Janet L. Sawin – March 3, 2008 – 6:00am
This year’s report finds a dynamic, rapidly growing
renewable energy sector, with the economic gap between renewables and fossil
fuels closing quickly, thanks to rising oil prices and growing recognition of
the high cost of carbon emissions. As a result, investing in renewables is no
longer just about “doing the right thing†and being green, but also about making green—and global investment
trends reflect this thinking.
!ADVERTISEMENT!
Investment growth rates have been accelerating for the past
several years. In 2006, investment in new renewable electric and heating
capacity came to $55 billion, climbing to a record high of some $71 billion in
2007. This is on top of tens of billions of dollars in capital investments in new
manufacturing plants and equipment, and public and private funding for research
and development—for a total investment flow exceeding $100 billion in 2006 and
2007.
Annual global investment in new electric and heating capacity
is now about five times what it was in 2000, and it has risen almost 10-fold
since 1995—the first year for which we have data. Wind power has become the
dominant technology, with a 47 percent share for 2007, followed by solar photovoltaics
(PV), at 30 percent. In fact, wind, PV, and solar thermal systems for water heating
made up more than 85 percent of the global total in renewables investment in
2007.
Market Trends
These investments are driving the marketplace. We estimate
that total renewable power capacity (excluding large hydropower) increased by 33
gigawatts (GW) in 2007, to 240 GW worldwide. It’s remarkable that this is
almost 50 percent higher than the global total just three years ago (in 2004).
Including large hydropower, renewables now provide more than 1,000 GW of electric
power capacity; this compares to about 4,300 GW of total global power capacity.
Wind and solar PV combined account for about two-thirds of
global market growth in renewables in 2007. Installed capacity of PV is still
relatively low: there were about 10.5 GW of PV operating worldwide by the end
of 2007. But PV is growing at breakneck speed and has rapidly become one of the
world’s fastest growing industries. Over the past five years, capacity has
risen by an average of 36 percent annually; grid-connected PV is rising far
faster, with annual growth rates exceeding 50 percent in 2006 and 2007.
Growth in wind capacity continues to be strong as well,
thanks in great part to the United States, which installed a record 5.2
GW in 2007 , greatly exceeding early projections. Worldwide, the wind industry brought
on line about 15 GW of new capacity in 2006, and added another 21 GW last
year—compared with only 1 GW of new nuclear power capacity that came on line
around the globe in 2006. Wind power has grown an average of more than 24
percent annually over the past five years, and global capacity totaled
approximately 95 GW by the end of 2007. More than 70 countries now use the wind
to generate electricity, including many developing countries that have recently
come on board, such as South Africa,
Mexico, and Iran.
Global capacity of small hydropower and biomass power came
to 73 GW and 45 GW respectively by the end of 2006. Solar thermal for power
generation is another promising technology that is again seeing growth, with
new projects in the United States
and Spain.
And solar thermal for water heating continues its rapid rise. Rooftop solar
collectors now provide hot water for more than 50 million households worldwide.
Biofuels production was up about 18 percent in 2006, with
similar growth in 2007. As with wind, growth is being driven largely by
the United States, which passed Brazil in ethanol production in 2005,
and by Germany, which
leads the world in biodiesel production. But the race is on as Brazil
now has
an ambitious program to increase sugar cane-based ethanol production 50
percent
by 2009. And many other countries in the European Union, Africa, and
Southeast Asia are becoming established biofuels producers.
Although renewables still represent a fairly small share of
global energy demand, they are growing rapidly. Renewable power capacity
(excluding large hydropower) represents almost 5 percent of total global power
capacity, and its share is rising. And, of course, the contribution of
renewables is already far higher than this in many countries.
The surge in production of ethanol and biodiesel in 2006
accounted for 17 percent of the increase in supply of all liquid fuels
worldwide last year, and this share is likely to rise in coming years as well.
National Policies
Helping to drive these high growth rates, at least 64
countries now have national targets for renewable energy. At least 60 countries
have policies to promote renewable electricity, while at least 53 countries,
states and, provinces have biofuels mandates. Many of these targets and
policies are in developing countries, and several additional developing nations
are in the process of enacting policies. Worldwide, incentives for renewables exceed
$20 billion per year, and it’s estimated that more than half of this is now
going to biofuels.
