In a panel discussion at the seventh annual Renewable Energy Finance Forum–Wall Street at New York City’s Waldorf Astoria Hotel, cleantech experts discussed how renewable energy is viewed globally, how it impacts the greater energy mix and the driving forces behind it.
Kicking off the discussion was Milbank partner William Bice, who said the recent global economic downturn is responsible for how the cleantech industry develops.
“It’s the economy that drives a lot of what’s going on,” Bice said, highlighting specifically the cost to build new power plants. “It’s a fairly simple economic issue. The move toward great parity on the technological side…those costs are still high.”
Compounding the problem is slow-footed policy. Bice said the U.S. Department of Energy’s program has “been slow out of the gate” and is “waiting for everyone to join hands and push forward this green revolution.”
“In the U.S., at least, we have a very short attention span, at least on the political cycle,” he said. “There is, in my mind, a distinction [between politics and policy]. Policy doesn’t always come all the time from your elected representatives. Policies don’t necessarily follow politics.”
What’s more, lending is constricted, cutting off the cash flow necessary to build capital-intensive projects, he said.
“U.S. banks are not that involved in the renewable energy sector, at least from the projects side,” Bice said.
Above all, the renewables industry faces the challenge of convincing Americans that going green isn’t an inconvenience.
“We don’t like the question of having a tradeoff,” he said. “We don’t like the question of having green power and paying more for it. Americans want to have the best of both worlds. How do we encourage the technological development to make it less of a painful choice?”
In a presentation, Liebreich explained that after an “enormous surge” in investment activity from 2004 to 2008, the cleantech sector is still smarting from 2009, when it experienced its first year of lower activity. “It could have dropped more,” he said.
His cleantech investment figures:
- 2004: $46 billion
- 2005: $70 billion
- 2006: $110 billion
- 2008: $173 billion
- 2009: $162 billion
“The past year has been strangely uneventful — the index has neither surged nor collapsed,” Liebreich said. “What we’re looking at is the industry having reached a kind of new normal.”
He added: “If we’re going to reach peak emissions [soon], that number needs to triple.”
In June, the United Nations proposed that all countries should “peak” their emissions in 2020, forcing them to transition rapidly fossil fuels in just a few years.
Liebreich said the sector was still “volatile,” but “showing value creation from a financial point of view.”
Why? Mostly thanks to $184 billion of clean energy stimulus programs. Relatively little of that money was spent last year — approximately $17 billion. Liebreich said much more of that stimulus money would be spent this year, and over the next two years, have global impact.
One caveat, though: U.S. investment in cleantech remains deflated, while China has experienced uninterrupted growth. Why? Because the global economic crisis was really a Western economic crisis, Liebreich said.
“Perhaps the most important trend over the crisis period has been the regional distribution of clean energy investment,” he said. “This industry would be in a very very much worse place globally had Asian investment not surged between 2008 and 2009.”
Liebreich supported them claim with several sets of data.
Among them, the top three nations that experienced new financial investment in clean energy in 2009:
- China: $33.8 billion
- U.S.: $17.9 billion
- U.K.: $11.7 billion
The top three nations experiencing asset finance for new build clean energy in 2009:
- China: $29.2 billion
- U.K.: $11.1 billion
- U.S.: $10.7 billion
The top three nations experiencing new venture capital investment in clean energy in 2009:
- U.S.: $2,136 million
- U.K.: $109 million
- China: $97 million
“The U.S. is outinvesting the world,” Liebreich said.
Liebreich also listed the global top 10 manufacturers of wind and photovoltaic solar power.
The top 10 in wind:
The top 10 in solar PV:
Liebreich’s takeaway point: only a few of these firms are based in the United States.
“In wind, the next couple of years will be flat,” he said. “In Europe, same thing. One of the key points: overcapacity. There are more turbine manufacturers even here in the U.S. than are required to meet demand.”
Solar power is going through a different scenario: competition on price.
“Solar prices were high because of excessive demand and not enough supply,” he said, adding that the silicon price index surged before the economic downturn. “That sort of unraveled.”
Liebreich also said the cost of debt is constraining demand. “The U.S. banks are not really supporting in the way that they could,” he said.
Switching from a historical to futuristic view, Liebreich outlined his “seven magnificent targets” for renewables for 2020.
- Cost-competitive clean energy.
- Pervasive data.
Transformation of transportation to electric powertrains.
- Cities go green as megacities grow.
- Nuclear power on the march — that is, it’s back in the mix.
- Developing world leapfrogs the West, thanks to a lack of legacy infrastructure with which to deal.
- Technology (and other) black swans. “There are break points in the development of this industry where solar becomes competitive. Where you get a million vehicles plugged into the grid.”
Liebreich closed his presentation by mentioning the Gulf of Mexico oil spill, which he said had both positive and negative ramifications.
“It is very sad to stand up here and say that one great strength of the renewable energy industry is that there is zero chance of an event like this happening,” he said. “We need to be quietly satisfied that we’re on the right side of history here.”
Also among the panelists: Navigant managing director Lisa Frantzis and CERES president Mindy Lubber. Read what they had to say.