Europe Continues to Dominate Current Solar Market

Germany was able to pick up the slack from Spain and grow to ~50% of the global total. Italy, the Czech Republic, and elsewhere in Europe made up another 24% of the global market.

But Europe’s 74% global share was down from over 80% in 2008. The US remained the third largest solar market (this year after Germany and Italy) at 8% of the global market. Solar installations grew a quick 36% in the US to 485 MW in 2009. Japan ranked fourth after its market more than doubled.

Solar cell production is now close to 10 GW (less than a third of wind turbine production in 2009, but its catching up). Global solar demand may approach the 10 GW milestone in 2010 as it is expected to return to white-hot growth. This growth is less dependent on subsidies since the price of solar modules fell 38% during 2009 and prices are expected to continue to decrease in 2010. This could usher in the period of affordable solar by late 2010, especially if prices for oil, natural gas, and coal continue to trend higher.

While solar won’t be as cheap an emissions reduction option as the bicycle, its ability to compete economically with fossil fuels will be greatly enhanced in the year ahead.

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

Wind Tech Advances Quicker Than Fossil Energy Tech

Many fossil energy advocates who ignore the harmful global warming effects of burning oil and natural gas pretend like technological change will allow us to increase our use of these fuels forever. But the reality is that US oil reserves and production have fallen more than 15% and 20%, respectively, since the early 1990s. And at some point within the next decade or so a similar trend will likely constrain the natural gas market even though EIA estimates of its reserves have climbed ~50% since 1993. Over the same time period, the estimate of wind power potential has climbed more than 3.5 times what the Pacific Northwest Laboratory estimated in 1993. This shows that wind technology during the period has advanced much quicker than exploration and production technology for oil and natural gas. A major improvement comes from taller wind turbines today, since wind is stronger at 80 meters than at 50 meters above the ground.

The Biggest Changes

The main sources of growth for US wind power potential came in the Great Plains, which was already known to be the heart of our resource. Texas, long the largest wind power producing state, is now estimated to be the top state for wind potential after passing the Dakotas and Kansas. In fact, it is estimated that Texas can produce from wind 15X the amount of power it consumes from all electric sources today. Another twenty states can also produce so much wind power that they could become major exporters of this electricity to other states around the country. The estimate excluded wind potential in parks, urban areas and over water — so this is a major underestimate once you consider the offshore wind potential we have off the Atlantic and Pacific coasts. Even so, the 37,000 TWh per year (~365 quadrillion Btus) listed in their onshore wind power estimate is more energy than that contained in our oil and natural gas reserves combined.

Solar Energy Potential Even Larger

The estimate of solar energy potential is more than 100X that of wind power, at over 2,000 TW. So, the issue for renewable energy isn’t any lack of supply. The challenge is for us is to continue cost reductions for wind and solar to make them cheaper than their fossil energy competitors. The year 2010 could be a breakthrough period in that regard as prices for wind turbines and solar modules fall toward grid parity.

Renewables Dominance Will Take Over a Decade

Even when wind and solar are more economical, it will take some time for them to grow from their current base of ~2% of US electricity. Manufacturers of solar modules and wind turbines will have to ramp up global production capacity from current levels of ~10 GW and ~40 GW, respectively, to at least 50 GW each before these sources of electricity can take significant market share from natural gas, oil, and coal. And we will need to continue to improve energy storage capabilities and economics along with our development of a smart grid that can adjust to the intermittency of wind and sunshine for this transition to renewables to take place smoothly over the next 10-25 years.

Now we know there is plenty of renewable energy available to keep us warm, lighted, and wired throughout the 21st century once we have moved on from our dependence on fossil fuels. Let’s make 2010 a huge step in this monumental project!

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

Global Growth Shines

The global wind power market also grew at an astounding rate — clocking a 37.5% growth rate in its annual market (37 GW vs. 27 GW in 2008). China’s annual growth became the biggest in the world at 13 GW, which makes sense due to their larger electricity demand growth. At the end of 2009, China became the 3rd largest wind energy producer after the US and Germany (35.1 GW, 25.8 GW, and 25.1 GW). China will become the 2nd biggest wind producer in 2010 and may challenge the US by 2011.

The global solar market didn’t grow as quickly due to the collapse of its top market of 2008 — Spain (~50% of the world market that year). But Germany rode to the rescue and extended its lead as the biggest solar power producer in the world (it may have passed 8 GW). Germans took advantage of a 40+% decrease in solar module prices and had record growth (becoming ~50% of the global market themselves).

In the US

As I wrote last year, wind was already replacing oil-fired electricity in 2008. In 2009, wind took some market share from the most polluting power source, coal. In the years ahead, wind and solar can provide for new electricity demand growth and then begin to take significant bites out of the market for the leading electricity sources, coal and natural gas.

