Global Climate Change Response Can Spur $7 Trillion in Clean Energy Investment by 2030

Global Climate Change Response Can Spur $7 Trillion in Clean Energy Investment by 2030

CAMBRIDGE, Mass., Feb 05, 2008 (BUSINESS WIRE) -- Increasing public concerns about climate change -- and its potential economic and political security consequences -- are driving public policy and private investment to bring clean energy technologies from the fringes of the global energy industry to the center of activities as quickly as possible, a new analysis by Cambridge Energy Research Associates (CERA) has concluded.

The result of this rising public and private momentum is an increase in worldwide clean energy investment that could surpass US$7 trillion by 2030 in cumulative real 2007 dollars, according to the CERA report Crossing the Divide: The Future of Clean Energy.

"We are seeing a major shift in public opinion, reinforced by the expectation that carbon policies could fundamentally change the competitive landscape of the global energy business," said Daniel Yergin, CERA Chairman and IHS Executive Vice President. "This is providing a vital impetus that is moving clean technology across the great divide of cost, proven results, scale and maturity that has separated it from markets served by mainstream technologies and processes."

Key Insights

"The rapidly advancing new paradigms of climate change, energy security, and policy implementation and cooperation among the United States, the European Union, China and others will produce a broad range of opportunities, risks and pitfalls as the modern energy industry increasingly moves to adopt clean technologies that will be part of the alternative, low-carbon pathway to the energy future," said Robert LaCount, head of CERA's Climate Change and Clean Energy Group.

"All participants in the global energy business, from traditional incumbents such as electrical power companies and major oil and gas companies to new entrants such as venture capital firms," he added, "will play a role in shaping this alternative energy future. CERA's Crossing the Divide analysis offers a number of key insights about potentially significant clean energy opportunities for almost every energy sector participant:

-- There is already a "bubbling" of clean energy clusters - Some places are becoming concentrations of political, technical, institutional and financial clean energy specialization and experience. Examples include Brazil in biofuels, Germany in photovoltaic (PV) technology, Spain in wind technologies.

-- Renewable power technologies are poised for substantial growth - Wind will make the largest gains, followed by solar power and biomass -- despite near-term bottlenecks in wind turbine manufacturing, supply shortages in silicon, and competitive pressures from escalating component costs.

-- Government policy remains a key driver for clean energy advancement - Putting a price on CO2 emissions, setting mandates, and providing subsidies all work to kick-start clean energy technologies by overcoming the economic advantage of conventional technologies. The challenge in the years ahead is to provide subsidies in a way that ensures that these technologies get off the drawing board and are able to wean themselves from support - allowing for a phase-out rather than an increase in subsidies - as they become commercially viable on their own.

-- Conventional emission-free technologies - Nuclear and hydroelectric generation will account for most of the clean energy impact for the next decade, and almost half the gross clean power additions by 2030.

-- Disruptive technology potential - Clean energy technology could have disruptive rather than incremental impact. Modular and distributed PV could disrupt traditional central-station models of electricity production and distribution. Breakthroughs in cellulosic ethanol can disrupt the traditional vehicle fuel system if scale, logistics, and costs prove manageable. Conventional biofuel feedstocks, such as grains and oilseeds, may also produce serious unintended consequences such as disruption in global agricultural prices as well as land and water use patterns, as well as a policy backlash.

-- Asia demand and manufacturing - Rapid economic growth may push Asian energy needs from 30 percent of current global demand to 40 percent by 2030; combined with its manufacturing cost-competitiveness, this could make Asia a nexus for clean energy technology research, development and equipment production.

Clean Technology Drivers

Across the entire range of potential scenarios, Crossing the Divide identified the primary drivers that affect the pace of clean energy technological development and its commercial success:

-- Oil & natural gas prices - Directly affect the economics of clean energy technologies, energy security concerns, biofuels development, renewable power and conventional clean energy.

-- Government policy - Central to development of all clean energy technologies, with sustained government support ensuring ongoing research, seed money and confidence for investors; the sustainability of support policies shapes the timing and ultimate success of new technologies, particularly to the degree to which it encourages private investment.

