Renewable energy has come of age. Today, it’s a business imperative and personal prerogative; solar panels appear on homes and offices, biomass plants power factories and hospitals, and wind turbines are now a common sight.
Governments are setting carbon cutting targets and converting to green power. Money is being spent and earned in an industry which, just four decades ago, was considered the remit of hippies and eccentrics.
The convergence of culture, politics and science has meant renewable energy is now a global term, with the past decade in particular seeing it move from adolescence into adulthood. For those same 10 years, we have been publishing our quarterly RECAI, tracking which nations have attracted significant clean energy investment and successfully incentivized deployment. But it is important to remember that the foundations of this industry were laid more than four decades ago, and it is in this context we consider what has changed the global landscape, which nations have gained and lost, and why?
If you were reading this in 1973, wind turbines and solar panels are futuristic dreams and the word “renewable” has no significance. Cheap and plentiful oil rules the planet enables a post-war industrial boom. But things are about to change, all thanks to politics …
Ironically, war is the route to a greener world. Following conflict in the Middle East and the OPEC oil embargo, oil prices rocket by 70%. “No gas” signs at petrol pumps across Britain and the US bring home the scary reality of the West’s over-reliance on a small group of oil-producing nations.
Although there is a nascent environmental movement, it’s the oil crisis that suddenly galvanizes the world into action, with economic imperative driving more developed nations to look for fossil fuel alternatives. A definite shift in culture has begun.
With Denmark leading the way, the US and Europe begin deploying significant volumes of wind power capacity. The sector starts to see the first utility-scale renewable energy projects, laying the foundations of the industry we have today.
The 1990s introduce a new phrase: the “greenhouse effect”, first used by the Intergovernmental Panel on Climate Change in its first assessment report, which asserted that human activity is damaging the atmosphere and resulting in climate change.
Toward the end of the decade, politicians and businesspeople draft the Kyoto Protocol, the 1997 international agreement setting out multilateral plans to cut global carbon emissions.
Just as our music habits morphs from listening to chunky cassette tapes to CDs, our appetite for renewable energy also starts to change, with demand for more sophisticated, efficient products. Solar PV technology is moving from satellites and spacecraft to the factory floor, and for the first time people are talking about energy saving. Green power reaches a milestone in 1999, as solar installations reach the 1GW mark. In context, however, today that figure is a huge 100GW.
“At the end of the 1990s, onshore wind was becoming more familiar across Europe and the US, and we started to see MW-scale turbines. Then no one would have believed that, in only a decade and a half, the solar sector would be worth nearly US$80b a year.”
The new millennium starts with warnings about the “Y2K” computer bug. But at the same time as predicting the end of the digital world as we know it, suddenly climate change is on everyone’s lips, and polar bears and melting ice caps trigger talk about renewable energy.
The RECAI era begins...
The RECAI launches in February 2003, covering 15 countries, with Spain at the top of the index. Today, Spain no longer ranks in the top 10 and the index now tracks 40 countries across six continents. It has become a chronicle of the changes – the good, the bad and the ugly – that have completely redrawn the global renewables map over the last decade.
Since then, clean energy has become an economic sector in its own right and technological advancements and global expansion have created new, dedicated value chains.
And it is an economic sector with a healthy price tag ...
2012’s global annual clean energy investment of US$269b represented a five-fold increase on 2004, with Asia and Oceania the only regions to see continuous growth during this period; in 2012, they accounted for 42% of the global total.
This is mainly thanks to China, which entered our index in December 2004, in 19th place. Our narrative– discerningly accurate if not somewhat understated – commented “China is poised to play an increasingly significant role in world renewable energy markets.”
While China is now realigned to second place behind the US after a three-year reign at the top of the index– with our revised methodology now reflecting high barriers to entry for external investors – proactive policy measures and unprecedented expansion have made it a cornerstone of the global renewables market.
Rapidly falling technology costs have also helped this investment surge; since 2008 average wind turbine prices have fallen 29%. Solar PV prices have fallen 80% in the same period and 20% in 2012 alone.
The RECAI has chronicled policymakers’ struggle to implement stable, transparent measures supporting renewables deployment in a global economic crisis. The need for this deployment has intensified, as energy security, industry creation, global competitiveness and growing demand drive clean energy expansion alongside environmental concerns.
But we are also tracking the challenges; over-supply, fiscal issues, access to finance, infrastructure barriers, fossil fuel cost-competitiveness and supply chain consolidation are just some of the short-term barriers hindering renewables deployment on a national and global scale.
In 2006, Lord Nicholas Stern puts climate change into an economic perspective for the first time – warning of the cost of inaction – while, in the US, former Vice President Al Gore launches his provocative documentary, An Inconvenient Truth. Many governments battle to claim leadership over the fight against climate change, and the race to drive green collar jobs begins.
