 The production of bulk electricity from renewable energy is one of the high-potential pathways for mitigation of global climate change. The technologies discussed in this toolkit (hydropower, wind, biomass, geothermal and solar) are all proven and commercially available1 , and together they have the potential to grow into a major option for electricity generation over the next 50 years. In addition, the local economic development generated by their utilization will greatly help to reduce poverty, address regional and local health and environmental concerns, and increase energy security.
Grid-connected renewable energy is already a multi-billion dollar industry and the fastest growing sector of the global energy market. Globally, installations of new renewable energy capacity (other than large hydropower) are expected to more than double over the next ten years from about 140 GW in 2003 to 300 GW in 20132 . However, this will still represent less than 5 % of total generating capacity. The table below provides a breakdown of the currently installed grid-connected renewable energy generating capacity as of 2003. Overall, renewable energy (including large hydropower) represents about 23% of total electricity generating capacity worldwide and about 30% of total capacity in developing countries. Renewable Grid-Based Electricity Generation Capacity3 Installed as of 2003 (GW) |
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The critical challenge to rapidly expanding the grid-connected renewable energy pathway is to learn from the markets that have already been developed and to use that information to create the appropriate promotional policies, market approaches and financial mechanisms that will accelerate the development of new markets in all regions of the world. In certain cases, renewable energy technologies can be the lowest economic cost option. However, too often market conditions, their capital intensity and other factors create barriers to their financial viability. Policies to promote grid-connected renewable energy systems are usually based upon the fact that most electric power markets do not value some of the important benefits that renewable energy technologies generate, such as their: - Environmental health benefits, which include greenhouse gas reductions and the health cost savings and quality-of-life improvements from cleaner air;
- Energy security benefits, which include reduced dependence on imported fuels, and more stable electricity price from less use of price-volatile fuels;
- Social development benefits, which stem from the fact that renewable resources are largely located in rural areas and their development often benefits the local population through jobs and tax revenues; and
- Economic growth benefits, which follow from the fact that clean, renewable energy technologies are an important growth area for the power sector and there are multiple new markets and business opportunities.
The key market development issues that need to be addressed include establishing the legal framework for private power producers, reducing transaction costs through standardized power purchase agreements and interconnection regulations, and finding ways to address the initial high cost of the technologies through policy and financial interventions. This module discusses policies that have been used in various locations to promote renewable energy projects, explains the business models that can be used to support sustainable market development, and describes possible financial mechanisms that can support project implementation. Links to several case studies help to illustrate how these approaches have been implemented on past projects. Critical project tools for grid-connected systems, such as technical specifications, terms of reference, contacts and other knowledge documents can be found using the links to the left. |
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