2012

Research concepts for Built Environment The cost effectiveness of Renewable Energy

CONTENTS
PART 1 ...................................................................................................................................................... 1 INTRODUCTION ........................................................................................................................................ 1 RENEWABLE ENERGY ............................................................................................................................. 1 Uses of Renewable energy ........................................................................................................................ 2 Main drivers of Renewable Energy .......................................................................................................... 3 COST EFFECTIVENESS OF RENEWABLE ENERGY ............................................................................ 4 Cost effectiveness evaluation criteria ....................................................................................................... 6 ASSESSING THE COST EFFECTIVENESS OF RENEWABLE ENERGY ............................................. 7 Steps in assessing the cost effectiveness ................................................................................................... 8 PART 2 ...................................................................................................................................................... 9 CONCLUSION ........................................................................................................................................... 10 REFERENCES ........................................................................................................................................... 12

LIST OF FIGURES

Figure 1: Assessing the Cost Effectiveness .................................................................................................. 8

PART 1 INTRODUCTION
In this present environment, renewable energy is growing at a skyrocket pace, creating thousands of roles, drumming Yankee power sources, reducing pollution and helping many other patrons (Moretz, 2012). Renewable energy is being defined as that energy, which uses certain sources that are continually replenished by the nature i.e. the sun, the wind, water, earths heat and plants (Wood and Dow, 2010). The major work of this type of energy is to turn these fuels into usable forms of energy. It is also being considered as the most cost effective power generation energy. Articulated from this fact the subsequent research report will investigate various aspects in regards with the renewable energy and its cost effectiveness. The literature review of the cost effectiveness of renewable energy is being presented therein.

