In my quest to better understand the current state of the renewable energy industry around the globe, I came across the studies of the Ernst & Young Environmental Finance Team. This global research team publishes their findings in a quarterly report and produces the Renewable Energy Attractiveness Index. This index scores the top 40 national renewable energy markets – yes, a billboard chart for countries singing about renewable energy. To no surprise, China sits atop the list with their deep pockets, followed by the US, Germany, India and Italy. After seeing the index, I decided to take a closer look at these leaders and get a better understanding of their success.
Despite the industry recently seeing a new wave of promising technology and a mass pop culture following to “Go Green”, money and politics are what is really steering the ship across the world. For the industry to continue in the right direction and further gain momentum, clean energy companies need two things: Firstly, easy access to capital in the financial markets and from governments. Secondly, federal policies in place to protect companies from failure and incentivize growth. These two factors currently serve some countries extremely well, while others not so much.
To spotlight the global leader of Clean Energy, China puts their money where their mouth is. Combined with a courageous commitment to source 16% of its energy from renewables by 2020, record investments continue to be made to fuel growth. In 2011 alone, China invested US$30b to solar manufacturers last year (20 times US efforts). India also saw record levels of funding with US$7.2b in the first three quarters injected into the clean energy projects.
In the U.S., the outlook remains uncertain mainly due to current clean energy policy (concerning money). The government has made no sign to re-enact the Department of Energy’s Loan Guarantee Program which expired in September. In addition, the 1603 Treasury Grant Program expires at the end of the month. These programs are the main source of new renewable energy projects in the US. With a growing list of high profile, government backed clean energy bankruptcies combined with an increasingly abundant natural gas industry, intensively growing the clean energy business may not be atop Washington’s list of priorities.
The best use of legislation to support clean energy has been through the use of feed in tariffs which is the system in China and Germany. Feed-In Tarriff’s effectively put more money in the hands of the individuals who are generating the power from renewable sources. In Germany, typically 40% of the profit goes to the energy producer and is bought from utility companies under a long term contract at prices four times higher than the current market rate. With renewable energy businesses being highly profitable and sustainable, the industry continues to grow, many new jobs have been create, and new ventures are highly supported by the general public.
While growing at varying paces around the world, the key factors for growth seem to be consistent throughout the world: money and politics. Simply put, my research has brought to light that the renewable energy industry is too young to stand up in the free market without financial and political crutches.