Five More Winners of the Clean Energy Race
Tom Konrad CFA
The Pew Charitable Trusts
just released the 2011 edition of their report, "Who's Winning the
Clean Energy Race?"
This is the second year I've written
about their findings, and I wonder what the question really
means. In particular,
- Who are the competitors? (Pew looks at countries)
- How do we judge the winner? (Pew looks at total investment)
And the Winners Are...
#5 Largest Investment Sector:
Solar manufacturing stocks were lousy investments in 2011.
That was mainly a consequence of rapidly falling solar module
prices. Those same falling prices led to a boom in solar
deployments. Solar attracted more than half of all Clean
Energy investments in 2011, at $128 billion, up 44% from 2010.
Solar deployment was up 54%, to 29.7 GW in 2011. This was particularly notable in Italy, where solar has hit grid parity. Grid parity means that power from solar panels now costs the same as grid electricity, and is a consequence of Italy's high electricity prices and good solar resource. Italy added almost 8GW of distributed photovoltaic capacity, more than half of all distributed capacity added in 2011. 8GW of solar is about the same capacity as six large nuclear reactors, and (due to lower capacity factors) produces almost as much energy as two such reactors.
Italy's rapid solar deployment in the midst of a financial crisis should finally prove that solar can scale as quickly as any traditional electricity generation technology.
Solar investments also surged in the United States (where developers rushed to take advantage of the expiring incentives, and Japan, in the wake of the Fukushima nuclear disaster.
#4 Most Rapid Transition Towards a Clean Energy Economy: ItalyThe ultimate goal of the Clean Energy Race is to transition the world economy off its unhealthy and resource-constrained dependence on fossil fuels to a sustainable economy based on the efficient use of renewable resources. To measure progress towards that goal, we need to evaluate not total investment, but rather how significant the investment is relative to a country's economy.
By this measure, Italy is the clear winner. Italy grew its
investments in clean energy at a compound annual rate of 89% over
the past five years, producing 24-fold growth over that period,
and clean energy investment now accounts for 1.58% of the
For skeptics who worry that Italy is wasting money on clean
energy at a time it can least afford to, it's important to note
that solar, which accounts for virtually all Italian investments
in Clean Energy, has reached grid parity in Italy. In other
words, Italian solar investments are profitable investments.
Italian solar power also reduces future imports of natural gas to
produce electricity, improving the long term balance of trade in a
country with too much debt.
#3 Sector Finally Getting Some Respect: Efficiency
Energy Efficiency has long been the under-appreciated but
hardworking sibling in the Clean Energy family. Energy
Efficiency is far more cost effective than renewable (or even
conventional) energy generation, and has the capacity to meet at
least half of our future energy needs.
In addition, the arguments that Clean Energy creates jobs are the strongest (and the criticisms the weakest) for Energy Efficiency. Those who argue that Clean Energy will destroy jobs base their arguments on the relatively high costs of some clean technologies relative to conventional energy. While these arguments are weakening as Solar and Wind deployment gets cheaper, they have never been true for Energy Efficiency, which has always been cheaper than coal.
Efficiency is getting respect in the sense that Venture Capital and Private Equity(VC/PE), are increasingly flowing to the sector. In 2011, the energy efficiency and other low carbon technologies accounted for 40% ($3.6 Billion) of VC/PE investment. With luck, other types of investment will follow (as they often do) where VC/PE investment leads.
#2 Economic Winner: Energy Consumers
The most notable change in Clean Energy during 2011 were the
rapid price drops. With Wind and especially Solar power
cheaper, the big winners are Clean Energy consumers. As
discussed above, Italians are already saving money by investing in
solar to displace electricity from the grid.
World Clean Power capacity additions in 2011 were 83.5 GW, 59%
more than in 2010, at a cost of $141 billion, up only 12% from
2010 levels. In other words, we're getting a lot more energy
by only spending a little more. The $59 billion dollars
extra that the same amount of capacity would have cost at 2010
prices is pure gain for consumers.
#1 Winner of the Clean Energy Race: Our Children
At some level, it's not important which country invests the most
in Clean Energy, which sector comes out ahead, which country is
moving most quickly towards sustainability, or even who benefits
the most economically.
What is important is that we make the transition as quickly as
possible, so that fewer resources are wasted digging stuff out of
the ground and burning it, scarring the landscape, polluting the
air, and messing with our planet's delicate ecological
With investments in Clean Energy we get what we pay for.
The up-front cost has often been more (although that's rapidly
changing), but that's typically the whole cost. With fossil
fuel investments, we've long been getting more than we paid for,
but now the difference is coming back in the form of deferred,
hidden costs. Our children and our children's children will
be paying these costs in the form of depleted resources and a less
hospitable (if not downright hostile) environment for generations
We're even paying for our previous use of fossil fuels
today. This mild winter may seem like less of a cost than a
benefit of Global Warming (unless you are a skier or a maple
syrup producer), but any disruption of the natural cycle
creates costs far beyond the immediate effects. Allergy
sufferers are already feeling the effects, and the mild
winter was even more of a boon
to insects than it was to us.
If the Clean Energy Race makes everyone run faster, we all
win. Except maybe the bugs.