-- Pace of technology innovation - Movement of technologies from the fringe to the center of the energy business is heavily dependent on policy support and private investment, which, in turn, is strongly affected by fossil fuel price cycles, carbon pricing, and expectations.

-- Economic growth - Affects energy demand and carbon emissions as well as the political and financial support for research and development of new clean energy technologies.

-- The Big Three: "The Big Three" in terms of energy consumption - the United States, the European Union and China - will have a major impact on development of "clean energy," along with certain other countries, particularly Japan and Brazil.

Scenarios Findings

CERA's analysis used a scenarios framework to assess the winners and losers among various clean energy technologies and help define key risks and opportunities as companies seek to place their technology bets. The analysis addressed new and conventional energy technologies that can provide energy with a minimal carbon footprint and facilitate greater energy security. These technologies include biofuels, renewable power technologies, carbon capture and storage, nuclear and hydropower. While CERA's scenarios provide widely different outcomes, advances occur in at least some clean energy technologies across all three scenarios.

In the Launch Pad scenario, strong energy prices, growing public pressure to control CO2 emissions, and a stable investment environment coalesce to drive the development and adoption of a wide range of clean energy technologies. Renewable power capacity grows from three to 16 percent of global capacity and biofuels grow from less than two percent to 16 percent of the total road transportation fuels market.

In contrast to Launch Pad's broad-based advancement of clean energy, the Global Fissures scenario highlights how weaker global economic growth coupled with increasing global tensions and political insecurity could lead to an uneven outlook for clean energy technologies. In the Global Fissures scenario, renewable power capacity grows to seven percent of the global power mix, but nuclear power experiences little growth and carbon capture and storage technology fails to develop commercially by 2030.

The Asian Phoenix scenario describes a world where the global balance of geopolitical and economic power shifts to Asia, expanding Asia's role as both consumer and exporter of clean energy technologies. Although concerns over climate change influence political agendas, a global patchwork of uncoordinated policies result in inconsistent government support programs leading to periods of fits and starts for private investment flows, and limiting technological and commercial breakthroughs. Renewable power grows to 10 percent of global capacity and biofuels capture seven percent of the market for road transportation fuels.

"Crossing the Divide and the CERA scenarios highlight that the future of clean energy can take several paths," said Lawrence Makovich, CERA vice president and senior advisor. "This demonstrates how important not only technology, but also well-crafted energy policy are to shaping the energy future."

The Crossing the Divide analysis combined the collective input of study participants with CERA's broad research capabilities and deep expertise in a range of energy segments and geographic regions to help gauge the expectations for clean energy and align them with reality. Highlights of each technology include the following:

-- Biofuels. Development of biofuels is rapidly growing around the world, driven by rising global oil prices and transportation demand. Support for biofuels is also driven by interest in promoting domestic agricultural sectors. Based on the state of current technologies, however, biofuels promise to displace a relatively small fraction of petroleum, owing to twin constraints:

competition for land with food crops and relatively high production costs. More petroleum could be displaced if next generation technology is developed that converts more plentiful nonfood biomass into fuel and expands the useable crop base, but significant cost and technology hurdles must first be overcome. Biotechnology may surprise and shine a light on the appropriate solutions.

-- Wind. Given its relatively low cost compared with other renewable power alternatives, wind is the leading renewable technology in power generation worldwide in terms of installed capacity. As favorable onshore resources are harnessed, the key to maintaining wind capacity growth will be movement to low-speed onshore sites and offshore wind development. The majority of all new wind capacity (approximately 80 percent) is expected to come online in Asia and Europe, with almost all of the remainder in North America.

-- Biomass. Europe continues to lead the way in biomass power growth for electric generation through its bioenergy policy initiatives. Cost-effective, dedicated biomass crops would create a breakthrough for this technology.

-- Geothermal power. Current trends indicate that new geothermal power projects should increase installed capacity by 50 percent or more in the next five years as the number of countries with geothermal power operations roughly doubles to over 40. Enhanced geothermal systems (EGS), commonly known as "hot rocks," may hold the greatest potential for expanding the role of geothermal energy. EGS takes advantage of the heat locked in impermeable rock layers deep below the earth's surface through artificially created geothermal reservoirs. Although EGS technology shows great promise, it is still in a formative stage of development and must overcome a number of challenges before becoming a viable energy source.

