More of the secret to the success of clean energy investment
Nathaniel Bullard is Director of Content at Bloomberg New Energy Finance, the clean energy and carbon markets analysis group of Bloomberg LP. In his role he oversees analytical engagements across sectors in clean energy, as well as the group's executive engagements through its Leadership Forum Series and its yearly Summit. He is also a contributor to Bloomberg's cross-platform initiatives to analyse mergers and acquisitions, and environmental, social, and governance data. More BNEF opinion editorials here.
Bloomberg New Energy Finance--the clean energy and carbon markets analysis group of Bloomberg L--dives deeper into the drivers for 2010's US$243 billion in clean energy investments
Earlier, I wrote that clean energy's 30 percent growth in 2010 came about, thanks to major government support around the world. Looking closely at how government support took shape, and the implications it had for growth in particular sectors, there are two key themes: Stimulus, German solar, and China.
Early in the economic downturn, governments around the world provided nearly US$200 billion in stimulus funding for clean energy. That capital took many forms: Tax relief for factories, construction of new transmission lines, and in very effective fashion, direct grants to subsidise the construction of new renewable energy power plants.
There is a wrinkle to stimulus funding, however: It is often effective, but it is not immediate. In the first chart here, we see that no stimulus funding was disbursed in 2008, when it was most needed--and only 10 percent of the funding was disbursed the next year, when capital was so scarce. However, by 2010, governments disbursed nearly 75 billion US dollars and are on schedule to disburse just under that amount again this year. The lag time between stimulus funds being agreed, and their impact on the market, was more than a year.
2009 was not without its stimulus success stories, such as the US wind industry which installed 10GW of new capacity, which would have been impossible to finance without the support of a cash grant programme sponsored by the US Treasury. Even though only 10 percent of the total promised stimulus funding made it out the door in the first full year of the economic downturn, it was a crucial 10 percent for a major industry in a major market.
China as the role model
If we want to see more on the stimulus story though, we need to look to China. China actually installed more wind in 2010 than the US, with 14GW. And last year, low natural gas prices in the US meant developers installed less than 6GW of new projects, while Chinese growth soared even further to 17.2GW.
China also supported its solar installations with a subsidy programme, and its state-owned transmission company built new wires rapidly in hopes of shortening the wait time for wind developers to get connected to the electrical system. Less directly, the China Development Bank provided tens of billions of dollars in credit facilities to some of the country's leading clean energy manufacturers. These funds, while not loans, do provide support for expansion. With the introduction of a solar feed-in tariff as of August 2011, China will start to rapidly add new PV installations.
Direct government support was crucial to keeping the clean energy sector growing in 2009 and 2010. Even as stimulus funding tails off, it will continue to drive new installations and expansions.
A final thought on China's wind market in 2010. For reference, its 17.2GW of wind in 2010 is nearly the same amount of generating capacity as the famous Three Gorges dam. That project took 18 years to build, and displaced millions of people. Cost? US$159 billion. 17.2GW of wind took a single year. Cost? US$42 billion.
Global Clean Energy Stimulus spending by year, 2011–13 ($bn)
Note: 2011–13 according to Bloomberg New Energy Finance expectations
Source: Bloomberg New Energy Finance
|For the next few weeks till SIEW 2011, Knowledge Partner Bloomberg New Energy Finance will run a series of opinion editorials on SIEW, where its lead analysts will bring insights pertinent to clean energy in Singapore and Asia.|
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