Renewable energy might never be cheap, but that's not really the objective. The idea is to get it to where it's competitive with fossil fuels, and there are many ways to do that, financially speaking. But competitiveness also depends on technical issues like reliability. What do you do when the wind dies - or even when it blows too hard? Sudden bursts of renewable energy can be just as much of a challenge for the grid, and for the other suppliers feeding it. As renewables gain ground, this is starting to be a serious question. You can't just power down a nuclear or coal power station whenever there's a strong gust of wind.
New research published last week by analysts Poyry suggests that the issues around peaking of renewable energy could be adequately dealt with by the network, as long as the market adapts to highly variable systems. It has occasionally been suggested that combining wind, solar, landfill gas and wave energy, or any othe source one cares to suggest, would help to even out the peaks and troughs in supply. This may be true, but it doesn't eliminate the risks.
The answer could lie in in the economics of scarcity, the research suggests. The way to harness the market, so to speak, is by pricing wind energy according to how hard the wind blows. Pricing should be based not only on demand (like charging consumers more for using electricity during peak periods) but also on supply variables. When the wind is howling, wind energy would be cheap enough that other suppliers couldn't compete, and would reduce their output.
Of course, this approach might not go down too well with suppliers who are just starting to win the North American battle over feed-in tariffs (FITs). Proponents have pointed to Germany as a success story that shows how stable FITs are needed to establish the confidence needed for heavy investment in renewable energy projects, and this idea is gaining traction in Canada and the US.
Feed-in tariffs guarantee long-term payments at pre-established rates for the electricity generated from renewable sources. The production-based payments are often higher than market rates, but are on the verge of becoming competitive in specific locations for certain technologies such as wind power.
NREL (National Renewable Energy Laboratory) analysts have identified a shopping list of factors needed for a FIT policy that successfully stimulates investment and achieves the desired spinoff benefits. They recommend stability, long-term contracts, adequate energy prices, incrementally decreasing tariffs, differentiation according to technology, incorporating FIT into the rate base, and reducing bureaucracy. But they also caution that there needs to be careful consideration of local conditions and policy objectives.
The NREL reports examine a wide range of FIT programs. For example, Gainesville's tariff is limited to photovoltaic projects with a total city-wide cap of 4 megawatts (MW). Under Washington state's FIT policy, solar PV, solar thermal, wind, and anaerobic digesters are offered a payment that differs by technology and that increases if system components are manufactured in-state.
This spring, the Canadian province of Ontario revised its three-year old program to include a 20-year fixed price of as much as US $0.69 for every kilowatt-hour of solar power generated. In response, SunEdison, First Solar, Everbrite Solar and Nanosolar are developing both solar energy farms and manufacturing facilities near Ottawa, Kingston and other cities.