Climate Finance and ESG

Chapter 1: Introduction

Thomas Schmid1
Spring 2025
1
University of Hong Kong, Faculty of Business and Economics

1
Motivation

Basics

Technologies

Facts and figures

2
Motivation

3
Climate change is the (?) biggest challenges today

Source: NY Times; Forbes; UN; Bloomberg 4

Global cooperation on climate is crucial ...

Source: NY Times; AP News 1; AP News 2 5

... but recent developments look not so promising

Source: Reuters; NYTimes; Bloomberg; FT, May 2024 6

Global cooperation in the scientific community

The Coupled Model Intercomparison Project (CMIP) is a standard

experimental framework for studying the output of coupled
atmosphere-ocean general circulation models → standardization enhances
the collaboration of modelling groups all around the globe!

Source: Nature; NCAR 7

CMIP workshops

The CMIP modelling groups hold various workshops to discuss the

models and their output as well as futufre advancements
The CMIP6 model analysis workshop was held in March 2019 in
Barcelona, Spain

Source: Workshop website 8

CMIP models

Climate predictions come from Coupled Model Intercomparison Project

(CMIP) models

• Scientific coupled atmosphere-ocean general circulation models that

aim to predict earth climate for the next century
• The history of the CMIP dates back to 1995 and has subsequently
grown into a program that standardizes and promotes the modeling
of earth climate
• CMIP has developed “climate model experiment protocols, formats,
standards, and distribution mechanisms to ensure model output
availability to a wide research community” (link)
• The most recent completed CMIP phase is CMIP6, which started in
the mid-2010s
• CMIP7 is currently in the process of being started

Source: SSRN 9
Future temperature predictions

The CMIP models form the backbone of the climate assessment reports
backbone by the Intergovernmental Panel on Climate Change (IPCC)
Average abnormal temperature predictions across all models of CMIP
Phase 6 for different scenarios:

Source: IPCC, p. 22 10
CMIP models

These average predictions are highly aggregated numbers

• Average across >100 CMIP models and scenarios
• As illustration, these are the monthly abnormal temperature
predictions of all models for New York until 2060:
CMIP5 models CMIP5 (same scenario)

• Worldwide average across all regions and countries

→ Aggregation can mask the actual risk of climate change!

11
CMIP model example: CAS-ESM2-0 / June 2040

One example for a CMIP6 model is CAS-ESM2-0 from the Chinese

Academy of Sciences
CAS-ESM2-0 monthly temperature forecast (in ◦ Celsius) using the
SSP245 scenario for June 2040:

Temperatures are winsorized at plus/minus 40 degrees Celsius for this illustration

12
CMIP model example: CAS-ESM2-0 / June 2040

One example for a CMIP6 model is CAS-ESM2-0 from the Chinese

Academy of Sciences
CAS-ESM2-0 monthly abnormal temperature forecast (in ◦ Celsius) using
the SSP245 scenario for June 2040 (reference value is the average
December temperature from 1900 to 1999):

Abnormal temperatures are winsorized at plus five degrees Celsius and minus one degree Celsius for this illustration 13
CMIP model example: CAS-ESM2-0 / December 2040

One example for a CMIP6 model is CAS-ESM2-0 from the Chinese

Academy of Sciences
CAS-ESM2-0 monthly temperature forecast (in ◦ Celsius) using the
SSP245 scenario for December 2040:

Temperatures are winsorized at plus/minus 40 degrees Celsius for this illustration

14
CMIP model example: CAS-ESM2-0 / December 2040

One example for a CMIP6 model is CAS-ESM2-0 from the Chinese

Academy of Sciences
CAS-ESM2-0 monthly abnormal temperature forecast (in ◦ Celsius) using
the SSP245 scenario for December 2040 (reference value is the average
December temperature from 1900 to 1999):

Abnormal temperatures are winsorized at plus five degrees Celsius and minus one degree Celsius for this illustration 15
Abnormal future temperature in China

Guess the abnormal future December temperature in China relative to

the base period of 1900 to 1999 according to the CMIP6 models!
Please take two minutes to guess the answer here: link

16
Basics

17
What is Climate Finance?

Climate finance refers to financial resources and instruments that are

used to support action on climate change

• More precise definition: “Climate finance refers to local, national or

transnational financing—drawn from public, private and alternative
sources of financing—that seeks to support
mitigation and adaptation actions that will address climate change”
• Climate finance is needed for mitigation, because large-scale
investments are required to significantly reduce emissions
• Climate finance is equally important for adaptation, as significant
financial resources are needed to adapt to the adverse effects and
reduce the impacts of a changing climate

What is the most economical way to spend financial resources for action
on climate change?

