon Netherlands United Kingdom Georgia New Zealand United States Germany Niger Uruguay Ghana Nigeria Venezuela Greece Pakistan Yemen iv TABLE OF CONTENTS Page ACKNOWLEDGEMENTS............................................................................................................................ iii WEC OFFICERS AND MEMBER COMMITTEES................................................................................... iv FOREWORD................................................................................................................................................... vii 1 RENEWABLES IN THE GLOBAL ENERGY ECONOMY: TODAY AND TOMORROW... 1 1.1 Introduction......................................................................................................................................... 1 1.2 Leading Renewable Energy Resources............................................................................................... 3 1.2.1 Biomass............................................................................................................................................ 3 1.2.2 Wind................................................................................................................................................. 6 1.2.3 Geothermal....................................................................................................................................... 10 1.2.4 Solar.................................................................................................................................................. 12 1.2.5 Hydropower...................................................................................................................................... 14 1.2.6 IHRP................................................................................................................................................. 15 1.3 Electrical Energy Storage Systems...................................................................................................... 16 1.4 Resources and Technology Summaries............................................................................................... 17 1.5 Policies, Economics, Social Considerations and Environment........................................................... 18 2. FINANCIAL, TECHNICAL & OTHER CRITERIA FOR SELECTING AND EVALUATING RENEWABLE ENERGY PROJECTS............................................................... 25 2.1 Resource Availability ......................................................................................................................... 25 2.2 Cost-Effectiveness, Affordability, Profitability, Subsidies ................................................................ 30 2.3 Development, Installation and O & M................................................................................................ 34 2.4 Social and Environmental Aspects...................................................................................................... 36 2.5 Risk Analysis and Risk Management.................................................................................................. 38 2.6 Development of Local Expertise......................................................................................................... 39 2.7 Stakeholders' Buy-in........................................................................................................................... 39 3. STRATEGIES FOR SUCCESS....................................................................................................... 41 3.1 Specific Steps for Renewable Energy Categories............................................................................... 43 3.2 Renewable Energy in Developing Countries....................................................................................... 45 3.3 WEC Action Plan................................................................................................................................ 45 4. PROJECT CHECK LIST................................................................................................................. 47 4.1 Evaluation, Selection of Technology, Financing Options, Project Documentation............................ 47 4.2 Policy for Promotion of Renewables................................................................................................... 50 4.3 Cost Evaluations.................................................................................................................................. 70 4.4 Inclusion of Externalities..................................................................................................................... 77 WEC STUDY COMMITTEE MEMBERSHIP ........................................................................................... 78 LIST OF ACRONYMS & ABBREVIATIONS ........................................................................................... 79 LIST OF FIGURES & TABLES.................................................................................................................... 80 BIBLIOGRAPHY............................................................................................................................................ 