Renewable portfolio standards and feed-in policies are spreading to an
increasing number of countries, states, and provinces around the world. And
many are having a significant impact. Just to give one example, thanks mostly
to Germany’s feed-in law , the share of
electricity from renewable sources there increased from 6.3 percent in 2000 to
12 percent in 2006. It’s estimated that renewables provided more than 14
percent of Germany’s
gross electricity consumption by the end of 2007, well ahead of official
targets for 2010. As a result of this success, the German government recently
announced increased targets for renewables to account for 25–30 percent of
electricity by 2020 (up from 20 percent), and some proposals now call for a target
of at least 45 percent by 2030 .
China Taking the Lead
China is without a doubt the biggest story
in renewable energy in the past year. Based on current trends, China could
well be the world leader in renewable energy within the next three years.
Following are a few key trends:
First, China
continues to lead the world in production and use of solar thermal for water
heating, with more than 65 percent of global capacity by the end of 2007.
Today, more than one-tenth of China’s
households rely on the sun to heat their water. China has more than 40 million
solar thermal systems in place.
Second, wind power capacity increased at least another 2 GW
in China
last year (by some estimates the growth exceeded 3 GW). This means that, for
the second year running, China
doubled its installed capacity of wind. The average growth rate for wind power
in China
since 2004 exceeds 80 percent per year.
But solar PV is the biggest surprise. China is seeing
the emergence of a dynamic solar manufacturing industry. Just three years ago,
in 2004, China
produced about 65 megawatts (MW) of PV. In 2007, it was expected to manufacture
more than 1,500 MW. And more than 4,000 MW of new PV are expected in 2010—or far
more than the entire world produced in 2006. China’s entry into the industry
will likely have far-reaching implications, by helping to drive down prices
dramatically and making PV more affordable in markets across the globe.
Most solar PV manufactured in China
today is for export—with the majority going to Germany
and Spain.
But PV use is rising in places like Rizhao ,
a city of about 3 million people in China’s northeast that powers most
of its outdoor lighting and heats almost all of its water with the sun. The
city’s leaders see solar energy as a starting point for sparking social,
economic, and cultural development through a cleaner environment—and they are
already seeing great benefits.
Cities Turning to
Renewables
Rizhao is among a growing number of cities
around the world that are investing in renewables and energy
efficiency, setting targets, and even establishing mandates for renewable
energy use.
From Portland, Oregon, to New York City;
from Adelaide, Australia,
to Vancouver, Canada;
and from Cape Town, South
Africa, to Daegu,
Korea, cities
are going green . And they are doing this thanks to a growing
realization that energy choices can achieve a number of goals, including:
reducing the threat of climate change, creating new local jobs, ensuring more
secure and reliable energy supplies, and improving the natural environment and
health of their citizens.
The Many Benefits of
Renewables
Renewables are already providing enormous benefits to
millions of people around the world, in addition to the energy that they
produce.
Worldwide, more than 2.5 million people now have jobs in the
renewable energy sector. In 2006, well over 200,000 people were employed in
renewables industries in Germany
alone.
Although global estimates are not available, the German
government estimates that renewable energy avoided the release of more than 100
million tons of carbon dioxide (CO2 ) in Germany
in 2006—that’s equivalent to taking more than 18 million U.S. cars off
of that nation’s roads. Renewable energy is available now to be rapidly
scaled-up to meet the increasing demand for energy services around the world,
and—in combination with energy efficiency improvements—it offers the greatest
potential for short- and long-term reductions in CO2 emissions.
The net economic
benefits of renewable electricity to German consumers now amount to about 6
billion euro per year, according to the German government. In other words, the
benefits of fuel-import savings, environmental and health benefits of renewable
electricity, and an associated decline in wholesale electricity prices all far
exceed any additional costs to consumers of producing and using renewable
power.
Renewables provide a host of other benefits as well, by
helping to advance rural development in industrial and developing countries
alike, improving energy security, and providing cleaner air and water and
improved human health.
Conclusion
The above trends and others all tell us that renewables are
close to a tipping point. And their potential
is absolutely enormous , particularly in combination with improvements
in energy efficiency. Moreover, we can get there quickly, as experiences in Germany and
other countries demonstrate.
The challenge for all of us is to convince our political
leaders of the potential of renewables, and indeed our great need for renewable
energy. We must work together to create the political will and strong,
consistent, and long-term policies that are needed to propel renewables into
the mainstream.