At 35 GW, wind now produces ~2% of US electricity demand. At almost 2 GW, solar produces ~.1% of US electricity demand. Biomass and geothermal produce ~1.5% and hydro almost 7%. The big three power sources today are nuclear (~20%), natural gas (~23%), and coal (~45%). When you look at particular states, it is exciting to see that wind power already provides three states with more than 20% of their power needs (Wyoming, Iowa, and North Dakota). By 2023, wind could provide 20% of the whole country’s electricity and solar another 12.5% (based on growth rates of 17.6% per year for wind – half the recent rate – and 40.4% for solar – a slight pickup from the last few years).

The US Energy Information Administration predicts US demand growth for electricity at a rate of 1% per year through 2035. I personally think that rate is higher than necessary as electricity demand growth has fallen every decade since the 1950s and it only grew .4% per year in the ’00s. Increased efficiency efforts can help electricity demand stay flat or even fall, as Google presents in its Clean Energy 2030 Plan.

Trends in Europe as a Glimpse at Our Future?

Europe installed over 10 GW of wind power capacity in 2009. The continent now gets ~9% of its electricity from wind and wind was the top source of of new electrical capacity at 39%. Solar power was third at 16% after natural gas which supplied 26%. Adding hydro and biomass, renewable energy provided 61% of new capacity. Meanwhile, coal is on the decline, as over 3 GW were decommissioned. The US can accomplish this same feat of most new demand coming from renewables in 2010 and beyond.

Price Curves Favorable for Wind & Solar

The prices of wind and solar should continue to drop in 2010, as opposed to an increase in the price of oil, natural gas, and coal. This trend should help maintain swift growth from these sources and make them the new energy titans within a few more years.

The Human Toll of Fossil Fuels

As I discussed a few months back, our addiction to fossil fuels has a serious human toll (on top of inducing global warming and hurting air quality). The tragic blast at a Connecticut power plant that killed at least five people today is a grim reminder of this. Our transition to an efficient reliance on renewable energy will help to reduce such accidents in the future.

Nuclear & “Clean Coal” Not a Near-term Remedy

While Obama has been trumpeting nuclear and “clean coal” as a necessary bridge to a renewable energy future that he thinks is decades away, renewables are actually better situated to provide for us. It takes ten years to commission and build a new nuclear power plant. And carbon sequestration coal is not market-ready yet. In contrast, wind and solar are growing quickly, proven technologies, and falling in cost. Here’s to further record growth for wind and solar in 2010 — finally putting to rest any doubts that they can lead us to a new climate-friendly energy future.

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

There are significant costs to such a transition for this island nation and its 12,000 citizens. But when your highest point is less than 5 meters, you don’t have the luxury to procrastinate on emissions reduction. The more the US, China, and the EU can develop and improve renewables, the easier we can make the sustainable energy transition for our neighbors in the developed and developing world. Here’s to continued advances in solar technology that brings it to grid parity by the early 2010s so that we can all replace our older, dirty fossil fuel-based energy system.

Onwards to further climate progress-

Oil Output Slides Slower than Demand

Oil demand is down more than 5% in 2009 thus far and shows few signs of change. The Energy Information Administration (EIA) Petroleum Weekly Report shows demand of most oil-based fuels nosediving. Gasoline, distillates (mostly diesel), and propane demand fell 3.2%, 24%, and a whopping 39%, respectively. As a tempering force to supply gains, US crude output slid 1.8% to 5.163 Mbd last week, just .8% higher than in 2008. Much further reduction in production could bring US stockpiles back into the average range and threaten to lift prices above $70 per barrel again. But more economic stability is necessary to raise prices much further.

Natural Gas Storage Finally Slows its Growth

It took sub-$4 per MMBtu and a heat wave across the South to finally keep natural gas inventories from its above average growth. Output may fall below 2008 levels in July and send prices back above $4. But again, some economic recovery is important for prices to climb significantly above $4.50 per MMBtu. Storage remains more than 20% above average, and is poised to hit new record levels by October. Natural gas will remain a strong substitute for coal this summer even though coal prices are half their 2008 average.

Low Energy Demand Means Slow Renewables Growth

It’s hard to justify strong demand for new renewable energy when overall energy demand remains significantly below 2008 levels. But if solar and wind producers can continue to lower costs and economic recovery picks up in the second half of 2009, we may be on the cusp of another wave of strong expansion.

Bottom line: The recession maintains its grip on fuel prices midway through 2009. Whether demand recovery, output decreases, or changes in the exchange value of the dollar will change that reality in the months ahead is difficult to know. I’ll keep you posted on these trends and their influence on greenhouse gas emissions in the weeks ahead.

