cleantech–isitfeasibleto bridgethegapofeurope’s ......so far, the focus has been on onshore wind...

Energy, Utilities and Chemicals the way we see it

Cleantech – Is it feasible tobridge the gap of Europe’srenewable ambitions?

Point of View by Oskar Almén and Alain Chardon

We believe that these questions havenot been satisfactorily addressed inthe general debate and by Europeanpoliticians, despite ambitious targetsbeing set for investments. In line withthe European Renewable EnergyCouncil, it is our point of view thatsetting an ambitious target does notautomatically deliver the results—although we do agree it is animportant start. Hence, we questionthe feasibility of a mass investmentinto renewable technologies at a timewhen bottlenecks are already visiblein several parts of the value chain.Further, support mechanisms differgreatly between countries andtechnologies, causing confusion forprivate investors and utilitiesinterested in this market. Therefore,

The announced targets for increaseduse of renewable energy in Europespurs a number of obvious questionsfor each of the member states ingeneral, and more specifically for thepower industry, surrounding the issueof bridging the gap for cleantech1

capacity. Primarily, the issues includetechnical feasibility, operational cost,and return on investment.Additionally, issues likecompetitiveness and reliability ofsupply need to be addressed, ascurrently there is a tighter peakcapacity margin in Europe. A thirdissue is the “Guarantee of Origin”(GO). This concerns the function ofproviding proof that a given quantityof energy was actually produced froma renewable source.

A European focus on sustainability

Figure 1: Target for the 2020 renewable ambition (+20% in the energy mix)

5

0

10

15

20

2534%13%16%13%13%30%25%38%23%18%18%13%16%17%42%23%11%10%14%15%31%24%14%25%20%49%15%

ATBEBGCYCZDKEEFIFRDEELHUIEITLVLTLUMTNLPLPTROSKSIESSEUK

Share Renewables in thefinal energy demand by 2020

1990 1995 2000 2005 2010 2015 2020

Year

EU-25 trendEU-25 target 2020EU-25 with additional measures projectionsEU-25 target 2010

12%

20%

Sha

reof

rene

wab

leen

ergi

esin

ener

gym

ix[%

]

Source: European Commission, Capgemini Analysis

1 There is no one single definition for cleantech. Common to all definitions regarding electricity generation, is that it is a means to create electricity with a limited environmental footprint. The notion of renewablesources and cleantech is generally used simultaneously.

with a greater understanding of thesevariables, we believe that investorswill feel more at ease to get involvedand committed to reaching theambitious goal of ensuring that 20%of all energy consumed by 2020 isrenewable.

Strong impact on thegeneration mixThe ambition suggested by the EUincludes all forms of energy. Wepredict, however, that a large share ofthe announced target will fall onelectricity and heat production.Already today a large share of Europe’sgenerated electricity comes from non-carbon sources, and a majority of thatis hydro or nuclear power. In fact,with the current kWh price, there is

1

Cleantech – Is it feasible to bridge the gap of Europe’s renewable ambitions? 2


Figure 2: Generation capacity and electricity mix (2006)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

FR DE UK IT ES SE NO PL NL FI BE CZ CH GR AT PT DK HU IE SK SI LU

Pea

klo

adan

dto

talg

ener

atio

nca

pac

ity[M

W]

+ 4%

+3.7%

+ 4%

+4.4% +6.3%+4.6%

-2.8%

+4.6%

+4.7%+4.4%+5% +4.3%

+4.2%

Peak load (2006)

Peak load evolution 2006 vs. 2005 (significant: +4%)

Non Carbon installed capacity (nuclear, hydro, other renewables)

Carbon installed capacity (coal, gas, other thermal)

Total generation capacity evolution 2006 vs. 2005 (significant: +4%)

+10%+9.3%

+16.4%

Sources: UCTE, Nordel, EirGrid, National Grid—Capgemini EEM09

limited potential left for an additionalcost efficient extension of hydropower. This already existing highshare of hydro power, in combinationwith a strong local opposition againstfurther exploitation of rivers and theareas they run through, makes hydroa marginal source of the futureadditional capacity. The effort willhence need to primarily be ondeveloping and expanding other cleantechnologies for power production inorder to reach the targets. Inevitably,this means that a large share of thegrowth of renewable energy will focus

on non-base load capacity, andcapacity that is off the main grid.Further, these technologies and energysources will have to compete withexisting sources for where substantialinfrastructure investments havealready been made, making themrelatively cheap in comparison today.