RENEWABLE ENERGY
Renewable energy refers to the energy, which is obtained from the resources that are essentially inexhaustible. These resources encompass wind, living organisms, biomass, sun, geothermal, movement of water i.e. hydro, wave, and tidal other products (Twidell and Weir, 2012). In addition to this it also include all renewable resources that can be utilized to generate thermal energy as well as electricity (Renewable Energy Most Cost Effective Power Generation Option, 2012). There is a common notion that the cost of renewable energy is often more than the other conventional sources. But in fact it is being recognized that under the right conditions, this case and situation is not necessary. Most of the businesses, organizations and owners of institutions are switching towards renewable resources with a view to reduce their energy costs (Wood and Dow, 2010). Green energy is gaining more popularity, as the political and industrial sides of fossil fuels grow more exhausting. It is very trickier to outline the image of clean energy. Selection of sources of energy is a catchall phrase and thus it is required much broad definition. Considering this in intellect, green energy must be outlined as any power source that naturally happens and is extremely abounding. Ironically, relatively all replenish-able energy sources is largely dependent on nuclear power (Moretz, 2012). There are many perspectives on the basis of which renewable energy can be divided. These perspectives are political and legal (Ideal, 2010). As per the political view point,
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renewable energy resources are being categorized into numerous categories on the basis of political objectives and goals under consideration (Renewable Energy Most Cost Effective Power Generation Option, 2012). For instance, in a specified nation, a distinction in the renewable resources can be made in relation with the well established versus those which are underdeveloped. Another differentiation can be made on the basis of immediate development potential versus those which do not (Twidell and Weir, 2012). The political perspective of the policy maker in a particular country provides justification in regards with the treatment for established resources like, large hydroelectric from nascent resources such as geothermal. When talking about another country, the reverse may be the true. Similarly, treatment of all renewable resources will be different for urban application in comparison with the rural application (Wood and Dow, 2010). Uses of Renewable energy Today, most of the people primarily use fossil fuels in order to heat and power their homes and fuel their cars. It is very expedient to make use of coal, natural gas and oil for the purpose of meeting out our energy needs, but unfortunately these resources have very limited supply on the Earth (Productive Uses of Renewable Energy in Developing Countries, n.d). The usage of these fuels is being done with more rapid pace as compared to their creation. Eventually, they are more likely chances that these resources will run out soon. Although the supply of these resources and fossil fuel is limited, using renewable resources is considered better for both the environment and individual (Cost Effective Renewable Energy, n.d). Generally, most of the people call renewable energy technologies clean and green because they produce very few pollutants. If the fossil fuel is being burned, greenhouse gases reach to the atmosphere, which thereby, traps the heat of the sun and significantly contributes to global warming. According to the Climate scientists, from the past so many decades temperature of Earth sewerage has risen apparently. If this temperature and trend still continue than the level of sea will be also rises, which in turn give way to floods, droughts, heat waves and other extreme weather conditions more often (Productive Uses of Renewable Energy in Developing Countries, n.d). Renewable energy is abundant in nature and technologies in relation with this are also improving at a tremendous speed (Twidell and Weir, 2012). Renewable resources can be used in many ways. There are many people who are presently using renewable energy in their daily
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lives. Once the technology is imported, these resources will be very effective and cheap. These types of resources encompass solar, geothermal, wind, hydropower and tidal energy. In addition to this, bio fuels are grown and harvested without fossil fuels. Non-renewable energy resources like coal and petroleum require costly explorations (Cost Effective Renewable Energy, n.d). They also involve dangerous mining and drilling and are more likely to become more expensive, as supplies dwindle and the demand increases. On the other hand, renewable energy produces only minute levels of carbon emissions. Therefore, from the above facts it can be articulated that these resources will provide a supporting hand in combating climate change being caused by the utilization of fossil fuel. In this contemporary business environment renewable energy plays a very important role. There are many reasons attach in this regards. The first and the foremost is there accessibility. Natural gas, Coal and oil reserves are very finite and hidden. If the amount of this limited is limited and unknown than it will be buried deep underground or under the ocean. If it is more harvested than it will become more difficult and more expensive (Renewable Energy: Too Expensive or Cost Effective, n.d). Exploiting of these resources is already a challenge more and sometimes it is dangerous as well. Further. Extracting marginal resources like oil sands, demands burning of huge amounts of natural gas in order to refine them into usable oil. Therefore, it is easy and convenient to find wind and solar energy and they are presenting in abundant. Secondly, renewable energy is far cleaner in comparison with the fossil fuels. Mining of coal and exploration of petroleum produces solid toxic wastes like, mercury and other heavy metals. All these toxic gases endangered the life of marine lives as well as deplete the ozone layer (Twidell and Weir, 2012). Main drivers of Renewable Energy Many drivers of renewable energy policy are available. Some of these are environmental drivers, economic drivers and social drivers. An explanation of all these drivers of renewable energy policies is being provided below: Environmental drivers This driver include aspects that affects and influence the environment of a particular place or a country. It encompasses emissions and climatic change. When talking in volume about the renewable energy other than Biomass, no direct emission from the energy conversion is there (Renewable Energy: Too Expensive or Cost Effective, n.d). Here in this, often the energy is being generated from the wave,
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solar energy and wind ad thus, it does not cause any kind of emission. On the other hand, in case of biomass or waste, secretion of toxic gases and fumes do exist (Sayigh, 2000). However all these emissions are limited as per the legislation of a specific place or a nation as well as it is similar to the fossil fuel or waste combustion. The second factor is climate change. It helps in reducing climate change. The emissions released from the biomass and waste is more likely to alleviate the pressure from the environment (Renewable Energy: Too Expensive or Cost Effective, n.d). This is because of the closed short carbon cycle. In renewable energy also, toxic gases and fumes are being released in the same quantity or even in larger quantities as compared to the fossil fuels, but in this at least no additional Carbon dioxide is brought into the atmosphere. In this energy, the CO2 is being captured before. It will be released by other alternative routes in the form of natural biodegradation or dumping. Social drivers The social drivers of Renewable Resources also includes many aspects like employment, public support and social economic cohesion. The first one is the employment. When the share of renewable energy is going to be increased, both type of employment i.e. direct and indirect will be generated. This is not only in relation with manufacturing of the plant or installation, however it also relates with maintenance and the fuel provision. Probably, enlargement of the renewable industry will be possible if use of renewable energy will be increased (Quaschning, 2005). Nevertheless, at the same point of time the net labor gain can be nullified due shrinkage of conventional power industry. It is not easy to assess the impact of renewable energy policy and labor. However, an assumption is being made that its effects will be positive in the market all around the world with a proceeding penetration of renewable energy sources. Another important factor is support of public. The subject of renewable energy is still alive most of the countries like Europe. As being part of a sustainable way of life, a significant number of people are demanding more attention in regards with the development of alternative energy sources (Thiam, 2012).

