Alternative Energy/Give an overall picture of the AE field

Answer the questions:

Give an overall picture of the field.

*How was this field born and how is it evolving?

Energy History

• The sun is the origin of most renewable energy (Sorenson 1991, 8)
• Sunlight has historically been used for warmth and water heating
• Biomass is plant matter that has stored energy from photosynthesis. It is burned for energy - heat, steam to run a turbine.
• Sunlight warms the earth in some areas more than others, as atmosphere warms and warm air rises, cool air moves in to fill its place creating the wind which powers wind turbines.
• Hydropower is a result of the force of gravity causing water to flow downhill. Moving water exerts its force of energy, on objects it comes in contact with, like the blades of a turbine.
• Ocean tides, the energy for tidal energy technology, is a result of the tidal forces acting on the earth from the sun and moon. [[1]]
• Renewable energy technologies harness the energy in the sunlight, wind, ocean, rivers, and plant matter, and turn it into electricity.

Technology History

"“No single technology will be the answer; what is needed is an array of technologies aimed at different markets and different ends of the supply/demand equation.” Dr. Joseph A. Stanislaw, Independent Senior Advisor to Deloitte LLP’s Energy & Resources group. (An industry in its growth stage)

Solar

• Solar furnaces were developed in the eighteenth century, which led to temperatures high enough to create steam for running an turbine to an electrical generator.(Sorenson 1991, 8)
• 1839 - The photovoltaic effect was discovered by Alexandre-Edmond Becquerel (Sorenson 1991, 9)
• 1953 - Scientists at Bell Laboratories discover the photovoltaic (PV) properties of silicon, and start R&D on the first silicon solar PV panel (Perlin 2004, 616)
• 1955 - US government contracts Bell Labs to develop PV panels for the space program. First steps toward creating high efficiency panels. (Perlin 2004, 617)
• 1969 - Elliot Berman, a chemist, receives venture capital funds from Exxon to develop a commercially affordable PV panel and through engineering with cheap materials, drops panel prices from $200/Watt to $20/Watt. (Perlin 2004, 617)
• 1970's - Solar PV market expands to commercial use for remote location energy needs: electronics on oil rigs, train track signals, remote farms and solar telephones in Australia. (Perlin 2004, 617-619)
• Solar technology for electricity can be divided into two major categories:
  1. Concentrating solar power - concave mirrors concentrate the sun's heat and energy on pipes or towers containing oil or molten salt which transfer heat to water through a heat exchanger making steam to drive a conventional turbine for electricity production - this technology is more mature though it still costs more than conventional energy due to the high capital expenditure costs of new plants.
  2. Solar photovoltaic panels (PV) - sun hitting certain materials will be converted directly into electricity - this technology is relatively mature, but very expensive still.
• Solar PV technologies have developed in a number of ways based on the materials used on the panels
  • The most common panels are made from a lower grade silicon than that which is used for computer chips
  • New thin-film panels are starting to be developed, which can be produced at a lower cost than silicon panels, and are flexible and light, but they have a much lower rate of conversion of sunlight to electricity.
  • Other PV technology developments are being pioneered monthly through research at universities, and government labs.

"The solar PV sector surged forward in 2007, attracting record levels of investment in technology, manufacturing and capacity installation (US$28.6 billion, according to New Energy Finance), but in general solar PV generation capacity thrives only where capital subsidies and feed-in-tariffs (FiTs) are there to support it. Even with oil prices at US$120/barrel, PV is still not competitive with conventional energy in the majority of markets, and is only just approaching grid parity where PV has been actively promoted and financially supported, as in California. In Germany, only the generous FiT makes PV economically viable." (Hohler 2008)

Wind

• Evidence of windmills has been found in India from 2500 years ago(Sorenson 1991, 8)
• 1887 - James Blythe builds first electricity generating wind turbine in Scotland[[2]]
• 1887 - 1888 - Charles Brush builds another electricity generating wind turbine in Cleveland, Ohio. [[3]]
• 1930’s - US wind turbines were used to generate electricity on farms that were not tied the electrical grid. Turbines built and produced by private companies. [[4]]
• 1970’s and 1980’s - US Government (NASA) received funding from the National Science Foundation, and later the Department of Energy to work with industry to create commercially viable wind turbines at the Lewis Research Center in Cleveland, Ohio. [[5]]
• PURPA (see policy history below) led to huge growth in the wind industry, contributing to economies of scale.

