The coming year promises to have energy markets move further into renewable energies on the back of both technological advances and political pressure, such as the recently concluded COP21 conference in Paris.
But in the short term, contrasting results from this transition are emerging from both sides of the Irish Sea. These developments are a reminder that the path toward greater reliance on wind and solar power will not be without short-term problems.
In Ireland, wind power now accounts for a full 25% of power moving to the national grid. That puts the country right on track for its declared targets by 2020 – 40% of electricity supplied by renewables.
Bad Weather Is Increasing British Energy Volatility
After a heavy investment of more than £1.25 billion ($1.84 billion), wind power has generated some criticism in the UK. True, there are few these days who oppose wind power on principle. But it is the degree to which wind in particular, and renewables in general, can reliably contribute to meet overall energy demand that is becoming the issue.
For several periods over the past three months, UK wind power has operated at only 10% of its generating capacity. That resulted in yet another call for a more developed energy supply network with a broader range of power sources.
The GMB, an English union supporting greater use of natural gas and nuclear power, released a report last week that claims no fewer than 12 days in the past three months resulted in wind power being able to provide only a tenth of its capacity.
Nov. 4 turned out to be a pivotal date in the findings. That's when a combination of low wind power production, high demand, and power plant malfunctions at one point pushed wind power down to less than 0.5% of its capacity.
In response, the government was forced to introduce what are now called "last resort" measures to keep the lights on. These include requests to major industries that they close down or decrease power usage. Of course, such a remedy has its own problems for the broader economy.
Later in November, the arrival of Storm Barney necessitated that much of the wind power-generating network close down over concerns that the 85-mile-per-hour wind gusts would damage turbines and the distribution network while providing a dangerous power overload to the national grid.
This has once again intensified the debate over the reliability of renewables in all demand situations, which is especially urgent as the UK rapidly departs from its historic reliance on coal power. The GMB's call for a more integrated combination of energy sources is now receiving additional support from other quarters.
Ireland, on the other hand, continues to move toward less reliance on traditional energies. The position of environmental interests in the country is one factor, while the commercial mix of energy demand is another.
Yet mainland England may well be a test case for the further rapid increase in wind power…
Integrating Power Sources Is the Key to the New Mix of Energy Sources
Similar concerns have been raised about solar – especially with regard to the ability to generate sufficient power during cloudy days. However, in the case of solar, huge projects are under construction in regions of the world where sunlight is the norm – the Middle East, North Africa, and Southeast Asia, among others.
The key for solar elsewhere – and wind in most locations – remains twofold, as shown by the transition to renewables on both sides of the Irish Sea.
First, there needs to be a better way to retain power generated at one time for use at another. Here, advances have taken place in battery technology allowing for energy to be retained for up to 12 hours. While these advances have been encouraging, greater scope in application and more cost-effective networks are still required.
Second, better ways of balancing loads are essential to avoid putting broader grids at risk from spiking power generation during certain periods. This obliges remedies that extend across the spectrum of traditional and renewable sourcing, as the British experience shows.
It comes down to better "integration" of different power sources…
Opportunities Abound in the New Energy Balance
Once again, we are pointed toward a position I have maintained for some time. The goal has to be an expanded energy balance. When the GMB calls for reserve natural gas or nuclear sourcing, or environmental groups urge greater reliance on solar and wind (provided the footprint of generating facilities don't present their own problems), we are reminded of the bigger picture.
Modern economies require energy that is affordable, reliable, and provided at minimal damage to the environment and lifestyle. This means the objective is not a silver bullet, not a single all-encompassing energy remedy.
Rather, the target needs to be a balance among a widening number of sources, allowing interchange when necessary and directed toward the dual benefits of energy availability and low cost.
The current situation in the UK is simply the latest reminder of that.
And within the mix, there will be plenty of opportunities for energy investors to make some hefty profits.
Where Renewables Will Head in 2016: Alternative energy is here to stay, with new energy sources adopted and improved upon at ever-increasing rates. And in 2016, alternatives will take an outsize position in the sector. The profits will be just as big, too…
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.