COST EFFECTIVENESS OF RENEWABLE ENERGY

According to the International Renewable Energy Agency, renewable energy is being considered as the most effective way to generate electricity for hundreds of millions of people all

around the world (Wooders and et. al., 2012). This type of energy is also the least-cost option for the purpose of extending the grid supply in areas with the necessary resources like wind, appropriate tidal options and sun. In todays business environment, it is becoming more difficult for the companies to extract fossil fuels, as they are effecting the environment as well as creating global warming on earth. Therefore, renewable energy is however the main source, which will not going to deplete and turn out to be a cost effective source for the company (Sayigh, 2000). According to Dolf Gielen, the revolution of renewable is underway. In recent years, certain level of fall in the cost of electricity is being witnessed, which in turn makes it as one of the cheapest option both in off-grid and on-grid places having plentiful resources (Wooders and et. al., 2012). Thus, it can be said that renewable energy is the cheapest option for meeting out the rising demands of electricity as well as in other options as well. There are many renewable power generation costs and explanation of these is given below: Biomass power generation It is now becoming very competitive and cheaper, as the forestry and agricultural waste is available at very low cost. They are also offering very competitive projects in the market that other firms who are not adopting Biomass power are in queue to implement sooner or later in their company (Renewable energy overview, n.d). Hydropower This is being considered as the largest source of renewable energy. This source often provides lowest cost electricity than any other generation source (Palmer and Burtraw, 2005). On the basis of total costs, renewable energy that is creating facility is often cost competitive in comparison with the conventional fuel facility being provided. This is because of the fact that the cost calculation takes into consideration long-term fuel costs. However, this generalization is not correct and right in each and every situation confronting the policy planner. Therefore, there is a need to apply cost-effectiveness criteria adapted to each situation (Wooders and et. al., 2012). Cost effectiveness is being defined as the measure of the amount of result as per the relative amount being spent (Thiam, 2012). Definition of cost effectiveness being used for the purpose of analysis is regarded in terms of costs for government or implementing agencies. A market efficiency criterion has included the costs for society as a whole. In the situation of promotion of renewable energy, the cost-effectiveness can be expressed both in terms of capacity
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and production (Smith and Taylor, 2008). From both these measures, which measure is needed to be adopted generally depends on the goals of the formulation of policy. It is very tedious and difficult to present quantitative analysis of cost effectiveness. This is because even when the information in relation with the expenditures is being known, the relationship among these two is significantly not certain. On the one hand, part of the expenses may have been used by free riders by implementing the technology if there was no issue related to policy instrument (Quaschning, 2005). On the other hand, if there was an existence of policy support measures then it would have been possible to reach a broader market as compared to the target group. This means that real cost effectiveness can only be analyzed by being close contact with the market (Palmer and Burtraw, 2005). Cost effectiveness evaluation criteria Renewable energy such as generating electricity may be cost effective in one market, but it cannot be such in other market or place (Griffin, 2010). There is not certain calculus that needs to be done, rather the policy maker need to apply some definite criteria. These criterias will help in identifying the financial viability of renewable energy. Some of them are explained below: The quality and quantity of the resource With the help of government-conducted resource assessment, quality and quantity of renewable resources can be identified. However, developers of the private sectors generally have their own pre-feasibility and feasibility studies that can be considered as the more accurate measures to determine the commercial viability of a given project (Beurskens and et. al., 2003). Each resource possesses unique measures of resource quality and quantity, but the resource quality and quantity for each and every renewable largely influences the energy input as well as the effective capacity of a generation facility (Smith and Taylor, 2008). For instance in geothermal resource development, the requisite production equipment is being determined by the dissolved impurities and the temperature of the resources. In turn, the cost of production equipment impinges the installed cost and the per-kilowatt-hour cost of delivered power. In biomass, installed costs, maintenance cost and operations are highly influenced by the quality and BTU content of the fuel (Wooders and et. al., 2012).