-- Solar PV. Solar enjoys fast growth globally, with installations increasing from just over three GW in 1996 to 6.5 GW in 2006. Solar PV is primarily a decentralized source of power generation that produces electricity directly from sunlight without moving parts or the need for significant balance-of-plant equipment. It is versatile in terms of applications, ranging from integration in lighting products and building materials to modular power installations that provide power to the grid. Its versatility and falling manufacturing costs make solar PV attractive to the investment community looking for clean energy technologies with near-term market potential. Still, solar PV-generated electricity costs significantly more than conventional power generation and requires subsidies to compensate.

-- Concentrating solar power (CSP: 11.25, +0.07, +0.62%). CSP is a large-scale, centralized power production technology that concentrates sunlight to generate heat that is used to produce steam-generated electricity. Although solar PV is more widely known, CSP technologies are actually much less expensive and more appropriately sized for utility-scale generation. However, they still require subsidies in order to compete in the marketplace. Emerging CSP technologies can be equipped with thermal storage systems that reduce the impact of solar energy's intermittence.

-- Ocean. The enormous energy potential of ocean resources is unlikely to provide a significant contribution to world electricity supplies for the next few decades owing to the early-stage nature of the technology. Successful demonstration projects, cost reductions and policy development on standards for resource use will be required to advance the growth of ocean energy. However, successful projects could have an impact on a local level, and within the next half century a tidal power plant with a capacity as big as or bigger than the Hoover Dam or the Yangtze River Dam is possible.

-- Carbon capture and storage (CCS: 23.09, +0.14, +0.61%). Carbon capture and storage is a combination of technologies that holds promise of bringing fossil fuel combustion into the clean energy portfolio. If done on a large enough scale, capturing and effectively storing CO2 before it reaches the atmosphere could fundamentally alter the carbon footprint of conventional fossil fuels. Even in the best case, CCS is at least two decades away from large scale deployment. Carbon capture technology is likely to advance well ahead of storage technology. Technical hurdles to carbon capture will be addressed in technology trials over the next decade while the associated political, regulatory and legal issues are worked out.

-- Nuclear. Nuclear power is an important part of the world's current electricity mix, providing 15 percent of global power generation. Future prospects for new nuclear construction, buoyed by growing concerns over climate change and energy security, could support new nuclear build of up to 700 GW of installed capacity by 2030. However, many challenges lie ahead with regard to policy, capital costs, waste management -- and public opinion. There is always the risk of a major safety incident or a successful terrorist attack which could seriously impede the progress of nuclear power.

-- Hydropower. Many developing economies and power systems are following the path set by the developed economies and maximizing their domestic hydroelectric potential to support economic development. Like nuclear, hydropower currently provides a significant portion of global power generation (16 percent) and is also poised for growth over the next few decades. Particularly in developing economies in Asia and Latin America, up to 600 GW of new capacity could be added through 2030. Hydropower engenders controversy, however, based on the social displacement and environmental impacts associated with large-scale dams and reservoirs.

About CERA (www.cera.com)

Oil from Wood - Startup Kior has developed a process for creating "biocrude" directly from biomass.

Dutch biofuels startup Bioecon and Khosla Ventures have launched a joint venture called Kior, which will commercialize Bioecon's process for converting agricultural waste directly into "biocrude," a mixture of small hydrocarbon molecules that can be processed into fuels such as gasoline or diesel in existing oil refineries. The process, Kior claims, boasts numerous advantages over other methods of producing biofuels: it could prove relatively cheap, relies on a nontoxic catalyst, taps into the present fuel-refining and transportation infrastructure, and produces clean-burning fuels that can be used in existing engines.

