U.S. spending on renewables is twice the level in Europe
LONDON, England, May 4, 2005 (Refocus Weekly)
Europe will spend between US$275 million and $335 million a year on renewable energy research until next year, compared with $530 million in federal support in the United States.
Europe may lead the world in environmental regulation, but its record in
creating clean and low-carbon energy technology companies lags that of the U.S.,
according to a ‘white paper’ published by financial services provider New
Energy Finance. The London company is calling on politicians to address this
‘clean energy innovation deficit’ and Europe's poor record in creating clean
energy technology companies.
New Energy Finance surveyed 3,500 organizations and identified 300 startups that
were active in various aspects of the clean energy industry. Of these 300, 157
were in the U.S., 44 in Canada and only 75 were in Europe.
“The USA may have opted out of Kyoto, but it would be very unwise to write
them off in the race for technological leadership in the sector,” says Michael
Liebreich of NEF. "What is needed from Brussels is not more co-ordination,
more goal-setting and more money going to unwieldy research consortia; it is a
basic understanding of the mechanics of building companies, and the breaking
down of the barriers to entrepreneurship, particularly in the area of clean
energy technologies.”
Europe's ‘innovation deficit’ in clean energy is particularly notable
because sustainability is one of the themes under the Lisbon 2000 strategy,
aimed at turning Europe into “the most dynamic, knowledge-based economy in the
world.” An interim report last year on Lisbon 2000 found that little progress
had been made and warns that “even one of Europe's flagship policy areas is
lacking dynamism.”
The EU’s Framework Programme 6, which started in 2002 and runs until 2006,
will spend at least Euro 17.5 billion on research, supplemented by further funds
by each member country. Of this, between Euro 215 and 260 million (US$275 and
$335 million) is being spent each year on renewable energy research, compared
with $530 million in the U.S. at the federal level.
Current plans to reform Lisbon focus on new roadmaps and performance targets,
with 148 objectives and 117 different indicators, which means the 25 member
states will release 300 annual reports “which clearly no-one reads," says
Liebreich. Politicians must focus instead on five policy areas to spur
innovation and to attract private sector funding into renewables and low-carbon
energy technologies, including general macro-economics for innovation and
entrepreneurship, ensuring access to markets for clean energy providers,
reducing subsidies for fossil-based energy providers, using the public sector to
create markets, and decoupling incentive programs from social and political
goals.
Of 1,338 companies active in the energy industry, 555 were involved in fuel
cells and 345 in energy efficiency, with 336 in solar and 290 in wind, as well
as 122 in geothermal. Total investment was $580 million in efficiency from 2001
to 2004, $413 million in wind, $359 million in fuel cells, $242 million in
electricity storage, $240 million in solar and $7 million in geothermal. That
represents an increase in venture investment of 112% for solar and 13% for wind.
The number and volume of investments reached an all-time high during the period
of 1999 to 2000, before falling back as the technology boom evaporated, the
report notes. From 2001 to 2004, there was a progressive reduction in average
deal size as the mix of venture investment changed from late-stage support of
existing investments to earlier stage, and as venture investors in the sector
became more cautious.
“The most popular sector for venture investment during the period was
efficiency breakthrough, largely because of the perception that companies in
this area can address large existing markets, often with products that offer
cost savings, and therefore that it is possible to build entrepreneurial
businesses within a venture time-frame even during a time of macroeconomic
weakness,” it notes.
“The U.S. leads venture investing in clean energy by a substantial margin,”
with a total investment of $942 million, nearly double that in Europe. The
European figures are distorted by a small number of very large deals, such as
the acquisition of Danish wind turbine blade manufacturer LM Glasfiber and the
ratio over the past four years is three times higher in the U.S. than in Europe
if that deal is excluded.
“Several venture-funded European companies have also gone on to lead the
consolidation of the wind sector, such as Vestas Wind Systems, and Bonus Energy,
which is now part of Siemens,” and
“The most damaging aspect of renewable energy legislation in Europe is not
that it is not uniform across countries (entrepreneurs, after all, will pick
attractive countries in which to operate) but that it is not stable over
time,” the report warns. Incentives and programs “are short-lived,
increasing the perception of risk among investors,” and NEF wants assured
access to markets for clean energy suppliers, reduction of removal of taxation
on clean energy products and services, removal of regulatory and legislative
barriers to clean energy, mandates to introduce net metering (“perhaps the
single biggest hurdle to the introduction of renewable energy into our
electricity generation mix”), and an end to subsidies for fossil-based energy.
It recommends a mandate for clean energy use in public procurement, a resistance
to the urge to create green funds (“there is little evidence that state and
regional development funds contribute to successful business-building”), a
decoupling of incentive programs from social and political goals, and ensure a
level playing field for start-ups in attracting research funds.
“There is no single new technology which will solve the world’s energy
needs,” it concludes. “The solar energy sector is already substantial - cost
reductions through new technologies or through increased manufacturing scale
should see it breaking into new areas of energy demand over the coming
decades,” while wind “has had the biggest impact on our energy usage
patterns over the past decade” and the next decade will see “continued
activity, particularly in developing countries and offshore.”
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