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Renewable Energy's Investment Hockey Stick
Joel Makower, 6 Nov 05

Global investments in renewable energy seem to be growing faster than any of us thought. If current trends continue, we'll soon be seeing the hockey-stick-shaped growth curves that have become iconic shorthand in technology sectors for hyper-paced growth.

According to a report released today (Download - PDF) by the Renewable Energy Policy Network for the 21st Century, or REN21, global investment in renewable energy set a new record of $30 billion in 2004. That's a far, far bigger number than others have projected, such as the Cleantech Venture Network, which just ten days ago projected that investments in clean technology -- a broader category than just renewable energy -- would total $10 billion between 2005 and 2009.

(My firm, Clean Edge, projected earlier this year that markets for just three technologies -- solar photovoltaics (PV), wind power, and fuel cells -- would grow to more than $102 billion annually by 2014, but that measures purchases of these technologies, not investments in them.)

REN21 is remarkable not just for its large numbers. The report has an impressive pedigree: REN21 was sponsored by the German Federal Ministry for Economic Cooperation and Development and the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. Formally established in Copenhagen in June, REN21 is now supported by a steering committee of 11 governments, 5 intergovernmental organizations, 5 nongovernmental organizations, and several regional, local, and private organizations.

The report is one of the most thorough accountings I've seen of the state of renewables worldwide. According to its findings:

Renewable energy supplies 17 percent of the world's primary energy, counting traditional biomass, large hydropower, and "new" renewables (small hydro, modern biomass, wind, solar, geothermal, and biofuels). Traditional biomass, primarily for cooking and heating, represents about 9 percent and is growing slowly or even declining in some regions as biomass is used more efficiently or replaced by more modern energy forms. Large hydropower is slightly less than 6 percent and growing slowly, primarily in developing countries. New renewables are 2 percent and growing very rapidly in developed countries and in some developing countries.

The fastest growing energy technology in the world has been grid-connected solar PV, with total existing capacity increasing from 0.16 gigawatts (GW) at the start of 2000 to 1.8 GW by the end of 2004, for a 60 percent average annual growth rate during the five-year period.

During the same period, other renewable energy technologies grew rapidly as well, says REN21:

  • wind power: 28 percent
  • biodiesel: 25 percent
  • solar hot water/heating: 17 percent
  • off-grid solar PV: 17 percent
  • geothermal heat capacity: 13 percent
  • ethanol: 11 percent

These compare with annual growth rates of fossil fuel-based electric power capacity of typically 3-4 percent (higher in some developing countries), a 2 percent annual growth rate for large hydropower, and a 1.6 percent annual growth rate for nuclear capacity during the three-year period 2000-2002.

Renewable energy investments now come from a highly diverse range of public and private sources, says the report, "aided by technology standardization and growing acceptance and familiarity by financiers at all scales, from commercial finance of hundred-million-dollar wind farms to household-scale micro-financing." One recent investment trend is that large commercial banks and stodgy energy utilities are starting to notice renewable energy investment opportunities.

Examples of large banks that are "mainstreaming" renewable energy investments are HypoVereins Bank, Fortis, Dexia, Citigroup, ANZ Bank, Royal Bank of Canada, and Triodos Bank, all of which are very active in financing renewable energy. Investments by traditional utility companies, which historically as a group have been slow to consider renewables investments, are also becoming more "mainstreamed." Examples of utilities active in renewable energy include Electricité de France, Florida Power and Light (USA), Scottish Power, and Endesa (Spain).

All told, it's an upbeat and encouraging assessment that renewable energy around the world is being embraced by an audience far more important than environmentalists, technologists, or even high-ranking government leaders: the big-bucks investors capable of growing the kinds of large-scale, sustainable markets we'll need to create a renewable-energy future.

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Wow, that's encouraging!

But aren't you underestimating the real growth in non-renewables like coal-plants?
The US, China and India are building 850 new coal plants offsetting Kyoto reduction targets completely, *quintupling* the amount of CO2 that's supposed to be saved under Kyoto.

If you were to look at the real megawatt output of those new investments in renewables, I'm sure they pale with the new investments in non-renewables like coal.

Don't forget that solar makes up 0.08% of the U.S. energy portfolio. So a spectacular 20% increase in investments in solar still only comes down to a dissapointing total share of 0.096% of the entire portfolio! (The same holds for all other renewables, which make up less than 4% of the entire U.S. energy portfolio.)

Secondly, and related to this caution about total shares, I found a funny statistic a while ago: it's a statistic from BP, which is launching a major campaign to push it being "Beyond Petroleum" now. The stat shows BP's "beyond petroleum" investments in solar energy:

Hilarious">">Hilarious BP graph

Still, the sector grows and that's good. Does it grow fast enough to offset the effects of dangerous climate change? I really doubt it.

Posted by: Lorenzo on 6 Nov 05

I think you are confusing installed capacity and growth. The 20% growth means we installed 20% more new capacity than we installed the previous year. So from a base 100: 120, 144, 172, 206. A doubling in four years! Wind at 28% doubles in only three years.

Like most new technologies and manufacturing processes, prices go down a predictable percentage with every doubling of production - somewhere between 15 and 20% for wind and solar IIRC.

