Renewable Reserves: Testing the concept for the US and Brazil

A report by Bloomberg New Energy Finance, commissioned by BP

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Executive Summary

With the growing importance of renewable energy in the global energy mix, it is increasingly common to compare renewable and fossil fuel energy sources. Yet many comparisons only consider the capacity and output of renewables today, rather than their potential contribution over future decades. It is also often difficult to compare renewables projects with each other on a clear and transparent basis. As a basis for comparison across energy systems, this report describes the concept of renewable reserves and the result of a simple renewable reserves classification methodology as applied to the wind and bioenergy sectors in the US and Brazil.

In the fossil fuel industries, a well-established methodology has been developed over many decades to assess projects based on agreed criteria. A company’s fossil fuel reserves, described using specific terms such as Proved and Probable reserves, are good indicators of its future earnings, and correlate with share prices.

While on a resource level renewable energy sources themselves are infinitely replenished and thus quite different from finite geological energy sources, at a project level it is possible to consider a renewable project as representing a future cumulative energy output. This output is not infinite, but bounded by technological and economic constraints in a way that has significant parallels with fossil energy projects. By considering a project’s commercial status within these constraints, it is possible to evaluate the cumulative energy output over its lifetime, and to classify this output as a reserve. In this way, different energy sources can be compared more easily, and renewable energy’s contribution can be more directly compared to that of fossil fuels.

Renewable energy from existing projects, when seen through this frame, is perhaps larger than expected. In the US, thanks in part to high rates of wind and biofuels deployment, the ‘commercial’ renewable reserves of these two sectors are about one seventh the size of the equivalent combined oil and gas reserves (note that bioenergy reserves include biomass and waste-to-energy sources). In Brazil, bioenergy is particularly strong, again because of biofuels, and represents reserves equivalent to over two fifths of the country’s Proved oil and gas reserves. The Brazilian wind sector, though small today, is expecting rapid capacity growth in coming years, shown by the large reserves attributed to ‘potentially commercial’ projects .

Many further factors must be included in the analysis under a full reserves accounting methodology. However, the proof-of-principle described here, and the estimates of renewable reserves derived from it, indicate the potential value of agreeing on a renewable reserves convention. This value will be realised by companies, investors and governments, all of which will be able to make investment and policy plans more effectively. This report concludes with a number of suggestions for further action that will be required to realise this ambition.

The Renewable Reserves Initiative, a group formed of industry stakeholders, is currently working to develop a methodology to enable the evaluation of Renewable Reserves using a framework consistent with the UNFC-2009 methodology. This study, commissioned by BP, is intended to complement the work of the RRI by demonstrating the concept for wind and bioenergy resources in the US and Brazil. Note that the approach used in this study should not be taken as indicative of the final approach that will be used in the Renewables Specification, or necessarily as representative of BP’s view of that methodology

About Bloomberg New Energy Finance

Bloomberg New Energy Finance (BNEF) is an industry research firm focused on helping energy professionals generate opportunities. With a team of 200 experts spread across six continents, BNEF provides independent analysis and insight, enabling decision-makers to navigate change in an evolving energy economy.
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