Renewable yes, but abundant and free?
Many renewable resources (like solar and wind) are described as abundant and free. Is this really the case?
By Gerald Arends and Swati Johri
The sunny climate and open spaces of Australia make it an ideal environment to harness renewable energy. While solar and wind energy are available for all to use, a number of factors impact whether these renewable resources are as abundant and free as we all believe.
The solar and wind power generation industries have long been based on the assumption that they tap into abundant renewable resources. While these resources are renewable, they are also finite as not all sun and wind can be converted to energy. Even if such resources can be converted to energy, they may not be sufficiently close to the location where the energy is to be consumed.
Financiers of any project undertake resource assessments and in doing so, take into account the absolute amount of resources available (i.e. solar irradiation and wind flow) as well as the variability of these resources. The levels of solar irradiation and wind flow at a project site need to be sufficient to generate the required level of electricity and will be a factor in determining whether power generation through solar and wind power is commercially viable.
The financial models of solar farms and wind farms typically do not model a cost of “fuel”. Instead, wind and solar are treated as resources that are free for anyone to use. This is unlike other renewable energy industries such as biomass in which feedstock has a price and hydropower where water rights are usually obtained at a cost.
The solar and wind industries tend to take a different approach as they typically consider the resources upon which they are relying to be more readily available. However, this does not take into account other factors that might impact the ability to harness these resources.
Access to resources
In 2012, the Asian Development Bank (ADB) installed on the rooftop of its low-rise Manila headquarters what would have been the largest solar installation in the Philippines at that time. The ADB offices are now nestled between high-rise buildings which cast shadows on the rooftop solar installation, reducing solar irradiance.
In an urban context, access to solar resources is no longer a given but is dependent on the allocation of this resource between conflicting users with impacts beyond the footprint of their own buildings.
In the wind industry it is common practice to avoid positioning turbines in the path of other turbines in the main direction of wind. This practical approach is usually the only way to secure optimal access to wind, as there is no legal protection for such access.
Allocation of renewable resources
As yet, very few attempts have been made to manage the allocation of renewable resources between users. The allocation of water-rights is probably the most developed (and oldest form) of renewable resource management. The use of wind, on the other hand, does not seem to be managed between users at all. Access to light is an important issue not only for the solar industry, but also for the urban environment.
The most practical way to manage the allocation of renewable energy resources between users may be to allocate a price to these and allow the trade of this resource.
Where a resource has a value, the state is usually not far. The Philippine state is legally entitled to receive a percentage of turnover generated by a renewable energy installation as payment for the use of renewable energy resources, though this is more a form taxation than resource management.
Pegasus Legal is a boutique law firm with an exceptional level of expertise in the renewable energy sector. Our lawyers have worked on a large number of solar, biomass and wind projects in a wide range of countries. For further information please contact our directors Gerald Arends or Swati Johri.