New research indicates on-site power generation like solar, wind, biomass and fuel cells needs to become cheaper to thrive.
According to Lux research analyst Matthew Feinstein, lead author of the report, on-site power needs more than sustainability goals in order to expand from niche status to a larger market, with capital expenditure reduction strongly suggested.
Distributed solar and wind, biomass gasifiers and boilers, and natural gas fuel all need to prove economic feasibility. Rising energy prices and carbon pricing help tilt the balance, but system cost reduction remains the most significant factor, the report, entitled “Reaping Profits from Biomass, Solar, and Fuel Cell On-Site Generation, has found.
“The strongest determinant of improved economics is lowered equipment capital expenditure, with solar and fuel cells two of the biggest targets for capex decrease” said Feinstein, Lux Research Analyst, the lead author of the report. “The price free-fall in solar should provide optimism for potential adopters that ongoing technical advances will lead to positive economics”, he added.
Lux Research evaluated payback period, emission reductions, upfront capital cost and several other factors for eight technologies across three building types and 18 geographies. Only 245 of the total 1,824 combinations offered a payback period of less than 10 years. Among their findings:
The report confirms that carbon tax can drive adoption. A carbon tax of $100 per metric ton can positively impact the economics of on-site generation technologies such as solar and wind. Also, an energy price increase of 50 per cent helps electricity-offsetting options like solar and wind, though the natural gas glut makes this scenario less likely.
Regardless of economics, companies driven by a desire for sustainability will support on-site generation. For example, German automaker Volkswagen is eyeing 20 per cent cuts in green house gas emissions by 2020, and 25 per cent cuts in energy consumption by 2018, and tech behemoths like Apple (NASDAQ: AAPL), Google, and Facebook (NASDAQ: FB) have set ambitious targets for clean energy.
China can drive costs lower. China has been a big factor in driving down costs of solar photovoltaic technology, and will likely play a similar role in emerging technologies such as biomass boilers and fuel cells. Its ability to scale quickly will be a deciding factor in new technologies.
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