Source: UNFCC; UNDP 18

Drivers of climate change

Relationship between cumulative CO2 emissions and global warming:

→ CO2 emissions are the main drivers of climate change, with a nearly
linear relationship between CO2 emissions and global warming
Source: IPCC, 2023, p. 83 19
Mitigation requirements

GHG emission per year for different scenarios:

→ A quick and dramatic reduction in GHG emissions in necessary to

limit global warming and avoid catastrophic outcomes 20
Source: IPCC, 2023, p. 59
CO2 emissions by sector

Sector-level breakdown of CO2 emissions from 1970 to 2004:

→ Electricity generation accounts for the majority of global CO2

emissions (approximately twice of second highest segment!)

Source: IPCC 21
CO2 emissions by sector

Sector-level breakdown of CO2 emissions from 1990 to 2022:

→ CO2 emissions from electricity generation continue to rise

Source: Our World in Data 22

CO2 emissions by sector

Sector-level breakdown of CO2 emissions in 2021:

→ Energy-related GHG emissions account for > 1/3 of all emissions,

making it the most promising sector for climate mitigation projects 23
Source: WRI
Analyzing climate mitigation options

Cost and potential of energy-related mitigation options:

→ Electricity production from renewable energy (RE) sources is the most

impactful and cost-effective mitigation strategy

Source: IPCC 24
Analyzing climate mitigation options

Agriculture, Forestry and Other Land Use (AFOLU) and Buildings-related

mitigation options:

→ AFOLU has potentially high impact, but also higher cost; limited
potentioal from building-related options

Source: IPCC 25
Analyzing climate mitigation options

Transport, industry, and other mitigation options:

→ Much lower impact and/or higher cost from these mitigation options

Source: IPCC 26
Renewable energy as key mitigation option

Source: National Geographic; ABC News; IEA 27

Investments in the energy transition

Annual energy transition investments in billion US$:

→ Investments in energy infrastructure of > 1.5 trillion USD in 2023

Source: BNEF 2024 28
Investments in the energy transition

CO2 emission per unit of generated electricity:

→ Although the overall CO2 emissions from electricity generation are still
rising globally, the emissions per produced unit declines

Source: EEA 29
Investments in the energy transition - news

Source: NYTimes, Oct 24, 2023; Reuters, May 14, 2024 30

Investments in the energy transition - news

Source: NYTimes, Dec 5, 2023, Bloomberg, July 20 and July 22, 2023 31
Investments in the energy transition - news

Source: Reuters, May 5, 2024; Bloomberg, April 15, 2024 32

But: massive (!) future investment needs

Future required annual energy-related investments in billion US$:

→ To achieve net zero emissions in 2050, more than 150 trillion US$ of
investments in energy infrastructure is needed until 2050
→ Biggest challenge now is raising the capital, more than the
technological development of RE! → Climate finance and ESG needs to
be on top of the agenda of investors and regulators to achieve the goal

Source: BNEF 2024 33

Required investments - news

Source: Bloomberg, January 30, 2024 34

How can we finance 150 trillion US$?

Putting 150 trillion US$ into perspective

• World GDP ≈

Source: World Bank; NY Times; OECD; IMF; MIT; SCMP 35

How can we finance 150 trillion US$?

Putting 150 trillion US$ into perspective

• World GDP ≈ 100 trillion US$

• Global public debt ≈

Source: World Bank; NY Times; OECD; IMF; MIT; SCMP 35

How can we finance 150 trillion US$?