Considering the factors mentionedabove, we believe that the increase ofelectricity from renewable sources willbe a challenging target to meet, as theinvestment in this area is not clear atpresent. It will be both an economical

and technological challenge togenerate large scale cost efficientenergy. Having said that, there is alsoa big potential in several of thetechnologies, and with the rightincentives from governments, theambitions could become reality. Theaim of this publication is to addressthese issues and explore the feasibilityof a large scale shift into cleantechelectricity and heat generatingcapacity. Our focus in this discussion,surrounding cleantech capacity,comprises renewable energy sourcesincluding wind, hydro, solar, andbiomass/biogas.

3

Figure 3: A comparison of mechanisms to support the development of renewable energies

Certificates and quotas

Feed-in-tariffs

ß Market based systemß Green certificates

pose a higher risk forinvestors and make itless attractive toinvest in developinghigh costtechnologies withlong term perspective

ß Favours theincumbent utilities

ß Electricity produced by RES issold at conventional power-marketprices, but the quota for this is setby the government.

ß Consumers (or suppliers) areobliged to purchase a certainnumber of green certificates fromproducers according to a fixedpercentage of their total electricityconsumption (supply). There arepenalties for non-compliance.

Certificates(tradable)and quotas

ß Feed-in tariffs havethe advantages ofinvestment security,the possibility of finetuning and thepromotion of mid- andlong-termtechnologies.

ß Political risk whenuncertain cost istransferred tocustomers

ß RES producers are paid a fixedtariff guaranteed by thegovernment.

ß FIT suggests a shift to a smallscale way of doing things (localgrids, local generation, localsuppliers and manufacturers)

ß A variant of the FIT scheme is thefixed-premium mechanismcurrently implemented in Denmarkand partially in Spain. Under thissystem, the government sets afixed premium or an environmentalbonus, paid above the normal orspot electricity price to RESgenerators.

Feed-in-tariffs (FIT)

Benefits and ConcernsDescription of mechanism

Source: European Commission, European Renewable Energies Federation, Capgemini Analysis

2 Worldwatch Institute, ''State of the World 2008: Innovation for a Sustainable Economy”

Artificial investment climateAlmost €100bn was invested inrenewable energy in the world in2007 (+ 21% compared to 2006)2.The mandatory trade in carbon creditshad reached €45bn ($60bn) in 2007,which is three times more than theprevious year.

The level of investments indicates thatoverall it has been financially quiteappealing to invest. This is primarilytrue in geographies where favorablesubsidies and incentive mechanismsexist; however, it is our point ofview—framed after developing anoverview of the European powerproduction situation—that thisstatement is not befitting to allcountries and technologies. Further,so far the scale of investment intorenewable energies (not includinghydro) has been rather small

compared to what is required infuture to reach the set targets.

Already we can see major differencesin attitudes and action. One exampleis the UK, where, despiteannouncements about enthusiasticambitions to increase the share ofelectricity generated by renewablesources, only 270 households wereawarded grants to help meet the costof installing solar photovoltaic systemsin 2007. This can be compared with130,000 grants awarded in Germany.

The industry and the general publichave been discussing alternativeenergy sources for quite some time;however, there are reasons why non-traditional sources have not yetbecome a significant share inelectricity production. The cost ofrenewable energy has been fallingsteadily for the last 20 years, butremains higher than that ofconventional energy sources. Theaverage additional cost of meeting theannounced targets is estimated atbetween €10 billion and €18 billionper year, depending on energy pricesand research efforts made3.

Both wind and solar power are bydefinition uncertain sources of energy,as we cannot predict and control theweather in the long run. For example,only 25% of the total hours in a yearhave favorable conditions to generatewind power. Further, solar power is—to a large extent—a decentralizedsource of energy (wind to somedegree). This enables customers tosave transmission and distributioncosts (roughly 2/3 of the finalelectricity price). However, theuncertainty and detachment from thegrid creates difficulties for theoperation and balancing of thecomplete electrical grid. As aconsequence, there is a necessity tobuild reserve energy sources to beused when there is no output fromwind farms and solar cells. Usually,operators are forced to have CO2

emitting reserve sources! Hence thepower is not entirely CO2 free.



