While the world has long been poised for innovative ‘green’ methods to satisfy power and transport needs, rises in energy costs, fears about global warming and concerns over national security have combined to fuel a new sense of urgency. Governments are now setting goals and putting into place tax credits and incentives to promote renewable energy, bringing down development and manufacturing costs. But politicians are seeing more than environmental shades of green: the US Department of Energy (DoE) estimates that the global renewable energy market exceeds $40bn.
“The opportunities are overwhelming,” US senator Hillary Rodham Clinton told an audience recently at the National Press Club in Washington, DC.
Some countries have a head start in implementing sustainable energy programmes: Denmark gets 20% of its power from wind; Brazil makes enough ethanol to power 40% of its cars. “Britain switched to clean energy technologies and has created hundreds of thousands of jobs in the past five years, while its GDP has risen,” Ms Clinton noted.
Criticised worldwide for not accepting the Kyoto Protocol, the Bush administration maintains that the answer lies in technology rather than treaties. The president has unveiled the Solar America Initiative (SAI), which calls for spending $170m between 2007 and 2009 on cost-shared, public-private partnerships to advance solar energy technology.
“This represents the largest funding increase for solar energy research in US budget history,” states Rhone Resch, president of the Solar Energy Industries Association.
Mr Resch is optimistic about the SAI’s implications. “With this programme, the US has reclaimed global leadership in investing in cutting-edge solar power development,” he says. “SAI will improve our competitiveness in a global solar market that is growing at 40% a year and help bring high-quality jobs back to the US.”
The DoE estimates that solar energy represents more than $1bn in annual sales. With the worldwide solar market growing from $8.3bn in 2004 to more than $12bn in 2005, the race is on for companies to capture a slice of the market.
Ambitious solar plan
Last year, California governor Arnold Schwarzenegger introduced what has been touted as the most ambitious plan in US history to promote solar energy. The California Public Utilities Commission (CPUC) is earmarking $3.2bn in customer rebates over 11 years for solar energy products. The move solidifies the state’s position as one of the world’s top three markets for solar power, after Japan and Germany.
California is already requiring that 20% of its electricity come from renewable sources by 2010 and 33% by 2020. It must produce a minimum of 20% of its own biofuels by 2010 and 40% by 2020. Of the estimated 900 million gallons of ethanol consumed annually in the state, only 5% is produced locally.
Meeting the charge, Pacific Ethanol is completing its first large-scale ethanol production facility in Madera County, where, later this year, it will begin producing more than 35 million gallons of ethanol annually. Microsoft Corporation co-founder Bill Gates is investing $84m in Pacific Ethanol, which will be spent on four more plants.
New York governor George Pataki is also hot on the trail for renewable energy investment. In January, he unveiled a comprehensive, multi-faceted plan to make New York a centre for renewable energy research and job creation, and to provide help to New York residents faced with soaring home heating bills.
New York State is home to 170 private renewable energy companies. Yet with increased renewable energy use, state comptroller Alan Hevesi claims 43,000 new jobs could be created in renewable energy-related industries. Albany, Syracuse, Rochester and Long Island are particularly well suited because of ongoing university and private company renewable energy research.
The private sector is responding to the push from the public sector. Global player UTC Power, part of United Technologies, is the only company to date making fuel cells for onsite power generation, buses and cars, and space applications. “UTC Power does not see any ‘show-stopping’ technical barriers to the advancement of fuel cells, but continued US commitment to research, development, demonstration and market transition initiatives are essential to reduce cost, improve durability and enhance performance,” Dr Francis Preli Jr, vice-president of engineering at UTC Power, told a congressional committee in June. Key to the industry’s advancement, he said, is the US government extending tax credits beyond 2007.
In western Canada, Alberta is profiting from booming production of tar sands, making it the second largest oil producer behind Saudi Arabia. But the province of Manitoba may soon hit pay dirt of another kind. Canada requires a 5% renewable fuel standard by 2010. Its biofuels Opportunities for Producers Initiative in the 2006 budget provides $11m in funds to ensure farmers and rural communities can participate in and benefit from increased Canadian biofuel production.
A 2003 provincial mandate requires that up to 85% of all gasoline sold in Manitoba contain 10% ethanol. That makes the province attractive for new processing facilities.
Manitoba is already home to one of Canada’s largest wind farm projects. It is also well suited for developing and producing ethanol and bio-diesel. But the province has only one ethanol production plant, owned and operated by Husky Energy. Husky plans to replace the facility with a new one in Minnedosa. It will accommodate 130 million litres and cost about C$145m ($129m). To construct the plant, Husky is receiving $10.4m in support from the Federal Ethanol Expansion Program. In return, the plant will support local farmers by requiring 350,000 tons a year of locally grown wheat. It will also produce about 125,000 tons a year of dried grains for livestock feed.
Bio-diesel production in Manitoba is small scale, but the province’s Asessippi Parkland region offers Canada’s least expensive feedstock and the community is investigating plant development. There is an existing canola crushing facility and refinery in Harrowby.
The EU lacks unification in its renewable energy approach but calls for 12% of total EU energy consumption to be supplied by renewable sources by 2010. European countries have set their own goals and their levels of commitment vary.
Germany, the second-largest market for photovoltaics, leads with its Electricity Feed-in Law. Under the law, customers receive 45.7 euro cents per kilowatt-hour for solar-generated electricity sold back to the grid. Areas in the former East Germany use the scheme, along with its lower property costs, to promote the region.
