INTERVIEW
Establishing Renewable Energy Markets
Deutsche Shell AG board member Fritz Vahrenholt is convinced that there are profitable niches for renewable-energy technologies. CAROLA HANISCH
5 0 8 A • DECEMBER 1, 1999 / ENVIRONMENTAL SCIENCE & TECHNOLOGY / NEWS
lthough renewable energy technology has captured only a small segment of the energy market and near-term forecasts for it are mixed for growth as a total percentage of global energy consumption, an increasing number of energy-based companies believe that clear opportunities exist for profitable development now. Among them is the Royal Dutch/Shell Group, which established renewable energy as its fifth core business in 1997. Its focus has been on solar power, biomass, forestry, and wind power, and this year an international hydrogen corporation was set up to complete the portfolio. Deutsche Shell AG, the Hamburg-based German subsidiary of the international Shell group, is actively developing and marketing renewables and hydrogen-based technologies. Its most prominent current project is the construction of the world's largest photovoltaic factory in Gelsenkirchen, Germany, which is being undertaken as a joint venture with Pilkington Solar International, headquartered in Cologne, Germany. The first of two plant production lines was scheduled to start operating this November.
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© 1999 American Chemical Society
When the second line is completed in 2001, the factory will produce about 13 million solar cells per year—equivalent to approximately 25 MW of energy— and will significantly increase Shell's solar cell production capacities currently located in Helmond, Netherlands, and in Japan. Professor Fritz Vahrenholt spoke about photovoltaics, hydrogen use, and energy supply in a recent interview. His remarks provide an indication of Deutsche Shell AG's development plans and outlook on future renewable energy technology prospects. As a member of the board of Deutsche Shell AG, he is in charge of renewable energies, chemistry, the environment, and public relations. Vahrenholt was born in 1949 in Gelsenkirchen, Germany. He holds a Ph.D. in chemistry and is a member of the Social Democratic Party, which currently governs the country in a coalition with the Green Party. In the late 1970s, Vahrenholt worked at the German Federal Environment Agency (Umweltbundesamt) in Berlin, and in the early 1980s, he worked at the environment ministry of the German state of Hessen. At that time, the nationwide conservative newspaper Frankfurter Allgemeine Zeitung referred to him as "a horror for the chemical industry" because of his penchant for tough environmental standards; hardly anybody then would ever have expected him to take a job in an oil, gas, and chemicals company. He subsequently relocated to the Hamburg environment agency, and in 1991, became senator of the environment in the city and state government of Hamburg. By that time, he was already supporting a shift toward renewable energy use. In February 1998, he went to Deutsche Shell AG and currently lectures in environmental chemistry as a professor of the University of Hamburg. Vahrenholt has published six books about environmental issues. He is married and has two sons.
structing a world-scale solar cells factory, production of 1 kWh of solar electricity costs about 1.50 DM. Conventional power plants produce the same amount of electricity for less than 10 Pfg. How can Shell make money on such an expensive technology? There are applications in which we are competitive with photovoltaic electricity production today. This is, of course, the case in decentralized isI am absolutely land systems in rural areas. Think of those 2.5 billion convinced that fuel people on Earth [who] are not connected to the grid— cell technology will they represent a big market potential. Every day, those replace the internal households consume, let's say, two to three candles combustion engine. plus lamp oil—just for light. They don't have a radio, and if they do, it runs on battery [power], which is expensive and energetically unfavorable. They don't have a TV, although communication becomes increasingly important to prevent huge and unequally developing countries like China from falling apart. Today, if you want to provide people in remote villages with electricity, you do it either with diesel units or you have to lay new power lines, neither of which is cheap. In which developing countries is Shell particularly active?
In South Africa, for example. In October 1998, Shell International Renewables Ltd. established a joint venture with Eskom, South Africa's largest power company. The joint venture is currently bringing photovoltaic electricity to 50,000 homes in South Africa. In China, we are planning to do the same for 100,000 homes. Who pays for that?
Why is Shell engaging in renewables at all?
We believe that in the next century, energy politics will be dominated by climate protection measures. Other oil companies might have a different view on that, but we think if we develop C0 2 reduction strategies early on, we will later have an advantage over those competitors who just wait and see. So, it is more than just an image campaign?
