Renewable energy commercialization
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- 1 Overview
- 2 Renewable energy industry
- 3 Public policy landscape
- 4 Employment
- 5 Recent developments
- 6 References
The present-day renewable-energy industry is an energy industry focusing on new and appropriate renewable energy technologies. Investors worldwide have paid much greater attention to this emerging renewable energy industry in recent years. In many cases, this has translated into rapid renewable energy commercialization and considerable industry expansion. The wind power and solar photovoltaics (PV) industries provide good examples of this. Leading renewable energy companies include First Solar, Gamesa, GE Energy, Q-Cells, Sharp Solar, Siemens, SunOpta, Suntech, and Vestas. Some 73 national governments now have growth targets for their own renewable energy futures, and have enacted wide-ranging public policies to promote renewables.
Continued growth for the renewable energy sector is expected and promotional policies helped the industry weather the 2009 economic crisis better than many other sectors. U.S. President Barack Obama's American Recovery and Reinvestment Act of 2009 included more than $70 billion in direct spending and tax credits for clean energy and associated transportation programs. Clean Edge suggests that the commercialization of clean energy is helping countries around the world pull out of the current economic malaise.
The term renewable energy covers a number of sources and technologies at different stages of development. Renewable energy development has involved three generations of technologies dating back more than 100 years. All forms of energy are expensive, but as time progresses, renewable energy generally gets cheaper, while fossil fuels generally get more expensive.
From the end of 2004 to the end of 2008, solar photovoltaic (PV) capacity increased sixfold to more than 16 gigawatts (GW), wind power capacity increased 250 percent to 121 GW, and total power capacity from new renewables increased 75 percent to 280 GW. During the same period, solar heating capacity doubled to 145 gigawatts-thermal (GWth), while biodiesel production increased sixfold to 12 billion liters per year and ethanol production doubled to 67 billion liters per year.
|Selected global indicators||2006||2007||2008|
|Investment in new renewable capacity (annual)||63||104||120 billion USD|
| Existing renewables power capacity,
excluding large hydro
|Wind power capacity (existing)||74||94||121 GW|
|Solar (PV) power capacity (grid connected)||5.1||7.5||13 GW|
|Ethanol production (annual)||39||50||67 billion liters|
In 2008 for the first time, more renewable energy than conventional power capacity was added in both the European Union and United States, demonstrating a "fundamental transition" of the world's energy markets towards renewables, according to a report released by REN21, a global renewable energy policy network based in Paris.
Renewable energy industry
During 2006/2007, several renewable energy companies went through high profile Initial Public Offerings (IPOs), resulting in market capitalization near or above $1 billion. These corporations included the solar PV companies First Solar (USA), Trina Solar (USA), Centrosolar (Germany), and Renesola (U.K.), wind power company Iberdrola (Spain), and U.S. biofuels producers VeraSun Energy, Aventine, and Pacific Ethanol.
Renewable energy industries expanded during most of 2008, with large increases in manufacturing capacity, diversification of manufacturing locations, and shifts in leadership. By August 2008, there were at least 160 publicly traded renewable energy companies with a market capitalization greater than $100 million. The number of companies in this category has expanded from around 60 in 2005.
Some $120 billion was invested in renewable energy globally in 2008, including new capacity (asset finance and projects) and biofuels refineries. This is double the 2006 investment figure of $63 billion. Almost all of the increase was due to greater investment in wind power, solar PV, and biofuels.
At the end of 2009, worldwide wind farm capacity was 157,900 MW, representing an increase of 31 percent during the year, and wind power supplied some 1.3% of global electricity consumption. Wind power is widely used in European countries, and more recently in the United States and Asia. Wind power accounts for approximately 19% of electricity generation in Denmark, 11% in Spain and Portugal, and 9% in the Republic of Ireland.
Vestas is the largest wind turbine manufacturer in the world with a 20% market share in 2008. The company operates plants in Denmark, Germany, India, Italy, Britain, Spain, Sweden, Norway, Australia and China, and employs more than 20,000 people globally. After a sales slump in 2005, Vestas recovered and was voted Top Green Company of 2006. Vestas announced a major expansion of its North American headquarters in Portland, Oregon in December, 2008.
GE Energy was the world's second largest wind turbine manufacturer in 2008, with 19% market share. The company has installed over 5,500 wind turbines and 3,600 hydro turbines, and its installed capacity of renewable energy worldwide exceeds 160,000 MW. GE Energy bought out Enron Wind in 2002 and also has nuclear energy operations in its portfolio.
Gamesa, founded in 1976 with headquarters in Vitoria, Spain, was the world's third largest wind turbine manufacturer in 2008, and it is also a major builder of wind farms. Gamesa’s main markets are within Europe, the US and China.