Biofuels are widely seen as a key stepping-stone on the path from fossil fuels to renewable energy sources, particularly for transportation. Their use could also reduce emissions of carbon dioxide and other greenhouse gases. But ethanol, the most widely produced biofuel, contains little energy compared with gasoline or diesel. And a great deal of energy goes into its production: growing the grain from which it is fermented, distilling it, and transporting it. Many biofuels boosters have pinned their hopes on finding ways to produce ethanol from cellulose, the tough polymer that makes up much of plant stems and wood. In practice, though, cellulose must be broken down into simple sugars before it can be fermented into ethanol or converted into synthetic gas and turned into fuels. Despite three decades of research, these remain difficult, expensive, and energy-intensive processes that are not yet commercially viable. Additionally, recent research shows that ethanol, which is highly volatile, may actually exacerbate smog problems when it evaporates directly into the air instead of burning in vehicle engines.

The way to make cellulosic biofuels viable, says Bioecon's founder, Paul O'Connor, is to use catalysts to convert biomass into a hydrocarbon biocrude that can be processed into gasoline and diesel in existing petroleum refineries. After decades developing catalysts for the petroleum industry, O'Connor started Bioecon in early 2006 to develop methods for converting biomass directly into biofuels. His first success is a catalytic process that can convert cellulosic biomass into short-chain hydrocarbons about six to thirteen carbon atoms long. Khosla Ventures agreed to provide an undisclosed amount of series A funding to spinoff Kior in order to commercialize the process. Vinod Khosla, founder of the venture fund, believes that converting biomass into liquid transportation fuels is key to decreasing greenhouse-gas emissions and compensating for dwindling petroleum reserves. Khosla is funding a number of biofuels startups with competing technologies and says that Kior's approach is unique. "They have some very clever proprietary catalytic approaches that are pretty compelling," he says. "They can produce relatively cheap crude oil--that's attractive."

The most effective method of converting biomass into fuel is to subject it to high temperatures and high pressure to produce synthetic gas, or syngas. In the presence of a catalyst, the syngas reacts to produce fuels such as ethanol or methanol (used as an additive in biodiesel). But this is a costly process, and catalysts able to withstand the high temperature of the syngas are expensive and frequently toxic.

Attempts to produce fuel by directly exposing agricultural cellulose to a catalyst have had little success because most of the cellulose is trapped inside plant stems and stalks. O'Connor says that while the Bioecon researchers are developing new catalysts, their "biomass cracking" process is the real breakthrough. Using proprietary methods, they have been able to insert a catalyst inside the structure of the biomass, improving the contact between the materials and increasing the efficiency of the process. While O'Connor won't go into details, he says that the most basic version of the technique might involve impregnating the biomass with a solution containing the catalyst; the catalyst would then be recrystallized. "What we're doing now is improving the method to make it easier and cheaper," O'Connor says.

Such a method would eliminate the need for the superhigh temperatures and toxic catalysts used in other thermochemical methods for cellulosic-biofuel production. While O'Connor says that he is still improving Kior's catalyst, his first versions are different kinds of modified clays, which are both cheap and environmentally friendly. The product is high quality as well, containing less acid, oxygen, and water. These characteristics make it suitable for burning as heating oil or for use in petroleum refineries, which can use existing processes and equipment to convert it into the longer hydrocarbon chains of gasoline and diesel fuel.

Bioecon has produced lab-scale quantities of its biocrude, a few grams at a time, from materials such as wood shavings, sugarcane waste, and various grasses. While the input material affects the yield somewhat, O'Connor says that the output is "all very similar, so we do not have a real preference." This means that the process can work around the world, with whatever biomass is locally available, almost year-round.

Kior is already in talks with at least two oil companies to establish partnerships to further develop the technology. It is starting a pilot plant with one company that should produce around 20 kilograms of biocrude a day within six to twelve months, says Kior CEO Rob van der Meij. If all goes well, the process could scale up to production of hundreds of kilos per day by 2009, and refined versions of Kior's biocrude might be blended into gasoline or diesel by 2010. In addition to being renewable, these fuels would have lower sulfur and nitrogen content, which should decrease smog in cities such as Los Angeles and Houston.

