Uncertainty of policy unfavorable renewable energy

Paolo Frankl holds a Ph.D. in energy and environmental technology and has more than 20 years of working experience in the field of renewable energy. On October 16, at the Beijing International Wind Energy Conference and Exhibition, the reporter interviewed Paul Frankel about renewable energy, especially during the development of wind power.

Reporter: After a few years of rapid development, the wind power industry in many countries is experiencing a period of declining development. Can you analyze from a macro perspective the most important reason for the depression period?

Paul Frankel: Wind power development in different countries faces different challenges, so their policies are different. But in general, the uncertainty of the policy is actually the biggest enemy of the development of renewable energy. For example, the United States implements a production tax credit policy for wind power, but how long the policy can last is often affected by the struggle of the US political parties and there is great uncertainty.

Therefore, I call on policy makers to first formulate predictable policies. The economic stimulus component of policies can be less, but it must be long-term and predictable. Otherwise, investments in renewable energy resources will fluctuate greatly. , which in turn affects the health of the entire industry. For example, due to the economic crisis, some European countries have reduced subsidies for renewable energy sources, leading to a 12% year-on-year drop in global renewable energy investment in 2012. This is also the main reason for the declining wind power.

Reporter: What are your suggestions for the healthy development of China's wind power industry?

Paul Frankel: Thanks to strong government support and low-cost **, as well as the overall strength of the entire industry, China's wind power development momentum is good. However, we have also seen some problems. For example, the development speed of wind power is faster than the construction speed of the power grid. As a result, after wind power is sent out, it cannot be effectively transmitted, resulting in the so-called “disposal of wind” phenomenon. China's dominant wind resources are concentrated in remote areas, while power consumption areas are concentrated in developed cities and require long-distance power transmission, which poses a challenge to the carrying capacity and construction speed of the power grid. To solve this problem requires coordination among multiple stakeholders, the IEA has sent out information suggesting that China further strengthen its efforts in this area.

Reporter: Do European countries have similar problems?

Paul - Frankel: Yes, for example, in Germany, the north of the country is rich in wind resources, but the demand for electricity is mostly in the west and south. It also needs long-distance transmission. In addition, the construction of transmission lines in many European countries is often opposed by the people because few people are willing to lay power transmission lines in their own backyard. Therefore, to better develop wind power in the future, we must better integrate wind power and power grids. In this regard, Denmark, Ireland, Portugal, and Spain do a very good job. Their grids are more flexible and can better absorb wind power.

Reporter: In the past few years, there have been some cases of mergers and reorganizations in the wind power industry. Even large-scale wind power companies have gone bankrupt or been forced to lay off staff in this process. What do you think of this phenomenon?

Paul Frankel: It is normal for some wind power companies to be merged or bankrupt. Market operations and industrial development are so ruthless. If a renewable energy source cannot develop better technologies and lower prices, it will be eliminated. The survival of the fittest does not only apply to wind power but also to other renewable energy models. In general, in 2014 and 2015, the days of many wind power companies may be even worse because some countries' subsidies have already expired. However, this process is also a process of overall upgrading of the wind power industry. According to the data of Bloomberg's New Energy Finance, the overall competitiveness of the wind power industry is increasing.

Reporter: Will the volatility of renewable energy subsidies affect the long-term development of renewable energy?

Paul Frankel: Indeed, the wind power industry in some European countries is plagued by changes in subsidy policies such as Germany, France, Italy, and Spain. In order to support the development of renewable energy, the people in these countries have to bear high electricity prices. Of course, the rise in electricity prices is the result of a combination of factors such as rising natural gas prices and the economic downturn. This makes renewable energy subsidies rise to sensitive political issues. To solve this problem, the United States provides a good model. Because of the development of shale gas, natural gas prices in the United States are very low, and the people’s electricity bill is also reduced due to low-priced natural gas. In this way, people are less sensitive to subsidies on electricity prices and renewable energy.

Reporter: Your logic is that the shale gas boom in the United States has inadvertently promoted the development of renewable energy in the country. However, there is a saying that the prosperity of shale gas has impacted the development of renewable energy. Do you agree with this?

Paul Frankel: I think that the development of shale gas in North America does not mean that it is also universal in other regions. For example, in China, due to differences in geology, environment, etc., North American experience does not necessarily apply. To determine the impact of shale gas on renewable energy investment, look also at the price of shale gas. If the price is maintained at $4.50 per million British thermal units, shale gas is indeed more competitive than renewable energy. But if shale gas prices rise to $6 per million British thermal units, renewable energy can compete with one. If it is more than 6 US dollars, renewable energy is more competitive.

I think even in the United States, shale gas prices will rise. If the United States exports large quantities of shale gas after liquefaction, it will flow to higher-priced Asian markets, such as those exported to Japan, where prices can reach 16 US dollars per million British thermal units. Driven by exports, shale gas prices in the United States will rise.