By Roger from Humanityy, an environmental blog
Uranium, oil, water, natural gas – as power sources, all have the potential to run out during the course of human development, perhaps in the next couple of hundred years. Renewable sources can fudge this problem by using energy sources that either will last longer than the human race or can be regenerated through agriculture. Most renewable energy sources are also environmentally friendly, fight global warming by reducing carbon emissions, and enable economies to reduce their dependencies on politically turbulent nations. From 2007 to 2008, the market for the top three renewables – wind, solar, and biofuels – grew from $75.8 billion to $115.9 billion, or about 53%, indicating that these energy sources are getting more and more popular.
Wind energy is best established of the renewables, representing 1% of global energy production, or about $51.4 billion in 2008. It can also be the most cost-efficient, especially when large installations using large turbines can capitalize on economies of scale. On the other side of the fence, solar power is the most expensive, least efficient form of renewable energy – for now. Increased spending in the sector has caused huge improvements both in cost and efficiency, and this has caused companies from China, Europe, and the U.S. to flood the sector, increasing competitiveness and driving even greater improvements; in 2008, $29.6 billion of the renewables market was made from solar. Geothermal energy gets relatively little attention, but with states along the fault lines and geysers of the Western United States increasingly passing renewable energy mandates, its potential is maturing. Biofuels, however, have been all the rage, and with Congress's 2007 passage of an energy bill mandating enhanced production of ethanol and cellulosic ethanol, the stage is set for their use to greatly increase – in spite of protests from social activists who are worried about rising food prices. In 2008, biofuels were worth $34.8 billion on the global market.
Since the middle of 2007, oil prices have been trending upwards, to record highs; on the 21st of May, 2008, for example, oil traded at $134.10 per barrel, after averaging around $20 during the 1990s. Still, most renewable technologies are still less cost-efficient than fossil fuels – though government support has led to heavy spending in search of ways to close this gap. Renewables are quickly catching on in progressive regions like Europe, and with over 750,000 deaths in China caused by air contamination and other environmental damages each year, the market for clean energy is expected to grow in there as well.
Geothermal energy uses hot water deep within the earth's crust to spin turbines and produce power 24 hours a day, seven days a week. It produces few carbon emissions and can re-inject used water back into the earth to be used again, making it fully sustainable. Not every part of the planet has geothermal resources; usually, they can be found in regions where there is volcanic activity, or where two tectonic plates meet. This is why places like Indonesia and the Philippines, which are situated on the Pacific "Ring of Fire", or California, with its myriad fault lines and hot springs, are such strong markets for geothermal technology.
-> The only pure-play geothermal company is Ormat Technologies, though Calpine Corporation operates a number of plants. Amazingly, with an installed geothermal capacity of 1,273 MW in Indonesia and the Philippines, oil giant Chevron supplies 13% of the world's current geothermal energy supply – and is the largest private geothermal energy company in the world.
-> Major electric utilities that purchase geothermal power include Southern California Edison, Hawaiian Electric Industries, and Sierra Pacific Resources.
The appeal of solar power is obvious. It is a virtually limitless resource. It's free of greenhouse gas emissions, widely thought to contribute to global climate change. In developed countries using lots of air conditioners, it generates more electricity exactly when you need it– at times of peak electricity usage (e.g, you run your air conditioners more during the hottest, sunniest days of the summer time). Once installed, solar systems can function for 25 or more years with little maintenance or oversight.
Solar comes with limitations, however, with poor cost-efficiency being the most notable. Solar is weather dependent and intermittent, requiring storage or back-up systems to supplement during times of weak generation. More importantly, thanks to fast-rising silicon prices, solar systems average $8,000 per kilowatt installed – extremely costly even in comparison to other renewables. Still, the solar market has exploded over the past year, with electricity generated from solar systems increasing from 2.5 GW in 2006 to 3.8 GW in 2007.
-> SunPower, First Solar, and Suntech Power Holdings are three emerging solar societies that have received a lot of attention in the past six months. Other major solar manufacturers, both emerging and established, include Evergreen Solar, JA Solar Holdings, Solarfun Power Holdings, Kyocera, Sharp, BP, Q-Cell, Mitsubishi, Sanyo, EMCORE, Uni-Solar and Daystar Technologies.
->Major polysilicon suppliers to the solar industry include MEMC Electronic Materials, LDK Solar, and Renewable Energy Corporation.
Wind is caused by different parts of the earth heating at different rates to different temperatures, producing pressure gradients and leading air molecules to move from areas of higher pressure (density) to areas of lower pressure (density). As long as the sun shines, the wind will blow. It would appear that wind is the best source of energy, but, like all other renewables, it faces some issues. Not every region has winds that are the right speed year-round; furthermore, turbines are very dangerous for birds, particularly during migrations. Wind parks can also "overproduce" on windy days, creating more electricity than needed by the utilities grid, though there are massive batteries being developed to store some of this excess energy for periods when the wind is weaker than needed.
Wind turbines have the lowest installation costs of any of the renewables, and with large wind installations taking advantage of economies of scale to reach lows of $800 per kilowatt installed, today it rivals natural gas as a form of cheap, base-load energy.