"Most of the leading large wind turbine manufacturing companies in the market today were rooted, at least in part, in wind power technology research and development that began in the late 1970s, most notably in Denmark, the Netherlands, Germany and the United States. Many studies of innovation in the wind power industry have also shown that the dominance of the Danish wind companies Vestas and NEG Micon stemmed in large part from their first-mover advantage (Karnoe, 1990; Connor, 2004; Kamp et al., 2004)."(Lewis, Wiser 2007, 1)

Tidal

more to come

US Policy History

"Another, equally important problem is the deep politicization of energy policy in the United States. For decades, the environmental wing of American politics, now tied to the political left, has urged subsidies to renewable energy — specifically to sun and wind, with notable neglect of geothermal energy. The right has been no less enthusiastic in its support of subsidies to oil, natural gas, and nuclear energy. The coal and oil industries, moreover, are protected by the congressional delegations in key states where they provide employment. Reflecting these pressures, plus a long regulatory history, the role of the government in the energy sector has long been intense and interventionist. Despite growing geopolitical and climate realities, a balanced, technology-neutral approach to energy policy has not been attempted by either political party. Today, a coherent approach to energy technology policy is still missing from the legislative policy debate in the U.S. Congress; each technology, new and old, seeks its own separate legislative deal for federal backing." (Weiss and Bonvillian 2009)

• 1970 Oil Embargo raised US interest in alternative energies for energy/economic security and resource and environmental sustainability. (Carlin 2004, 347)
  
• Before 1970, hydropower was the predominant alternative energy in the US.
• After 1995 hydropower production stagnated due to lack of available water.
• Hydro facilities still account for the majority of alternative energy production in the US, but there has been very little growth in hydropower capacity or production since 1995.
• Alternative energy plants such as wind, solar, biomass, geothermal, and tidal cost more than coal and natural gas power plants.
• Since the 1970's the US has used government run subsidy programs to give these technologies a competitive advantage in the US market.

US Renewable Energy Policies

• The Public Utilities and Regulatory Policy Act of 1978 (PURPA) was the first US policy that gave alternative energy a competitive advantage(Carlin 2004, 351):
  • Required Utilities to buy energy from alternative energy producers
  • Paid premium prices for each kilowatt hour of electricity produced
  • Guaranteed the prices for the entirety of 20 year contracts
  • Act was ultimately unpopular because:
  1. The high prices created windfall profits for alternative energy producers
  2. PURPA contracts were paid for by the electric utility, raising the price of electricity for all consumers
• After PURPAs initial, but brief, success, there was stagnation in US alternative energy development until 1997 caused by:
  • Electric power sector restructuring
  • repeal of federal and state incentives
  • sharply lower natural gas prices - making new natural gas plants more financially appealing
• In 1997 a new era of alternative energy policies began, which has helped to grow the alternative energy sector in the US.
• The most important of these policies are:
  • Renewable Portfolio Standards (RPS)(Chen 2009), [[6]]
  1. Sets state goals for renewable energy (RE) generation in a %RE of total state electricity generation by a particular year (2020 for instance)
  2. Requires all state electric utilities to reach same level of RE generation and uses tradable credit market to drive process
  3. Credits are proof that one MWh (megawatt hour) of renewable energy has been produced and fed into the electricity grid.
  4. Utilities will decide to generate RE, buy RE from another retailer or buy the tradable credits to comply with RPS policy.
  5. Compliance measured by a state regulatory office which verifies that each electric utility holds the proper # of tradable credits by the end of the year.
  6. If utility generates 200,000 MWh per year, and the RPS goal is 10%, the utility must present 20,000 credits at the end of the year to show compliance.
  • The Business Energy Investment Tax Credit (ITC) [[7]]
  1. Provides a 30% tax credit for qualified renewable developments. Most importantly solar developments.
  • The Renewable Energy Production Tax Credit (PTC) [[8]]
  1. Provides a $0.01 - $0.02 payment per kWh for qualified renewable technologies. Most importantly, for wind energy.
  2. Recent change allows developers to opt instead for the 30% tax credit offered by the ITC.
  • U.S. Department of the Treasury Grant Program
  1. Recent Obama Administration addition which allows ITC or PTC eligible RE developments to opt for a grant equal to the 30% ITC tax credit in year 1 of the RE project.
  • Public Benefits Funds (PBFs) [[9]]
  1. State renewable energy offices collect a small surcharge on all consumer electricity bills to fund renewable energy programs for the public.
  2. PBFs can be used for public education on RE and energy efficiency, or for programs that help fund RE or energy efficiency projects

