Valorisation of energy services: Essay on the value addition due to renewable energy

Abstract

The shift from fossil fuels and traditional renewable energy to costlier modern renewable energy based on geothermal wind and solar resources is explained. Statistical data collected from 14 countries with a population greater than 100 million inhabitants was used, where the EU is considered as a country. The period from 1990 to 2015 is covered, however divided in two parts, 1990-2005 when conditions were not favourable for renewable energy because the price of fossil fuels and policy support for renewable energy were low, and 2005-2015 when these conditions improved. Theoretical analyses show that the high price of fossil fuels, policy support and cost-effective technologies can explain the fast growth of modern renewable energy during 2005-2015; however, they only partially account for its slower growth during 1990-2005. An additional explanation might be that the innovators generate qualities due to renewable energy use, which are expressed on the markets as value addition of energy services. The statistical analysis of energy services during 1990-2005 shows that the European Union (EU) led in renewable energy compared to the United States (US), Japan and other countries, which was driven by the social initiatives that fostered new firms in the electricity and gas business. A statistical analysis of energy services in the US and EU during 2005-2015 reveals that their value added has grown on an annual average of 2.0% and 2.8%, respectively, which denotes an annual increase of 3 billion and 6 billion US dollars in the 2005 value (USD2005). This valorisation of energy services has invoked further innovations in distributed energy systems and energy storage. A further statistical analysis of the 14 largest countries by population confirms a valorisation of energy services due to modern renewable energy where the emission reduction of carbon dioxide (CO2) is a side-effect. Extrapolation of the average growth rates from the period 1990 to 2015 to the period 2015 to 2040, without any change but a substitution of fossil fuels for renewable energy, demonstrates that global income would grow fourfold and energy consumption twofold along with a 100 times larger modern renewable energy and CO2 reduction to 46% of the 2015 level. When those average growth rates of renewable energy decrease linear to 25% in 2040, the global modern renewable energy grows tenfold and CO2 reduces to 82% of the 2015 level. The implication of this statistical study on large countries shows that higher value energy services for households are often based on distributed renewable energy and that such an addition of value generates a CO2 emission reduction as a side effect which can be enhanced by pricing CO2 or obstructed by policy support for the vested interests. This study indicated that the valorisation of energy services will generate a growth of income, energy consumption and renewable energy along with a far-reaching emission reduction of CO2 if policies do foster sustainable innovations.