Onwards in the Sustainable Energy Transition-

Thousands of Deaths per Year

The same combustibility that makes fossil fuels a generous energy source claims the lives of thousands of people per year worldwide. A natural gas plant in Saudi Arabia recently exploded and killed 40 people. Several helicopters ferrying offshore oil workers have crashed in the last few months in the UK, the US, and Canada, killing scores of workers. But the most deaths probably occur in the coal mines of China, where thousands of miners lose their lives each year in explosions, collapses, and floods.

Renewable Energy Not Immune to Accidents

Wind turbines hundreds of feet in the air and rooftop solar installations can sometimes result in injuries or even a fatality as well. So the industry will need to take care and government regulations will be crucial to keep those numbers low as these industries scale up. Another risk that wind companies must take responsibility for is potential accidents at iron ore mines that are the source of their turbines’ steel (a recent iron ore flooding accident in China claimed 29 lives).

Bottom Line: The transition to efficiency and renewable energy reliance can help reduce mortality in our global energy system – not just from the effects of climate change and pollution. But even though wind and solar power may have inherently fewer risks, safety regulations will need to adapt to keep up with these new technologies and ensure the safety of the growing green-collar workforce.

Onwards in the Sustainable Energy Transition-

One of the most compelling speakers at our last day of REFF Wall Street was Deutsche Bank’s Global Head of Asset Management, Kevin Parker.

The focus of his talk was the importance for the finance community to respond to resource scarcity amidst a growing world population and the threat of catastrophic climate change. Parker cited capital markets validating renewable energy with scores of billions in investment over the last few quarters, while “clean coal” is only a dream receiving government support because it is years away from commercial viability.

Parker also emphasized the opportunity over the next several months as money moves from the sidelines (safe-haven money market accounts) back into the market. He talked of more than $10 trillion, of which a small fraction flowing into renewable energy financing could revolutionize our global energy system.

Parker believes investors are waiting for some regulatory certainty — in the form of US cap and trade bill passage and a potential federal Renewable Electricity Standard (RES). If the House passes ACES today and it is able to get through the Senate and to the President’s desk this summer, investors will have some certainty to help them get further involved in the renewable energy sector.

First Solar and other solar companies could definitely use more capital to help them continue to simultaneously break efficiency records and lower costs. First Solar announced yesterday that they aim to lower module production costs per watt by a third or more in the next five years, approaching 50 cents per watt in 2014. Such progress would put solar power on equal footing with coal electricity and lower the risks from future fuel scarcity, since there is practically an infinite supply of energy available from the sun.

The hundreds of billions of dollars that flow every year into coal and oil can shift into renewables. Such a flow would mobilize bright minds to improve energy storage and grid management and overcome the challenges from intermittency.

The technology for carbon capture and storage for coal and other fossil fuels has several years before it is ready for prime time on a multi-GW scale — Parker mentioned the date 2020. Meanwhile, renewable energy is ready to provide the US with more than 10 new GW per year in 2010 and beyond. Globally, the number is poised to approach 50 GW per year in 2010.

Parker and other speakers closed REFF-Wall Street on a positive note. The solution to climate change and resource scarcity is available and getting better in the form of efficiency, wind, solar, and other renewable energies. As debt markets and tax equity improve, regulatory frameworks solidify, and stimulus funds become available in the second half of 2009, massive amounts of capital will be deployable for the renewable energy sector. The hurt from our current recession will remain for many months, but lower prices for renewable energy in 2010+ makes it the go-to technology to achieve a stable climate and a prosperous world.

New Energy Finance

Based on his firm’s research, he called the first quarter of 2009 the bottom for renewable energy finance. He doesn’t say we are in euphoric times, but does believe renewables are poised to reach record growth again within a few quarters.

Based on their recent data, New Energy Finance predicts second quarter finance to be about double first quarter numbers and back to 2007 numbers at ~$25 billion. His slides showed a projection that US wind grows faster than any year except the record 2008. He also predicts stimulus funds will begin to help the efficiency and renewable energy sector in the late second half of 2009.

All conference speakers acknowledge that the recessionary times continue to be difficult for renewable energy. Liebreich even called 2009 the year of ramen noodle meals before spectacular growth in 2010.

On the price side, Liebreich echoed others’ emphasis on the silver lining of our recession: lower prices. For wind, turbine prices should begin to fall significantly in late 2009 and early 2010. And the solar story is much more dramatic – with module prices set to decline more than 40% this year.

Many speakers are excited about the prospect for public perception of clean energy to change from expensive to cost-competitive. For instance, SolarCity CEO Lyndon Rive is using financing to make new residential solar installations a cost-saving move for homeowners in California and Arizona. And the further reduction of solar module prices in the months ahead should make financing more available and help SolarCity grow capacity to reduce its eight-month long waiting list.