-> Danish wind giant Vestas Wind Systems is the world's leading producer of wind turbines, with the Spanish Gamesa and American General Electric following. Indian market entrant Suzlon Energy Limited has grown very promptly, out-pacing competitors like Nordex and Siemens.
-> Xcel Energy is an American electric utilities company that has made wind energy one of its main sources of grid-based electricity.
Wave power uses the kinetic energy from sea waves to generate electricity. Most wave energy producers are private labs and emerging companies, but Ocean Power Technologies has come out as the first publicly-traded wave power producer in the U.S.
Biofuels are sources of energy that are renewable in the truest sense of the word. They are made from plant matter; since plants can be regrown, the energy source can be renewed. Major biofuels include biodiesel, ethanol, and cellulosic ethanol, though there are currently private companies working on refining biogasoline. In the U.S., major companies that play around in the three main forms of biofuels include:
- Pacific Ethanol
- Archer-Daniels-Midland Company
- Aventine Renewable Energy Holdings.
Ethanol is a biofuel that can be mixed with gasoline; it is made by fermenting sugar, and corn is its primary input. Currently, American cars can run on a mix of 90% gasoline and 10% ethanol, though there isn't nearly enough corn-based ethanol being produced at the moment to meet this capacity. There are also cars that can run on 85% ethanol and even pure ethanol, though these vehicles are few and far between in the U.S. VeraSun Energy primarily produces corn-based ethanol.
Energy legislation passed in 2007 mandated an increase in the amount of ethanol used in the U.S. to far levels greater than the nation's corn-production capacity. Another form of ethanol, cellulosic ethanol, utilizes industrial or biological processes to refine ethanol from cellulosic matter, like paper, wheat husks, and dead plants. Companies like Bluefire Ethanol refine ethanol from trash, while others like Verenium Corporation use lab-developed enzymes to break down cellulose from plant matter like leaves and grass.
Biomass and Energy-From-Waste
Companies like Covanta use trash instead of gas to generate the heat needed to twist steam turbines. These companies burn waste from farms and landfills, converting leavings that would otherwise not me monetized into valuable electricity.
Notably excluded from this list is nuclear energy,is neither a fossil fuel, nor a form of renewable energy. The fuel source, uranium, is estimated to outlast mankind, i.e.100,000 years or more. Nuclear power produces radioactive waste. Nuclear power plants are not all the same quality, are highly technical, and involve risk of atmospheric and other environmental contamination. For this reason, nuclear power in the US carries a dual reputation and generally is unpopular for good reason. Large companies that are part of the nuclear industry include Exelon, Entergy, American Electric Power, and Duke Energy.
Hydropower is a special case of renewables, because the technology has been in use since the 19th century and, more importantly for those looking to expand renewable sources of energy, the majority of good sites for hydropower, at least in the developed world, have already been developed as power sources. Combustible renewables and renewable waste would include biofuels, but the historical driver of this 10.6% of our energy supply requires the burning of wood, plants, and organic waste in developing countries. Still employed around the world, this method of energy generation is, in the truest sense, renewable, though it is highly wasteful in terms of energy conversion and may take several hundred years to replenish itself (e.g., in the case of burned-down forests).
Building new generating capacity is expensive; many electric utilities would much rather deal with growing electricity demand by getting customers to use electricity more efficiently. Companies like EnerNOC (ENOC) contract with large industrial electricity users and electric grid operators; when energy use peaks, the company gets factories and other large consumers to cut down usage (by turning off unnecessary lighting, systems, etc.) so that grid operators can direct the extra electricity to where it is necessary. That way, they don't have to install extra generators to meet peak demand.
Private company EnerPath has developed technology to deliver cost effective energy efficiency upgrades to the mass markets and highly complex applications that have typically been difficult to penetrate with energy efficiency. EnerPath implements energy efficiency programs and delivers software for utilities throughout North America.
Renewable Energy Funds
Powershares Wilderhill Clean Energy ETF – stock symbol "PBW", along with a slew of other renewable funds, offers broad exposure to the sector. Given the plethora of IPO's in renewable energy and clean technology that occurred in 2006, 2007, and 2008, a broad exposure to the clean energy market through an ETF is a right bet for beginning green investors — like the Internet boom, some of these companies will split and others will survive, but it will be hard to predict early in the development curve which is which.
One item investors might want to consider with PBW the Powershares Wilderhill Clean Energy ETF, is that index is based on mostly US companies working on solar panels. An alternative one might consider is Market Vectors Global Alternative Energy ETF – stock symbol "GEX" which has a has invested more than half its assets outside the U.S. and includes a Danish company, Vestas Wind Systems which is the fund's top holding at nearly 11%. Rounding out the top three holdings are a Spanish company — Gamesa, a specialist in wind turbine and wind farms — at roughly 8% of holdings, and Norwegian solar energy company Renewable Energy, which accounts for roughly 7% of assets.