81 ANNEX 1 Companies/Organisations in Different Renewables Categories ANNEX 2 Resource Information ANNEX 3 Country Information ANNEX 4 British Petroleum’s Green Glossary v F O R E W O R D As part of the World Energy Council’s Technical Work Programme 2002-2004 a new Committee on Renewables was established. The Committee’s focus is on mainstream renewable resources: modern biomass, wind, solar, geothermal, hydro, and industrial waste heat (as a novel approach to industrial energy efficiency). Interest in renewable energy resources is burgeoning globally and many publications already exist. It was the intention of the Committee at its outset to bring together global information that would add value and support a more sustainable future for generations to come. It was agreed that this could be best done by examining the barriers and success factors relating to each technology, in general and in different economic contexts: developed and developing countries. The target audience is intended to be broad and should help politicians, financial institutions, consumers, media, regulators and industry leaders to see what is needed to promote a sustainable future, and the barriers that need to be overcome. Using this handbook and the associated information on the WEC’s Global Energy Information System (GEIS) the World Energy Council will actively contribute to the promotion of renewable energy as part of its mission to achieve the sustainable supply and use of energy for the greatest benefit of all. This Report is formally a report of WEC’s Committee on Renewables and our thanks go to all who contributed via debate and discussions at Committee meetings, and written contributions on case studies and drafts. However the majority of the underlying work and drafting was undertaken by Committee member, Mr Michael Lax and our special thanks go to him. Without his substantial and sustained efforts and general support from the WEC’s London Secretariat, in particular Ms Elena Nekhaev, Director of Programmes this report would not have been possible. Dr Christopher W Morris, Chair (2001-2003) WEC Committee on Renewables vii World Energy Council Renewable Energy Projects Handbook 1. RENEWABLES IN THE GLOBAL ENERGY ECONOMY: TODAY AND TOMORROW 1.1 Introduction This Handbook is designed as a manual to promote renewable projects in different categories, both for developed and developing countries, using the means already existing in the marketplace, policies and drivers, and to mark hurdles and barriers with which renewables are due to cope. Listing organisations, companies and institutions instrumental in the process of development of projects, it provides a brief overview of the leading renewable energy resources and technologies, a summary of the existing policies and drivers in different countries, identifies hurdles and barriers common to renewables and suggests practical ways of dealing with them. All this should contribute to an enhanced development of renewables, by mirroring the current situation, aiding navigation of the development of the projects through the “stormy sea” of bureaucratic rules and regulations. It will also suggest ways to overcome difficulties – both objective and perceived. The world demand for electricity is growing rapidly. It surpasses demands for any other energy end-use. The IEA’s World Energy Outlook foresees that with an annual average growth rate of 2.8%, electricity will almost double between 1997 and 2020. Primary world energy supply is expected to increase by 30% in 2010 relative to 1997, and by nearly 60% by 2020. Annual electricity demand grows unevenly in developed (projected to be 1.6% (OECD countries) and developing countries (projected growth rate 4.6%). It should be noted here that the developing world is in urgent need of energy, since more than 1.6 billion people until recently have lived without the benefit of modern energy services. With such increasing demands, the present growth pattern is strongly influenced by the domination of fossil fuels. Figure 1: World Total Primary Energy Supply, 2002 (Other includes geothermal, solar, wind, heat, etc.) Combustible Renewables Nuclear Natural Gas & Waste 6.8% 20.7% 11.1% Other 0.5% Coal 23.5% Oil Hydro 35.0% 2.3% Source: IEA/OECD Statistics, 2002 In developing countries where electricity supplies are inadequate, renewable energy can offer an alternative to expensive extensions of the grid to sparsely populated or rural areas, or a contribution to the grid-based energy mix to meet rapidly expanding electricity demand in urban areas. Other associated benefits include economic and social development, healthier environment, income generation for local communities, capacity building, and development of local employment and expertise. The 2002 World Energy Council’s Statement “Energy for People, Energy for Peace" restates the conclusion of the World Energy Congress that “fossil fuel will continue to be the most significant and stable component of the total primary energy mix for several decades to come”. The question is whether the domination of, and even preference (subsidies) for, fossil fuels can ensure sustainable development. We believe that this spectacular growth in energy demand cannot be met by traditional energy systems 1 World Energy Council Renewable Energy Projects Handbook alone without strongly increasing the pressure on reserves of natural resources, environment, public health/welfare and relations between nations. Renewable energy is closely associated with the concept of sustainable development introduced to the broad public in the report “Our Common Future” published in 1987 by the World Commission on Environment and Development chaired by Gro-Harlem