Visions on International Collaborations and leadership

"The problem of climate change is global, so that the new paradigm will need to be global. Even so, technology advance still largely follows a nation-state model.11 Although multinational corporations are moving the development stage toward international collaboration, other key features of innovation systems, such as research funding, science and technical education, and publicly funded research institutions, remain rooted in national funding and support.12 The U.S. innovation system has led world technology waves for many decades,13 and despite the rapid rise of capabilities in other countries, there is no easy substitute for its technology leadership in this arena.14 There is a trade-off between the need to share technology in order to work together to meet a common danger and to benefit from the exchange of knowledge, on the one hand, and the need to provide incentives to industry to gain competitive advantage through innovation and capacity building, on the other. The United States should keep in mind, too, that the economic advantages of leadership in technology have been the source of its wealth and well-being." (pg 6) (Weiss and Bonvillian 2009)

*What are the main business models?

coming soon

*What are the innovation dynamics in this field? (inputs/outputs, timing of innovation/ disruptive or incremental innovation?)

• International and national government policies have been a main driving force behind innovation in the alternative energy field.
• Germany, Spain and Denmark are three countries that have been world leaders in alternative energy production both from the production of electricity from these technologies, and the production of the technology itself.
• The main government subsidy program used in these countries is a Feed-in Tariff, which pays the owners of the technology a premium fixed price for the electricity they produce, which is contractually guaranteed for 20 years.
  • The alternative energy producer is also guaranteed a free interconnection to the electric transmission grid and the transmission grid operators are contractually obligated to buy every kilowatt hour of electricity the alternative energy producer creates.
• The Feed-in Tariff has created stable long term markets for alternative energy technologies in the aforementioned countries, and the accelerated development of the technology markets has caused rapid innovation in alternative energies to bring costs down and ensure the highest profits for the energy producers.
• Similar policies in the US, like the tax credits, PURPA, and RPS policies mentioned above, have been effective but not as powerful as the Feed-in Tariff.
• Government subsidies in response to climate change, energy security, and environmental damage concerns raised by coal, natural gas and oil electricity generation have resulted in increased government R&D funding for alternative energy technologies in the US and abroad.
• In the US, disruptive patterns around both technology innovation, and market growth in alternative energy, can be observed based on the support of government funding for R&D and for subsidy policies.
  • 1980 - 1988, President Ronald Reagan's two terms marked a rollback of President Jimmy Carter's aggressive environmental policies. Alternative energy technology and R&D funding for all but conventional sources of electricity, were reduced.
  • 1992 - 2000 President Bill Clinton started to revisit these programs and strengthened the alternative energy and environmental policies that were still weak from President Reagan and to a lesser degree President George Bush, Sr.
  • 2000 - 2008 President George W. Bush (Jr.) rolled back many of the Clinton era policies and focused his agenda of oil and coal.
  • 2009 - President Obama starts to attempt to rebuild the alternative energy and environmental policies to spur market growth and energy security.

