Investing in Renewable Energy

In 2009 a number of states have increased their legislative activity on renewable energy, and are poised to take maximum advantage of the clean-energy provisions of the federal stimulus package.

“Alternative” energy isn’t alternative anymore. The U.S. committed several years ago to replace 75% of our oil imports from the Middle East by 2025. Investment in alternative energy is doubling every several years.

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And Ray Lane, venture capital backer of Google, Amazon.com, and other internet groundbreakers says the alternative energy investment boom “is bigger than the internet by an order of magnitude. Maybe two.”

Investing visionaries like Warren Buffett, Bill Gates, T. Boone Pickens and others are betting big in alternative energy companies. Not all of the companies they’re investing in are large- or medium-cap either.

American VC firms injected $836.1 million in 59 deals in the first quarter of 2009. A principal at one clean tech investment firm says, “The $800 million of investment this quarter is more capital than has been invested annually for most of the years that we’ve been investing in the cleantech sector.”

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So far solar has attracted the most venture capital in 2009 with $356.6 million in 14 deals, followed by energy storage with $121.5 million, and biofuels with $94.15 million. Now, as billions of dollars of stimulus funding for the smart grid and energy efficiency projects enters the market, investors could see growth in this arena.

At least 14 of the 59 deals in the first quarter of 2009 were early stage.

John Doerr, partner at VC firm Kleiner Perkin says, “Greentech could be the largest economic opportunity of the 21st century. This level of green VC investment is not enough.”

Erik Straser, a partner at Mohr Davidow Ventures says, “Cleantech enjoys favorable tailwinds even in this challenging time. In the first quarter, quality companies continue to raise capital albeit with longer fundraising processes and through the Stimulus Plan we see a potent program of incentives and loan guarantees to accelerate adoption of these critical 21st century technologies.”

Renewable energy distribution market is growing

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Electricity is expected to remain the fastest growing form of end-use energy worldwide through 2030, as it has been over the past several decades.

According to the Energy Information Administration, “over the next 25 years, the world will become increasingly dependent on electricity to meet its energy needs.”

Right now nearly 70% of America’s electricity is generated by natural gas and coal. Still, companies that have solar and wind power generators tied into the grid are part of a major growth area.

Buildings account for almost 50% of the energy consumed in developed countries. Governments are putting increased focus on legislation and policies to improve their energy efficiency. In North America, initiatives such as the environmental building rating system (LEED) run by the US Green Building Council are helping to transform the market for added-value glazing, and this will continue. Similar opportunities are anticipated in Europe, for example, through the development of an EU-wide Energy Labelling system for windows. In China, legislation is at an earlier stage, but the government has already introduced building regulations to improve the energy efficiency of new buildings.

The U.S. market for new, non-residential ‘green buildings’ — such as offices and factories — is forecast to more than double to as much as $145 billion in five years, according to industry researcher McGraw-Hill Construction.

The global market for flat glass in 2008 was approximately 53 million tons. Of this tonnage, around 70 per cent is consumed in windows for buildings, 10 per cent in glazing products for automotive applications and 20 per cent used in furniture and other interior applications.

In terms of volume of glass consumed, Building Products is by far the largest sector (~45 million tons) Special applications is very small in volume terms but significant growth is being driven by the use of glass in Solar Energy generation. Over the long term, the market is growing in volume terms at around 4-5% a year. (Pilkington and the Flat Glass Industry 2009)

 

New Energy Technology Market

  • The United States has the world‘s largest transportation system.
  • In 2006, Americans traveled 5.2 trillion person-miles in vehicles and moved 4.6 trillion ton-miles of freight. This travel consumed 28.6 quads of energy, all but about 4% in the form of petroleum products —more energy than used in that year by the entire economies of all but two nations, China (73.8 quads) and Russia (30.6 quads).
  • Globally, the world auto fleet has increased from about 50 million vehicles to 580 million vehicles between 1950 and 1997, growing five times faster than the growth in population (Barker, et al., 2007).
  • Increasing Need for Distributed Power – The global electric power industry is evolving from a financial and engineering model that relies on large centralized power plants owned by the utilities to one that is more diverse – both in sources of generation and ownership of the generation assets.
  • Passenger cars and light-duty trucks account for about 60% of the energy used for U.S. transportation, and their energy use has grown by 1.4% per year over the past several decades (Davis, Diegel, & Boundy, 2009).
  • Freight truck vehicle miles traveled (VMT) and energy consumption are projected to grow faster than any other mode. The U.S. EIA projects that truck travel will grow from 241 billion vehicle miles in 2007 to 363 billion miles in 2035. (EIA, 2010a).

 

  • Maintain Global Consensus on Climate Change
  • Diversify Energy Resources
  • Reduce Dependency on Foreign Oil
  • Focus on Renewable and Alternative Energy Targets
  • A total of 482MW of grid-interactive PV systems were installed in the U.S in 2009 at a capacity-weighted average price of $6.90/W, indicating a total value of $3 billion for the U.S. solar PV market. Source: GTM Research.
  • Growth Forecast: Building-integrated and building-applied PV are set to achieve a compound annual growth rate of at least 41% through 2016. Source: Pike Research.
  • Driving Green Building Market: Rising energy costs, increasing electricity consumption; Unprecedented level of government initiatives; Heightened awareness and demand for green construction for sustainability and energy efficiency; and Improvements in sustainable materials.

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