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Alternative energy: prospects and pitfalls
07/11/2006. Source:Israel Venture Capital Journal (IVCJ).
 Alternative energy technologies are increasingly being sought out as oil prices have surged. But which technologies are likely to be successful in meeting a significant share of our energy needs? Professor Shmuel Ben-Yaakov, head of the Power Electronics Lab at Ben-Gurion University of the Negev (BGU) and founder of Green Power Technologies, discusses the various alternative technologies with the IVCJ’s Leora Eren Frucht and provides his evaluation of the sector.
Remember how the cost of personal computers plummeted as more and more consumers bought them, driving prices down? Shmuel Ben-Yaakov believes we may soon see that same type of scenario affecting alternative energy technologies. "There are many factors helping the alternative energy industry. Number one is the rise in oil prices," says Ben-Yaakov. "Number two is the fact that in technology there is a ‘magic wheel.’ Once the wheel starts turning, prices drop. There is a very large reduction in the cost of components as the volume goes up. Look at computers and consumer electronic goods: It’s almost unbelievable how cheap they are, and it’s because they’re produced in very large volumes." Rising fuel prices, a growing reluctance to depend so heavily on oil-producing countries, as well as concern about the environment, may all cause this wheel to start turning soon, says Ben- Yaakov.
The Ben-Gurion University professor cites three main alternative – or what he prefers to call ‘non-exhaustible’ – sources of energy: geologicallyderived (such as geothermal, hydroelectric, waves, and tides), wind and solar energy. Of these, he notes that geothermal, hydroelectric and wind energy already cost less than fossil fuels.
Geothermal energy – relying on heat emanating from the earth’s depth – and hydroelectric, derived from waterfalls, are both "very good businesses," says Ben-Yaakov. Unfortunately, only those specific places on earth that are blessed with these resources can reap their benefits, so this energy source stops short of providing a global solution.
"Generating electricity from the wind is also economical. It’s cheaper and cleaner than fossil fuel," notes Ben-Yaakov. "Its drawback is that it requires lots of space. Sometimes, aesthetic objections are raised as well." And, he notes, there’s a very practical disadvantage: "You get energy when there’s wind. You don’t get energy when you need it – at peak hours."
Despite these limitations, huge wind farms have been built in northern California, all over Scandinavia, as well as in northern Israel. And worldwide use of wind power is on the rise. Ben-Yaakov distinguishes between isolated, self-contained, so-called ‘stand alone’ wind farms, which have little impact on the economy, and those that are connected to the main electricity grid. The latter, he says, do make a real contribution to lowering dependence on fossil fuels. To date, no other form of alternative energy undercuts the price of oil. But Ben-Yaakov cautions that in evaluating the cost-effectiveness of a technology, one has to look at more than the bottom line.
"The economy is not the only aspect to be considered. Countries concerned about the environment are ready to promote the use of clean energy – even if it costs more. And if you look at the long term cost, in a global perspective, it is more economical to prevent CO2 pollution than to try to repair the damage after the fact," he notes. "It’s a good investment." Ben-Yaakov likens this approach to the inclusion of catalytic converters in cars. "They aren’t necessary for running the car, but they have become mandatory because of environmental concerns.
"The drive for a clean environment is going to lead more and more countries to subsidize alternative energy," says Ben-Yaakov. These considerations are already boosting the use of one technology: solar energy panels, also known as photovoltaic (PV) cells, on rooftops.
Like wind generators, this technology is sometimes used as a local solution: to generate electricity in an isolated area in the absence of power lines. But this, too, does nothing to solve the global or even national problem of energy, notes Ben- Yaakov. However, when PV cells are used to generate power that is then channeled into the main electricity grid, it can have an impact on a country’s overall energy consumption, says Ben- Yaakov. This is, in his eyes, the most promising use of solar energy today.
Currently, Germany is the world leader in promoting this technology. Ben-Yaakov explains how it works: "A person in a German village has photovoltaic cells on his roof, as well as a solar inverter that transforms the power from DC (direct current) to AC (alternating current), and this is connected to the main power line. The individual doesn’t benefit directly from the energy collected on his rooftop. That energy is stored in the main power source. Each individual and institution that installs such systems reduces the use of fossil fuels. The power plant needs less coal or oil to generate energy because part of it is being provided by solar energy."
This model has several additional benefits, notes Ben-Yaakov. The widespread use of PV cells could enable electric companies to spend considerably less on infrastructure. An electric company must provide power for peak rather than average usage. That requires a huge investment in infrastructure that is not even used most of the time. Solar energy has the advantage of providing the most energy in the middle of the day – at the same time as peak electricity usage. "If you have enough PV panel installations, solar energy can provide the additional power needed during peak usage, and the electricity company need not invest as much in infrastructure."
