January 7, 2008
2007: Did We Reach the Tipping Point?
by Stephen Lacey, Staff Writer
At the beginning of each year, as the renewable energy industry looks back
on its progress over the previous 12 months, the phrase "tipping point"
always seems to enter the discussion. But how will we know when renewables
have truly hit that tipping point?
"I haven't been calling renewable energy 'alternative' for years...This is
an industry that is proving itself in markets around the world."
--Michael Liebrich, CEO, New Energy Finance
Will one quarter of the world's electricity come from renewable resources?
Will more investment go into clean energy than into the fossil energy
industries? There's no agreed upon standard for how to define a turning
tide, but one thing is certain: 2007 clearly proved that there is a major
change underway in how the world produces and consumes energy.
"If 2007 isn't the tipping point, we are close to that," says Janet Sawin,
Director of the Energy and Climate Change program at the Worldwatch
Institute in Washington, DC. "This has been a truly remarkable year, and
we're seeing impressive development figures worldwide."
According to a REN21 2007 Renewables Global Status Report due out in
February, there are now 237 gigawatts (GW) of electrical generation capacity
from renewable resources online around the world.
When breaking that total capacity down among technologies, wind leads with
93 GW of total installed capacity; small hydro has 73 GW; biomass has 44 GW;
geothermal has 10 GW; and PV has just under 8 GW of total installed
capacity. While renewables still only make up around 5.5% of the world's
4,300 GW of total electrical generation capacity, the REN21 report concludes
that the industry "has clearly become mainstream" over the last decade.
Michael Liebrich, CEO of the analysis firm New Energy Finance, might
hesitate to call renewables mainstream — but he certainly believes the
industry is close.
"I haven't been calling renewable energy 'alternative' for years," he says.
"This is an industry that is proving itself in markets around the world."
According to recently released figures from New Energy Finance, global
public market transactions for renewable energy totaled approximately $17.5
billion, global venture capital investment totaled $21 billion, and
liquidity from carbon funds totaled $12 billion in 2007. REN21 also reports
that investment in new renewable energy capacity totaled $66 billion, up
from $55 billion in 2006.
"If you put that [investment in renewables] into perspective compared to
total energy investment, it's around 10%. So it's been another strong year
in terms of flows of money into the sector," says Liebrich.
Europe and the U.S. each make up about 45% of that investment, while Asian
countries such as India and China provide the other 10%. Capital flowing
into the industry from Asia — especially China — is likely to grow more
rapidly than in other regions of the world over the coming years. Some
analysts predict that China could rival Europe or the U.S. in new
development of wind and biomass within the decade. China is already far
ahead of any other country in solar thermal capacity, accounting for 65% of
the world's installed solar hot water systems.
Last year, China began making changes to its renewable energy law in order
to create a more attractive business climate for wind and solar
manufacturers, modify feed-in tariffs to encourage growth of the PV
industry, and expand biofuels and renewable electricity targets. The changes
are expected to pass sometime this year.
"In my estimation, 2007 will be looked upon as the year in which the
foundation was laid from a policy standpoint — and probably also from an
industrial standpoint — for the very rapid development of China's renewable
energy industry," says Lou Schwartz, President of the consulting and
analysis firm China Strategies, LLC.
China admits that it is not pursuing renewable energy because it is the
morally correct thing to do. The country simply needs as much energy it can
get to meet the various demands associated with its rapidly growing economy.
Domestic sources such as wind, solar and biomass are a necessary part of the
overall energy picture.
"The Chinese are looking for energy wherever they can find it. They
recognize that renewables will be a very significant contribution to the
total energy base," says Schwartz.
That attitude, along with the desire for energy independence, stable energy
prices and the need to address climate change, is what has driven 58
countries to set renewable energy targets and 56 others to create renewable
energy "promotion policies," ensuring a sixth consecutive year of double
digit growth rates for wind, solar and biofuels, says Sawin.
"I think we're seeing a critical shift in perception," she says. "While
renewables still only make up a small portion of the total energy mix,
there's certainly a change in how countries are approaching the industry in
relation to other forms of energy."
So while it is difficult — and perhaps futile — to determine when exactly
the tipping point for the industry may occur, many analysts believe that
2007 will be viewed as a historic moment when the world accepted renewables
not as "alternative energy" but simply as energy.
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