Although the wind power industry will be impacted by the global financial crisis in 2009 and 2010, a BTM Consult five year forecast up to 2013 projects substantial growth. Over the past five years the average growth in new installations has been 27.6 per cent each year. In the forecast to 2013 the expected average annual growth rate is 15.7 per cent. More than 200 GW of new wind power capacity could come on line before the end of 2013. Wind power market penetration is expected to reach 3.35 per cent by 2013 and 8 per cent by 2018.
Offshore wind power installations are emerging, and recent years have seen several hundred megawatts added annually, mostly in Europe.
First Solar became the world's largest solar cell maker in 2009, producing some 1,100 MW of product, with a 13% market share. Suntech was in second place with production of 595 MW in 2009 and market share of 7%. Sharp was close behind the leaders with 580 MW of output. Q-Cells and its 540 MW output was fourth in 2009. Yingli Green Energy, JA Solar Holdings, SunPower, Kyocera, Motech Solar and Gintech rounded out the 2009 Top 10 ranking.
At the end of 2008, the cumulative global PV installations reached 15,200 MW. Photovoltaic production has been doubling every two years, increasing by an average of 48 percent each year since 2002, making it the world’s fastest-growing energy technology. The top five photovoltaic producing countries are Japan, China, Germany, Taiwan, and the USA.
During 2007, the solar PV industry saw an increase in silicon production facilities around the world, which was a response to silicon feedstock shortages in recent years. Solar PV manufacturers were signing long-term contracts to ensure a growing supply, and many silicon manufacturers are announcing plans to build new plants. By the end of 2007, more than 70 silicon manufacturing facilities were being constructed or planned worldwide.
According to a 2008 analysis by New Energy Finance (NEF), the cost of photovoltaic electricity is due to drop considerably in 2009. NEF's latest "Silicon and Wafer Price Index" shows average silicon contract prices falling by more than 30% in 2009, compared with 2008.
According to the China Greentech Report 2009, jointly issued by the PricewaterhouseCoopers and American Chamber of Commerce in Shanghai and released on 10 Sept in Dalian, China, the estimated size of China's green technology market could be between US$500 billion and US$1 trillion annually, or as much as 15 percent of China's forecasted GDP, in 2013. With the positive drivers from the Chinese government’s policies to develop green technology solution, China has already played a more important role in green technology market development.
Concentrating solar power
Since 2004 there has been renewed interest in concentrating solar power (CSP) and three plants were completed during 2006/2007: the 64 MW Nevada Solar One, a 1 MW trough plant in Arizona, and the 11 MW PS10 solar power tower in Spain. Three 50 MW trough plants were under construction in Spain at the end of 2007 with ten additional 50 MW plants planned. In the United States, utilities in California and Florida have announced plans (or contracted for) at least eight new projects totaling more than 2,000 MW. Companies involved in new projects include Abengoa Solar, Acciona, Ausra, BrightSource Energy, Iberdrola, Solar Euromed, Solar Millennium, and Stirling Energy Systems.
In the ethanol fuel industry, the United States dominated, with 130 operating ethanol plants in 2007, and production capacity of 26 billion liters/year (6.87 billion gallons/year), a 60 percent increase over 2005. Another 84 plants were under construction or undergoing expansion, and this will result in a doubled production capacity. The biodiesel industry opened many new production facilities during 2006/2007 and continued expansion plans in several countries. New biodiesel capacity appeared throughout Europe, including in Belgium, Czech Republic, France, Germany, Italy, Poland, Portugal, Spain, Sweden, and the United Kingdom.
Commercial investment in second-generation biofuels began in 2006/2007, and much of this investment went beyond pilot-scale plants. The world’s first commercial wood-to-ethanol plant began operation in Japan in 2007, with a capacity of 1.4 million liters/year. The first wood-to-ethanol plant in the United States is planned for 2008 with an initial output of 75 million liters/year.
Public policy landscape
Public policy has a role to play in renewable energy commercialization because the free market system has some fundamental limitations. As the Stern Review points out:
In a liberalised energy market, investors, operators and consumers should face the full cost of their decisions. But this is not the case in many economies or energy sectors. Many policies distort the market in favour of existing fossil fuel technologies.
Lester Brown goes further and suggests that the market "does not incorporate the indirect costs of providing goods or services into prices, it does not value nature’s services adequately, and it does not respect the sustainable-yield thresholds of natural systems". It also favors the near term over the long term, thereby showing limited concern for future generations. Tax and subsidy shifting can help overcome these problems.
Tax shifting involves lowering income taxes while raising levies on environmentally destructive activities, in order to create a more responsive market. It has been widely discussed and endorsed by economists. For example, a tax on coal that included the increased health care costs associated with breathing polluted air, the costs of acid rain damage, and the costs of climate disruption would encourage investment in renewable technologies. Several Western European countries are already shifting taxes in a process known there as environmental tax reform, to achieve environmental goals.
