Recent updates in the renewable energy sector

Renewable energy has grown substantially since the release of the Intergovernmental Panel on Climate Change report on the status of climate change, which brought some not so very good news. To be sure, the trend started even before people were aware that climate change is real. Early on, companies knew that renewable energy was not only a means to fight climate change—the business promise of the sector was enticing in itself.

Renewable energy refers to energy derived from resources that are always there, like sunshine, wind, and little pieces of wood that fall in the forests, to name only a few. The term differentiates from oil, coal, and gas, which people have traditionally relied on for their energy needs. These resources, all derived from fossil fuels, are disappearing and burning them emits carbon dioxide, a heat-trapping gas.

According to the Key World Energy Statistics of the International Energy Agency, renewable energy in the form of bio-based renewables and waste, along with solar, wind, and other sources, made up a total of 10.7% of the world’s total energy supply. Another 2.2% came from hydropower, although the “green” sector does not include hydropower in conventional reports.

“Large hydro,” as it is sometimes called, has disadvantages, according to the Office of Energy Efficiency and Renewable Energy of the US Department of Energy. Hydropower requires the building of large impoundment dams that can impact the movement of fish, the quality and flow of water, and the local environment when it competes with other uses for land.

The most recent data compiling the global status of renewables comes from Renewable Energy Policy Network for the 21st Century or REN21. Its members include officials from the environment ministries of many nations and a wide range of stakeholders, including industry associations, schools, and NGOs, among others.

According to the REN21 Renewables Global Status Report released in May, 2009, total renewable energy generation as of 2008 is 280,000 megawatts (MW) or 280 gigawatts (GW). The leader in the renewable energy sector is wind. Some 121 GW of wind electricity-generating capacity is currently installed all over the world. Grid-connected solar photovoltaic production is 13 GW.

The year 2008, REN21 notes, was still a good year for renewables despite the onset of the financial crisis in the last quarter of the year. New investment in the sector was a whopping $120 billion, which was a doubling in just two years, from $63 billion in 2006. It was also the year when, for the first time ever, more renewable energy capacity was added in the European Union and the US than conventional power capacity.

As of 2008, at least 73 countries had clear renewable energy policy targets. Global renewable energy capacity is led by China, the US, Germany, Spain, and India. China is the leader in small hydropower. Biomass, geothermal, and wind power is led by the US. Germany has installed the most grid-connected solar power, followed by Spain. India is fifth in wind power capacity.

As renewable energy companies prepare for their second quarter reports, it might be good to look at what happened during the period.

The most significant events in the sector from April to now are mostly in the realm of policies, which is really the driver of renewable energy. In June 26, the US House of Representatives, in a series of events whose historical worth is matched only by developments in the next week, approved a landmark energy bill called the American Energy and Security Act.

Critics have expressed disappointment over the bill, which set the base period for emission reduction to 2005, and allows for as much as 8% of the 20% renewable energy target by 2020 to be substituted with energy efficiency. Hopes are for the US Senate, which discusses the bill next, to modify it.

But there is more good news. Earlier in April, the Obama administration released a framework for offshore wind farms and other projects in the US Outer Continental Shelf. With this framework, planners can now know what steps to take if they want to build an offshore wind farm, for example, of which the US has not a single one installed.

And more recently, the US Treasury department released guidelines for companies who want to apply for direct payments for every renewable energy project they install, instead of waiting for tax credits which do not work in a time of constrained profitability.

One exciting area to look into is the smart grid. Over the past months, insinuation about the upcoming great struggle between smart grid companies for dominance in the market revealed itself in the flesh. In May, IT giant IBM said it will provide up to $2 billion in financing for smart grid areas named in the economic stimulus that Obama signed in February. A few days later, Cisco said it was partnering with utilities, environment groups, and other sectors, for its own smart grid.

In the same month, in the UK, the government said it will work to become the first country in the world to have a nationwide installation of smart meters—electrical meters which allow for information exchange between power utilities and consumers.

There are also interesting developments going on in other parts of the world, “other” meaning not Western or, at least, not US.

In South Korea, power utility Korea South-East Power Co. said it signed a $2.6-billion deal to develop renewable energy with South Korea’s steel company POSCO. In Taiwan, the cabinet said it injected $1.3 billion for its green energy sector. Thailand, meanwhile, gets over $50 million investment for its first wind farm with a capacity of 35 MW.

It will be an interesting second quarter to watch for what has been called a “guaranteed-growth” industry. While climate change and energy security—two of the main drivers of the sector—are still at work, according to REN21, much is still in store for a sector that Obama promised with $150 billion in total investments over 10 years.


- Eric Dorente