Moreover, there are currentlybottlenecks in the production ofneeded equipment, due to the highdemand and limited number ofsuppliers of technology4. Thisincreases the cost for potential newprojects and the cost to maintainexisting ones.

Hydro powerConventional hydro power is a maturetechnology (wave and tidal technologiesare still in a developmental stage).Norway, France, Sweden and Italyhave the largest total installed capacityin MW. There is an estimated additional300 TWh/year of economically viablehydro power still not in use inEurope. However, growth of the totalcapacity, which is economicallybeneficial, is limited in WesternEurope and there is majorenvironmental opposition to use thefew remaining untouched rivers5.

Hydro has low volatility of poweroutput and high initial investmentcosts. From an economic point ofview, the most promising option isupgrading or refurbishing existingplants; however, the span of cost forrefurbishment is wide (800-3600€/kW). Equipment with improvedperformance can be retrofitted, oftento accommodate market demands formore flexible, peaking modes ofoperation. The investment cost (andcost span) for small (900-6050 €/kW)versus large hydro (1450-5950 €/kW)is fairly similar and the level dependsto a great extent on the physicalconditions on site. Most hydroequipment in operation today willneed to be modernized before 2030.

Which technologies could bridge the gap?

3 A Renewable Energy Roadmap: paving the way towards a 20% share of renewables in the EU’s energy mix by 20204 One indication is the results made by VESTAS in 2007.5 TheWater Framework Directive 2000/60/EC

Figure 4: Large hydro characteristics (LHP > 10MW)

Source: OPTRES, European Renewable Energies Federation, Frost and Sullivan, Capgemini Analysis

5

Additionally, hydro development isdriven by the increasing need forwater management. Multi-purposehydro reservoirs can bring security ofwater supply as well as power.

Current and future R&D priorities areon allowing manufacturers to proposesimple, reliable and efficient turbineswith guaranteed performancescovering the high cost of development.

Leading markets and where toinvest in hydroNorway, France, Italy and Sweden aremature markets. These markets havethe largest current shares of the totalcapacity in Europe. There is, however,limited economically beneficial

expansion potential, and currently thefocus lies on updating existingfacilities. In addition to updates,development of wave and tidaltechnologies has started, and Francehas one installation for tidal energy incommercial operation. This is an areawhere mature hydro countries may begoing in the near future. The maincurrent concern is the cost ofmaintenance of the equipment, whichhas a big impact on the total cost.

Central and Eastern Europe are thehot markets to pursue. Only one-thirdof Bulgaria’s technically feasible waterpotential has been developed so far.Many of the existing plants are over30 years of age and are in need ofrehabilitation. The forecast for 2015 isa total capacity of 2,850 MW. Thismeans a 10 TWh annual potential by2020 (including small, medium andlarge plants), investments which arehighly encouraged by the Bulgariangovernment.

Development of hydro power isfurther encouraged in Romania.Romania has an installed capacity of5,964 MW (29.2% of generationcapacity) and the build out isforecasted to be 7,044 MW in 2015.Currently the total annual generationis 19.5 TWh (2006).

Figure 5: Small hydro characteristics (SHP < 10MW)

Source: OPTRES, European Renewable Energies Federation, Frost and Sullivan, Capgemini Analysis

Typical plantsize (MW)

Investmentcosts (€€/kW)

Operation & Maintenancecosts (€€/KWh)

Lifetime (years)

>250 850–3,650

35 5075 1,125–4,875

20 1,450–5,950

Upgrading 800–3,600

Typical plantsize

Investmentcosts (€€/kW)

Operation & Maintenancecosts (€€/KWh)

Lifetime (years)

9,5 800–1,600

40 502 1,275–5,025

0,25 1,550–6,050

<0,25 900–3,700



Wind powerWind power is a standardized andproven power conversion technologywith an incremental mid-termpotential. Most machines start togenerate at a similar speed—around 3to 5 m/s—and shut down in very highwinds, generally around 20 to 25 m/s.Energy yields do not increase with thecube of the wind speed, mainlybecause energy is discarded once therated wind speed is reached. For thatsake, it does not make economic senseto build turbines with very highratings that will only be reached onrare occasions.