A four-year plan adopted in Germany in 1999 gradually shifted taxes from labor to energy and, by 2001, this plan had lowered fuel use by 5 percent. It had also increased growth in the renewable energy sector, creating some 45,400 jobs by 2003 in the wind industry alone, a number that is projected to rise to 103,000 by 2010. In 2001, Sweden launched a new 10-year environmental tax shift designed to convert 30 billion kroner ($3.9 billion) of taxes on income to taxes on environmentally destructive activities. Other European countries with significant tax reform efforts are France, Italy, Norway, Spain, and the United Kingdom. Asia’s two leading economies, Japan and China, are considering the adoption of carbon taxes.
Subsidies are not inherently bad as many technologies and industries emerged through government subsidy schemes. The Stern Review explains that of 20 key innovations from the past 30 years, only one of the 14 they could source was funded entirely by the private sector and nine were totally funded by the public sector. In terms of specific examples, the Internet was the result of publicly funded links among computers in government laboratories and research institutes. And the combination of the federal tax deduction and a robust state tax deduction in California helped to create the modern wind power industry.
But just as there is a need for tax shifting, there is also a need for subsidy shifting. Lester Brown has argued that "a world facing the prospect of economically disruptive climate change can no longer justify subsidies to expand the burning of coal and oil. Shifting these subsidies to the development of climate-benign energy sources such as wind, solar, biomass, and geothermal power is the key to stabilizing the earth’s climate."
Some countries are eliminating or reducing climate disrupting subsidies and Belgium, France, and Japan have phased out all subsidies for coal. Germany reduced its coal subsidy from $5.4 billion in 1989 to $2.8 billion in 2002, and in the process lowered its coal use by 46 percent. Germany plans to phase out this support entirely by 2010. China cut its coal subsidy from $750 million in 1993 to $240 million in 1995 and more recently has imposed a tax on high-sulfur coals.
While some leading industrial countries have been reducing subsidies to fossil fuels, most notably coal, the United States has been increasing its support for the fossil fuel and nuclear industries.
Renewable energy targets
Setting national renewable energy targets can be an important part of a renewable energy policy and these targets are usually defined as a percentage of the primary energy and/or electricity generation mix. For example, the European Union has prescribed an indicative renewable energy target of 12 per cent of the total EU energy mix and 22 per cent of electricity consumption by 2010. National targets for individual EU Member States have also been set to meet the overall target. Other developed countries with defined national or regional targets include Australia, Canada, Japan, New Zealand, Norway, Switzerland, and some US States.
National targets are also an important component of renewable energy strategies in some developing countries. Developing countries with renewable energy targets include China, India, Korea, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brazil, Israel, Egypt, Mali, and South Africa. The targets set by many developing countries are quite modest when compared with those in some industrialized countries.
Renewable energy targets in most countries are indicative and nonbinding but they have assisted government actions and regulatory frameworks. The United Nations Environment Program has suggested that making renewable energy targets legally binding could be an important policy tool to achieve higher renewable energy market penetration.
Current employment in the renewable energy sector and supplier industries is estimated at 2.3 million worldwide. The wind power industry employs some 300,000 people, the photovoltaics sector an estimated 170,000, and the solar thermal industry more than 600,000. Over 1 million jobs are found in the biofuels industry, associated with growing and processing a variety of feedstocks into ethanol and biodiesel.
A number of events in 2006 pushed renewable energy up the political agenda, including the US mid-term elections in November, which confirmed clean energy as a mainstream issue. Also in 2006, the Stern Review made a strong economic case for investing in low carbon technologies now, and argued that economic growth need not be incompatible with cutting energy consumption. According to a trend analysis from the United Nations Environment Programme, climate change concerns coupled with recent high oil prices and increasing government support are driving increasing rates of investment in the renewable energy and energy efficiency industries.
Investment capital flowing into renewable energy reached a record US$77 billion in 2007, with the upward trend continuing in 2008. The OECD still dominates, but there is now increasing activity from companies in China, India and Brazil. Chinese companies were the second largest recipient of venture capital in 2006 after the United States. In the same year, India was the largest net buyer of companies abroad, mainly in the more established European markets.
Global revenues for solar photovoltaics, wind power, and biofuels expanded from $75.8 billion in 2007 to $115.9 billion in 2008. For the first time, one sector alone, wind, had revenues exceeding $50 billion. New global investments in clean energy technologies — including venture capital, project finance, public markets, and research and development — expanded by 4.7 percent from $148.4 billion in 2007 to $155.4 billion in 2008.
Continued growth for the renewable energy sector is expected in the mid- to long-term, but 2009 was a year of refocus, consolidation, or retrenchment for many companies. At the same time, new government spending, regulation, and policies should help the industry weather the current economic crisis better than many other sectors. Most notably, U.S. President Barack Obama's American Recovery and Reinvestment Act of 2009 includes more than $70 billion in direct spending and tax credits for clean energy and associated transportation programs. This policy-stimulus combination represents the largest federal commitment in U.S. history for renewables, advanced transportation, and energy conservation initiatives. Based on these new rules, many more utilities are expected to strengthen their clean-energy programs.
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