The future of renewable energy
By Jane Allen - June 07, 2012
The future of renewable energy has been cast into doubt this past year. Natural gas prices have dropped significantly due to new technology that enables formerly uneconomic resources to be reached, creating a lower price bar that renewable energy must meet. The global financial situation has caused many jurisdictions to reduce or eliminate subsidies for renewable power, which has slowed the expansion of projects. Combined with opposition in many regions to the construction of wind turbines, one could wonder if the enthusiasm for renewable energy was an unsustainable short-term phenomenon.
Yet a different picture emerges from the investment data. According to Bloomberg New Energy Finance, more than $210 billion was invested worldwide in renewable energy in 2010, up from $33 billion in 2004; the year investment began being tracked in a meaningful way. China leads, with $50 billion in investment, followed by Germany at $31 billion and the US at $29 billion. BNEF’s report http://www.fs-unep-centre.org notes that a shift has taken place toward investment in smaller-scale projects such as rooftop solar, and that the Middle East and Africa, and South and Central America have emerged as more significant investors in renewable power – it is no longer a “China-only” story. On a recent visit to Morocco, I saw much evidence of small scale rooftop solar projects both in the main cities and in the rural villages, and there is a great optimism on the part of government and business about the ability for wind and solar power to meet the rapidly increasing demand for electricity in that country. Morocco has a population of 32 million – close to that of California, and plans to invest $9 billion to build 2000 MW of solar power by 2020. The vast potential of solar power to supply not only northern Africa but Europe, is only beginning to be tapped.
Continued investment in renewable energy has resulted in significant reductions in its price, particularly for solar photovoltaics and in some jurisdictions, solar and wind has reached grid parity – the price at which these forms of energy are competitive with conventional power being sold into the grid.
There is no doubt that faced with the cutback to subsidies, renewable power companies will have to do all they can to produce cost-effective products in order to compete with abundant, cheap, and incumbent fossil fuels. But with continued pressure to decarbonize the world’s electricity system, and continued investment feeding ingenuity and innovation, the renewable power industry will remain vibrant, and will provide a larger proportion of the world’s energy supply. Watch the investment levels to see how the renewables industry will become an increasingly competitive force.
Jane Allen is the Global Leader for Renewable Energy of Deloitte Touche Tohmatsu Limited (DTTL). In her global industry leadership role, she directs strategic initiatives to grow Deloitte member firm market share within the renewable energy industry. During her 34-year career, Jane has led teams serving all aspects of the power sector, including consulting with top management on strategy development and execution, and business performance improvement.