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| | The table below highlights some of the key risk issues affecting different RE technologies. Technology and operational risks are the principal deterrents to attracting appropriate commercial insurance cover (United Nations Environment Programme (UNEP), 2004). | | The table below highlights some of the key risk issues affecting different RE technologies. Technology and operational risks are the principal deterrents to attracting appropriate commercial insurance cover (United Nations Environment Programme (UNEP), 2004). |
| | | | |
| − | <br/>
| + | {| cellspacing="0" cellpadding="0" style="width: 70%;" align="center" |
| − | | + | |
| − | {| border="1" cellspacing="0" cellpadding="0" style="width: 50%;" align="center" | + | |
| | |- | | |- |
| | | colspan="3" style="width:566px;" | | | | colspan="3" style="width:566px;" | |
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| | | style="width:189px;" | | | | style="width:189px;" | |
| − | • Drilling expense and associated risk (e.g.
| + | *Drilling expense and associated risk (e.g.<span style="line-height: 1.5em;">blow out).</span> |
| − | | + | *Exploration risk8 (e.g. unexpected t<span style="line-height: 1.5em;">emperature and flow rate).</span> |
| − | blow out). | + | *Critical component failures such as pump <span style="line-height: 1.5em;">breakdowns.</span> |
| − | | + | *Long lead times (e.g. planning permission). |
| − | • Exploration risk8 (e.g. unexpected
| + | |
| − | | + | |
| − | temperature and flow rate).
| + | |
| − | | + | |
| − | • Critical component failures such as pump
| + | |
| − | | + | |
| − | breakdowns. | + | |
| − | | + | |
| − | • Long lead times (e.g. planning permission).
| + | |
| | | | |
| | | style="width:189px;" | | | | style="width:189px;" | |
| − | Limited experience of operators and certain aspects of | + | *Limited experience of operators and certain aspects of<span style="line-height: 1.5em;">technology in different locations.</span> |
| − | | + | *Limited resource measurement data. |
| − | technology in different locations. | + | *Planning approvals can be difficult. |
| − | | + | *‘Stimulation technology’9 is still unproven but can reduce <span style="line-height: 1.5em;">exploration risk.</span> |
| − | Limited resource measurement data. | + | |
| − | | + | |
| − | Planning approvals can be difficult. | + | |
| − | | + | |
| − | ‘Stimulation technology’9 is still unproven but can reduce | + | |
| − | | + | |
| − | exploration risk. | + | |
| | | | |
| | |- | | |- |
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| | | style="width:189px;" | | | | style="width:189px;" | |
| − | • Component breakdowns (e.g. shortcircuits).
| + | *Component breakdowns (e.g. shortcircuits). |
| − | | + | *Weather damage. |
| − | • Weather damage.
| + | *Theft/vandalism. |
| − | | + | |
| − | • Theft/vandalism.
| + | |
| | | | |
| | | style="width:189px;" | | | | style="width:189px;" | |
| − | Performance guarantee available (e.g. up to 25 years). | + | *Performance guarantee available (e.g. up to 25 years). |
| − | | + | *Standard components, with easy substitution. |
| − | Standard components, with easy substitution. | + | *Maintenance can be neglected (especially in developing <span style="line-height: 1.5em;">countries).</span> |
| − | | + | |
| − | Maintenance can be neglected (especially in developing | + | |
| − | | + | |
| − | countries). | + | |
| | | | |
| | |- | | |- |
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| | | style="width:189px;" | | | | style="width:189px;" | |
| − | • Prototypical/technology risks as project
| + | *Prototypical/technology risks as project <span style="line-height: 1.5em;">size increases and combines with other</span> |
| − | | + | *RETs e.g. solar towers. |
| − | size increases and combines with other | + | |
| − | | + | |
| − | RETs e.g. solar towers. | + | |
| | | | |
| | | style="width:189px;" | | | | style="width:189px;" | |
| − | Good operating history and loss record (since 1984). | + | *Good operating history and loss record (since 1984). |
| − | | + | *Maintenance can be neglected (especially in developing <span style="line-height: 1.5em;">countries).</span> |
| − | Maintenance can be neglected (especially in developing | + | |
| − | | + | |
| − | countries). | + | |
| | | | |
| | |- | | |- |
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| | | style="width:189px;" | | | | style="width:189px;" | |
| − | • Flooding.
| + | *Flooding. |
| − | | + | *Seasonal/annual resource variability. |
| − | • Seasonal/annual resource variability.