Technological solutions differ in detailby manufacturer, but in general, theoverall concepts are proven and wellestablished. The various componentsare standardized and manufacturing ischaracterized by increasingcompetition. The typical turbine sizegrew rapidly during the 1980s and1990s. Currently, the average size oftypical on-shore turbines is around 2 MW, with even 5 MW beinginstalled. Off-shore, the developmentis for larger scale and already Enerconand REpower are testing 6 MWturbines. We predict that the 10 MWturbine will be ready for full-scale testsby 2010.

So far, the focus has been on onshorewind farms (55.5 GW of total 56.6 GWwind capacity in EU-27). As marketsare getting mature, offshoredevelopment is considered. Strongsteady coastal winds, as well as biggermills will ensure higher and steadierproduction of electricity. On the otherhand, deep waters, grid connectionand distance from the coast willrequire higher investments and toptechnological skills from developers.Currently, the cost is typically 50-

100% higher for offshore capacitycompared to onshore; however, overthe coming 10-15 years this spread isforecasted to shrink substantially. Themajor difference at present is the costof grid connection, as attempts aremade to locate the fields further outto sea—for example the deepwaterMoray Firth project in Scotland whichis 25 km offshore.

The costs of turbines represent 50-70% of the total investment cost of anonshore wind farm, making it thecrucial part of an investment (and abottleneck). The global equipmentmarket is highly concentrated anddominated by a handful of companies,including the world leader Vestas.Additional new players are enteringthis booming industry, albeit with alimited market share (notably Asiancompanies). However, since a windturbine contains more than 8,000components, it is a highly complexstructure, making the ramp up timefor a new player quite long.

The growing demand brings abouthigher prices and ever longer delaysto get wind farms running. Currently,there is an estimated 24-36 monthsordering backlog for turbines, whichis expected to last until the year 2011.Due to that, utilities are diversifyingand investing vertically to cope withfuture demand. Iberdrola’s approachto this challenge was a bold bet in2006 to lock up most of the orderbook of Gamesa through 2009.Additionally, Iberdrola holds a 24percent equity stake in Gamesa.

Figure 6: Predicted evolution of turbine capacity 1985-2010

Source: European Renewable Energies Federation, European Wind Energy Association, Capgemini Analysis

Figure 7: Predicted evolution and share of wind capacity 2007-2020

Source: European Renewable Energies Federation, European Wind Energy Association, Capgemini Analysis

1985 1990 1995 2000 2005 2010

Nominal capacity (kW) 80 250 600 1,500 5,000 8–10,000

Output per year (MWh) 95 400 1,250 3,500 17,000

Capacity 2007 2007 2010 20120

Onshore 55.5(GW) 98% 93% 33%

Offshore 1.1(GW) 2% 7% 67%

7

Figure 8: Wind equipment market (share of the market at year end 2006)

56%

0%

0%

3%

0%

38%

1%

2%

28%

16%

15%

16%

8%

7%

3%

0% 10% 20% 30% 40% 50% 60%

Vestas

Gamesa

Enercon

GE Energy

Suzlon

SiemensWind Power

Nordex

Others

Market share on-shore

Market share offshore

Source: Company annual reports, Capgemini Analysis

Figure 9: Wind characteristics

Source: European Wind Energy Association, OPTRES, European Renewable Energies Federation, Capgemini Analysis

Leading markets and where toinvest in windGermany and Spain are the largestonshore markets in Europe. Germanydominates the wind market in Europewith 40% of the installed capacity in20077 (22,247 MW). A governmentobjective is to increase onshore windcapacity with an additional 10,000MW by 2020. Total long-termgovernment targets for offshore wind were identified at 1,500 MWuntil 2011.