 The location of the resource This factor is considered as very important factor in determining the cost effectiveness of a particular energy. Location or in other words proximity of the resource to a customer base has direct impact on the costs. It is just like immediacy to an existing infrastructure such as roads, transmission lines, to the developers technology manufacturing base and to industry support facilities like concrete plants (Korte, 2011). In the case of geothermal, the major cost factor is regarded as the depth of the resource. In case of hydro, solar technologies and wind, cost is mainly affected by the climatic variations like rainfall, cloud cover; intense storms etc. further, in case of biomass, the distance between the transportation, the fuel source and the generating facility may significantly affect the cost of electricity (Thiam, 2012). Government-imposed costs When speaking in volume about the private-sector developer, time is being considered as money for them. The costs of renewable projects is more likely to be increased due to the time expended in responding to bid proposals, licenses and concessions, in obtaining requisite permits and in negotiating contracts. It is the responsibility of the policy maker to consider those policies, which organize and simplify the processes of local institutional processes (Renewable energy overview, n.d). All these policies prevent adding major costs and time delays to what would otherwise be considered as highly cost-effective facility. Likewise, fees, tariffs, government-imposed taxes and royalty payments are all conceded to the consumer of electricity and influence the kilowatt-hour cost of delivered power (Wooders and et. al., 2012).

ASSESSING THE COST EFFECTIVENESS OF RENEWABLE ENERGY

The cost effectiveness of the renewable energy is assessed with the help of impact analysis approach (Griffin, 2010). Here, in this approach policys outputs i.e. the products or activities that it generates is separated out from the policys outcomes as well as the effects that these products or activities are anticipated to achieve. For instance, in case of renewable power deployment subsidies, the main output is to generate renewable electricity and to increase the consumption of renewable energy technologies (RETs) (Woodruff, n.d). The GSI has categorized the advantages of renewable electricity in its review of literature into four key issues areas i.e. economic and social benefits, energy security, the environment and technological development. There is a strong need to take into consideration various brawny reasons to make

an assumption in regards with the causality between subsidy policies and deployment (Johansson, 1993). There arise many situations in which renewable energy technologies are deployed without having any kind of support (Thiam, 2012). According to the GSIs exploratory studies it has been articulated that the key issues and concerns that should be addressed in the course of are firstly, identification of the impacts of subsidies and secondly allotting them a financial value (Quaschning, 2005). Afterwards, the total value of the benefits is compared with the total cost of the policies. This process involves six very easy steps and is summarized below:

Figure 1: Assessing the Cost Effectiveness (Source: Wooders and et. al., 2012) Steps in assessing the cost effectiveness There are many steps being involved in evaluating the cost effectiveness of renewable energy. The first and the foremost are identifying the policy outputs, which further involves measuring the deployment of the energy (Korte, 2011). The next step is identifying the policy outcomes. Here in this step many aspects are included further. This involves evaluating various impacts like, environmental, economic and social, energy security impacts and technology development (Smith and Taylor, 2008). The last step is determining the costs. In this stage the cost is being assessed. Cost of each and every mechanism is determined at this stage of impact analysis approach (Renewable energy overview, n.d).

