Project Syndicate / Phyllis Cuttino and Michael Liebreich/ 2011-08-16
LONDON – After less than a year and a half in which so much energy news seemed troubling – nuclear meltdowns, oil spills, rising gas prices – it might be startling to find out that worldwide installed capacity of renewable energy has now surpassed that of nuclear power. In fact, global investment in clean energy, driven by enlightened, forward-looking national policies, grew to a record $243 billion in 2010, up 30% from the previous year.
Indeed, in less than a decade, clean energy has grown from a niche industry to a significant source of trade, investment, manufacturing, and job creation. Since 2004, annual investment in the sector has increased by an impressive 630%. We need to ensure that this encouraging trend continues.
The emergence of the clean-energy sector reflects rational policies – from research to financing to tariff incentives – in the world’s largest economies. These measures, which still pale in comparison to what is granted to conventional fossil fuels, will be reduced over time as economies of scale are realized and costs fall. We are not far from the day when clean energy can compete head to head with coal, oil, and gas.
In many places, wind energy is already competitively priced, and it has attracted almost half (48%) of all G-20 clean-energy investments in recent years, fueling the addition of some 40 gigawatts of generating capacity – enough to power 30 million homes.
But the solar sector is the fastest-growing clean-energy industry, in large part because prices of solar panels have declined by more than 60% in the last 30 months. By the end of this year, solar modules are expected to cost half as much as they did four years ago. The 17 GW of solar-generation capacity that was added in 2010 from investments totaling $79 billion could power more than 12.5 million homes.
Geographically, recent research by The Pew Charitable Trusts and Bloomberg New Energy Finance reveals that Europe continues to lead the world in such investment, attracting $94.4 billion in 2010, a 25% gain over 2009. Investment in Germany more than doubled, to $41.2 billion, surpassing the United States to take second place globally. Italy was in fourth place (up from eighth in 2009), attracting almost $14 billion in investment. France entered the world’s top ten, after annual investment grew 25%, to $4 billion. Investment in Spain, meanwhile, was down by more than half, but remains in the top ten worldwide, at $4.8 billion.
The research also demonstrates that Europe’s consistent policies leave it well positioned to compete in the clean-energy sector. Investors want to be sure that there will be ongoing demand for renewable energy. The European Union is providing that certainty through its clean-energy targets, carbon markets, and feed-in tariffs (under which utilities guarantee to pay a fixed rate for clean energy).
For example, European policies are driving an explosion in small-scale, distributed solar-power generation. Investment in these projects doubled in 2010, to $59.6 billion globally, with most poured into the EU – and more than half into Germany alone.
Germany also is demonstrating that sound clean-energy policies can drive not only domestic investment and installations, but also manufacturing and export opportunities. Last fall, Germany’s environment ministry reported that renewable-energy jobs had doubled since 2004, to 340,000, thanks to the country’s investments in education, training, research, and innovation.
Owing to high prices for conventional energy and abundant sunshine, Italy is the first country to achieve grid parity, or cost-competitiveness, for solar energy. Sixty-two percent of its private clean-energy investment was directed toward small-scale solar projects in 2010. Yet what is striking is that Italian manufacturers have almost entirely failed to carve out a position in this booming sector.
Moreover, Europe’s global clean-energy leadership is being challenged by Asia, where private investment, powered largely by China’s surge, is growing faster. Indeed, among individual countries, China is the world leader, attracting $54.4 billion in investment in 2010. In the space of just a few years, China has become entrenched as the leading destination for private investment and manufacturing of related equipment.
Last year, China added a staggering 17 GW of wind-power capacity, and now produces half of the world’s wind and solar equipment, in part to meet its own highly ambitious clean-energy targets, which include deployment of 150 GW of wind power and 20 GW of solar power by 2020. China has already surpassed the US to lead the world in installed clean-energy capacity.
But China is not alone in pushing Asia to the global forefront. India, too, entered the ranks of the top-ten countries for clean-energy investment in 2010. Moreover, its five-year growth rate for renewable-energy capacity also ranked tenth worldwide, and the country was seventh in terms of installed capacity. With a target of 20 GW of solar generating capacity by 2020, investment in India could grow rapidly.
The events of the past 15 months – starting with the Deepwater Horizon oil spill in the Gulf of Mexico, followed by the violence in North Africa and the tragedy in Japan – confront the world with a stark choice between the costs and risks of traditional energy sources and the promise and progress of clean energy.
In recent decades, Europe has been a driving force for energy modernization. In the years ahead, such leadership will be needed to help capture the economic, environmental, and security benefits of renewable energy. Reaffirming its commitment to rapid decarbonization of its energy system, and to creative policies in support of that goal, will help Europe continue to reap the rewards of one of the most remarkable new market opportunities in living memory.
Phyllis Cuttino is Director of the Clean Energy Program at The Pew Charitable Trusts. Michael Liebreich is CEO of Bloomberg New Energy Finance.