Drivers of renewable energy
The 2008 Financial Crisis Will Likely Slow Renewable Expansion
Companies in every industry are feeling the effects of the 2008 Financial Crisis as budgets shrink and it becomes more difficult to obtain loans and investments. These conditions are especially dangerous to industries, like solar, that are expanding rapidly (as with solar, which flourished at a rate of 41% per year from 2001-2008) and require large sums of money to do so – a description that fits the renewable sector exactly. Tighter lending practices will not only make it harder for renewable companies to expand at such high rates but also threaten to decrease demand, as their customers struggle to obtain funding for the expensive projects. Centrica has estimated that it costs million per megawatt to build a wind farm – less than nuclear energy – and most lending institutions simply don't want to loan to projects that are so large and risky – at least until credit markets calm down.
Declines in the Price of Carbon Emissions Trading on European Markets Reduces Incentives for Renewable Investment :
From the summer of 2008 to February 2009, the right to emit one ton of carbon fell from €30 on the EU carbon market to €11.80. Research has suggested that carbon needs to trade at around €25 in order to have a significant effect on green investment. With the price of carbon allowances so low, incentives for clean energy production in Europe have dramatically decreased.
Legislative support for clean energy investment in the form of tax breaks, subsidies, and energy mandates has driven growth in the sector over the past few years. Because most renewables aren't as cost-efficient as traditional fossil fuels, such government support is necessary to make clean energy appealing. In April, 2008, the US Senate approved the passage of the Clean Energy Tax Stimulus Act of 2008, in response to high oil prices and climate change fears. This act continues the previous subsidies, increasing the amount of spending to $19 billion. In addition to national legislation, states have also passed their own mandates on clean energy adoption. California has notably strict policies, including the California Global Warming Solutions Act of 2006, which requires utilities to provide 20% of energy from renewable sources by 2020.
In March 2009, Senator Harry Reid drafted legislation that would make it easier for the government to approve the installation of transmissions lines from remote renewable energy generators to major population centers; the legislation would also set aside enough government land for 4-25 GW of solar energy generators. Whether the bill passes remains to be seen.
In July 2009, the government of the UK released a white paper documenting a plan to reduce carbon emissions to 22% below 1990 levels by 2012, 34% below 1990 levels by 2020, and 80% below 1990 levels by 2050. These goals are expected to be pursued through the use of wind power and nuclear energy, though many are skeptical about the government's ability to meet the 2020 goal.
Obama Supports a Renewable Future
Where does electricity come from? (USA, 2008)
In January 2009, President Barack Obama called for the U.S. to double its use of renewable energy by 2012, as part of his plan to stimulate the economy and pull the country out of recession. His plan, which is expected to include up to $800 billion over two years in subsidies and tax cuts for renewable energy, energy efficiency, and electric grid modernization plans, has the potential to pull the industry out of the depression caused by the 2008 Financial Crisis.
In response to the Financial Crisis, Obama pushed through a stimulus plan that earmarks $80 billion for green projects, including $7.6 bn in renewable energy loan guarantees and bonds, as well as grants of up to 30% for business/homeowner investments in renewables. A further $10 bn has been earmarked for energy efficiency, $11 bn for efficient power grid expansion, $6 bn for clean energy research, and $2 bn for hybrid cars.
China is Investing in Renewables
China announced in March of 2009 that it would subsidise solar energy installations at a rate of $3 per watt – about 60% of the cost – as part of its economic stimulus package.
Cost of substitutes
Demand for renewable energy is driven largely by the price of the alternatives, namely coal and natural gas (for electricity generation) and oil (for liquid fuel). All the factors that drive rising oil prices or fears of peak oil, therefore also drive demand for renewable energy. On the demand side of the equation, clearly rising worldwide energy demand also plays a large role.
Fears of greenhouse gas emissions
As the evidence in favor of climate change has mounted and governments and citizens have begun to crack down on greenhouse gas emissions, demand for biofuels has ramped up significantly. It's expected that this demand will only continue to grow, as the consensus behind reducing greenhouse gas emissions grows. Heavy investments in renewable energy by such petroleum firms as BP, Shell, Chevron, Total, as well as companies as diverse as HP, Intel, and Google, suggest that businesses are already acknowledging this future demand.
On February 4th, JP Morgan Chase, Citigroup, and Morgan Stanley said that they would put into effect a set of "Carbon Principles" by which they would give investment priority to clean energy groups, and compel any company planning to build coal-powered plants to show how they would deal with the carbon dioxide pollution in order to get investment money. With investment priority at these major banks now going to renewables, clean energy start-ups should have less trouble getting financing.
Cost of inputs
Though its energy inputs are typically renewable, generating renewable energy is not costless, and like all booming industries, renewable energy confronts bottlenecks and supply shortages for its key inputs. In the case of wind energy, the cost of turbines has climbed, as manufacturers typically put customers on 18-month waiting lists and even then struggle to source gearboxes and other key parts for the finished products. Solar cell manufacturers face shortages in polysilicon, while biofuels producers face rising costs for their feedstocks, especially corn and sugarcane.
Here is a nice podcast from Max Lindberg I found about nuclear energy supposed cleanness :