NEW ENERGY 2010

Clean Energy Trends 2010
March 16, 2010 (Clean Edge)
and
Clean Energy Trends 2010
Ron Pernick and Clint Wilder (w/Dexter Gauntlett and Trevor Winnie), March 2010 (Clean Edge)

THE POINT
The numbers are in on 2009 and they are impressive. Anybody who endured the year, they show, has earned the right to brag about it in years to come. Anybody who started a business deserves a medal. Venture capital spending was lower than in any year this century. There were only 13 U.S. initial public offerings (IPOs). The only thing that kept the recession from becoming a depression was historic-level government spending. New Energy, however, held its own.

Though global investment in all New Energies fell from 2008’s $155.4 billion to $145.3 billion in 2009 and U.S. venture capital (VC) investment in New Energy fell from 2008’s $3.2 billion to $2.2 billion in 2009, New Energy’s share of total U.S. VC investment was bigger than ever before, going from 11.4% to 12.5%. And, thanks to being tapped as part of the answer to the economic devastation and winning healthy chunks of that government spending around the world, New Energy has started coming back.

Clean Energy Trends 2010, from Silicon Valley New Energy and Energy Efficiency business authority Clean Edge, runs all the numbers on New Energy investment from VC and private equity investors, public market activity (IPOs, etc.), project financing, asset financing, government research & development and corporate research, development, & deployment. It ends by highlighting important trends in solar PV, solar power plant building, biomass electricity generation, high-speed rail technology and the unique challenges of New Energy megaprojects.

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Global revenue for solar photovoltaics (PV), wind power, and biofuels was $139.1 billion in 2009.

Biofuels (global production and wholesale pricing of ethanol and biodiesel) reached $44.9 billion in 2009 and are projected to grow to $112.5 billion by 2019. In 2009 the biofuels market consisted of more than 23.6 billion gallons of ethanol and biodiesel production worldwide.

Wind power (new installation capital costs) is projected to expand from $63.5 billion in 2009 to $114.5 billion in 2019. Last year’s global wind power installations reached a record 37,500 megawatts. China, the global leader in new installations for the first time, accounted for more than a third of new installations, or 13,000 megawatts.

Though solar revenues fell for the first time in this century, revenues (including modules, system components, and installation) are nevertheless expected to grow from $30.7 billion in 2009 to $98.9 billion by 2019. New installations reached just less than 6 gigawatts worldwide in 2009, a nearly six times over increase from 5 years earlier, when the solar PV market achieved gigawatt capacity for the first time. But because of rapidly declining solar PV prices, industry revenues between 2008 and 2009 were down about 20% – from a revised $38.5 billion in 2008 – as solar prices dropped from an average $7 peak watt installed in 2008 to $5.12 peak watt installed last year.

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Given the slow and so far nearly jobless economic recovery, it is possible these are the most significant numbers in the Clean Edge report: The global solar PV and wind industries presently provide 830,000+ direct and indirect jobs and are expected to provide 3.3+ million jobs by 2019.

For many observers, the result of the December UN summit in Copenhagen was the strong impression there is no hope for significant unified action by the world’s governments to turn back global climate change and the only remaining hope is the private sector. The stalemate in the U.S. Senate on climate change legislation only underscores this impression.

Though the fight against climate change will not, apparently, be the driver behind the development of New Energy and Energy Efficiency on a global scale, something perhaps even more profound (if less altruistic) remains: The profit motive.

Talk of the polar bear’s fate has faded but energy security, national interests, economic revitalization and jobs now seem even better reasons to put a price on greenhouse gas emissions and use the revenues generated to build a New Energy economy.

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THE DETAILS
Significant 2009 government investments in New Energy (NE) and Energy Efficiency (EE):
(1) ~$100 billion of the $787 billion American Recovery and Reinvestment Act stimulus funds,
(2) $84 billion of South Korea’s “Green New Deal” to be invested by 2013, and
(3) ~$440-to-$660 Chinese investment through 2019.

The 12.5% of U.S. VC investment earned by the New Energies cumulatively in 2009 was the biggest share ever for the asset class. The key to its gain was government investment.

Three Benchmark Technologies:
(1) Biofuels. $44.9 billion in ethanol and biodiesel global production (23.6 billion gallons); projected to grow to $112.5 billion by 2019.
(2) Wind power. $63.5 billion in new installation capital costs; projected to grow to $114.5 billion by 2019. Total global installations were a record 37,500 megawatts; China was the world leader for the first time with 13,000 megawatts, more than one-third of the world’s total.
(3) Solar PV. $30.7 billion (modules, system components, and installation) expected to grow to $98.9 billion by 2019. Global new installations were ~6 gigawatts, 6 times the 1 gigawatt mark PV hit 5 years ago. Revenue fell 20% from $38.5 billion in 2008 because the average solar price fell from $7 per peak watt installed to $5.12 per peak watt installed.

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Total 2009 revenues were $139.1 billion, 11% more than 2008’s $124.8 billion, despite a dropoff in global investment (VC and private equity investors, public market activity (IPOs, etc.), project financing, asset financing, government research & development, and corporate research, development, & deployment) from 2008’s $155.4 billion to $145.3 billion; Expected to grow to $325.9 billion by 2019.

In both 2008 and 2009, there was more investment in New Energy than in conventional fossil fuels. In the U.S., wind and natural gas were about equal as leading providers of new electricity generation, the third consecutive year wind has matched natural gas.