*How does knowledge flow in this field?

coming soon

*Is this field replicating models from other fields?

The alternative energy sector does not mirror the technology revolutions of the past due to a few differences:

• Alternative energy is a collection of various technologies unlike past technology developments, and therefore the cost of development is much greater, and the landscape for AE technologies is much larger and much more complicated.
• AE has to be comprised of various technologies, because any one technology alone cannot ween the US or any other country off of fossil fuels
  • This has to do with the higher cost of the technologies, the intermittency of wind, solar and tidal/wave, the locational constraints of different technologies based on resource quality, and electrical grid transmission constraints due to technology location.
• There is significant investment and lobbying for the oil, gas and coal industries, and many AE technologies are trying to provide direct competition to their market share.
  • The oil, gas and coal lobby is exerting heavy pressure against the market entry of new technologies.

The result of all of these factors is a market landscape that is unmatched in our existing technology histories. (Weiss & Bonvillian 2009)

*How many companies?

coming soon

*How much money do they make or how much money do they “move” in the American economy?

coming soon

*How important is research from universities in this specific field?

Research from universities is very important. Much of the new innovation in the field takes place at these institutions though there is a disconnect between initial research & development (R&D) and the step to market deployment. Venture capitalists are wary of making initial bets on early innovation at the university level, and therefore many promising technology innovations are lost in the "valley of death," the area between initial R&D and the step to market deployment. The US government exacerbates this issue by developing policies that pick technology winners rather than adopting a technology-neutral approach to help all alternative energy technologies make it to market. The other major hurdle for all AE technologies is the powerful oil and gas lobby and the US subsidies for these types of energy production, which make it very hard for new innovations to supplant the incumbent technologies, and also very expensive to do so. (Weiss & Bonvillian 2009)

*How important is public funding in this field?

Investment history

"Federal support for energy R&D has fallen by more than half since a high point in 1980, and private-sector energy R&D has similarly fallen. These levels of expenditure compare poorly to other major federal R&D efforts that met challenges of similar magnitude: the Manhattan Project, the Apollo Project, the Carter-Reagan defense buildup, and the doubling of the budget of the National Institutes of Health.24 Advances in energy technology will not occur on the scale required without significantly increased investment by both government and business." (pg 9) (Weiss and Bonvillian 2009)

Public funding and Technology Policy

Public funding, inside a appropriate technology policy, is crucial to drive the market for alternative energy: "Technology policy lies at the core of the climate change challenge. Even with a cutback in wasteful energy spending, our current technologies cannot support both a decline in carbon dioxide emissions and an expanding global economy. If we try to restrain emissions without a fundamentally new set of technologies, we will end up stifling economic growth, including the development prospects for billions of people. Economists often talk as though putting a price on carbon emissions through tradable permits or a carbon tax will be enough to deliver the needed reductions in those emissions. This is not true. . . . We will need much more than a price on carbon. Consider three potentially transformative low-emissions technologies: carbon capture and sequestration (CCS), plug-in hybrid automobiles and concentrated solar-thermal electricity generation. Each will require a combination of factors to succeed: more applied scientific research, important regulatory changes, appropriate infrastructure, public acceptance and early high-cost investments. A failure on one or more of these points could kill the technologies." (pg 8) (Weiss and Bonvillian 2009, citing Jeffrey Sachs)