Brundtland. The concept is defined in the report as: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” The World Energy Council, in its publication “Energy for Tomorrow’s World – Acting Now!” (ETWAN), has translated the challenges for sustainable energy development into three goals of accessibility, availability and acceptability. Accessibility requires provision of reliable and affordable energy services for all, availability addresses the quality and reliability of the service, stressing its long-term continuity determined by the right energy mix, while acceptability addresses environmental goals and public attitudes. To ensure development according to these principles of sustainable development, renewable energy is expected to provide an increasingly important contribution to supply diversification, emissions reduction and energy sustainability over the longer term. Renewable energies have a huge potential and can, theoretically, provide an unlimited supply of relatively clean and mostly local energy. In absolute terms, renewable energy supply has been growing strongly; albeit from a very low base. The annual growth for wind, for example, has in recent years been over 30%. In relative terms, on the other hand, the share of renewables, including large hydro, in the total primary energy supply has been around 14% for many years. Renewable is a term used for forms of energy which are not exhausted by use over time. It means that the renewable resources can be regenerated or renewed in a relatively short time. This Handbook focuses on the following leading renewable resources: biomass, wind, geothermal, solar and hydro. Industrial heat recovery power (IHRP) is a fairly novel approach to improving industrial energy efficiency by means of power generation, and in the US it is now included in the Renewable Energy Portfolio Standards. The sources of renewable energy can be divided, according to their origin, into natural renewable resources (wind, geothermal, solar, hydro, etc.) and renewable resources resulting from human activity (biomass, including landfill gas and industrial heat recovery power). Modern biomass encompasses a range of products derived from photosynthesis and is essentially a chemical solar energy storage. It also represents a renewable storage of carbon in the biosphere. Wind energy is a result of thermal heating of the earth by the sun, having global patterns of a semi continuous nature. Geothermal energy refers to heat stored beneath the surface of the earth. It originates from the earth’s molten interior and the decay of radioactive materials. Solar energy is a result of radiation from the sun. Industrial waste heat is a result of unused heat streams from industrial processes. This source can be tapped in different configurations – gases, condensing vapours, fluids or hot oils. The resource is renewable in the sense that it does not deplete primary energy resources. Small hydro is power harnessed from small (capacity <10 MW ) rivers and streams. e The definition “new renewables” usually includes modern biomass, small hydro, geothermal, wind, solar and marine energy. Generally, WEC considers all hydropower as a renewable energy resource. However, the majority of tables in this Handbook refer to small hydro (<10 MW), to make it more comparable with the “new renewables”. Since wave and tidal energy renewable resources are scarcely implemented, they are not considered in this Handbook. By definition, renewables should provide a continuous and unlimited supply of energy. However, technical difficulties, the intermittent nature of some of the renewable energy resources, as well as other constraints still pose limits to their wider deployment. With installed electric power capacity in developed countries now exceeding 1.8 million MW, of which only about 40,000 MW is renewable energy, 98% of electricity is generated by conventional technologies (fossil fuel, nuclear, large hydro) while the share of new renewables is approximately 2%. 2 World Energy Council Renewable Energy Projects Handbook The alternative scenario of the IEA World Energy Outlook 2000 projects that if OECD countries were to adapt new policies to encourage further use of renewables, their share in the electricity mix could increase from 2% in 1997 to 8.6% of electricity output in 2010 (590TWh). This corresponds to providing an additional 150 million people with renewable electricity in 10 years (assuming approximately 3,000 kWh per person per year for residential electricity needs in 2012). This would require an additional 160,000 to 180,000 MW of renewable energy capacity, representing capital investments of US $90-120 billion. As for the developing countries, the World Bank evaluates their needs for the next four decades as 5 million MW of electrical generating capacity. By 2010, IEA projections expect that investments for renewable energy in developing countries could exceed US $5 billion per year. However, these evaluations and projections were undertaken on a “business as usual” basis. A slight acceleration, and recently we have witnessed serious attempts to accelerate the development of renewable energy, can contribute to even more spectacular growth. 