Another advantage of PV technology is that anyone can use it. Ben-Yaakov says, "You don’t need a major company to set up an installation in some large area – as in the case of wind generators, for instance. Each person can contribute to a clean environment by choosing to install a PV cell and inverter on his or her rooftop."
A typical home PV rooftop system provides 3 - 5 kilowatts of electricity, which is the equivalent of what a home uses, says Ben-Yaakov. Such a system costs approximately $5,000 to $7,000 to install. So it takes a long time to pay for itself. To make it more appealing, governments provide subsidies to cover part of the cost of installing the system. Another way is to pay for the energy that a PV-panel-equipped household supplies to the electricity company.
The sunnier the location, the more economical the technology becomes. Spain is about to embark on such a program and it should be a great success there, predicts Ben-Yaakov. It could be adapted in much of North America too.
Notably, Israel – blessed with an abundance of sun – has done little to encourage the use of PV cells. "In general, the PV technology is spreading like wildfire," says Ben-Yaakov. "In the last few years there’s been a 30 percent increase in use of this technology worldwide. There is already a world shortage of PV cells, since manufacturers can’t keep up with the growing demand."
Ben-Yaakov sees less promise in some of the other much-touted alternative energy sources. Wave energy – which utilizes the difference in high tide and low tide to generate electricity – is limited to very particular geographic areas that are large, can be enclosed, and have the appropriate tides. Fusion – which essentially is an imitation of the sun – is "still in its infancy."
Enthusiasm for cars run by fuel cells, fed by hydrogen – is now "cooling down," says Ben- Yaakov, with the realization that hydrogen cylinders – which must be stored at very high pressure – are very dangerous. And since the hydrogen must be generated from electricity, it is not really an alternative energy resource, adds Ben-Yaakov.
Certain other forms of solar energy, including the Israeli-pioneered solar pond method, have proven to be unfeasible.
Biomass – a type of solar energy – is now being used successfully in Brazil. Fuel is produced from trees and then used in cars. But this solution is limited to countries with the right climate and geographic features.
So is the PV technology the ideal global energy solution? "Not yet," says Ben-Yaakov. "Even if many households installed PV cells on their rooftops, we would see, at most, a 20 percent reduction in our dependence on fossil fuels." On the other hand, Ben-Yaakov notes that "even a one percent reduction in the use of fossil fuels can save a huge sum of money. And you’re contributing to a cleaner environment. So it does make a difference."
What would make an even greater difference is improved technology, he says. "At best, only 20 percent of the energy hitting the solar panel can now be channeled into electricity. And this is without taking into account the additional loss of 5 to 10 percent that is incurred when converting from DC to AC. In other words, the efficiency of the process is very poor.
"One reason for this is that the present solar cells use only a very small portion of the solar spectrum. There is a lot to be done to improve the technology of PV cells."
Another key to making the system more successful – this is Ben-Yaakov’s own field – is in power conversion, that is, improving the efficiency and reliability of the inverter systems.
Israel, he notes, doesn’t have big solar cell fabrication plants, but there are several start-up companies working in both these fields: developing more efficient PV cells (some, from materials other than silicon), and extending the life of inverters. Unfortunately, he says, the government and funding agencies in Israel are cool towards energy technologies in general. "Ministries and government granting agencies don’t look upon energy as an industry to cultivate in Israel. They prefer Internet and computer communications rather than basic industry. I think this is the wrong approach. A country needs old-fashioned, long range basic industry. There are very good people in Israel and many good ideas. Energy is an industry that doesn’t require natural resources – just brainpower.
"I can say from first hand experience that whenever I submit proposals in Israel in the area of energy in general, I’m told ‘this is not exciting.’ But it is exciting, and, in fact, the US and many countries in Europe recognize it as an important part of the economy and are investing in it, and supporting it. So I think this attitude has to change in Israel."
Ben-Yaakov believes Israel already missed the boat in one area of alternative energy in which it was a world leader: the use of solar water boilers on rooftops throughout the country.
"We could have made a big industry out of this since we were the first to use it so widely. We could have swamped the world with systems like this. Only now, after so many years, some Israeli companies are starting to sell abroad. But now, it’s too late: other countries know about the technology and are doing it on their own."
Israel still lags behind many western countries in both the use of PV cells and in government support of energy research. Ben-Yaakov hopes the government wakes up soon. "All expectations are that it won’t take long before solar energy from PV cells becomes competitive with fossil fuels. The question is: Will it be two years or five? There is still time for Israel to do a lot."
This article appeared in the Israel Venture Capital & Private Equity Journal (IVCJ). IVC Research Center publishes the Israel Venture Capital & Private Equity Journal, a quarterly review of trends and developments in the Israeli-related venture capital industry. IVCJ, distributed worldwide, is dedicated to provide wide-range coverage of Israel's venture capital industry. For more information please visit www.ivc-online.com
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