Learn about diverse and integrated markets for primary energy, and the essential considerations driving business leaders and policy makers in development of global energy resources.
Key Capabilities for Energy Business - Alternative Resources
A range of technological and commercial factors determine accessibility and utilization of unconventional energy resources. These lectures review considerations essential to the development of alternative sources of energy, including nuclear and various renewable resources.
Renewables Value Chain15:13
Renewables Market Activity24:33
Renewables Business Issues13:26
Michael J. Orlando
Global Energy Management, Business School
Let's take a look at some of the key
factors moving the renewables sectors, you know?
What are those factors that are encouraging or
discouraging investment and expansion in these industries?
Well, the one obvious one, perhaps the most obvious one,
is these environmental considerations.
You know which are resulting in legislation and
regulation, tighter restrictions on the kinds of
emissions associated with fossil fuels in particular.
So that's one of the, the primary factors driving
driving expansion and growth in this industry.
There are advances on the,
what you might call the transportation or distribution end.
Smart-Grid technologies refer to those, those innovations that allow a,
an individual or an entity who has installed some of,
renewable technology on their property let's say solar or wind power.
When they are short on power Smart-Grid really doesn't mean a whole lot.
If, if they're not producing enough power for
their needs, and they're a little bit short, they just buy off of the grid.
But what Smart-Grid Technology allows you to do is if you're long on power.
If you're producing more than you need even as just primarily a consumer,
you can actually run your meter backwards and sell back on to the grid.
So those advances are, you know,
encouraging individuals to invest even at their smallest scales.
And storage technologies are somewhat complementary to
these Smart-Grid approaches, to the extent that we have cheap ways to store
the power that maybe generated from these renewables.
It just winds up being an alternative to being
essentially held hostage by a limited transportation and distribution system.
And then finally, this ongoing efficiency gains associated with these technologies.
Sp there's a lot of research and innovation going into each of those.
So if we think about the decline factors however,
you know there, the main one is the continued
relatively high cost of these technologies in comparison to others.
What I'd like to do is, is have you recall this a chart
that shows recall this from week two the levelized cost of new generation sources.
So, recall that this was the a cost per mega watt hour
of the capital, and the expected operations, and maintenance costs.
And, and the associated transition, transmission investment of building
electrical-generating power using one of these various technologies.
And just to put the, you know, the cost challenges of these technologies into
perspective, I think this one chart does, does it as well as any.
Recall up here, we have our sort of newer,
more efficient natural gas generation facilities.
And here, we might have, we call, what we think of as conventional coal
which seems somewhat middling, unless you recall one little.
Arcane comment I had in week two about, what if you take out of this
chart the, the cost the carbon tax cost that was built in?
Which basically amounted to about $15.
And so then, what happens is coal winds up being.
You know, not as cost-effective as our
best natural gas-fired generation technologies.
But really, you know, much more cost-effective than all of these types of
technologies that we think of as much greener, mm, kay?
So that shows you the kind of headwind, if you will,
that the, the renewables industries are facing.
It's, it's still a pretty tough challenge.
Some other challenges for the industry include
as was somewhat indicated in the prior slide.
But associated with the low cost of that gas-fired generation is just that the,
the input fuel for that particular technology is so cheap.
So, there,
you can see a lot of the complementarities across these industries show through and.
In particular, natural gas we know is putting pressure on a lot of
the other sectors.
And then you know, what I might call grin,
grid instability is there really the capability to take advantage
of things like these Smart-Grid technologies is one of them.
But maybe even more importantly a lot of the technologies that
we think about using most extensively, at least in, in practical terms,
would be say wind and solar, but to the extent weather conditions are varying.
The, the power that we're deriving from those resources is varying in a,
in a non-trivial way.
And that makes it much more of a challenge to incorporate those resources on,
onto the grid, onto the existing portfolio of electrical generation.
One last thing I'd like to talk about just very briefly is this one growth factor,
which we think of often as positive.
But what you can argue is because there's sort of a double-edge sword here.
Because a lot of this is driven by legislation or
regulation and outcome of the political process.
There's a degree of uncertainty associated with political decision making.
That ironically is actually I think it's in, to some degree, ironic.
Because you think there's a limited number of
people making these political decisions.
But they're a lot less predictable quite often,
than things that are coming out of the market.