Putting 150 trillion US$ into perspective

• World GDP ≈ 100 trillion US$

• Global public debt ≈ 90 trillion US$
• Covid-19 stimulus measures globally ≈

Source: World Bank; NY Times; OECD; IMF; MIT; SCMP 35

How can we finance 150 trillion US$?

Putting 150 trillion US$ into perspective

• World GDP ≈ 100 trillion US$

• Global public debt ≈ 90 trillion US$
• Covid-19 stimulus measures globally ≈ 16 trillion US$
• Cost of high speed rail network in China ≈

Source: World Bank; NY Times; OECD; IMF; MIT; SCMP 35

How can we finance 150 trillion US$?

Putting 150 trillion US$ into perspective

• World GDP ≈ 100 trillion US$

• Global public debt ≈ 90 trillion US$
• Covid-19 stimulus measures globally ≈ 16 trillion US$
• Cost of high speed rail network in China ≈ 1 trillion US$
• Cost of the 2008-9 U.S. bailouts ≈

Source: World Bank; NY Times; OECD; IMF; MIT; SCMP 35

How can we finance 150 trillion US$?

Putting 150 trillion US$ into perspective

• World GDP ≈ 100 trillion US$

• Global public debt ≈ 90 trillion US$
• Covid-19 stimulus measures globally ≈ 16 trillion US$
• Cost of high speed rail network in China ≈ 1 trillion US$
• Cost of the 2008-9 U.S. bailouts ≈ 0.5 trillion US$

Will we be able to raise the required capital? How? What are the main
opportunities and challenges?

Source: World Bank; NY Times; OECD; IMF; MIT; SCMP 35

Energy sources

Fully renewable Partly renewable Non-renewable

• Solar • Hydro • Fossil fuels
• Wind • Geothermal • Nuclear
• Wave • Biomass
• Tidal
• Ocean thermal

Fully renewable energy sources are non-depletable

Non-renewable sources are depletable in human time scales
Partly renewable energy sources are in between those two

Source: Stanford Understand Energy Learning Hub (link) 36

Renewable energy sources

Fully renewable energy sources are

non-depletable because they are replenished at
a higher rate than they are consumed
• Sunlight and wind, for example, are
constantly being replenished
• Theoretically, the availability of renewable
energy sources is unlimited
• Renewable energy can be used for
electricity generation, space and water
heating and cooling, and transportation

Source: Met office, BBC, Physics world, USGS, Nationalgeographic,

Wikipedia, Nature, [Link] 37
Partly renewable energy sources

The replenishment of partly renewbale energy

sources is not constant, but requires some time
• The growth of biomass takes time, making
its availability limited; requires
months/years to replenish
• Geothermal energy requires the extraction
of steam or hot water, both of which is
available in limited quantities; requires
days/weeks to replenish
• Energy stored in water decreases as water
flows to lower elevations or slows down;
requires days/weeks to replenish

Source: Met office, BBC, Physics world, USGS, Nationalgeographic,

Wikipedia, Nature, [Link] 38
Non-renewable energy sources

Nonrenewable energy comes from sources that

will run out or will not be replenished in our
lifetimes—or even in many, many lifetimes
• Fossil energy sources take millions of years
to form → limited amount of gas, oil, coal
• At current rates, coal will last for ≈ 100
years and oil and gas for ≈ 50 years
• But forecast depends on changes in
consumption patterns and efficiency
• There is a finite amount of nuclear fuels
that can be mined from the ground
• Lasts for approximately 100 to 200 years
of consumption at current rates
• But the theoretical availability of
uranium from sear water is relatively high

Source: Met office, BBC, Physics world, USGS, Nationalgeographic,

Wikipedia, Nature, NG; SciAm; ZME Science 39
Where is the energy coming from?

OcTh Wave Solar Wind Hydro BioM

Moon Tide Sun

Nuclear Fossil

GeoTh Earth

Source: Stanford Understand Energy Learning Hub (link) 40

Global primary energy consumption

Primary energy consumption increased dramatically in the past 200 years

Usage of coal, oil, and gas as energy sources spurred consumption growth

Source: Our World in Data 41

Are (all) renewable energy sources clean?