Because of its ability to slide into the existing petroleum refining and delivery infrastructure, the technology has a huge cost advantage, says O'Connor. It could also be adopted much more rapidly, according to Khosla. "If you can do a solution that's compatible with the oil companies and their current refineries, it becomes much easier for them to get comfortable with it," he says. "Getting them into the game would be a big addition."

Steve Deutch, a senior research scientist at the National Renewable Energy Laboratory, says that the little information Kior has released about its process is plausible enough, but that until the details are available, the company's claims are "not really possible to evaluate." The main challenge for Kior, or anyone working on cellulosic fuels, Deutch says, is to develop a process simple enough to bring close to the sources of biomass--farms. "Collecting biomass and getting enough of it in one place to make a difference is a problem in the biomass world," Deutch says. "Trucking costs can become exorbitant. You want to preprocess it at the farm and then ship a high-density, high-energy intermediate to processing plants."

Salt water as fuel - could bring a whole new meaning to fire-water

For obvious reasons, scientists long have thought that salt water couldn't be burned.

So when an Erie man announced he'd ignited salt water with the radio-frequency generator he'd invented, some thought it a was a hoax.

John Kanzius, a Washington County native, tried to desalinate seawater with a generator he developed to treat cancer, and it caused a flash in the test tube.

Within days, he had the salt water in the test tube burning like a candle, as long as it was exposed to radio frequencies.

His discovery has spawned scientific interest in using the world's most abundant substance as clean fuel, among other uses.

Rustum Roy, a Penn State University chemist, held a demonstration last week at the university's Materials Research Laboratory in State College, to confirm what he'd witnessed weeks before in an Erie lab.

"It's true, it works," Dr. Roy said. "Everyone told me, 'Rustum, don't be fooled. He put electrodes in there.' "

But there are no electrodes and no gimmicks, he said.

Dr. Roy said the salt water isn't burning per se, despite appearances. The radio frequency actually weakens bonds holding together the constituents of salt water -- sodium chloride, hydrogen and oxygen -- and releases the hydrogen, which, once ignited, burns continuously when exposed to the RF energy field. Mr. Kanzius said an independent source measured the flame's temperature, which exceeds 3,000 degrees Fahrenheit, reflecting an enormous energy output.

As such, Dr. Roy, a founding member of the Materials Research Laboratory and expert in water structure, said Mr. Kanzius' discovery represents "the most remarkable in water science in 100 years."

But researching its potential will take time and money, he said. One immediate question is energy efficiency: The energy the RF generator uses vs. the energy output from burning hydrogen.

Dr. Roy said he's scheduled to meet tomorrow with U.S. Department of Energy and Department of Defense officials in Washington to discuss the discovery and seek research funding.

Mr. Kanzius said he powered a Stirling, or hot air, engine with salt water. But whether the system can power a car or be used as an efficient fuel will depend on research results.

"We will get our ideas together and check this out and see where it leads," Dr. Roy said. "The potential is huge.

"In the life sciences, the role of water is infinite, and this guy is doing something new in using the most important and most abundant material on the face of the earth."

Mr. Kanzius' discovery was an accident.

He developed the RF generator as a novel cancer treatment. His research in targeting cancer cells with metallic nanoparticles then destroying them with radio-frequency is proceeding at the University of Pittsburgh Medical Center and at the University of Texas' MD Anderson Cancer Center in Houston.

Manuscripts updating the cancer research are in preparation for publication in coming months, Mr. Kanzius said.

While Mr. Kanzius was demonstrating how his generator heated nanoparticles, someone noted condensation inside the test tube and suggested he try using his equipment to desalinate water.

So, Mr. Kanzius said, he put sea water in a test tube, then trained his machine on it, producing an unexpected spark. In time he and laboratory owners struck a match and ignited the water, which continued burning as long as it remained in the radio-frequency field.

During several trials, heat from burning hydrogen grew hot enough to melt the test tube, he said. Dr. Roy's tests on the machine last week provided further evidence that the process is releasing and burning hydrogen from the water. Tests on different water solutions and concentrations produced various temperatures and flame colors.

"This is the most abundant element in the world. It is everywhere," Dr. Roy said of salt water. "Seeing it burn gives me chills."

By David Templeton