We don't do this for public relation reasons, but for business reasons. We believe that we can make money with renewables. But photovoltaics, for example, are still suffering from prohibitive cost. In Germany, where Shell is con-
We have developed a kind of leasing system. Of course, you cannot expect a shepherd in Inner Mongolia to invest 1000-2000 DM in a photovoltaic home facility. So we put the solar home system into place for him, and he pays for its usage on a monthly basis. The system produces electricity only if the user has inserted a chip card. He can buy that card at the local Shell gas station or community hall for 14 DM. After 30 days he has to recharge the card. With this kind of leasing system, we get our investment cost back and we even make a profit; otherwise, we wouldn't do it. We are also active in Indonesia, but we don't use the leasing system I just described. It is more like DECEMBER 1, 1999 / ENVIRONMENTAL SCIENCE & TECHNOLOGY / NEWS • 5 0 9 A
direct subsidies, which, by the way, don't work that well. After only five years, most of the s t a t e financed photovoltaic facilities are damaged. People don't take care of things that they get for free. So the large photovoltaics factory in Gelsenkirchen is to be mainly built to supply rural China with electricity? Yes, at least half of the solar cells [manufactured] are going to be exported. The factory is located in Germany because here we enjoy the benefits of a very In China, every two active research landscape and subsidy from [the] govyears, the equivalent ernment. But it is of course nonsense to believe that of a new Japan is with 100,000 solar roofs in Germany—that's the govcreated in terms of ernment's program—you can change the German economic power. energy situation or even get out of nuclear energy. That doesn't mean that here we don't need a growing proportion of renewables. But it is more difficult because we have an existing grid, large assets, and cheap fuels. So photovoltaics only make sense for developing countries at the moment? We have to start in the regions where it is competitive today. Solar energy will slowly begin to move out of those niches, and as it does, it will create greater demand and greater turnover. Then you will be able to afford more research and development and to further reduce the cost. So, yes, I believe in the end [that] even in developed, grid-connected countries, photovoltaics will be competitive, perhaps by 2020. But it is a long way [off], and we have to start in regions where it is competitive today. We cannot subsidize photovoltaics for 20 years. The same is true for wind energy. Today, it is already competitive in regions with a lot of wind, for example, Patagonia, in Argentina. We want to develop offshore wind energy production. Offshore, you have a higher wind yield, and you can construct higher facilities. And we know how to do this, how to deal with adverse weather and sea conditions—that's our field of expertise. How will renewables be able to penetrate the market in developed countries? You start by penetrating the electricity market from the top, where power is the most expensive, and then slowly move down. First, you have to cover the peak power [market]. Peak power is already very expensive today because electricity is hard to store. But you can store renewable energy with hydrogen and in that way cover peak power—that would be the start. Oil and gas started in small niches. In 1922, the first public gas station started operating. In Germany, before that, oil had to be bought in a drugstore! With renewables we are in the same situation now. People who now laugh at these new energies have the same attitude as the coal barons 5 1 O A • DECEMBER 1, 1999 / ENVIRONMENTAL SCIENCE & TECHNOLOGY / NEWS
had toward the oil industry in the 1920s. Oil was so expensive at that time that it was sold for drugstore prices! In Gelsenkirchen, Shell will be able to reduce solar cell production cost by 30%. How can that be achieved? In most cases, solar cells and modules are still manufactured by hand. These operations have a production capacity equivalent to 3-10 MW But at Gelsenkirchen, we have a production capacity of 25 MW, so we can afford the most up-to-date production technology. Robots don't pay off for 3 MW, but they do pay off for 25 MW! What has happened in car manufacturing during the last 20 years hasn't even started yet for solar cell production: automation, robots, and manufacturing control. There is less breakage if the production process is optimized; wafers can be made thinner, and energy efficiency can be increased: A human being is just not as perfect as a machine. But it is not only optimization, it is, of course, economy of scale, too—if you produce 25 MW at your factory, specific costs are less than if you do it on a smaller scale. Yes, we have reduced cell production cost by 30%, but this is only half the truth. You have to see the process as a whole—solar cell production is not the most expensive part. First, you make the wafer from silicon; then, you make a solar cell out of the wafer (by doping, for example), and then you make a module out of the cells by connecting a frame, cables, converters, and so forth. The very first step is the most costly. If you split up the cost of the complete process, you have 50% for wafer production, maybe 30% for making the solar cell, and 20% for module manufacturing. We have reduced the solar cell production cost, but this doesn't help us that much, because we still have a high wafer production cost. So I guess our solar cells produce electricity by about 1.30 DM per kilowatt hour instead of 1.50 DM. The most important thing is to bring wafer costs down! And there I see a huge potential. Today, wafers are about 300 um thick. If we manage to produce wafers only 30 pm thick, we will have decreased its production cost by a factor of 10. We will get there, I am sure. But we need some time. This year, Shell Hydrogen Corporation was founded. What is its task? Its task is to bring together research and development activities. It has a $120 million budget for that. One focus is on storage of hydrogen, of course, a very important problem. Then we will try to develop a catalytic partial oxidation (CPO) reactor for fuel cell cars and stationary electricity production. Does that mean you will be able to power fuel cell cars with gasoline? We believe that it represents an important bridge to a hydrogen economy because there is no infrastructure for hydrogen yet. The CPO reformer allows you to fuel your car with gasoline as you are now accustomed to doing. The reactor converts the gasoline on board the car to hydrogen, which feeds the fuel cell.