Clean energy comes from generation systems that do not produce any
kind of pollution (e.g., emission of CO2)
• Not all energy that comes from (partly) renewable energy sources is
clean and not all non-renewable energy is polluting!
• Nuclear as non-renewable energy source could be considered clean
(we will discuss more about that later in the lecture!), while biomass
is renewable and polluting

→ The concepts of “clean energy” and “renewable energy” are similar,

but not exactly the same!
Source: Iberdrola; IAEA 42
Technologies

43
Overview on RE generation technologies

Category technology status

Biomass combustion widely applied
gasification applied, still developing
Wind onshore widely applied
offshore applied, still developing
Solar photovoltaic widely applied
concentrated experimental, pilot projects
Hydro dam widely applied
run-of-river widely applied
Geothermal steam/heat extraction widely applied
Ocean tidal developing, some units operating
wave experimental, pilot projects
thermal experimental, pilot projects

Source: Stanford; U.N.; GES, p. 774 44

Biomass

Sun energy creates directly or indirectly various types of biomass through

photoynthesis

→ The energy that is stored in biomass can be used for electricity

generation via combustion or gasification
Source: IEA 45
Biomass combustion

Biomass combustion plants combust biomass, such as wood, to produce

steam, which moves a turbine and recover some steam for heating
Technological illustration:

→ Biomass is burned instead of fossil fuels to generate electricity (and

often heat for district heating networks)

Source: Be Atex, Power vamp 46

Biomass combustion

What is the CO2 balance of biomass combustion?

• Biomass combustion emits CO2
(even more than combusting coal!)
• However, the production of biomass
removes CO2 from the atmosphere
(fossil fuels removed CO2 millions of
years ago) → biogenic carbon cycle
• Forestry type, transport, and other
uses of biomass play crucial role →
full supply chain must be considered
→ Market for biomass can potentially lead to reforestation (planting
trees in existing forest) and afforestation (planting of new trees)

Source: IEA; Drax 47

Mukaihama biomass combustion plant

Location: Akita, Japan; Capacity: 20.5 MW

Generates electricity for approx 38,000 households by utilizing 150,000
tons of local unused wood per year → revitalize forestry

Source: Renovainc 48
Biomass gasification

Biogas is produced by anaerobic digestion

• Organic matter such as animal or food waste is broken down to
produce biogas (and biofertiliser)
• This process happens in the absence of oxygen in a sealed,
oxygen-free tank called an anaerobic digester

Link: link Source: Stour Energy 49

Qila Energy biomass gasification plant

Location: Inchdairnie, Scotland, U.K.; Capacity: 2 MW

Gas-to-grid anaerobic digestion plant where organic feedstocks (farm
grown crops and draff, a by-product from an adjacent Whiskey Distillery)
are fed into the digester to produce biogas

Link: video Source: Inderen; Gravis 50

Wind

Wind energy is used since thousands of years

• Used to propel boats along the Nile River as early as 5,000 BC
• Simple wind-powered water pumps in China by 200 BC
• Extensive use of wind pumps and windmills for food production in
the Middle East by the 11th century

Electricity production from wind energy started >100 years ago

• Small wind-electric generators since the late 1800s
• Electrification programs limited the importance of wind energy
• Recently, wind energy became more popular again

Source: EIA; Alberta History 51

Wind turbines

Wind turbines use blades to collect the wind’s kinetic energy and convert
it into electricity
• Wind flows over the blades creating lift, similar to the effect on
airplane wings → Bernoulli’s principle
• The blades are connected to a drive shaft that turns an electric
generator, which generates electricity

Most common design today uses horizontal design with three blades and
upwind rotor

Source: EIA; Science facts 52

Components of modern horizontal axis wind turbine

Modern turbines are highly complex and consist of multiple parts

Link: video Source: Sustainability Journal; SSREN, p. 551 53

Wind turbine size

Wind turbines have grown in size in the past decades

• Growth both in terms of hub height and blade length
• Taller turbines with longer blades are more efficient and can
generate more electricity
• But they lead to transportation challenges and have a higher
environmental impact (e.g., noise, visual, birds)