1.2 Leading Renewable Energy Resources Renewables are an almost unlimited supply of energy if one considers the energy required by mankind, compared with the extremely large amount of energy we receive from the sun. Modern energy services require the growing inclusion of renewable energy into the sustainable energy mix. A brief summary of the actual utilisation of renewable energy follows, together with the potential of various categories of renewables for future developments. The technologies used for conversion of renewable energy sources to heat, electricity and/or fuels are plentiful. Their development has contributed to the gradual lowering of technology prices on the one hand, and to improvement in their efficiency on the other. Gradually renewable energy and its different energy conversion technologies have become economically viable, capable of competing with fossil-fuelled technologies in the energy market. 1.2.1 Biomass Biomass resources suitable for energy production covers a wide range of materials, from firewood collected in farmlands and natural woods to agricultural and forestry crops grown specifically for energy production purposes. It includes timber processing residues, solid municipal waste and sewage, aquatic flora, etc. Biomass can be divided into four sub-categories: • wood, logging and agricultural residue • animal dung • solid industrial waste • landfill biogas. The potential of landfill gas is dependent on environmental considerations and waste management practices. The potential available for exploitation increases as controlled landfill replaces other dumps and uncontrolled tipping. It is estimated that the global potential for landfill gas use by the year 2010 will be equivalent to 9,000 MW . e Biomass is one of the renewable sources capable of making a large contribution to the future world energy supply. Forms in which biomass can be used for energy are diverse: 3 World Energy Council Renewable Energy Projects Handbook Table 1: Types of bioenergy supply Residues Costs/Remarks 1. Primary Residues material from primary biomass production, especially forestry, agricultural crops, animal raising • Residues arising in concentrated form [dung from stalled livestock; harvested cereal straws, stalks, husks]............................................................................................................ low or negative • Residues that must be gathered together [dung from grazing livestock; crop residues which are not normally harvested such as cotton and maize stalks]..................................... low to medium 2. Secondary residues low or negative material from processing wood, food and other organic materials, usually in (avoided disposal concentrated form [sawmill bark, chips, sawdust; liquors in paper manufacture]. costs) 3. Tertiary residues low to medium wastes arising after the consumption of biomass [sewage, municipal sold wastes, landfill gas] Natural Resources 4. Biomass gathered from natural resources [fallen tree branches, woody weeds, shrubs] low to high Energy Crops 5. Dedicated energy crops medium to high biofuels as sole or principal product [trees, grasses inc. sugarcane, sweet sorghum, starchy roots, oil crops] employment usually: • not replacing conventional crops e.g. on field boundaries, “waste” land............... - increased • replacing conventional crops.................................................................................. - reduced 6. Biofuel co-production low to medium pre-planned multi-output production including biofuels [sugarcane to produce sugar, ethanol, electricity; timber or tree-fruit production designed to deliver thinnings and harvest wastes as biofuels] Note: Broadly speaking, the potential size of biomass resources and risks associated with their production increases as one moves from the top to the bottom of the table Source: Shell Foundation, Using modern bioenergy.p.7 Availability of these sources would vary, depending on their attractiveness to the end user. It should be remembered that biomass differs markedly from conventional fuels and other renewable energy resources by having a wide range of competing uses (e.g. food, fodder, fibre, agricultural fertilisers, fuels, etc.). In many places, some types of biomass are less valuable as a source of energy than as sources fulfilling other needs. Biomass production requires land. The net energy production per hectare of various crops depends on climatic and soil conditions. Land availability for biomass production should not be a bottleneck provided it is combined with modernisation of conventional agricultural production. Bioenergy is very land intensive. One may expect an electrical output of about 20 MWh from each hectare committed to growing biomass (assuming annual production of 15 dry tons of biomass per hectare, 19.2 GJ per dry ton and conversion to electricity at 25%). The potential of landfill gas to energy schemes is dependent on environmental considerations and changes in waste management practices. The potential available for exploitation will increase as controlled landfill replaces other dumps and uncontrolled tipping. It is estimated that the global potential for landfill gas use by the year 2010 will be equivalent to 9,000MW . e Preliminary Resource Assessment will take into account the following parameters: • Local conditions, both physical and socio-economic • Crop availability, land conditions, local climatic conditions • Local stock and flow of biomass resources • Amount of biomass source to apply adequate conversion technology • Affordable biomass supplies for long-term project sustainability • Alternative use for the biomass source • Evaluation of energy resource alternatives 4