Spain has the second largest capacityin Europe and the highest growthambitions in absolute terms. Thetarget is an additional 18,000 MW by2015, which will be very difficult toachieve with current bottlenecks insupply. With over 4,500 MWinstalled, Iberdrola is the leadingplayer in Spain (and the world).Acciona Energia and Endesa areadditional players among the top 5 inthe world based on installed capacity.

Current small and medium sizemarkets in Europe are hot marketsbecause of their faster growth. Italy isfor several reasons one of the mostinteresting markets for investment inEurope. The government objective is afurther 4,000 MW in capacity duringthe period of 2006-2015. To reach thetarget, Italy offers the highestincentives for wind power in Europewith its green certificates system. Inaddition, Southern Italy is a recipientof EU structural funds (for heavyinvestments).

Poland has a modest installed currentcapacity, but is predicted to have oneof the highest relative annual growthrates over the next 10 years withinEU-278. Further, Poland has fairlygood geographical conditions foroffshore wind farms.

Type Invest. Cost(€€/KWh)

Operation &Maintenancecosts (€€/KWh)6

Lifetime Typical farm size(MW)

Onshore 890–1,100 33–40 25 2–50

Offshore/Near Shore 1,590 55 25 50–100

Offshore 5-30km 1,770 60 25 50–100

Offshore 30-50km 1,930 64 25 50–100

Offshore >50km 2,070 68 25 50–100

6 OPTRES 7 European Wind Energy Association 8 European Wind Energy Association



Biomass and biogasThe European biomass market isdominated by Finland, Sweden andGermany. There has been aspectacular growth of electricity andheat production from biomass, and itis a viable option in comparison towind to reach the renewable targets. It is however a CO2 emittingtechnology, which is controversial(although the CO2 is equalized bycultivation of replacement trees).

Electricity generation from biomass ischaracterized by non-volatility of thepower output, high variable costs (upto 165 €/kWh), and various energyconversion concepts. It is difficult toprecisely determine the cost ofproducing electricity from bio sources,and to estimate the price evolutiondue to the great diversity andcomplexity of combinations oftechnologies, conversion processes,fuel types, system designs, industrialpatterns and local climate. Also, as itis a small scale (typically 1-25 MW)and often local form of generation, theconditions vary greatly includingaspects of infrastructure and supply offeedstock. The development of thesetechnologies has reached a secondgeneration and is becomingincreasingly efficient with decreasing cost.

Germany is a dominant force inbiogas with almost 70% of thevolume; however, the market consistsof a high number of very small units(0,1-0,6 MW capacity) with a lowefficiency (0,26-0,36). The market isgrowing fast, and volumes areexpected to double in the next 10years. Due to the often lackingdemand for heat, it can be used for(pure) power generation. Hence, ifpossible, CHP (Combined Heat andPower) would be the preferable option.

Leading markets and where toinvest in biomass/biogasThere is considerable potential forgrowth of both biomass and biogas inGermany. This is due to high and

Figure 10: Biomass characteristics

Source: OPTRES, European Renewable Energies Federation, Capgemini Analysis

Figure 11: Biogas characteristics


long-term guaranteed feed-in tariffsunder the EEG Act and othersupporting measures. At the end of2006, proximately 3,500 biogas unitswere in service in Germany. Theseunits are small, however, and amajority is for household use, which then makes the total capacityrather small.

Co-generation of heat and poweronsite in biogas is the most prominentway of utilizing biogas in Germany. Inaddition to farm-scale plants, thereexist currently around 100 bio wastefermentation plants and 700 sewagesludge fermentation plants.

Technology Invest. Cost(€€/KWh)

Operation &Maintenancecosts (€€/KWh)

Efficiency Lifetime(years)

Typical size(MW)

Biomass Pl. 225–2,530 75–135 0.26–0.3 30 1–25

Co-firing 550 60 0.37 30

Biomass PI CHP 2,600–4,230 80–165 0.22–0.27 30 1–25

Co-firing CHP 550 60 0.2 30

Type Invest. Cost(€€/KWh)


Efficiency Lifetime Typical size(MW)

