Alternative energy growth creating secular demand for composites

Alternative energy sources, such as solar, wind, and geothermal, are finally emerging as contenders alongside our primary electric-power-producing fossil fuels, natural gas and coal (but not oil), primarily because these technologies are ready for widespread distribution and adoption, based on average pricing for electricity.

The 2006 World Energy Outlook report by the International Energy Assn. (IEA) stated that solar, wind, ocean and geothermal power technologies will account for just over 9 percent of global power generation by 2030. That does not sound like much of an energy revolution — until you consider that 9 percent of total global power generation in 2030 will be on the order of 1 billion megawatt hours. A second, more recent United Nations Environmental Programme (UNEP) study entitled Global Environment Outlook: Environment for Development (GEO-4) predicted even higher percentages for alternative energy, perhaps as much as 23 percent, by 2030. A third report from IEA concerning carbon emissions has estimated that a global investment of $45 trillion (USD) in alternatives will be needed by 2050 to attain the 50 percent reduction in carbon emissions suggested by the Intergovernmental Panel on Climate Change. Alternative energy is now a viable, sustainable industry with interesting financial implications for advanced composites.
   Alternative energy sources, such as solar, wind, and geothermal, are finally emerging as contenders alongside our primary electric-power-producing fossil fuels, natural gas and coal (but not oil), primarily because these technologies are ready for widespread distribution and adoption, based on average pricing for electricity. To help these alternatives compete in the growing energy marketplace, governments in some areas of the world, at least, are offering significant incentives that make investments in alternative energy attractive. Germany and Japan, for example, have funded developmental programs in solar energy that have been largely successful. China, simply based on need, is bankrolling various government investments in alternative energy, as are Italy and Spain. In the U.S., the growth of alternative energy sources, particularly wind power, is strong thanks to individual state renewable portfolio standards. Yet the federal government continues to drag its feet on long-term extensions of the solar investment tax credit (ITC) and the wind/geothermal production tax credit (PTC) — both of which are set to expire in December of this year.
   So where do advanced composites fit into this burgeoning market? Composite materials are important components in several of the alternative energy subsectors, primarily wind power and compressed natural gas, and soon will assume a greater role in automotive and transportation applications.
   Wind power growth continued in 2007 with 20 gigawatts (GW) of new installations in 2007, according to the Global Wind Energy Coun-cil (Brussels, Belgium), with the U.S. leading the way at an estimated 5.2 GW installed. The price to produce electricity from wind is a bit higher (5.5 to 7.5 cents per kilowatt hour) than fossil fuel “grid pricing,” which is estimated at 2 to 4 cents per kilowatt hour for coal. (Consumers in the U.S. pay, on average, about $0.15/kWh.) That is why the soon-to-expire PTC — a 2-cent incentive (30 percent of a producer’s average cost) — is so very important to sustained growth in the U.S. As the public’s desire for clean energy is coupled with the need for energy independence, the financial viability of wind projects is an important factor for further deployment, and composite materials offer a compelling solution for increasing energy efficiency and reducing the cost of energy as well.
   Wind power is a well-understood, mature technology, and increasing the scale of turbines up to perhaps 5 MW is one of the best methods to increase efficiency, reduce costs, and achieve that as yet elusive point of “grid parity,” whereby the costs of produced electricity from wind power and from fossil fuels are equal.
   OEMs are able to increase turbine size and capacity because the use of advanced composites makes it practical to build the much longer rotor blades they require. Using a combination of fiberglass and carbon fiber, blades built to lengths of up to 50m/164 ft are lighter and stronger than all-glass blades, thus increasing turbine efficiency and reducing the cost to implement wind power.
   Natural gas is a cleaner alternative to coal and oil, but a lingering issue for natural gas is that much of the known reserves are “stranded” or located far from existing infrastructure and pipelines. At least one major new application, still under development, would transport natural gas to market in large composite storage cylinders on purpose-built ships. Carbon fiber demand driven by this application could approach 2,000 metric tonnes (more than 4.4 million lb) in 2008. Another major application that could spur demand for natural gas storage cylinders is natural gas-powered transportation vehicles, which have begun to gain some market acceptance.
   A third application for composites in relation to alternative energy is the introduction of carbon fiber into automotive vehicle parts for any type of vehicle, whether conventional, electric or hybrid. Lightweight composites could reduce weight by as much as 30 percent when compared to steel, thus increasing fuel mileage without commensurate reductions in safety. But, as many of you well know, material pricing, fabrication and tooling remain large impediments to achieving a mass-production scale.
   Additional applications for composites still in the research and development stage include hydrogen fuel storage vessels, fuel cell components, electrical transmission lines, flywheel technology, tubing and piping for geothermal directional drilling, solar panel support structures and wave/ocean power components. Many of these R&D projects might never see commercial adoption, yet the focus on and investment in alternative energy will continue to propel novel applications for composites.
   The 625 percent increase in investment in alternative energy technologies from the 2001 estimate of $714 million to $5.2 billion in 2007 signals long-term, secular growth in the industry. I estimate that the annual use of carbon fiber related to alternative energy applications could approach 18,150 metric tonnes (40 million lb) by 2010, producing nearly $650 million in revenue. In the same time frame, annual figures for fiberglass could reach almost 226,800 metric tonnes (500 million lb), with revenue of $1.5 billion in revenue for fiberglass, by 2010.
   Without question, the continued penetration of composites technology into the alternative energy industry is stimulating rapid — and increasingly stable and sustainable — growth in the demand for materials and manufactured components from the advanced composites industry.

Brian Yerger covers the alternative energy industry for Jesup & Lamont and publishes from the Mid Atlantic regional office in Wilmington, Del. He joined the company’s research department in 2007, after 15 years on Wall Street in sales, trading and investment banking. Yerger holds a BS in business administration from the University of Delaware. Frequently quoted in Barron’s, Bloomberg, BusinessWeek, Forbes and the Wall Street Journal. A presenting expert at forums presented by CFA Society of Philadelphia and COMPOSITESWORLD Conferences, he is a Chartered Financial Analyst (CFA)™ charterholder and a member of the CFA Society of Philadelphia, holding the following series registrations: 7, 63, 65, 86 and 87.

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