In the end, of course, you will use regeneratively produced hydrogen or methanol. But you cannot do this all at once. So you believe in the hydrogen economy? Hydrogen is the best secondary energy carrier for storing renewable energy. The problem with renewable energy is that it is not produced at times when and at places where you need it. So storage is the main problem, and one possible solution is hydrogen. Are fuel cells the propulsion method of the future? I am absolutely convinced that fuel cell technology will replace the internal combustion engine. Consider the efficiencies of modern gasoline or diesel engines or conventional power plants: You can still increase those efficiencies, but only very modestly. That is nothing compared with the almost 80% efficient chemical energy conversion achievable in fuel cells. With combustion engines we will always have high heat losses, and there, fuel cell technology offers a big advantage. But critics, such as the German Federal Environment Agency, Umweltbundesamt, say that it would make more economic and environmental sense to optimize conventional technology. We are now at a stage equivalent to when Berta Benz drove the first vehicle in 1890. So I think it is not fair to compare such an immature technology to a 100-year-old technology that has reached its limits. And [consider that] when there are 1 billion cars in China in the next decade, it will consume more oil than the United States. You must look at the dynamics of energy consumption that will make our globe go awry. In China, every two years, the equivalent of a new Japan is created in terms of economic power. Wealth is directly related to mobility—so these people will get mobile. So the 80-mpg, 3-liter car won't be enough to prevent the climate collapse? It will help, but we have to go further. We must reduce emissions further. And if you want a zeroemission vehicle or a near zero-emission vehicle, you must embark on [developing] a new technology. How about stationary power production? What role will fuel cells play, in your opinion? Hydrogen is going to revolutionize energy production. In a couple of years, we will have the first fuel cells in basements—small power plants that provide houses with electricity and heat and that feed the extra power into the grid. So in the end, we will have a completely changed energy supply structure. The customers will be consumers and producers at the same time—that is a revolutionary change. Is deregulation of the power market a chance for renewables? Yes and no. Yes, because I think deregulation enables a branding of power as a commodity. There are
people who only want "green" electricity. There are people who only want cheap current. Maybe there are people who only want nuclear power, technology freaks, or whatever. In Hamburg, since June, we have started the "newpower" project, which provides people with electricity produced only from renewables for an additional cost of about 9 Pfg per kilowatt hour. The market potential, however, is only something like 1%. This proportion grows, of course, with a decreasing price difference—and that is the drawback of deregulation. Deregulation will Deregulation will lead to price drops, and then relead to price drops, newables will be even less and then renewables competitive than they are today.
will be even less
What should be done to competitive than prevent this from happening? Utilities should be required they are today. by law to provide 1-2% of their electricity from renewable sources, whether they produce it themselves or buy it. In Germany, there is a lot of discussion about how fast nuclear power should be replaced. Is this the chance for the breakthrough of renewables? My opinion is this: The slower we get out of nuclear power the better for renewables. We need time. The German environment minister states just the opposite. He is wrong. You must understand mat the last chapter of nuclear power has been written. There are no new nuclear plants going to be built in Germany. It is a run-out process. We can argue about how long it will take—30 years, 35 years, or whatever. But one thing is clear: If we now replace nuclear power plants with conventional power plants, then those will be around for 50 more years! I would prefer that we take our time, and in 20-30 years, we might be able to replace some nuclear plants with renewables. We are not ready to do this now; we would lose the competition to oil, gas, and coal as well as imports. Therefore, I would suggest the following: there is no question that nuclear power produced by depreciated plants is the cheapest energy source. So why not use this power to push renewables? Why not put a tax on nuclear energy to support renewables? It doesn't make sense to turn off three nuclear power plants now and have to instead import nuclear power from less safe plants. That is not a strategy; that is a joke! Instead, you can build a bridge from nuclear to renewables by using cheap nuclear power to finance sustainable energy sources. That would really give renewables a good chance to finally replace nuclear power. Carola Hanisch is a freelance writer based in Freiburg, Germany.
DECEMBER 1, 1999 / ENVIRONMENTAL SCIENCE & TECHNOLOGY/ NEWS " 5 1 1 A