Hannon Armstrong’s CEO Jeff Eckel spoke this morning about renewable price reduction aligning the stars for an amazing 2010. Other panelists agree that the year will bring record growth in US wind and solar power, with deployment breaking 10 GW and 1 GW for the first time, respectively.

Liebreich projects that most of the federal ARRA stimulus money will flow in 2010. This means the money meant to spur economic recovery may not emerge until recovery is already upon us. But this fact was presented as a reality more than a complaint. Conference panelists are sharing great appreciation for the government support that exists, calling today an unprecedented policy environment.

So, while REFF participants concede that the recessionary hurt lingers, Liebreich makes the encouraging call that the first quarter of 2009 was the bottom for the renewable energy sector. The good news of lower prices for renewables and federal stimulus support in late 2009 and 2010 signal an upcoming boom for the sector in the quarters ahead.

I’ll keep you updated on further insight as the conference continues and beyond.

These folks aim to foster a new image for the financial capital of our country. They aim to be leaders tackling climate change and empowering an energy revolution.

The American Council On Renewable Energy (ACORE) is convening a gathering of financial muscle for the second year, entitled the Renewable Energy Financial Forum (REFF). Last year, over 600 participants came to REFF Wall Street. This year, a similar number are filling the elegant Waldorf rooms to strategize a resurgence of renewable energy finance.

Even though markets continue to struggle, the conference started with positive energy this Tuesday morning. Leaders from finance are discussing how the negative trends of 2009 can make way for robust growth in 2010 – building on the positive news emerging such as bicycle sales and lower prices for solar.

The first speaker was Undersecretary of Energy Kristina Johnson. She represented a goal-oriented DOE that is aggressively interested in tapping into the vast latent renewable resources throughout the US. She put forward goals for wind and solar power to make up 21% of US electricity in 2030 (15% and 6%, respectively). She also focused on the potential for hydropower to grow from its ~6.5% share by adding turbines to lakes that are currently solely for recreation and water supply.

International Energy Agency head, Nobuo Tanaka, called this renewable energy transition necessary to properly address the urgent climate crisis from business as usual energy consumption. He believes current US federal legislation to lower emissions 80+% by 2050 is in the range of what is needed to achieve a safe greenhouse gas concentration of 450 ppm (parts per million in the atmosphere).

The head of ACORE, Michael Eckhart, estimates that such DOE renewable energy growth goals will take $1 trillion in finance over the next two decades to come to fruition. That huge prospective capital flow is why we have standing room only filling the main ballroom. The panelists are hopeful that the current freeze in capital markets will recover by mid-2010. Cards are beings swapped, relationships are beginning, and these industry leaders have better information to lead their institutions to successful renewable energy deployment in the years ahead.

It will take a while for Wall Street to change its image from unchecked greed and rapacious industry. But gatherings like REFF can help empower an ethos of environmental stewardship and climate responsibility into the community.

I’ll keep you updated on how the conference develops over the next two days. Here’s hoping participants are able to figure out and share innovative financing methods that can continue to lower renewables’ cost and help these cleaner sources substitute dirty fossil fuels in our energy system.

The Details

The EIA expects oil consumption to fall 3% in the US to a little more than 18.8 million barrels per day. Most of the reduced demand is projected to come from lower use of distillates (mainly diesel) and jet fuel. For coal, the EIA predicts consumption to fall ~2.6% based on much lower industrial and coke plant demand and a substitution to natural gas for electricity generation. Even after taking up some slack from coal, natural gas consumption is expected to fall 1.9% (.1% further than estimated in April). Adding all these decreases together produces emissions that are 3% lower than in 2008.

Room for Further Reductions

I see room for emissions to fall even further than 3% as petroleum demand is currently more than 5% below last year (not just 3%) and substitution from coal to natural gas may drive a huge drop in coal demand of 4+% (compared to their ~2.6% estimate).

Some Background on Natural Gas Substitution of Coal

The report included a supplement on coal-to-natural gas substitution which helped me understand the situation more clearly. Since natural gas power plants are more efficient (less heat needed per kWh generated), natural gas prices that are higher than coal prices by 33% or less are often competitive. While most coal demand is guaranteed through long-term contracts, as much as 10-20% of some regional electricity markets can switch from spot market coal to spot market natural gas purchases. A natural gas price of $4 per MMBtu is more economical than a coal price of $3.25 per MMBtu in many efficient combined cycle natural gas plants.

Bottom Line: US greenhouse gas emissions from energy are now predicted by the EIA to decline faster than the swift fall of 2008. For us to continue this trend in 2010 and beyond, we must base our economic recovery on efficiency and renewable energy deployment (through federal climate legislation and a Renewable Electricity Standard).

I’ll keep you updated as progress is made-