Germany is also committed to wind power. Among its largest generators is the Alsleben Wind Project near Leipzig, where 36 General Electric Energy wind turbines entered into service in May.
GE Energy’s wind business has a strong presence in Germany. Its European headquarters is in Salzbergen, where it maintains a wind turbine manufacturing plant. Research is conducted at the GE Global Research Center-Europe at Munich Technical University’s Garching campus. “We bring top talent from all over Europe to Garching,” says Thomas Limberger, GE Germany chairman.
The EU wants the use of biofuels in transport to reach 5.75% by 2010. The target could be increased to 8% by 2015, pending further impact analysis.
New York-headquartered Green Energy Resources is making good use of the EU’s target-setting. As a global supplier of waste wood to power utilities since 2003, Europe is its largest customer. Joe Murray, Green Energy CEO, reports that two contracts worth more than $100m are pending in Italy. The company is also in merger discussions with an Italian concern.
Biofuels themselves may be considered ‘green’ but some environmentalists are concerned about the impact on the environment of growing crops for biofuel production. For example, BirdLife International, a global alliance of conservation organisations, while broadly welcoming the European Commission’s biofuels strategy published in February, has highlighted the fact that the issue is not straightforward. It has warned the EU that the huge swathes of monoculture needed to produce biofuel crops to meet EU targets, in some cases replacing areas of pristine rainforest in countries such as Indonesia, are a threat to wildlife and could have a greater impact on the environment than the greenhouse gases that biofuels are meant to reduce.
The UK is a leader in environmental technologies but has been criticised by greens for not supporting renewable energy more strongly through its energy review. The government has set a target of 15% of the UK’s energy to be generated from renewable energy sources by 2015.
The climate for renewable energy investment in the UK is exceptionally favourable, however. It is estimated that the public sector will be spending £125bn a year in sustainable procurement by 2009. Major projects include the site for the London 2012 Olympics, which is the largest land decontamination project in Europe, and the Thames Gateway, a development that includes 120,000 carbon-neutral homes east of London.
Judy Chapman of Gateway To London, the agency set up to help businesses invest in this area, states: “This massive growth programme gives an excellent opportunity for environmental businesses to incorporate and showcase their latest technologies while assisting us to secure a fully sustainable development”.
Wales is a centre for photovoltaic (PV) innovation. The Welsh Opto-electronics Forum’s photovoltaic group works with private and public sectors to strengthen Wales’ PV industry and attract new investment. Wales is already home to two of the three main UK PV products manufacturers: Sharp Corporation at Wrexham and ICP Solar at Brigend. Sharp chose north Wales for its European manufacturing base because of the promising potential for solar power applications in the UK and Europe.
Scotland, too, is home to two big projects: Scottish Power’s Whitelee wind farm near Glasgow, due to be completed in 2008, and Bosch’s investment in an experimental wave power station off the coast of the Orkney Islands. Bosch’s project is backed by a £5m grant from the UK Department of Trade and Industry.
Wave energy is believed to be the most economical of the renewable energy technologies. Spurred on by the potentially large returns, the UK’s venture capital industry is taking an interest. Cleanteach Venture Network, a membership organisation of environmental and renewable energy firms, tracks and advises on investment.
Not all countries can kick-start their renewable energy sectors, but they can obtain assistance in developing policy or financial models from the Renewable Energy and Energy Efficiency Partnership (REEEP). Set up after the Johannesburg Earth Summit on Sustainability, REEEP is a partnership of 160-plus members, including all G8 nations except Russia. In April 2006, REEEP announced 32 new projects that will receive funding, including 10 in Africa. Most of the projects focus on identifying business models for solar water heating, small hydro projects in the tea industry, and biofuels.
“Financial barriers to renewable energy and energy efficiency in Africa are significant,” says Glynn Morris, REEEP’s southern Africa secretariat director. “By working with financial institutions, we’re hoping to build the business case from the bottom up.”
Nigeria, for example, could save $150m annually by adopting biofuel as an alternative to fossil fuels. A biofuel project is proposed for Nigeria as part of its renewable energy strategy.
China has plans to spend $200bn on renewable energy over the next 15 years. Wind power is expected play a major role. With a potential wind power capacity of 250 gigawatts onshore and 750 gigawatts offshore, China holds the largest wind resource of any country in the world.
In May, GE signed a memorandum of understanding with China’s National Development and Reform Commission to help advance renewable energy technologies, including wind power. GE Energy opened its first wind turbine assembly plant in China in June. Located in Shenyang, the multi-million dollar facility will provide local support for the growing wind power industry in China and Asia.
Thailand has set a goal to have 8% of its power generated from renewable energy sources by 2011. It promotes the development of biomass and solar energy and its top exports of rice, rubber, cassava and sugar offer huge potential for biomass technologies.
Biomass development faces challenges, however, due to seasonal availability and the varying quantity of raw materials. Consequently, the Thailand Board of Investment offers incentives, such as exemption of import duties on replacement machinery or equipment, for companies setting up renewable energy operations.
Thailand’s ample sunshine makes solar energy viable, particularly in the more isolated areas. However, high development costs are an impediment and, unlike Japan, Thailand does not subsidise residential solar installation. Solar cell producers do receive an eight-year tax holiday, though.
Thailand leads Asia in solar cell research but a shortage of silicon material for solar panels has been holding the industry back. With the market for solar cell production now guaranteed by the government, return on investment could be upwards of 50%, by some estimates – quite a sunny proposition.