The importance of Public Funding to face sectorial barriers

"An innovation system must be stimulated by market demand for improved technology, but workable policies to stimulate this demand still presuppose a strong innovation system. What is more, most new energy technologies face a dense network of political traps in the United States because of the huge scale of deployment required, because of the deeply entrenched, price-efficient competitors, and because of the economic interests, policies, and public attitudes that support the old, fossilfuel- based paradigm. Ideally, then, economics and technology would develop together. Major supply-side technology development programs would be coupled with policies that create a demand pull for improved energy technology through assured, sustained, high carbon energy prices, incentives for conservation and for the entry of new energy sources, and penalties for wasteful use. This mix would feature public-sector investment leveraging private capital at scale and vice versa."(pg 9) (Weiss and Bonvillian 2009)

Main government policies

• The main government policies for alternative energy help to lower the cost of wind, solar and tidal technologies and make them cost-competitive with conventional energy sources (coal, natural gas, nuclear).
• These public funds include tax credits, and state subsidy programs for wind, solar, hydro, geothermal, biomass, biogas, and others.
• Government funding for the research and development of alternative clean technology is provided through the national energy laboratories. These are:
  • Ames Laboratory
  • Argonne National Laboratory
  • Brookhaven National Laboratory
  • Idaho National Laboratory
  • Lawrence Berkeley National Laboratory
  • National Renewable Energy Laboratory
  • Oak Ridge National Laboratory
  • Sandia National Laboratory
  • Savannah River National Laboratory

*How important is private funding / venture capital in this field?

• "In 2007, Cleantech companies began making strategic alliances with Fortune 100 companies; for example, Chevron Texaco Technology Ventures invested in BrightSource Energy Inc., a developer of utility-scale solar plants, Konarka Technologies, Inc., a developer of photovoltaic materials, and Southwest Windpower, a producer of small wind turbines.2 Additionally, non-financial drivers such as regulation, political will, and fears over energy supplies remain strong, creating a more competitive commercial environment and presenting unique challenges in some areas such as wind energy, solar energy, and biofuels." (pg 243)(Ward et al, 2008)
• "Private investment in research on alternatives to fossil fuels is discouraged by the history of wild oscillations in the price of energy. A barrel of oil may cost about $60 as these words are written in the fall of 2008, but it cost more than $140 in the summer of 2008 and less than $20 in 1998.15 If energy companies were convinced that $100-a-barrel oil were here to stay, some would see the long-term business wisdom of major investments to diversify their raw materials and their technologies, despite their current high profit levels. As things now stand, however, many of them remain opposed, skeptical, or at best ambivalent. Yet there are clear indications that, unlike the price spike induced by the oil embargo of the 1970s, increasing energy prices are predominantly due to a significant rise in world demand from developed and particularly emerging economies. Here we distinguish between the demand for energy itself, and the demand for improved energy technology. The two are related but are not the same. In the short term, carbon charges or high energy prices will reduce the immediate demand for fossil fuels or energy, respectively. Demand for improved or alternative energy technology, on the other hand, will be created only if these prices are seen as likely to be sustained. We may similarly distinguish between the supply of energy technology and the supply of energy itself;" (pg 7) (Weiss and Bonvillian 2009)
• private funding for R&D is most important for the less mature developing technologies like solar photovoltaic cells and tidal energy technology
• private funding in wind technology is not focused so much on technology development as it is in marketing and growth.

*Are there any specific public policies (from agencies, federal or state policies) that give incentives for openness or enclosure?

