theReactor

July 14th, 2011

Developing Countries, Led by China, Surpass US and Europe in Renewable Energy Investments

By Kent Harrington | Comments (4)
Last year, global investors pumped a record $211 billion into green energy as the world continued to rebound economically from the receding financial crisis, which was one-third more than in 2009 and 540% above 2004. The last six years may indeed represent a tipping-point in support for green energy. Wind farms in China and small-scale solar panels on European rooftops were largely responsible for last year’s 32% rise in worldwide green energy investments, according to a press release for a UN renewable energy trends report issued by the (UNEP) and the Frankfurt School Collaborating Centre for Climate and Sustainable Energy Finance.

China leads green investments

A long-held preconception was also easily demolished: developing economies overtook developed ones with $72 billion invested vs. $70 billion, which contrasts with 2004 when the ratio was a skewed 1/4 to 3/4. Of course, that was long before the global recession, which is still stunting growth in the United States, Europe, and Japan. China, with $48.9 billion in green energy investment (up 28%), was the world leader in 2010. Pulled along in the China and global updraft, smaller parts of the emerging world also showed strong growth:
  • South and Central America: up 39% to $13.1 billion;
  • Middle East and Africa: up 104% to $5 billion;
  • India: up 25% to $3.8 billion, and
  • Asian developing countries, excluding China and India: up 31% to $4 billion.
“The investment activity in the developing world is not only leading to innovations in renewable energy technologies. Furthermore, it will open up new markets as first-mover investors are facilitating a range of new business models and support entrepreneurship in the developing world,” explains Udo Steffens, President and of the Frankfurt School of Finance & Management. Further predictable drops in costs for solar, wind and other technologies lie ahead, the report says, posing a growing threat to the dominance of fossil-fuel generation sources in the next few years.

Increased government R&D a very positive trend

Another positive development for long-term clean energy was increased government research and development, climbing to $5 billion, an increase of more than 120%. This goes hand-in-hand as governments begin to set serious long-term energy goals. In the United States, while the government dithers over an energy policy, growth has been noticeably affected. Mr. Steiner, UN Under-Secretary-General and UNEP Executive Director, said: “The continuing growth in this core segment of the Green Economy is not happening by chance. The combination of government target-setting, policy support, and stimulus funds is underpinning the renewable industry’s rise and bringing the much needed transformation of our global energy system within reach.’’ Throughout the last decade, wind was the most mature renewable energy technology and enjoyed an unassailable lead over rival power sources. Globally, wind turbine prices have fallen 18% per megawatt in the last two years, reflecting fierce competition in the supply chain. PV modules per megawatt have fallen 60% since mid-2008, making solar power far more competitive in a number of sunny countries. Prices for polysilicon, the basic material used to make PV cells, will continue to drop as Asia’s largest producers flood the market. With prices as high as $450 per kg in 2008, prices plunged to $53.40 per kg, their lowest level in more than six years in June, from $78.90 in March. It’s a strategy that Chinese solar panel makers have used to capture more than half the growing worldwide market for solar panels.

Areas of negative growth remain

The report points out that not all areas enjoyed positive growth in 2010: there was a decline of 22% to $35.2 billion in new large-scale renewable energy in Europe in 2010. But this was more than made up for by a surge in small-scale project installation, predominantly rooftop solar. Corporate R&D, deployment and private equity fund investment dropped off in 2010, the former dropped 12% to $3.3 billion, while the latter fell off 1% to $3.1 billion, starting a recent round of consolidation in the green energy sector. In another strong trend, many countries were rushing to make their PV tariffs less generous. Indeed, Spain and the Czech Republic both moved to make retroactive cuts in feed-in tariff levels for already-operating projects, which “damaged investor confidence,” the report says. Other governments, such as those of Germany and Italy, announced reductions in tariffs for new projects, which are logical steps reflecting sharp falls in technology costs. Low natural gas prices, unanticipated four years ago—which were between $3 and $5 per million BTU for almost all of 2010-- also hurt the growth of green energy. The price of natural gas was far less than it was in much of the mid-2000s, before it peaked at $13 in 2008. “This gave generators in the US, Europe, and elsewhere an incentive to build more gas-fired power stations,” says the report. With new natural gas fields coming online all over the world, this trend will continue to cause utilities to juggle asset portfolios well into the foreseeable future.

Do you feel the world is truly at a green energy "tipping point?"

Photo: wind trubines in sunset: istockphoto Photo: solar cell- DOE, PD wikicommons Photo: hands hold solar cell- Ersol, wikicommons Photo: roof top solar w plants- KVDP, PD wikicommons Photo: Obama and solar panels- WH Photographer Jason Lee, Wikicommons Photo: desert solar array, USAF, wikicommons
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4 Responses to “Developing Countries, Led by China, Surpass US and Europe in Renewable Energy Investments”

  1. Robert S says:

    While the fact that developing countries spent more on renewable energy than developing countries is a milestone, I think it might be more relevant to compare renewable construction to total – those countries are just spending a lot more on energy in general. Cue the often repeated 1 coal power plant per day in China quote.

    I am more interested with the Central and South America number. That is sizable bump in areas with semi-established energy markets. I would be interested to see how much that is influenced by Brazilian sugar cane projects.

    I was listening to a piece on the radio the other day and they quoted that it can cost as much as 40% more to install a home PV system in the US compared to Germany – almost entirely from permitting and other red tape costs. Until it is no longer "weird" (i.e. requiring lots of difficult permitting or being outright prohibited by local governments) to want to produce your own power, use what land you have for something other than mowed lawn, or practice any kind of waste water management on your property it is difficult to see us being at a tipping point. We may be getting closer, but still a way from universal acceptance.

  2. harrington.kent says:

    Thanks for writing.

    Daniel Nocera, MIT chemistry/ energy prof, who currently has a development deal with India's Tata group for a cutting edge energy solution, frequently makes the "power plant a day" comment, illustrating that unless someone creates a game-changing technology (and he's hoping it's his), particularly for the developing world, game over. That solving the problem is very different in mature economies with legacy systems and 3rd world countries which barely have a grid or an energy infrastructure. But you know a lot more about that than I do.

    Ultimately, the world has to untangle the water/energy/food gordian knot– which you allude to a lot. Just look at the collision between energy and water in drought stricken Texas. They're rapidly adding wells, building infrastructure (pipelines etc) and if the drought continues much longer, something has to give.

    I just think governments have started to move in the right direction– regardless of the internal and external impediments.

  3. Robert S says:

    Agreed. Funny you mention the Texas drought…that is my new location. I get to experience it firsthand. We had a couple of sprinkles today, not enough to help much but sounded like the most they have had in a while.

  4. "While the fact that developing countries spent more on renewable energy than developing countries is a milestone"

    AGREED!

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