Agriculturalbiogas plant

2,550–4,290 115–140 0.28–0.34 25 0.1–0.5

Agri. CHP 2,760–4,500 120–145 0.27–0.33 25 0.1–0.5

Landfill gas 1,280–1,840 50–80 0.32–0.36 25 0.75–8

Landfill gas CHP 1,430–1,990 55–85 0.31–0.35 25 0.75–8

Sewage gasplant

2,300–3,400 115–165 0.28–0.32 25 0.1–0.6

Sewage gasplant CHP

2,400–3,550 125–175 0.26–0.3 25 0.1–0.6

Solar energy: photovoltaic andsolar thermalAlthough using the sun as a source forenergy is an ancient idea, electricpower generated from the sun is still adeveloping area. Photovoltaic (PV)technology has advanced the most,showing potential for large scalecapacity in the long-term perspective.Solar thermal is far from being matureand very much a developmentaltechnology. One area of sun energyalready in full blossom is roof topwater heating for residential houses,and this is an important part ofseveral governments’ futurelegislations to increase energyefficiency. The photovoltaic market isgrowing very fast—thanks toincremental developments in celltechnologies, which are substantiallylowering the cost of electricitygeneration. Currently the market isfragmented with a few large players(Sharp, Q-Cells and Kyocera), and aconsolidation and acquisition wave ofthe smaller players could be expectedin the near future as the marketmatures. The growth in productionhas been extreme over the last coupleof years, with market leaders Sharpand Q-Cells almost doubling theiroutput between 2006 and 2007(Figure 12).

Germany dominates the global andEuropean PV market as far as installedcapacity and investment into R&D(with leading company Q-Cells) isconcerned. There is a major interestoutside Europe with Japanese andChinese companies leading the way.PV development is still highlydependent on support schemes. ROIis closely correlated with commitmentfrom national governments, andcannot currently be justified on itsown merits, as the current investmentcost is beyond 5000 €/kW.

The main driver for the high cost isthe increasing price on silicon due to

the current deficit of production.There are doubts whether siliconcapacity will be increased quicklyenough to sufficiently lowerdevelopment cost, which hampers thegrowth pace of generation capacity till 2010.

Leading markets and where toinvest in photovoltaicGermany is the primary Europeanmarket for investment and R&D, witha high public awareness andacceptance for the technology.Although Germany is not the mostobvious geography for solar-basedenergy, the industry has developedfast due to strong backing by the

government. This support has led toGerman companies being worldleaders in the development of solartechnology as well as buildingcapacity. In 2006, Germany accountedfor more than 89% of the installedEuropean capacity. Additionally, Italyand Spain are increasingly attractivemarkets with strong current initiativesand a beneficial climate for PV;however, we note that tariffs in Spainare expected to decline at the end of 2008.

9

Figure 12: Global PV cell makers’ market shares 2007 (Cell production in Mw)

710

398

280

260

240

180

150

130

1052

435

253

160

155

180

102

111

96

800

0 200 400 600 800 1000 1200

Sharp

Q-Cells

Suntech

Sanyo

Kyocera

Motech

MitsubichiElectric

Schott Solar

Other

2007 (MW)2006 (MW)

Source: Company annul reports, Capgemini Analysis

Figure 13: Photovoltaic characteristics


PlantSpecificities

Invest. Cost(€€/KWh)


LoadFactor(hours)

Lifetime(years)

Typicalsize(MW)

GWh/year

PV plants 5,080–5,930 38–47 500–1,300 25 5–50 4

the capacity. The existing wind farmsare utilizing the most favorable areasfor wind energy, and hence newinstallations will incur higher cost andmore opposition from local communities.Offshore wind power is a solution,but it lies 10-15 years away in thefuture before the costs are low enoughto make this economically sound asinvestments. In addition to this, aswind cannot be counted as base load,balancing capacity needs to be built aswell. The other technologies are stillnot mature enough to be counted ona large scale.

We strongly emphasize that governmentsall around Europe have to assumegreater responsibilities, by introducingfavorable incentive schemes to



It is our point of view thathydropower can contributesignificantly to reach the objective ofgaining increased share of the totalrenewable energy capacity mix in2020. There is potential to increasethe cleantech capacity through buildouts and refurbishment. However, thiswill simultaneously lead to strongopposition from environmentalists(hydro and wind) as well as the localpopulation with NIMBY9 objections.