We have to keep our eyes on growth rather than absolute numbers. Since access to large amounts of capital was a limiting factor for wind farms, what I would like to see now is a list of those factors still limiting growth and what we can do about them.

Although obviously putting some of your retirement / 401(k) / RRSP if you have one in an organized fund seems like it is going to be an obvious move- a way to profit while doing well. I wonder if these stodgy bankers can be trusted to not mess this up?

Posted by: Daniel Haran on 6 Nov 05

"renewable energy around the world is being embraced by an audience far more important than environmentalists, technologists, or even high-ranking government leaders: the big-bucks investors"

- have to take issue with the 'far more important' part - importance is relative, but if it weren't for the environmentalists and the techies, the 'big-bucks investors' wouldn't have something worth investing in to begin with.

Posted by: Stephen Aichele on 6 Nov 05

Yes, I mixed up both. But I thought we ought to look at absolute numbers as well, to get a grip on reality from another angle. A doubling in solar 'installed capacity' in four years time looks much less spectacular when you look at what this means in absolute terms, in terms of the share of that capacity in the total energy portfolio.

When it comes to CO2 emissions, the spectacular 20% annual growth in solar capacity is immediately offset by the projected meagre 1.5% growth in coal consumption. That is so because coal has a 51% share in the U.S. energy portfolio, while solar has a micro-share of 0.08%.

In short, if we don't look at real terms and absolute numbers, we might encounter some very ugly surprises. If we do look at them, we understand that the current spectacular growth which the article refers to, is not nearly enough to make a nano-difference in the fight against world threatening climate change.

Graph of a conservative projection of the share of renewables in the total energy portfolio (coal share grows much faster):

Posted by: Lorenzo on 6 Nov 05

Looking at absolute numbers can be pretty depressing. The whole sector looks puny in comparison with the expected demand.

Consider DOE's energy predictions have historically been way off base. I don't think the DOE policy wonks ever read things like The Kaya Identity, and they certainly didn't factor in low-flow showerheads in their 70's predictions. We can help invalidate them by focusing on conservation.

Take a look at this data on wind energy, in particular the last graph on that page. That to me says it's unstoppable.

Guaranteed prices, incremental additions, and shorter lead times: that's the current value proposition for wind. From what I can gather, the price of wind energy looks set to be lower than coal long before 2025. To predict that coal use would increase between 2020-2025 is most bizarre- at most I'd expect it to flatline.

Posted by: Daniel Haran on 6 Nov 05

Have any of you seen this article? very interesting prospects...,3605,1627424,00.html

Posted by: Ram on 7 Nov 05

Increases in coal capacity should be mandated at zero or less. As if. To project and plan for more than that is just saying that GW is fine and guaranteed.

Posted by: t on 7 Nov 05

Not everybody's cup of tea, but Howard Kunstler presented a piece entitled "Renewable Energy: Too Little, Too Late" at the PetroCollapse Conference.
Even though I think it's never too late, he does raise some good points.

Posted by: Lorenzo on 7 Nov 05

Currently there are only a few forms of baseline energy generation. Hydro. Nuke. Coal. Gas.

Oil no longer is one and gas is likely to be phased out if it keeps getting more expensive.

Hydro is a decaying industry.

So all you have left are nuke and coal.

Now china is building a new coal plant every 14 days and a new nuke plant every month or more now. India is also builing new plants.

America isnt expanding like those two are but likely a hundred or so new coal plants will come online this decade some to replace aging decrepid old coal plants and some to expand base cap. Nuke plants... we expect 10-40 in the next decade depending on how many rolling blackouts freak americans out;/ And how new regulations and new designs streamline and cost reduce the nuke plants.

In the end by 2025 while yes wind will do its part and likel contribute 5-15% coal will be 50 or more and nuke will be most all of the rest. AND more importantly even with efficeincy drives the total cap needed will be alot more then today.

Now given how important coal is and how much of it will be used this century thats why our gov is trying desperatly to improve eff and such with coal power plants.

Oh and no we arnt gona stop global warming and certainly not climate change this side of 2050 BUT believe it or not bush has started the ball rolling with hydrogen of all things and the boons are already comming.

A wind farm connected to a suped up hydrogen generator and a stationary fuel cell power station can then become a baseline power plant. And THEN we can talk about gargantuan sea based windfarms generating 25-50% or more of our power needs.

Posted by: wintermane on 7 Nov 05

Here in the UK renewable energy is starting to lose the argument to nuclear. The problem as I see it is that it's just easier for politicians to see the role nuclear plays - RE is too complex. I don't see RE generating 25-30% of power (not just electricity, note!) unless it's marketed better and nuclear doesn't take off.

Posted by: John Kazer on 10 Nov 05

The main holdup for investments has likely been alot of companies are in endgame and wont invest untill they sell off thier old bussinesses.

Oil companies selling off oilfields and refineries to bigger oil companies.

Car companies selling off factroies and workers then buying new in china.

Power companies selling off old power plants and investing outside the us even.

Some of that is already happening and as it excellerates so too will investments in alternative and renewable energy.

Posted by: wintermane on 10 Nov 05



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