• The main public policies for renewable energy are:
  • Renewable Portfolio Standards (RPS)(Chen 2009), 6
  1. Sets state goals for renewable energy (RE) generation in a %RE of total state electricity generation by a particular year (2020 for instance)
  2. Requires all state electric utilities to reach same level of RE generation and uses tradable credit market to drive process.
  3. Credits are proof that one MWh (megawatt hour) of renewable energy has been produced and fed into the electricity grid.
  4. Utilities will decide to generate RE, buy RE from another retailer or buy the tradable credits to comply with RPS policy.
  5. Compliance measured by a state regulatory office which verifies that each electric utility holds the proper # of tradable credits by the end of the year.
  6. If utility generates 200,000 MWh per year, and the RPS goal is 10%, the utility must present 20,000 credits at the end of the year to show compliance.
• The Business Energy Investment Tax Credit (ITC) 7
  1. Provides a 30% tax credit for qualified renewable developments. Most importantly solar developments.
• The Renewable Energy Production Tax Credit (PTC) 8
  1. Provides a $0.01 - $0.02 payment per kWh for qualified renewable technologies. Most importantly, for wind energy.
  2. Recent change allows developers to opt instead for the 30% tax credit offered by the ITC.
• U.S. Department of the Treasury Grant Program
  1. Recent Obama Administration addition which allows ITC or PTC eligible RE developments to opt for a grant equal to the 30% ITC tax credit in year 1 of the RE project.
• Public Benefits Funds (PBFs) 9
  1. State renewable energy offices collect a small surcharge on all consumer electricity bills to fund renewable energy programs for the public.
  2. PBFs can be used for public education on RE and energy efficiency, or for programs that help fund RE or energy efficiency projects
• For R&D the funding to the Department of Energy laboratories listed under public funding, handle any policies that would designate open or closed practices with alternative energy technology.
• Further research is required to determine how the above policies may incentivize openness or enclosure.

*What is the cost structure of the field?

• The main issue for alternative energy generation is that it generally cost more than conventional sources of energy like coal, natural gas and nuclear generation.
• The cost of electricity is generally measured by an average price per kilowatt hour ($/kWh) of electricity generation, or the "generation cost."
• The generation cost of coal, natural gas and nuclear electricity is lower than alternative energies because the energy plant infrastructure and technology has been developed over a long period of time and the costs have come down due to the large economies of scale.
• The captial expenditures and labor cost of new conventional energy plants are lower due to vast information diffusion and streamlined building processes.
• Among the alternative energies we're studying, wind energy is the cheapest to develop because it is the most mature and most prevalent alternative energy worldwide (outside of hydropower).
• Solar and tidal technologies are less mature and cost significantly more than wind to develop.
• Solar can be divided into two classes of electricity production technology:
  • Solar photovoltaic panels - sun hitting certain materials will be converted directly into electricity - this technology is relatively mature, but very expensive still, and relies on public policies like the government subsidy programs listed above to encourage rapid and widespread adoption.
  • Concentrating solar power - concave mirrors concentrate sun's heat and energy on pipes or towers containing oil or molten salt which transfer heat to water through a heat exchanger making steam to drive a conventional turbine for electricity production - this technology is more mature though it still costs more than conventional energy due to the high capital expenditure costs of new plants. Also relies on government subsidies for market competitiveness.
• Tidal energy is a new and very immature technology which has high costs and very little diffusion in the world market.
  • It is not targeted in government subsidy policies as much as wind and solar due to it's high cost and relative immaturity in the market.

*Who are the producers, the buyers, and the users?

Alternative Energy Technology

• The producers of alternative energy technologies are universities, the government, for-profit companies, and non-profit companies.
• The buyers of the technology are alternative energy plant developers, individuals, communities interested in co-op electricity production, and sometimes large electric utilities.
• The users of the technology are the utilities, the developers, the communities, and the indivduals who purchase the technology.

Electricity produced by Alternative Energy Technologies

• The producers of alternative energy are the alternative energy plants
• The buyers of alternative energy are the utilities and the consumers
• the users of alternative energy are the residential and commercial consumers

*What is the structure of power from the production side and what is the structure of power in the demand side? E.g., who has the power to control production and demand? How is the control distributed?

• The production of alternative energy technologies is controlled by private companies and the government.
  • While private companies control a lot of the solar, wind, and tidal technologies and bring them to the market, the government has a lot of control on the market demand through subsidy policies.
  • When there are generous government policies encouraging the adoption of alternative energies in the US, the demand for the technologies increases pushing the production side.
  • When the government subsidy policies lag or are allowed to expire, historically, the alternative energy markets have stagnated, limiting demand and production.

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