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Resources



Market News

 March 05, 2007
Clean Energy Markets: Managing High-Tech Growth

 We've said it before. Clean energy markets are more akin to the computer, wireless, and Internet sector than traditional energy sectors like coal, natural gas, oil, and nuclear. Clean energy markets not only are growing on average by more than 30 percent per annum (much like the PC industry's two decade plus 28.5 percent annual growth rate), but they resemble many of their high-tech predecessors for their ability to scale-up with volume manufacturing while driving down costs. Case in point: just this past week German- based SolarWorld AG announced plans to acquire a shuttered U.S. semiconductor manufacturing facility to build the U.S.'s largest solar manufacturing facility at 500 MW. They plan to leverage a never opened computer chip facility to manufacture both silicon wafers and solar cells.

As our readers and subscribers know, Clean Edge has been tracking high-growth benchmark clean-energy sectors since 2000. At that time, the markets for solar photovoltaics (PV) and wind power, for example, represented annual global revenues of just $2.5 billion and $4 billion respectively. Six years later, these two industries combined equal more than $30 billion in annual revenues, a roughly fivefold increase.

Indeed, PV and wind have become big business. GE's wind division now sells around $3 billion in wind turbines annually (up from $2 billion in 2005) and Sharp, the world's leading manufacturer of solar PV modules, now racks up more than $1 billion annually in PV sales.

Clean energy markets continued their inexorable climb in 2006:

  • global markets for biofuels (global manufacturing and wholesale pricing of ethanol and biodiesel) reached $20.5 billion in 2006 and are projected to grow to $80.9 billion by 2016;
  • wind power (new installation capital costs) is projected to expand from $17.9 billion in 2006 to $60.8 billion in 2016;
  • solar photovoltaics (including modules, system components, and installation) will grow from a $15.6 billion industry in 2006 to $69.3 billion by 2016; and
  • the fuel cell and distributed hydrogen market will grow from a $1.4 billion industry (primarily for research contracts and demonstration and test units) to $15.6 billion over the next decade.
Together, we project these four clean-energy technologies, which totaled $39.9 billion in 2005, and expanded 39 percent to $55.4 billion in 2006, will quadruple to $226.5 billion within a decade. Over the past year we've also seen explosive growth in new investments in energy technologies from venture funds. Along with our colleagues at Nth Power we report that U.S.-based venture capital investments in energy technologies nearly tripled from $917 million in 2005 to $2.4 billion in 2006. As a percent of total VC investments, energy tech increased from 4.2 percent in 2005 to 9.4 percent in 2006. Over the last seven years, venture investments in energy technologies have increased from less than 1 percent of total venture investments to nearly 10 percent.

As usual, we also identify five noteworthy trends. For 2007, they are:
  • the traction of carbon markets
  • the growth of closed-loop biorefineries
  • the promising growth of advanced batteries
  • Wal-Mart's unexpected clout as a clean-energy market maker
  • energy utilities' growing enlightenment around renewable energy
But with the growth of clean energy markets also comes growing pains. The cost to install a MW of wind power increased more than 20 percent over the last couple of years due to higher costs for steel, cement, and a general shortage of turbines. Similarly, solar PV costs saw momentary increases in their prices as the high-cost of silicon raised module pricing. And profit margins for ethanol in the U.S. all but collapsed in 2006, as the price of corn nearly doubled in just two years.

But with ramped up manufacturing, increased supply of new feedstocks, growing government support at the regional and federal level, increased investments, and the deployment of new technologies -- we believe that prices will stabilize and then begin to decrease -- much like the high-tech sector before it. It will be a delicate, carefully managed, balancing act, but we believe technology-focused startups and multinationals will find ways to lower prices and build competitive industries as these clean-energy sectors expand. And they have a lot at stake: Clean Edge projects that annual production of biofuels will increase over the next decade from around 13 billion gallons last year to 50 billion gallons, solar will jump from 2 GW of production to nearly 20 GW, and wind power will increase from 15 GW to 67 GW.

You can download this year's free report by, clicking here.

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Ron Pernick is cofounder and principal of Clean Edge, Inc. His book, The Clean Tech Revolution, (coauthored with Clint Wilder) will be released by Collins Business in June, 2007.