Three Clean Edge/NASDAQ market indexes that dynamically and objectively reflect the value of the New Energy/Energy Efficiency asset class:
(1) CELS, U.S. listed clean-energy companies, up 75% in 2007, down 64% in 2008 and up 44% in 2009.
(2) QWND, international wind power companies, up 67% in 2007, down 54% in 2008 and up 38% in 2009.
(3) QGRD, smart grid and grid infrastructure companies, up 34% in 2007, down 43% in 2008 and up 49% in 2009.

These indexes are expected to remain volatile but outperform the overall market both up and down.

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New Energy and Energy Efficiency are becoming progressively more affordable and commonplace as commodities (solar PV, smart meters, energy storage devices, wind turbines, etc.; examples: Dow Chemical solar PV roof tiles, GE washing machines sold with smart grid technology). They are expected to continue maturing through 2019 and much market consolidation is anticipated in the decade as increased commoditization drives big players to absorb smaller ones in pursuit of ever-larger market shares.

Solar PV installed price is predicted to drop 60% by 2019. (2008 average per watt peak price: $7.00; 2009 average per watt peak price: $5.12; 2019 predicted average per watt peak price: $2.11)

Installed wind turbine price, down 11% from 2008’s $1.9 million per megawatt to 2009’s $1.69 million per megawtt and now cost-competitive with other new electricity generation sources without subsidies, is expected to drop to $1.5 million per megawatt by 2019.

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Biofuel prices are uncertain because they are dependent on other commodity costs. As non-food feedstocks, waste streams, and algae (non-commodities) become viable next-gen biofuels, prices are expected to stabilize or fall.

China now leads the New Energy sector with: (1) Most new wind installed in 2009, 13,000+ megawatts, one-third of total new global development, (2) most solar hot water heater manufacturing and installations in the world, (3) most solar PV manufacturing in the world, and (4) the “strongest” scientific research growth in the world (1979-to-2009), to become 2nd in the world to the U.S. in scientific knowledge production.

China’s advantages: (1) Cheap labor, (2) artificially low exchange rate, (3) manufacturing skills and infrastructure, (4) government investments, (5) aggressive policies.

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What could keep China from dominating: (1) Too many subsectors in the New Energy/Energy Efficiency field for any one country to totally dominate (dozens of "nodes": Solar PV, energy storage, green buildings, smart grid networking, wind power, etc.), (2) China has “significant” environmental and pollution issues, and (3) the Chinese government has improved its educational infrastructure and science development capabilities but constricts the free flow of information which may be vital to innovation. China is, however, adapting and is expected to continue challenging the U.S., Germany and Japan for leadership across most subsectors.

The paper ends by highlighting 5 trends Clean Edge considers especially important:
(1) Carbon as a Feedstock,
(2) The Impact of the PV Price Drop on the Solar Industry,
(3) Utility-scale Biomass and District Heating,
(4) Advances and Challenges in New Energy Megaprojects, and
(5) High Speed Rail.

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Possibly the single most important numbers: Jobs.
(1) The global solar PV industry presently provides 267,562 direct and indirect jobs.
(2) The global wind industry presently provides 563,577 direct and indirect jobs.
(3) The total is 830,000+ jobs.
(4) By 2019, the global solar PV industry is expected to provide 2,178,919 jobs and the wind industry is expected to provide 1,122,815 jobs for a total of 3.3+ million jobs.

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QUOTES
- From the Trends 2010 report: “2009 will go down as one of the worst years in economic history. Overall venture capital spending fell to its lowest level in more than a decade. Initial public offerings (IPOs) in the U.S. continued at historic lows, with just 13 venture-backed IPOs in 2009 (up only slightly from a meager six venturebacked IPOs in 2008)…Once stalwart financial and market leaders crumbled under new harsh economic realities, with many shuttering their operations or surviving as a mere shell of their former selves. Governments around the world, working to stave off a global depression, announced unprecedented commitments to stimulus programs to keep the global economy on life support. But signs of hope have begun to emerge…”

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- From the Trends 2010 report: “…Clean Edge, along with NASDAQ, currently 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 three Clean Edge indexes* were up a meteoric rise of 75, 67, and 34
percent respectively in 2007, came back down by 64, 54, and 43 percent respectively in 2008, and outperformed most market indicators once again in 2009, rising 44, 38, and 49 percent respectively. We expect clean-energy indexes to continue to demonstrate volatility, outperforming the general market during stock market upswings, and trending downwards further during market corrections…”

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- From the Trends 2010 report: “…[C]lean energy is now one of the leading forces behind a global economic recovery. China, the U.S., Japan, Europe, and other parts of Asia are all competing to dominate in a range of clean-energy sectors – making the future for clean energy look promising as the global economy begins to recover…One great place to look for lessons is the history of the mobile and telecom industry in the U.S. Between 1997 and 2007, the mobile and telecom industries spent $850 billion to go digital – creating 1.7 million jobs in the process. According to former FCC chairman Reed Hundt, the investment to upgrade the U.S. grid and embed intelligence in it (i.e. the creation of the smart grid) will require a similar amount of money and could result in a similar number of jobs. But the funding of clean-energy projects – whether in the U.S., China, Japan, Europe, or elsewhere – won’t be easy. Like all the energy sectors that preceded it – from coal and oil to natural gas and nuclear – it will take a concerted public and private commitment, along with the necessary policy and regulatory schemes, equity and project financing, and technology innovation…"