Out of the market, you might think that's a chaotic place.
And we've got literally billions of people around the world
making little decisions that are all rolling up into prices.
But there's a sense in which it's a lot easier to predict and
understand the behavior of unfettered markets.
Then it is the behavior of particular individuals with particular aspirations,
and particular values, and particular goals.
And that's really what politics is about.
Political outcomes are really a function of a much more limited set of
decision-makers, and actually much more difficult to predict.
So you could argue that this one growth factor, is actually double edged sword.
It could be both a plus and a minus, the fact that we do see those, rules.
Increasing in the cost of conventionals is good for renewables.
The fact that a lot of those rules are exclusively coming out of the political.
Decision making processes kind of means that the investment environment for
renewables remains relatively uncertain.
But regardless there, we do expect you know a degree of growth in particular
in solar and wind that at least on the, the current horizon seems
to be where the best opportunities for employment in the sector are.
Probably would think of, let's say, Bio,
to a large extent, being a bit more of a bench technology.
At least a, a,
a number of those technologies are not, maybe, in quite as extensive use.
Or the ones that are in extensive use,
like ethanol production, are pretty established, not as much room for growth.
Hydro, somewhat similar.
There's a, all ready in a, in a, there's a sense in which hydro is our most
significantly eh, exploited to date renewable technology.
Recall the, the chart we talked about it earlier where it showed about 83%,
no, 87% of our electrical generation around the world coming from renewables,
comes from hydro already.
So the scope for growth there is probably much less limited than where you see
other of these underutilized technologies growing and being exploited.
A big issue will be workforce training, you know that could be a bit
of a limitation and really be a number of these technologies including the.
The manufacturer of the goods used in, in the field, and the maintenance of
those goods are, you know, requires somewhat specialized skills.
And, and unique capabilities that aren't something that's
necessarily floating out in the workforce in a very thick or extensive manner.
So workforce training is somewhat of a significant issue in this sector.
One last thing I was going to mention that's not depicted here is,
we didn't talk much about energy efficiency, but
unrelated to these particular technologies.
There's whole number of folks working more around the the side of
reducing demand rather than increasing supply using renewables.
So that in some sense is, is an additional opportunity for
employment, growth, sort of in the broader set of green sectors.
So there are just a few more things I would like to point out here,
of course the types of jobs, we're thinking about a lot of technical jobs.
And skilled maintenance folks, and this high demand areas in particular.
You know, again electricians,
because this is all associated with electrical generation for the most part,
regardless of where the renewable technology is except bio fuels of course.
Transportation because that is where one of the bottle necks is.
In, in, in you can think about that in two ways.
One is if you're talking about the,
the renewables that are going into electrical generation.
Then transportation is all about issues of grid stability and
the extensiveness of the network, and things like that.
If, in the case of biofuels, you know, just the fact that biofuels is
the one most amenable to use in transportation means that,
you might have some relatively higher demand for biofuels.
But, and then, lastly, there are the, sort of more conventional
business and policy capabilities that are going to continue to be in demand.
You know, because of the challenging cost environment,
this is in with public interest.
In these technologies, there's certainly some demand for
advancing policies that encourage these, these investments.
And there's certainly going to be demand for
people who can figure out how to do this stuff.
Essentially, to some extent, on a shoestring, or
within the framework of the incentives that are being set up by the policymakers.
And the, the one last thing I would point out with the b l s, survey data here.
Not so much to, be thinking about particular numbers.
But what I'd like you to notice from that is, compared to all of
the different technologies that were energies sectors we may have thought of.
What I find interesting here is just how different.
The base case scenario is, from the advanced scenario.
Excepting, of course, in the case of hydro, where, you know,
this is perhaps our most established, technology.
So we really don't see much growth,
BLS forecasters don't see a whole lot of growth going forward in the hydro,
you know, the hydro sector in particular as far as employment.
And even in their advanced growth scenario there's not a whole lot of
a story to tell here.
Maybe here in bio diesel?
You know there's as I mentioned maybe a bit more of a bench level technology at
this point.
And not as much growth even in the most advanced type of gross scenario.
But all of these others, notice a big difference between the growth
forecasted in the base case, versus forecasted in the advanced scenario.
Just another indication of how much uncertainty there is,