| + | *Prolonged breakdowns due to offsite <span style="line-height: 1.5em;">monitoring (long response time) and lack </span><span style="line-height: 1.5em;">of spare parts.</span> |
| − | | + | |
| − | • Prolonged breakdowns due to offsite
| + | |
| − | | + | |
| − | monitoring (long response time) and lack | + | |
| − | | + | |
| − | of spare parts. | + | |
| | | | |
| | | style="width:189px;" | | | | style="width:189px;" | |
| − | Long-term proven technology with low operational risks | + | *Long-term proven technology with low operational risks <span style="line-height: 1.5em;">and maintenance expenses.</span> |
| − | | + | |
| − | and maintenance expenses. | + | |
| | | | |
| | |- | | |- |
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| | | style="width:189px;" | | | | style="width:189px;" | |
| − | • Long lead times and up-front costs
| + | *Long lead times and up-front costs <span style="line-height: 1.5em;">(e.g. planning permission and </span><span style="line-height: 1.5em;">construction costs).</span> |
| − | | + | *Critical component failures (e.g. gear <span style="line-height: 1.5em;">train/ box, bearings, blades etc).</span> |
| − | (e.g. planning permission and | + | *Wind resource variability. |
| − | | + | *Offshore cable laying. |
| − | construction costs). | + | |
| − | | + | |
| − | • Critical component failures (e.g. gear
| + | |
| − | | + | |
| − | train/ box, bearings, blades etc). | + | |
| − | | + | |
| − | • Wind resource variability.
| + | |
| − | | + | |
| − | • Offshore cable laying.
| + | |
| | | | |
| | | style="width:189px;" | | | | style="width:189px;" | |
| − | Make and model of turbines. | + | *Make and model of turbines. |
| − | | + | *Manufacturing warranties from component suppliers. |
| − | Manufacturing warranties from component suppliers. | + | *Good wind resource data. |
| − | | + | *Loss control e.g. fire fighting can be difficult offshore due <span style="line-height: 1.5em;">to height/location.</span> |
| − | Good wind resource data. | + | *Development of best practice procedures. |
| − | | + | |
| − | Loss control e.g. fire fighting can be difficult offshore due | + | |
| − | | + | |
| − | to height/location. | + | |
| − | | + | |
| − | Development of best practice procedures. | + | |
| | | | |
| | |- | | |- |
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| | | style="width:189px;" | | | | style="width:189px;" | |
| − | • Fuel supply availability/variability.
| + | *Fuel supply availability/variability. |
| − | | + | *Resource price variability. |
| − | • Resource price variability.
| + | *Environmental liabilities associated with <span style="line-height: 1.5em;">fuel handling and storage.</span> |
| − | | + | |
| − | • Environmental liabilities associated with
| + | |
| − | | + | |
| − | fuel handling and storage. | + | |
| | | | |
| | | style="width:189px;" | | | | style="width:189px;" | |
| − | Long-term contracts can solve the resource problems. | + | *Long-term contracts can solve the resource problems. |
| − | | + | *Fuel handling costs. |
| − | Fuel handling costs. | + | *Emission controls. |
| − | | + | |
| − | Emission controls. | + | |
| | | | |
| | |- | | |- |
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| | | style="width:189px;" | | | | style="width:189px;" | |
| − | • Resource risk (e.g. reduction of gas
| + | *Resource risk (e.g. reduction of gas <span style="line-height: 1.5em;">quantity and quality due to changes in </span><span style="line-height: 1.5em;">organic feedstock).</span> |
| − | | + | *Planning opposition associated with odour <span style="line-height: 1.5em;">problems.</span> |
| − | quantity and quality due to changes in | + | |
| − | | + | |
| − | organic feedstock). | + | |
| − | | + | |
| − | • Planning opposition associated with odour
| + | |
| − | | + | |
| − | problems. | + | |
| | | | |
| | | style="width:189px;" | | | | style="width:189px;" | |
| − | Strict safety procedures are needed as are loss controls | + | *Strict safety procedures are needed as are loss controls <span style="line-height: 1.5em;">such as fire fighting equipment and services.</span> |
| − | | + | *High rate of wear and tear. |
| − | such as fire fighting equipment and services. | + | |
| − | | + | |
| − | High rate of wear and tear. | + | |
| | | | |
| | |- | | |- |
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| − | • Survivability in harsh marine environments
| + | *Survivability in harsh marine environments <span style="line-height: 1.5em;">(mooring systems etc).</span> |
| − | | + | *Various designs and concepts but with no <span style="line-height: 1.5em;">clear winner at present.</span> |
| − | (mooring systems etc). | + | *Prototypical/technology risks. |
| − | | + | *Small scale and long lead times. |
| − | • Various designs and concepts but with no
| + | |
| − | | + | |
| − | clear winner at present. | + | |
| − | | + | |
| − | • Prototypical/technology risks.
| + | |
| − | | + | |
| − | • Small scale and long lead times.
| + | |
| | | | |
| | | style="width:189px;" | | | | style="width:189px;" | |
| − | Mostly prototypical and technology demonstration | + | *Mostly prototypical and technology demonstration <span style="line-height: 1.5em;">projects.</span> |
| − | | + | *Good resource measurement data. |
| − | projects. | + | |
| − | | + | |
| − | Good resource measurement data. | + | |
| | | | |
| | |} | | |} |
There are a number of key risks and barriers that can threaten investment in renewable energy (RE) projects and thus prevent the uptake of desirable technologies.