Link: video Source: [Link]; SSREN, p. 553; TRU 54

Wind speed and turbines

The amount of kinetic energy in the wind that is theoretically available

for extraction increases with the cube of wind speed
However, a turbine only captures a portion of that available energy
• 3-4 m/s: cut-in speed
• 11-15 m/s: rated speed
• 20-25 m/s: cut-out speed
• Theoretical energy extraction
limit of 59.3%
(Lanchester-Betz limit)

When at rated speed, control systems limit power output to prevent

overloading the wind turbine when speed increases, either through stall
control, pitching the blades, or a combination of both

Source: IPCC SSREN, p. 550 55

Offshore versus onshore wind

Onshore wind energy is generated by turbines on land while offshore wind

energy comes from wind blowing across the sea
Key differences between onshore and offshore
• Onshore turbines are faster and cheaper to construct and maintain
(infrastructure typically available, easy access)
• Offshore turbines are more efficient: higher and more consistent
wind speed, taller turbines due to less space constraints and
environmental impact)

Floating farms and energy islands as new forms of offshore wind farms
• Allows wind farms further away from the shore: less visual impact,
higher and more consistent wind speed
• But construction is expensive, high transmission losses

Link: link; CNN Source: National Grid; Renewable Energy World 56

Wind turbine investment cost

Investment cost vary over time, now between 1,000 and 2,000 USD/kW
for onshore wind (> 3,000 USD/kW for offshore wind)

Source: [Link] 57
Jiuquan Wind Power Base

Location: Jiuquan, Gansu, China; Capacity: ≈10GW (#1 world)

Located near the Gobi Desert, the Jiuquan Wind Power Base has 7,000
turbines arranged in rows and cost approx. US$17.5 billion

Source: SCMP; NY Times 58

Solar photovoltaic

Photovoltaic (PV) cells convert sunlight directly into electricity

• No conversion to heat/steam, no traditional generator involved

The history of PV cells goes back to the 1950s

• Mostly used for satellites and remote locations
• First large-scale solar parks for electricity generation in 1980s

PV cells can be installed in commercially operated parks (typically

>1MW) or as rooftop solar (<100 KW)

Source: EIA; Goldbeck Solar; PV-tec 59

Solar photovoltaic evolution

1. Scientific advances in the 19th and 20th century provided a

fundamental understanding of light (wave-particle duality) and how
it interacts with molecular structures (e.g., Einstein and the
photoelectric effect)

2. Breakthrough at Bell Labs in 1954 that made a commercially

available PV device (video)
3. Government R&D and public procurement effort in the 1970s, with
the first major rooftop subsidy program in Japan in the 1980s and
feed-in-tariff for solar in Germany in 2000s → larger-scale usage led
to price decline and made PV economically more attractive

Source: Nemet, [Link]; ASDN; Sun Wind Solar 60

Solar photovoltaic illustration

Sunlight can free electrons (photoelectric effect)

• Electron is freed if the light shining on the material has energy >
material-specific band gap, which is the case for semiconductors
• The electron-hole pair wants to recombine because of opposite
charges; however, if the free electron is exposed to the junction
potential, it is pushed on n-doped side (opposite direction for “hole”)
• If a wire connects the top and bottom of the PV cell, the electron
goes this way to recombine with the “hole” → electric current!

Link: video Source: EIA; G2V 61

Solar photovoltaic cell efficiency

Highest efficiency of solar PV cells in the lab over time:

→ Cell efficiency increased substantially over the past 50 years; most

efficient solar cell today is FHG-ISE, a four-junction solar cell, with an
efficiency of 47.6%
→ Best commercially available solar PV module efficiency at the start of
2022 was about 22.8%

Link: video Source: NREL; ISE; Elon Smartmeter 62

Solar photovoltaic component cost

Solar module price (in 2019 US$) and cumulative installed capacity:

