The renewable energy – to aid or not to aid ?

The renewable energy is clean and available in large quantities, so there is no surprise that it became so fashionable in the recent years, almost everywhere in the world.  Even if the source of energy is, often, completely free (basically, the Sun), the costs for extracting the energy and make it useful is a different story.     The renewable energy has two major drawbacks which would undercut its score in front of the bankers and put it at disadvantage in the competition with the classical sources of energy – the lower efficiency of the generation capacity in transforming the basic wind, solar or thermal energy into electricity and the lack of continuity of generation, especially for the wind and solar energy.  Due to the surge in demand for generation equipment for renewable energy sources worldwide, the prices for such equipment soared and are likely to stay high for the next years. After all, when the gold rush was at its peak, even the worst carriage used to cost a fortune! In the context of a financial crisis and, hence, a reduced access to financing the conditions were met for “high-voltage” tension between old and new energy producers, fighting for the scarce available funds.  The renewable energy producers had a struck of luck (or rather were more efficient and persistent in front of the Government) and benefited, after hurdles and delays, of a generous state aid scheme, in the form of “green certificates”, which must be bought by the energy producers from traditional sources.   The likely privileged status of the renewable energy had both supporters and foes, which is rather normal if we consider that traditional energy producers have to support now both their needs for investment and the needs of the renewable energy producers – through the green certificates they acquire and the obligations to balance the grid whenever the wind or solar energy producers are off-production.  The Romanian energy industry was already facing major problems, from the old and obsolete assets in the coal-fired and hydropower units to the insufficient capacity of the national grid to take over the quantities of electricity produced by the new sources.  New investment in the fossil-fuels generation units is paramount and new nuclear reactors in Cernavoda are still considered as a viable option.  Therefore, before the newcomers were even considered competitors in the energy market itself, they became competitors for the financing available for this industry.  This kind of competition could be solved, of course, on pure market basis, i.e. the most efficient energy project was to win the race.  But the renewable energy would have lost the fight easily if governments and legislators on all continents did not step into this game and tried to ensure what they consider a level playing field for the new generation of energy generation.  For years, Romania lagged behind the EU Member States in terms of new investment in renewable energy and the chance of meeting the targets assigned to it under the Europe 20-2o-2o program were slim.   To be honest, Romania was not in such a bad situation if we take into account the high  number and the capacity of the large hydropower stations, which come under the definition of renewable energy – although these are not considered to be environmentally-friendly – and which have been used for almost 100 years.  Also in order to be honest, the large hydropower units were old and they required immediate and significant investments in refurbishing and upgrading.  Romania made no exception from the legislative intervention trend and the Romanian Parliament passed a law in 2008 – Law 220/2008 – creating a whole support structure for the renewable energy, aligned with the objectives set for Romania by the European Union: 24% energy produced from renewable sources in 2020.  The issuance of this law was the beginning of another period of to make it effectively applicable.  Some of the opposition was justified by the fact that certain provisions of Law 220/2008 could not be applied as such and needed to be amended.  On the other hand, certain arguments against the new sources of energy were based on the failure to understand or even to accept that the advent of the renewable energy was necessary for the energy market as they increased the variety of the supply, in harmony and in addition to all the other sources – based on the fossil fuels, the nuclear power or the large hydropower units.  Was this intervention useful and was the field leveled? It is difficult to say but for sure the producers from renewable and environment-friendly sources received a boost and started to be loved by the banks.  Unfortunately, no real analysis on the right place of the new renewable energy sources took place so far in Romania and investments in the new generation units were made rather because money was available for it.   The arguments in favor of the renewable energy are based too often on lot of enthusiasm and on environmental considerations rather than on sound market considerations. A speculative “bubble” is still possible in Romania (as it happened in other countries) but it is not unavoidable.  Interestingly enough, most of the early investors in renewable energy sites, in 2009-2012, came from the real estate sector, where another bubble just burst.  They should have learned their lesson but there is no guarantee.  Real energy investors should step in as soon as possible.  The arguments against an increased use of the renewable sources seem also short-sighed and out-of-time, so they are unconvincing.   The contenders are sometimes as the horse carriages owners in England who, when the steam engine appeared, raised against its use based on arguments such as that the locomotive should be the “work of the devil”- after all it was throwing hot steam, isn’t it ?!  They were not saying, of course, that their fear was in fact that the new technology shall force them to either change their business model or it shall force them out of business at all.  Of course, things are not so dramatically this time, as energy produced from coal, gas and uranium shall still be viable for a long time.  The argument of the horse carriages masters may come back in a different form: if we can still do the job, why to rush and extend the use of the new technology, outside the environmental arguments? I think that this would be a valid question.The new renewable energy sources proved their “raison d’etre” in the Romanian energy industry and their utility in supplying the necessary energy to the grid, as it happened during the severe drought in the last two years, which seriously affected the generation capacity of the large hydroelectric units. The renewable energy has a future but it must start walking on its feet. Not the soft cushion of the financial aid from the State is what the renewable energy needs but the solid ground of a clear and consistent energy strategy.The debate is on.

1 Comment
  • Jean Constantinescu

    February 18, 2013 at 7:43 pm

    Indeed, a sound energy strategy is utmost needed. It would most likely define an harmonised i.e. balanced supply, with a much more role for alternative energy staying on its feet. However, I would not fully share the idea of fight between conventional and alternative producers. Actually, the RES is competing with nuclear (and to some extent, to coal) for the balancing service of hydro and gas. And, in spite of the surge in demand, on mid-run the price of RES equipment will decrease due to technology improvement and increased competition.