INDUSTRY I ANALYSIS
However, this increase was mostly due to an increase in ethanol and biodiesel prices. 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 from 27.2 billion gallons to 27.9 billion gallons of ethanol and biodiesel production worldwide. Together, we project these three benchmark technologies, which totalled $188.1 billion in 2010 and grew 31 percent to $246.1 billion in 2011, to grow to $385.8 billion over the next decade.
Solar realities
As noted above, the scale up of renewables is apparent in the rapidly declining costs and resulting increase in deployment of a host of clean technologies, most notably solar PV. Solar cells, which are mostly made from silicon (the same basic material used in manufacturing computer chips), are now exhibiting economies of scale seen in earlier high-tech revolutions such as personal computers and cell phones.
Between 2007 and 2011, solar PV total system costs (including PV modules, balance of system components, and installation) dropped by more than half, with complete systems being installed globally in 2011 at an average $3.47 a peak watt or 14 to 23 cents per kWh. Contrary to Solyndra’s critics who say the industry isn’t ready for prime time, solar is, in fact, becoming increasingly cost-competitive (making it difficult for high-cost providers like Solyndra to survive).
Clean Edge historical data and projections (see table 1) show that solar PV is on a steep price decline that is bringing it into cost parity at the retail level (for residential, commercial, and industrial applications), and increasingly competitive at utility scale, far sooner than many had projected.
At the retail level (the customer side of the electric meter), where solar is most competitive, the U.S. shows a dynamic and rapidly changing landscape. In less than a decade, Clean Edge projects that in 13 states (Alaska, California, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, New Hampshire, New Mexico, New York, Rhode Island, and Vermont) solar PV will be cost-competitive at the residential level without any subsidy requirements. And solar will become increasingly attractive with a likely explosion in a new breed of power providers (such as solar installers/financiers SolarCity, SunEdison, and SunRun) providing residential, commercial, and industrial customers with a hedge against fluctuating retail electricity rates tied to volatile prices of fossil fuels.
Similar cost breakthroughs have already occurred in much of the wind industry. New wind farms can produce electricity in the 5-8 cents per kWh range, making it competitive today with the cost of fossil fuel electricity generation in many markets.
No slow down for investment In 2011, 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
Table 2 Global clean energy market size
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.
Another view on the markets comes from tracking the performance of publicly traded clean-energy stocks. Clean Edge, along with NASDAQ, produces three indexes which act as transparent and liquid benchmarks for the sector: CELS, which tracks U.S.-listed clean-energy companies; QWND, which tracks global wind power companies; and QGRD, which looks at smart grid and grid infrastructure companies.
These Clean Edge indexes have been extremely volatile, soaring 75, 67, and 34 percent respectively in 2007; falling 64, 54, and 43 percent respectively in 2008; outperforming most market indicators once again in 2009, up 44, 38, and 49 percent respectively, and mixed in 2010, up two percent, down 35 percent, and essentially flat (down 0.4 percent) for the year. 2011 demonstrated the continued decline of most clean-tech indexes, with retail investors perhaps questioning the relative lack of public market exit opportunities and an economic environment with severe government budget shortfalls. CELS, QWND, and QGRD were down 41, 30.4, and 21.6 percent respectively
in 2011, against a relatively flat S&P 500. As of February 15, 2012, however, all three indexes were once again outperforming the S&P, with CELS, QWND, and QGRD up 16.7, 7.4, and 13.2 percent for the year compared to the S&P’s 6.8 percent, demonstrating once again the sharp rises and falls that we’ve come to expect from this emerging investment sector.
The future is cleaner
There’s little doubt that the future of energy will be cleaner. The shift from carbon-intensive energy sources like wood, coal, and oil to nuclear, and now natural gas and renewables, is well underway. For much of the developed world, and for developing nations leapfrogging the West, the future looks increasingly like it will be built off of a mix of energy efficiency, renewables, the electrification of transport, and lower carbon fuels like natural gas. In 2011, for example, nearly 70 percent of new electricity capacity in the European Union came from renewables. Solar PV and wind power accounted for 47 percent and 21 percent of new additions respectively. Add in natural gas, which made up 22 percent of new capacity installations in Europe, and these three sources are proving the energy sources of choice,
Issue III 2012 I
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