→ Drop of module price of 99.6% since 1976 (learning effects, higher

efficiency, competition)
Source: OWID 63
Solar photovoltaic component cost - recent developments

Solar module prices, share prices, and production capacity in recent years:

→ Prices for solar modules tumbled in 2023 and 2024

→ Share prices of largest solar module producers also tumbled
→ In addition to efficiency gains, overcapacity played a role

Source: Economist 64
Solar photovoltaic investment cost

Total investment cost for U.S. residential and utility-scale PV over time:

→ Investment cost down from >4 USD/W in 2011 to <1 USD/W today
→ The decline in cost is mainly driven by lower module cost Source: NREL 65
Bhadla Solar Park

Location: Rajasthan, India; Capacity: 2,245 MW (#1 world)

The project was developed across four phases from 2015 to 2020 and is
spread over 50 km2 with more than 10 million individual panels and
investment cost of over US$ 1.3 billion

Link: video Source: Business Insider; NASA; PV Magazine 66

Floating solar PV

Source: Bloomberg, July 14, 2023 67

Concentrated solar power

Concentrated solar power (CSP) plants collect and concentrate sunlight

to produce the high temperature heat needed to generate electricity
• Established technology with currently limited relevance: first plants
were built in the 1980s, no new major plants in the 1990s and
2000s, some growth since the 2010s
• Huge future potential: some estimates indicate that CSP could
generate a quarter of world’s energy by 2050
• Comparison to solar PV
• Disadvantages: more expensive, higher minimum investmentm and
maintenance requirements (pipes etc), requires high direct sunlight,
higher land requirement
• Advantages: some level of dispatchability, still higher efficiency (≈
40% versus 20%), potentially very high capacity

→ Currently PV much more common, but CSP has high future potential!

Source: EIA; Guardian; Solar Quarter 68

Concentrated solar power illustration

Reflectors (mirrors) capture and focus sunlight onto a receiver with a fluid
that is heated to produce steam → steam is converted into mechanical
energy in a turbine, which powers a generator to produce electricity
There exist two types of concentrating solar thermal power plants for
utility-scale electricity generation:
Linear concentrating solar power Solar towers

→ Linear CSP systems are more common and developed, but towers
have higher efficiency (limited commercial operation so far)

Source: EIA; [Link]; Nur Energie 69

Mojave Solar Project

Location: Mojave desert, California, U.S.; Capacity: 250 MW

In September 2011, the Department of Energy issued a $1.2 billion loan
guarantee to finance the parabolic CSP plant on previously disturbed
agricultural land near Barstow, California

Link: video Source: [Link] 70

Ashalim Power Station

Location: Ashalim, Negev Desert, Israel; Capacity: 121 MW (#1 tower)

Completed in 2019, the tower-based CSP plant cost nearly one billion
USD; the tower has a hight of 240 meters, making it one of the tallest
structures in Israel

Source: Mosessco; NYTimes; NREL 71

Hydro

Hydropower converts energy stored in water into electricity

• Kinetic energy, i.e., the movement of the water
• Potential energy, i.e., the height of the storage of the water
Humans used water to perform work for thousands of years
• Horizontal and vertical water
wheels were used by the Romans
and in ancient China more than
2,000 years ago for multiple
purposes, e.g., hulling rice or
grinding wheat
• Electricity generation from hydro
power began at the end of the 19th
century, with several large hydro
projects in the first half of the 20th
century (e.g., Hoover dam)
Source: EIA, [Link]; [Link]; [Link] 72
Hydro electricity generation

Hydraulic turbine converts energy of flowing water into mechanical energy

• Water is used to turn a turbine,
which turns a metal shaft in an
electric generator
• Movement generates electricity: a
magnet is moved past a conductor,
which causes electricity to flow
• Modern turbines with >90%
efficiency
Hydro power plants require a large river that has a large drop in elevation
and can either use a dam or run-of-river approach → require specific
terrain characteristics!