Further, we are convinced that windcan—to a large extent—contribute tothe ambitious plan of increased shareof renewable energy. However, with analready existing capacity of over56,000 MW in Europe, it will behighly complex and costly to increase

Figure 15: Summary of clean technologies’ Benefits and Concerns (in order of technology maturity/size of capacity)

Bio mass/Bio gas

MatureHot markets

Photovoltaic

Wind (on & off shore) Hydro power

Within the next15-20 years.

PV has a potential which can berealised from a technical point-of-view in most countries but the timescale is uncertain.Small scale residential applicationshave high acceptance andfeasibility.

• High volatility of thepower output

• High initial investmentcosts

• Technology in earlydevelopment stage

• Fragmented suppliermarket

PV

Both tech, smallscale already inplace. Biomass:Large scalewithin the next10-20 years.Biogas:Large scale 10-15 years

An energy source with a limitedpotential – depending on country-specific conditions. The energeticuse of biomass stands incompetition to the material use. Biogas potential in semi-urban oragricultural areas where waste andsewage can easily be accessed.CO2 emitting and hence not agood green solution.

• Non-volatility of thepower output

• High variable costs• Biomass represents a

‘competitive resource’• Various fuel fractions

occur• Long distance

transportation should beavoided

Biomass/Biogas

Onshore :Already

Offshore : Withinthe next 10years

The technical potential for windenergy is high, but several barriershave to be overcome, e.g. publicacceptance, power grid constraints.High R&D and operational cost foroff shore

• High volatility of thepower output

• Standardised and provenpower conversiontechnology

Wind

Maturetechnology.

Wave and tidalwithin the next10-20 years.

Realisable potential for large-scalehydro power is hard to predict.Despite high current exploitation inEurope, the technical as well as theeconomic potential is still quite high– compared to other renewableoptions.

• High exploitation• Proven technology• Low volatility of the

power output• High initial investment

costs

Hydro

Timing ofcommercialmaturity

ConclusionsCharacteristicsTechnology

Source: European Renewable Energies Federation, American Wind Energy Association, Capgemini Analysis

Figure 14: Forecasted average globalgeneration cost based on a 2006 costbaselinetechnology maturity/size ofcapacity)

Average global electricity generation costs from renewable energies

0,40

0,35

0,30

0,25

0,20

0,15

0,10

0,05

0,002000 2005 2010 2015 2020 2025 2030

€/kWhPhotovoltaic

Concentrating solar thermal

Wind

Biomass

Geothermal

Hydro

Source: OPTRES, European Renewable EnergiesFederation, Capgemini Analysis

Our point of view on bridging thecleantech gap

9 Not In My Back Yard (NIMBY)

www.capgemini.com/energy

Contacts:

Oskar Almén+46 8 5368 [email protected]

Alain Chardon+ 33 (0)6 1902 [email protected]

Acknowledgments:This Point of View is based on the vast experience and knowledge of the global network of Capgemini.The authors wish to especially thank the below mentioned people for their helpful input based on theirexperience through conversations and suggestions on the topic, and their help with backgroundresearch:Colette LewinerDoug HousemanPhilippe DavidPhilippe CoquetSopha AngEmmanuel Gourbesville

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promote more investment to reach therenewable ambitions. But the focuscannot only be on direct subsidies forbuilding capacity. Governments andthe EU must also focus on thedevelopment of companies who in turndrive the development of maturingtechnologies and to focus on nextgeneration technologies. In the 1990s,the Danish government handed outvast subsidies to develop a domesticrenewable energy industry. As a result,Vestas is now the world’s largest wind

turbine manufacturer. Germany andJapan are leading the development ofphotovoltaic technology andgeneration of solar power for the samereason. We believe that in order toreach the targets, similar approachesmust be made so that the cost of eachof the developing technologies (andthe ones still in the laboratories) canbe lowered, and hence the technologycan become both a technically andeconomically viable option for a securedand green energy supply in Europe.

This Point of View is part of a series of publications from Capgemini focusing on the challenges of the European Union’s ambition tocombat climate change. This overview of Cleantech industries follows Capgemini’s publication of July 2007, “European Union ClimateChange Objectives”, for which a new edition is planned to be released during 2008.

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