PART 2
In light of the findings, many gaps were revealed in the literature review part of the research. It was found that renewable energy is cost effective according to a particular market or place. In some market or location, it is very cost effective and some it is not so. In addition to this, benefits from the renewable energy can be achieved only in long term (Research for Renewable Energy Development, n.d). There were many people who views that in order to protect the earth from the impact of global warming and to fight against this, each and every company should move away from the fossil fuel and should proceed towards renewable energy (Winkler, n.d). However, there were many criticisms in this regards, which suggested that there is no positive impact of switching to these sources in the distant future. Unless and until a positive sign is being derived, it is not a useful task for the companies (Smith and Taylor, 2008). In addition to this, the main gap being found in the research was that there are many companies and business houses that are not aware about the benefits pertaining to the use of renewable energy sources (Korte, 2011). They are making use of fossil fuels, which will deplete in coming years and creating a hole in the ozone layer of the atmosphere. World is now started suffering from the effects of global warming that can be somehow combat through the use of renewable energy sources. This can be implemented and promoted by making use of various methods. They are being explained in this section below. With the help of these energies, nations need of energy will be fulfilled and it will be going to reduce the effects of greenhouse gases inextricably (Research for Renewable Energy Development, n.d). For most of the consumers, renewable energy is considered as a means to save money. This can be articulated from the fact that the production of renewable energy is often more efficient. For instance, biogas electricity plants harness energy from all compost and waste (Johansson, 1993). It produces around 30 percent more biogas in comparison with the other electric plants of producing energy in just third of the time being taken by those electric plants. According to the American Wind Energy Association, in the coming four years, for the purpose of eliminating the gas shortage of 3 to 4 billion cubic feet of gas per day, more than enough wind plants could be built (Winkler, n.d). Switching towards the renewable energy sources will help the nation to boost up their economy and at the same time it will be going to provide a needed kick to all the companies (Tohill, 2011). Many examples of companies and other businesses witness the benefits of using
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renewable energy source. As per the study in 2007, the Pittsburgh Post-Gazette reported that by moving towards the sources of renewable energy, the University of Tennessee were in the position to increase the net farm income by $460 million and created approximately 44,000 employment opportunities in the state of Pennsylvania alone (Research for Renewable Energy Development, n.d). At times when many environmentalists have advocated the use of renewable energy sources, many private corporations and government officials are jumping towards these sources as they think that it will make a good business sense (Li, and Rajola, 2010). However, there were many companies and businesses that are not aware about the enduring positive effects of renewable energy sources. As the above literature review was being done on small scale basis, it was not feasible to identify these gaps and to solve them apparently (Winkler, n.d). Here in this research report the main gap is that it has not identified how the use of renewable energy sources can be promoted in various companies and businesses so that it can be very cost effective for them. However, there are many companies like General Electrical (GE), who are the leading supplier of wind energy has launched Capture the wind tour. This tour was basically representing the promotion of using renewable energy sources (Smith and Taylor, 2008). Other than this, various other campaigns should also initiated by the government which aims at spreading awareness in the intellects of all consumers and companies in regards with the potential use of renewable energy (Korte, 2011). But, there are many companies who have already made a shift towards the use of renewable energy sources and are now witnessing the immediate impact of renewable energy. In the coming few decades countries like Germany could be using 100 percent renewable energy and thereby they will save billion of money in importing energies from other nations (Winkler, n.d).

CONCLUSION
From reviewing the above literature it can be concluded that the energy from renewable sources is more likely to play an important role in the global future energy provision (Sayigh, 2000). In this market development business scenario and current phase of technology, policy support for renewable energy act as a major foundation for its market position (Li, and Rajola, 2010). In the coming twenty years, support from the specific policy will remain necessary with a view to improve the technologies as well as bringing the supply and demand of the renewable

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energy up to a level of maturity such that the sector can be in a position to compete on a level market with other energy sources (Johansson, 1993). The whole report is focusing on renewable energy and its uses in large business corporations. As the fossil fuel are depleting day and night, it is pre-requisite on the part of the companies to implement and adopt the renewable energy sources. This would also prove very cost effective for the firm and protect the earth from the affected of global warming, which is not possible in case of other conventional energy sources (Sayigh, 2000).

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REFERENCES
Books and journals Griffin, J. P., 2010. Improving Cost-effectiveness and Mitigating Risks of Renewable Energy Requirements. Pardee RAND Graduate School. Johansson, T. B., 1993. Renewable Energy: Sources for Fuels and Electricity. 2nd ed. Island Press. Korte, K. J., 2011. Government Promotion of Renewable Energy Technologies: Policy Approaches and Market Development In Germany, the United States, and Japan. Springer. Li, B., and Rajola, V., 2010. Climate Change Adaptation and Disaster Risk Reduction: An Asian Perspective (Community, Environment and Disaster Risk Management). Emerald Group Publishing Limited. 5. pp.261-283. Quaschning, V., 2005. Understanding Renewable Energy Systems[Multimdia Multisupport]. Earthscan. Sayigh, A. A. M., 2000. Renewable Energy: Renewables: The Energy for the 21st Century : World Renewable Energy Congress. Brighton: Elsevier. Smith, A. Z., and Taylor, K. D., 2008. Renewable and Alternative Energy Resources: A Reference Handbook. ABC-CLIO. Thiam, D. R., 2012. Policy instruments for a market penetration of low carbon technology in developing nations. International Journal of Energy Sector Management. 6(4). pp.465487. Twidell, J., and Weir, T., 2012. Renewable Energy Resources ED2. Taylor & Francis. Wood, G., and Dow, S., 2010. The likely impact of reforming the renewable obligation on renewables targets. International Journal of Energy Sector Management. 4(2). pp.273 301. Online references Beurskens, L. W. M., and et. al., 2003. Renewable Energy Policies and Market Developments. [pdf]. ENEL, Green Power. Available through: Website: th <http://www.ecn.nl/docs/library/report/2003/c03029.pdf>. [Accessed on 7 December 2012]. Chua., J. M., 2008. The True Costs of Renewable Energy. [Online]. Available through: <http://www.livescience.com/5114-true-costs-renewable-energy.html>. [Accessed on 8thDecember 2012]. Cost Effective Renewable Energy. n.d. [Online]. Available through: <http://www.eonenergylab.co.uk/cost-effective-renewable-energy/>. [Accessed on 7thDecember 2012].