Source: USGS 73
Hydro dam illustration

Most common type of hydro plant is an impoundment facility:

(1) a dam is used to store river water in a reservoir
(2) water released from the reservoir flows through a turbine
(3) release can be controlled (e.g, electricity needs, flood control)

→ Often (very) high capacity, but expensive and time consuming to

build, high environmental impact, requires suitable location
Source: [Link]; USGS 74
Three Gorges Dam

Location: Sandouping, Hubei, China; Capacity: 22,500 MW

(#1 power plant in the world)
Constructin started in 1994 and took nearly two decades to finish, with
cost of US$28.6 billion

Link: video Source: CNN; CNN 2 75

Hydro run-of-river

A run-of-river or diversion plant channels a portion of a river through a

canal to utilize the natural decline of the river bed elevation:

→ Typically smaller than dam-based plants, but easier and cheaper to

build and lower environmental impact 76
Source: [Link]
Geothermal

Geothermal energy comes from heat within earth

• Produced by the slow decay of radioactive
particles in the earth’s core
• The temperature of the earth’s inner core is
about 6,000 °C (≈ sun surface)
Use of geothermal energy has a long history
• Used for bathing in paleolithic times (>7000
years BCE)
• Hot water from hot springs was directed to
bathing houses by the Greeks and Romans
• Modern industrial use of geothermal energy
started in the 19th century, with the first
geothermal electricity plant opening in 1911

Source: EIA; Wikipedia 77

Geothermal illustration

Binary-cycle plants are the most common design:

(1) Cold water is pumped at high pressure into an injection well
(2) Earth’s heat warms up the cold water, which is then extracted
(3) Hot water is passed through a heat exchanger to boil a secondary fluid

→ Dispatchable and predictable source of electricity, can have relatively

high capacity, but expensive and suitable location is required
Source: WTS Energy; BBC 78
The Geysers geothermal plant

Location: Geysers Geothermal Field, Mayacamas Mountains, California,

U.S.; Capacity: 900MW (#1 geothermal power plant)
In total, there are 319 steam wells and 73 injection wells, with a max
depth of 4km and an average depth of 2.5km

Link: video Source: Power Technology; NCPA; [Link] 79

Ocean tidal energy

Gravitational pull of the moon and sun along with the rotation of the
earth create tides in the oceans
• Tide mills have been used since the Roman times
• Using tidal energy to generate electricity has been discussed since at
least a century

So far, using tidal energy for electricity generation is a niche technology

• Plant design can use underwater tidal turbines (water is about 800
times denser than air) or a tidal barrage with turbines
• Tidal movements very predictable (→ dispatchable generation),
potentially high capacity, but expensive, high tidal range necessary,
high environmental impact

→ Further technological advances needed to make tidal plants

economically viable

Source: EIA 80
Tidal barrage-based power plant

A low dam, called a barrage, is built across an inlet

• The barrage has one-way gates that allow the incoming flood tide to
pass into the inlet to create a water level difference
• When the tide turns, the water flows out of the inlet through huge
turbines built into the barrage, producing electricity
• Several barrage plants are operational

Source: EMSD 81
Sihwa Lake Tidal Power Station

Location: Sihwa Lake, Gyeonggi Province, South Korea

Capacity: 254MW (#1 tidal power plant)
Located on Korea’s western coast with tidal ranges of up to 9 meters,
this tidal barrage plant has 10 turbines and can supply electricity to a
population of 500,000

Link: video Source: K Water 82

Ocean wave energy

Waves are a source of ocean energy that can be converted into electricity
• Wind creates waves in oceans and
large lakes, which contain energy
• Different methods and technologies
for capturing and converting wave
energy to electricity are under
development
• Continuous generation, but
challenges include environmental
impact, required space, high
investment cost, remote locations,
and technical limitations
→ Converting ocean wave energy to electricity is still in early
(experimental) phase, potentially will play a role in the medium/long term

83
Ocean thermal energy

Ocean thermal energy conversion (OTEC) exploits temperature

differences between ocean surface waters and deep ocean waters
• Sun heats surface water of oceans,
leading to warmer surface water
• Warm surface water is pumped
through an evaporator with a working
fluid, which drives a generator
• Continuous generation, dispatchable
(stored solar energy), but high
investment cost and >20◦ C difference
required (often far from coast)
→ Converting ocean thermal energy to electricity is still in early
(experimental) phase, potentially will play a role in the medium/long term

