Investing in Renewable Technologies

Investing in Renewable Technologies

Eventually renewable energies will dominate the world’s energy supply system. There is no real alternative. Mankind cannot indefinitely continue to base its life on the consumption of finite energy resources.

Today, the world’s energy supply is largely based on fossil fuels and nuclear power. These sources of energy will not last forever and have proven to be contributors to our environmental problems. The environmental impacts of energy use are not new but they are increasingly well known; they range from deforestation to local and global pollution. In less than three centuries since the industrial revolution, mankind has already burned roughly half of the fossil fuels that accumulated under the earth’s surface over hundreds of millions of years. Nuclear power is also based on a limited resource (uranium) and the use of nuclear power creates such incalculable risks that nuclear power plants cannot be insured.

Renewable sources of energy are an essential part of an overall strategy of sustainable development. They help reduce dependence of energy imports, thereby ensuring a sustainable supply. Furthermore renewable energy sources can help improve the competitiveness of industries over the long run and have a positive impact on regional development and employment. Renewable energy technologies are suitable for off-grid services, serving those in remote areas of the world without requiring expensive and complicated grid infrastructure.

In his 2007 State of the Union address, President George W. Bush outlined plans to ease the United States out of its foreign oil dependence through the use of renewable energy resources, and reduce gas usage by a full 20% in ten years through alternative fuels.

“Extending hope and opportunity depends on a stable supply of energy that keeps America's economy running and America's environment clean. For too long our nation has been dependent on foreign oil, and this dependence leaves us more vulnerable to hostile regimes and to terrorists who could cause huge disruptions of oil shipments and raise the price of oil, and do great harm to our economy. It's in our vital interest to diversify America's energy supply -- the way forward is through technology. We must continue changing the way America generates electric power by even greater use of clean coal technology, solar and wind energy, and clean, safe nuclear power. To reach this goal, we must increase the supply of alternative fuels by setting a mandatory fuel standards to require 35 billion gallons of renewable and alternative fuels in 2017 - and that is nearly five times the current target.”

His speech emphasized the many benefits of developing and investing in renewable energy technologies. This report on Investing in Renewable Technologies expands further on this speech and offers an in-depth analysis of all the renewable energies available today, from biofuels to geothermal. The report explores the benefits of each energy source, the growth drivers, challenges and barriers, economics of that energy, and much more. A complete analysis of all the renewable energies in use today, along with a section devoted to country analysis is also provided in the report.

Executive Summary 6

Introduction to the Energy Crisis 7
Effect on Economy 7
Historical Crises 7
Future and Alternative Sources of Energy 10

Introduction 12
Integration of Renewable Energy 13
Market Development of Renewable Energy 15
Benefits of Renewable Energy 15
Challenges of Large-Scale Deployment of Renewable Energy 17
Political Framework 18
Targets for Renewables 19
Benefits of Using a Bigger Share of Renewables 21

Business Case for Renewable Power 23

A Global Perspective on Renewable Energy Resources Development & Utilization 25
Wind Power 25
Overview of Wind Energy 25
Wind in the Energy Market 25
Economics of Wind Energy 26
Financing Alternatives for Wind Power 27
Business Drivers for Wind Power 29
Challenges & Barriers to Growth 32
Market Trends 32
Geothermal Power 34
Hydro Power 35
What is Hydropower? 35
Historical Background 35
Hydro Dams 35
Hydropower Plants 36
How a Hydropower Plant Works 36
Head & Flow 38
Storing Energy 39
Pumped Storage Systems 39
Hydropower Production 39
Hydropower for Baseload Power 40
Economics of Hydropower 40
Hydropower & the Environment 41
Other Hydro Resources 42
The Biological Cost of Hydropower 43
Biomass Power 44
What is Biomass? 44
Biomass Use in the Developing World 44
Technical Aspects 46
Combustion Theory 46
Technologies Involved 47
Charcoal Production 48
Briquetting 48
Animal Waste 48
Commercial Utilization of Biomass 49
Issues & Challenges 49
Biomass Energy: Cost and Scale Issues 50
Solar Power 52
Introduction to Solar Power 52
Solar Power & the Consumer Energy Market 53
Industry & Growth 53
Shortage of Solar Silicon 54
Solar Technology 55
Solar Markets: Industrialized Countries and Government Incentives 59
Solar Markets: Electrification of Developing Countries 63
What Investors Should Know About Solar 67

SWOT Analysis of Top 5 Renewable Technologies 68

Renewable Energy Policy Framework & Policy Instruments 71
Policy Framework to Develop Market for Renewable Power 71
Policy Instruments for Renewable Power 73
Regulatory Framework for Renewable Power 74

Funding Sources for Renewable Power in Emerging Countries 75
Financing for Large Scale On-Grid Renewable Power Projects 75
Financing for Off-Grid Renewable Projects for Rural Electrification 76

International Tax Incentives for Renewable Energy 77
Introduction 77
Why Use Tax Incentives? 77
Targeting Specific Needs 77
Creating Tax Parity or Encouragement for Renewable Energy 78
Relation to Other Incentives 78
Top Ten Tax Incentives for Renewable Energy 78
Investment Tax Incentives: Large-Scale Applications 79
Investment Tax Incentives: Customer-Sited Applications 80
Production Tax Incentives 81
Property Tax Reductions 82
Value-Added Tax Reductions 83
Excise (Sales) Tax Reductions 84
Import Duty Reductions 85
Accelerated Depreciation 86
Research, Development, Demonstration, and Equipment Manufacturing Tax Incentives 86
Tax Holidays 88
Taxes on Conventional Fuels 88
Policy Preferences for Renewable Energy Tax Incentives 89
Utilizing Each Type of Renewable Energy Tax Incentive 91
Makings of Successful Tax Incentives 93
Relationship to Other Policy Tools 93
Creating Tax Parity 93
Incentive Targeting 93
Size and Use of Tax Incentives 94
Administrative Efficiency 94
Public Sector Participation 94
Education and Outreach 95
Credibility and Enforceability 95
Performance Standards 96
Technology Neutral 96
Predictability and Consistency 96
Conclusion 96

Case Studies 98
Brazil 98
China 99
Wind 99
Hydro 100
Solar 100
Geothermal 100
Renewable Energy Policy Framework 100
India 101
Indonesia 101
Geothermal 102
Hydro 102
Solar 102
Wind 102
Malaysia 102
Mexico 103
Philippines 103
Wind 104
Hydro 104
Solar 104
Geothermal 104
Thailand 105
Wind 105
Hydro 105
Geothermal 105
Solar 105
Vietnam 105

Appendix 107

Glossary 109