Clean Energy’s Falling Prices and Expanding Markets Overshadow Challengesby Trevor Winnie
March 19, 2012
America’s divisive election year politics have once again turned energy into a wedge issue, with gas prices, pipelines, and clean technologies becoming mere talking points. In our latest Clean Energy Trends 2012 report, we cut through partisan bickering to find that one thing is clear: the global clean-energy industry is still on the rise – attracting investment, creating jobs, and replacing dirty energy sources at a frantic pace. In 2011 combined global revenue for the three major clean-energy sectors – solar photovoltaics (PV), wind power, and biofuels – surged by 31 percent over the prior year, reaching $246.1 billion. And according to Clean Edge research and analysis, these three sectors are expected to reach $385.8 billion by 2021.
Although the year will likely be remembered for Solyndra’s high-profile collapse, this single story did not reflect the vast expansion that was seen in the broader market. In the European Union, for example, nearly 70 percent of new electricity capacity added in 2011 came from renewables. While the accelerated price decline that spurred this growth was not entirely welcomed by manufacturers (who faced shrinking profit margins as a result), lower costs are key to the viability of clean-energy technologies. In a sense, Solyndra likely foreshadowed the future awaiting many other technology developers seeking commercialization: compete with low-cost competitors, or don’t compete at all.
Clean tech isn’t withering on the vine as some would proclaim, but instead is continuing its rapid expansion, witnessed by the growth of distributed and centralized renewables, green buildings, smart meters, hybrid electric vehicles, LED lighting, and a host of other clean-tech breakthroughs that are becoming increasingly ubiquitous.
Clean Energy Trends 2012 research highlights include:
- Wind power (new installation capital costs) is projected to expand from $71.5 billion in 2011, up from $60.5 billion the prior year, to $116.3 billion in 2021. Last year’s global wind power installations equaled 41.6 GW, the largest year for global installations on record. China remained the global leader in new installations for the fourth year in a row, installing more than 40 percent of all global wind turbines.
- Solar photovoltaics (including modules, system components, and installation) increased from $71.2 billion in 2010 to a record $91.6 billion in 2011. We project the market to continue to expand to $130.5 billion by 2021. These market numbers, while impressive, do not fully capture the extent of actual industry expansion. While total market revenues were up 29 percent, installations climbed more than 69 percent from 15.6 GW in 2010 to more than 26 GW worldwide last year. This reflects a more than 40 percent decline in crystalline module prices between 2010 and 2011.
- Biofuels (global production and wholesale pricing of ethanol and biodiesel) reached $83 billion in 2011, up from $56.4 billion the prior year, and are projected to grow to $139 billion by 2021. The continuing trend of rising biofuel prices, up 10 to 20 percent in 2011, is the result of higher costs for feedstock commodities – mainly sugar for ethanol and rapeseed and other vegetable oils for biodiesel. Between 2010 and 2011, global biofuels sales remained relatively flat, expanding to 27.9 billion gallons of ethanol and biodiesel production worldwide.
- U.S.-based venture capital investments in clean technologies increased from $5.1 billion in 2010 to $6.6 billion in 2011, an increase of 30 percent, marking a near-record year according to data provided by the Cleantech Group. Last year’s $6.6 billion, while slightly below 2008’s record-breaking $6.9 billion total, represented clean tech’s largest percentage of VC activity in the U.S. ever recorded, clocking in at 23.1 percent. At nearly a quarter of total VC activity in the U.S., the clean-tech sector has expanded more rapidly than any other venture category, up from just 1.2 percent of total venture activity a decade earlier.
The report also outlines five key trends that will impact clean-energy markets in the coming years:
1. The Few, The Proud, The Green: Military Leads Clean-Energy Deployment
As the world’s largest single consumer of energy, the U.S. Department of Defense is pushing forward with an aggressive clean-tech strategy to strengthen military energy security and eliminate the debilitating battlefield addiction to oil.
2. Japan Moves Toward Cleaner Post-Nuclear Future
Plans to increase nuclear’s share of electricity to 50 percent by 2030 disappeared after Japan’s earthquake-tsunami-Fukushima disaster. Now the country is changing course toward a future powered in much greater measure by renewable energy.
3. Deep Commercial Building Retrofits Reap Major Efficiency Savings
With buildings responsible for more than a third of energy use worldwide and accounting for up to 80 percent of carbon emissions in large urban environments, retrofitting the built environment has become priority number one for energy-efficiency advocates.
4. Waste-to-Resource Breakthroughs Attract Attention - and Investment
An army of emerging companies – promising to turn our trash into much needed low-carbon fuels, electricity, and specialty chemicals – is increasingly garnering notable financing rounds, strategic partnerships, and project development support, signaling that major innovation is on the horizon for waste recovery technology.
5. New Energy Storage Solutions Embolden the Grid
High-profile projects and innovative applications have begun to usher in a hopeful new era of energy storage, one that will allow the grid to absorb supply interruptions, integrate intermittent renewables on a massive scale, and diminish the need for costly peak power generation.
Trevor Winnie is Clean Edge's senior research analyst. He is involved in a range of activities, including preparation of reports, subscription products, and consulting projects. E-mail him at winnie[at]cleanedge[dot]com. The firm's latest publication, Clean Energy Trends 2012 can be downloaded free of charge.