Source: IEA; TU Delft 84

Generation cost

The levelized cost of electricity (LCOE) is a measure that is commonly

used to assess and compare alternative methods of electricity generation
• Calculated as the net present value of the total cost of building and
operating the power plant divided by the total electricity generation
over its (expected) lifetime
• The LCOE consider the initial investment cost, maintenance and
operations expenditures, fuel expenditures, the discount rate, the
expected life time of a power plant
• Implicitly, the LCOE also considers a plant’s expected capacity
factor (ratio of produced electricity to the maximum possible
production with continues operation)

→ The LOCE are both time and location specific!

Source: CFI 85
Generation cost

Global LOCE from 2009 to 2023 in USD/MWh from Bloomberg NEF:

→ Onshore wind and PV are have now the lowest LOCE

Source: Bloomberg NEF 86

Technical potential

Minimum and maximum of the estimated technical potential of the

different generation technologies in Exajoule (EJ) per year
Technology min max mean
Solar PV 1,338 14,778 8,058
Solar CSP 248 10,791 5,520
Geothermal 118 1,109 614
Wind onshore 70 450 260
Biomass 50 500 275
Ocean 7 331 169
Wind offshore 15 130 73
Hydro 50 52 51
→ Renewable energy sources have the potential to generate the global
electricity demand, which is about 100 EJ/yr

Source: IPCC SSREN, p. 206; GES, p. 774 87

Comparison of renewable technologies

Technology size (MW) dispatch predict capacity factor

Biomass 0.1-100 yes yes 50-90
Solar PV 0.004-100 no no 12-27
Solar CSP 50-250 some no 35-42
Geothermal 2-100 yes yes 60-90
Hydro dam 1-20,000 yes yes 30-60
Hydro run-of-river 0.1-1,500 some yes 20-95
Ocean tidal 1-200 no yes 19-60
Ocean wave 1-200 no no 22-31
Wind onshore 5-300 no no 20-40
Wind offshore 5-300 no some 30-45
Capacity factor is the ratio of actual electrical energy output over a given period of time to the theoretical maximum electrical energy

Source: IPCC SSREN, p. 108 88

Possible technological breakthroughs

Source: Bloomberg, March, 2023 89

Facts and figures

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Electricity demand

Global electricity demand by region (absolute in TWh and relative):

→ Global demand for electricity has approximately tripled since 1990

→ Asian countries account for half of the electricity demand today

Source: IEA; WE Forum 92

Electricity generation

Global electricity generation by source over time (in TWh):

→ Electricity production from coal and gas more than doubles since 1990!
Source: Our World in Data 93
Electricity generation

Global electricity generation by source over time (relative):

→ Coal and gas account for more than half the electricity production
→ Share of renewable energy (other than hydro) still limited
Source: Our World in Data 94
Renewable electricity generation

Global renewable electricity generation by technology over time (in TWh):

→ Hydro is by far the most important source for renewable electricity

→ Wind and solar show the highest growth rates 95
Source: Our World in Data
Low carbon electricity generation

Global share of electricity generation from low-carbon sources over time:

→ Share of electricity produced from low carbon sources (renewables and

nuclear) remained relatively constant

Source: Our World in Data 96

Low carbon electricity generation

Global share of electricity generation from low-carbon sources by

technology over time:

→ While the share of renewables increased steadily since 2010, the

relevance of nuclear declined

Source: Our World in Data 97

Electricity generation by country

Share of electricity generation by country and technology in 2022:

→
Substantial heterogeneity across countries!

Source: Our World in Data 98

Electricity generation by country

Share of electricity generation by country and technology over time:

→ Renewable share is growing steadily over time in most countries

Source: Our World in Data 99
Electricity generation by country

Share of electricity generation by country and source in 2022:

→ Hydro is the dominant generation technology in several countries

→ Wind is important in some countries, while PV still relatively small
Source: Our World in Data 100
End of chapter

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