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Ideal, G., 2010. 5 Innovative and Cost Effective Renewable Energy Resources. [Online]. Available through: <http://www.greenerideal.com/alternative-energy/other-energy/85585-innovative-and-cost-effective-renewable-energy-resources/>. [Accessed on th 7 December 2012]. Moretz, P., 2012. Researchers seek efficient, cost-effective renewable energy solutions. [Online]. Aailable through: <http://news.temple.edu/news/2012-03-29/researchers-focus-attentionrenewable-energies>. [Accessed on 7thDecember 2012]. Palmer, K., and Burtraw, D., 2005. Cost-Effectiveness of Renewable Electricity Policies. [pdf]. Washington: Resources for the Future. Available through: <http://www.rff.org/rff/Documents/RFF-DP-05-01.pdf>. [Accessed on 7thDecember 2012]. Productive Uses of Renewable Energy in Developing Countries. n.d. [Online]. Available through: <http://www.martinot.info/productive_uses.htm>. [Accessed on 7thDecember 2012]. Renewable Energy Most Cost Effective Power Generation Option. 2012. [Online]. Available through: <http://www.energymatters.com.au/index.php?main_page=news_article&article_id=347 9>. [Accessed on 8thDecember 2012]. Renewable energy overview. n.d. [Online]. Available through: <http://www.oas.org/dsd/publications/Unit/oea79e/ch05.htm#TopOfPage>. [Accessed on 7thDecember 2012]. Renewable Energy: Too Expensive or Cost Effective. n.d. [Online]. Available through: <http://www.celsias.com/article/renewable-energy-too-expensive-or-cost-effective/>. [Accessed on 7thDecember 2012]. Research for Renewable Energy Development. n.d. [Online]. Available through: <http://www.esrl.noaa.gov/research/renewable_energy/>. [Accessed on 8thDecember 2012]. Tohill, J., 2011. IEA Recognizes Increasing Cost-Effectiveness Of Renewable Energy. [Online]. Available through: <http://www.the9billion.com/2011/11/24/iea-recognizes-increasingcost-effectiveness-of-renewable-energy/>. [Accessed on 7thDecember 2012]. Winkler, S., n.d. What is the immediate impact of renewable energy. [Online]. Available through: <http://science.howstuffworks.com/environmental/energy/impact-renewableenergy.htm>. [Accessed on 8thDecember 2012]. Wooders, P., and et. al. 2012. Assessing the Cost-Effectiveness of Renewable Energy Deployment Subsidies: Guidance for Policymakers. [pdf]. NCCR trade regulations. Available through: website: <http://www.wti.org/fileadmin/user_upload/nccrtrade.ch/wp5/5.9b/Guidance%20for%20Policy%20Makers%20%20FINAL%2031%2001%202012%20-%20revised%20FINAL.pdf>. [Accessed on 7thDecember 2012].
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Woodruff, A., n.d. Are renewable energy technologies a cost effective option for promoting rural electrification in Pacific island countries. [pdf]. SOPAC Miscellaneous Report. Available through: website: <http://ict.sopac.org/VirLib/MR0695.pdf>. [Accessed on 7thDecember 2012].

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