Wind farms start appearing all over the world, and solar power no longer saunters along in sandals: it strides forward with a shiny new briefcase and speaks an international language. People realise there’s money to be made, the industry pays attention, and our view of renewable energy changes irrevocably.
“Even 2008’s global financial crisis didn’t slow the renewable energy market, and many nations, notably China and the US, launched stimulus packages with a very heavy green agenda.”
For developed nations, rising oil prices and the fear of “peak oil” drive a change to a low carbon world and a race to exploit vast fossil fuel reserves. This happens in parallel with an interest in renewable energy, and even the oil-laden Middle East starts to explore solar power and energy efficiency.
Why the change?
Preserving our planet is obviously a factor, but the economic crisis is what really brings home the volatile cost of energy and the relative merits of homegrown green electricity.
The renewable energy market, however, does not escape the economic crunch, as Europe starts to shy away from previously generous subsidy levels. But luckily for those wanting to go green, the cost has fallen significantly – in large part thanks to the Asian tiger economies.
“It has taken the wind sector 40 years to compete with fossil fuels on a levelized-cost basis. The solar PV sector has got there four times as fast. Today, solar PV competes with any other form of energy generation in many markets and many applications across the globe. This was almost unthinkable only five years ago.”
The biggest tiger of all is China. Venturing out of a strict communist system a little over a decade ago to compete on par with the developed nations, it becomes the surprise leader in the race to take the renewables crown.
By 2010, for every dollar invested globally in renewable energy, 50 cents goes to China, and around half the world’s wind turbines are installed there. In 2012, the cost of Chinese solar panels drops to just US$0.60 per watt peak, even lower than 2011’s US$1.25 which led solar installations to double worldwide. Unsurprisingly, in 2010 China overtook the US to take first place in our RECAI index.
And why? Because Beijing’s energy policy is closely aligned with industrial planning: It’s easy to see the job creation that China was benefiting from – and now the thing that’s really top of the agenda in China, particularly in Beijing, is pollution and lowering emissions.
Other emerging markets are also picking up the low carbon and renewable energy agenda, as the BRIC economies start demanding more energy to drive economic growth.
For some countries such as South Africa, it’s a case of reducing their reliance on coal after being struck by power shortages. Brazil is championing wind and biofuels , while Chile is South America’s rising star, with a pipeline of solar plants being planned in the Atacama Desert. The reason? Growing populations demand more energy, and homegrown renewable sources give them far more control over their energy.
India’s ambitious Central Government is targeting 9GW of installed solar power over the next few years, no doubt partly driven by the crippling blackouts that sparked riots in several Indian cities.
Elsewhere, Australia’s new US$10b Clean Energy Finance Corp. Fund, which starts issuing loans in July 2013, is attracting investors; while last year Mexico joined the UK as only the second nation to introduce legally binding climate change targets.
Green power is now not just competing for investment, it’s also changing the way we think about energy and many are starting to take responsibility for their supply. In 2013, the world’s energy sector stands on the threshold of another revolution: power to the people.
Flexible and renewable power sources are now spreading their tentacles further than any large fossil fuel power stations could. Where huge, centrally located plants used to pump out energy to millions, people are now able to run their own small personal power plants thanks to solar panels, CHPs, biomass boilers and mini wind turbines.
And while investment incentive programs might now be less popular in some countries, they are emerging in new markets keen to attract the global investment community. Flourishing feed-in tariff (FIT) schemes in Kenya, Uganda, Thailand, South Korea and Israel are attracting more and more consumers down the renewable energy path.
The price of energy has also made it a boardroom issue, with energy managers now sitting on the boards of the world’s corporate giants.
Energy has become not just a financial and business issue, but also a social one, as companies try to manage their businesses in a more responsible manner. Just this year, Apple announced plans to run its iCloud data centers on 100% renewable energy, and supermarket giant Walmart has similar plans to run every store on green energy by 2020.
Google led the way in 2007 by installing a 1.7MW solar farm at one of its sites, and has now spent more than US$1b on renewable sources, including a 161MW wind farm. Nike, HSBC, Volkswagen, PepsiCo, Renault and Sumitomo, as well as smaller businesses, are also following suit.
But is there enough momentum to keep going? What will the renewables industry of the 2030s look like?
Energy demand, natural resource, technology costs, access to finance, and global competitiveness will probably determine which markets remain attractive in the long run, regardless of whether they are “emerging” or “developed”.
And where smartphones and tablets go, perhaps energy may follow. We’re at a stage where the consumer is king and can make real choices. Just as we’ve taken control of telecoms, with instant global communication on social networks and video calls between phones and tablets, perhaps we can do the same with energy.
“Who would have predicted we would be controlling energy consumption in our own home from our smartphones, even 10 years ago? Mobile applications and new technologies have given energy users more control and choice. Businesses, communities and individuals can all generate their own power today; who knows what the future holds?”
Power to the people is just beginning. Say hello to the democratization of energy.