Lindlein & Mostert (2005) have suggested that it is appropriate to group these barriers by the market categories supply, demand and framework conditions. From this view the most pervasive barriers to financing renewable energy from demand to supply are categorised as:
At a broad macro-economic level, barriers to RE investment can be categorised as follows (United Nations Environment Programme (UNEP), 2004):
Different RE technologies have different degrees of exposure to the various barriers and risks due to their specifics and maturity.
The table below highlights some of the key risk issues affecting different RE technologies. Technology and operational risks are the principal deterrents to attracting appropriate commercial insurance cover (United Nations Environment Programme (UNEP), 2004).
|
Key Risks & Barriers Associated with RE Projects
|
|
RET Type
|
Key Risk Issues
|
Risk Management Considerations
|
|
Geothermal
|
- Drilling expense and associated risk (e.g.blow out).
- Exploration risk8 (e.g. unexpected temperature and flow rate).
- Critical component failures such as pump breakdowns.
- Long lead times (e.g. planning permission).
|
- Limited experience of operators and certain aspects oftechnology in different locations.
- Limited resource measurement data.
- Planning approvals can be difficult.
- ‘Stimulation technology’9 is still unproven but can reduce exploration risk.
|
|
Large PV
|
- Component breakdowns (e.g. shortcircuits).
- Weather damage.
- Theft/vandalism.
|
- Performance guarantee available (e.g. up to 25 years).
- Standard components, with easy substitution.
- Maintenance can be neglected (especially in developing countries).
|
|
Solar thermal
|
- Prototypical/technology risks as project size increases and combines with other
- RETs e.g. solar towers.
|
- Good operating history and loss record (since 1984).
- Maintenance can be neglected (especially in developing countries).
|
|
Small hydropower
|
- Flooding.
- Seasonal/annual resource variability.
- Prolonged breakdowns due to offsite monitoring (long response time) and lack of spare parts.
|
- Long-term proven technology with low operational risks and maintenance expenses.
|
|
Wind power
|
- Long lead times and up-front costs (e.g. planning permission and construction costs).
- Critical component failures (e.g. gear train/ box, bearings, blades etc).
- Wind resource variability.
- Offshore cable laying.
|
- Make and model of turbines.
- Manufacturing warranties from component suppliers.
- Good wind resource data.
- Loss control e.g. fire fighting can be difficult offshore due to height/location.
- Development of best practice procedures.
|
|
Biomass power
|
- Fuel supply availability/variability.
- Resource price variability.
- Environmental liabilities associated with fuel handling and storage.
|
- Long-term contracts can solve the resource problems.
- Fuel handling costs.
- Emission controls.
|
|
Biogas power
|
- Resource risk (e.g. reduction of gas quantity and quality due to changes in organic feedstock).
- Planning opposition associated with odour problems.
|
- Strict safety procedures are needed as are loss controls such as fire fighting equipment and services.
- High rate of wear and tear.
|
|
Tidal/wave power
|
- Survivability in harsh marine environments (mooring systems etc).
- Various designs and concepts but with no clear winner at present.
- Prototypical/technology risks.
- Small scale and long lead times.
|
- Mostly prototypical and technology demonstration projects.
- Good resource measurement data.
|
8 The probability of success in achieving (economically acceptable) minimum levels in thermal water production (minimum flow rates) and
9 Stimulation technology attempts to improve natural productivity or to recover lost productivity from geothermal wells through various
techniques including chemical and explosive stimulation. (United Nations Environment Programme (UNEP), 2004)
Generally all large RET projects will require access to long term funding on a project finance basis, but their exposure to their barriers and risks will differ. Thus the need to obtain pre-investment financing and other project development processes will be more significant for hydro projects and less so for other technologies that do not have the same impacts on land use and on downstream communities (The World Bank, 2013).
Thus project sizes and transaction cost barriers are generally lower for wind and geothermal projects that can be developed on a greater scale than other technologies.
Geothermal and small hydro can be competitive with conventional technologies, and wind energy is also approaching competitiveness in some countries. However, solar technologies remain a long way from achieving cost competitiveness; therefore its affordability remains a key risk (The World Bank, 2013).
The figure below shows the significance of barriers and risks to different technologies, providing an indication of which barriers and risk are likely to pose the greatest challenges to developing RETs.
