Doug Arent, Ph.D., Executive Director of the Joint Institute for Strategic Energy Analysis, NREL
January 07, 2013 | 0 Comments
In late June, the United Nations Conference on Sustainable Development was held in Rio de Janeiro, Brazil, two decades after its predecessor, the 1992 Earth Summit, was held to advance sustainable development through international cooperation. The "Rio+20? event drew the attendance of more than 100 Heads of State, and the top-level negotiated result from the conference was captured in a 53-page document called "The Future We Want."
As widely expected, the document reaffirmed prior commitments and articulated a common ground for continued negotiations, it was without a major breakthrough, but did capture the importance of Energy in Sustainable Development. Additionally, a great many informal (e.g. non government to government) commitments were made at Rio+20, many of which reflect the global trends that are shaping the clean energy and clean tech industries today, trends that SRI and impact investors should keep a close eye on.
A Maturing Clean Energy Industry
The bottom line is that the clean energy industry has grown up. Back in 2004, for instance, global investment in clean energy totaled $53 billion, but that figure ballooned to $280 billion in 2011, according to Bloomberg New Energy Finance. Clean energy investment has set new records every year since 2004, showing growth even through the recession.
Renewable energy is becoming a significant part of the energy mix in many countries. As an example, on one sunny Friday in May, solar power provided 22 gigawatts of electrical power into Germany’s power grid, meeting about half of the country’s peak power load. Wind power provides significant shares in Denmark, Spain, Portugal and many parts of the United States. In Iowa and South Dakota, wind power now provides more than 20 percent of the state’s electricity demand. And on one windy day in October 2011, Colorado’s biggest utility, Xcel Energy, used wind power to supply more than 50 percent of its power load. As a result of success stories like these, renewable energy’s role in state and national energy mixes, and in the global energy mix, has never been more strongly recognized.
Rio+20 marked a major milestone for energy — particularly clean, efficient, and accessible energy. Never before has energy been a core priority of the global development discussion. This year, United Nations Secretary-General Ban Ki-moon launched and strongly promoted his Sustainable Energy for All initiative. As a result, energy services are now recognized as a critical element for sustainable development, a creator of jobs and economic development, and a source of energy security.
Achievements at Rio+20: The Major Players
In Ban Ki-moon’s vision statement for Sustainable Energy for All, he declares that, “to defeat poverty and save the planet, we can and must achieve sustainable energy for all by the year 2030,” and he further identifies three goals: ensuring universal access to modern energy services, doubling the rate of improvement in energy efficiency, and doubling the share of renewable energy in the global energy mix.
At Rio+20, Secretary-General Ban Ki-moon announced that more than 50 governments engaged with the Initiative and are developing energy plans and programs. That includes the U.S. government, which plans to provide $2 billion in grants, loans, and loan guarantees. As part of that, Secretary of State Hilary Clinton announced an effort in which the State Department, the Overseas Private Investment Corp., and the U.S. Trade and Development Agency will provide $20 million in grants to business owners in Africa to help leverage hundreds of millions of dollars in private financing. “This new initiative is part of an across-the-board push by the United States to make clean energy and energy security cornerstones of our foreign policy,” said Secretary Clinton at the launch of the initiative.
In addition, businesses and investors committed more than $50 billion to achieve the initiative’s three objectives; by one tally, more than 156 voluntary commitments were made in support ofSustainable Energy for All. Microsoft is one of those businesses, having pledged to become carbon neutral by the end of 2013. Microsoft will also institute an internal fee on carbon emissions, with the aim of driving greater advances in energy efficiency in its data centers and buildings, increasing its procurement of renewable energy, and reducing its travel-related emissions.
Banks are also playing an important role in the initiative, as multilateral development banks have committed more than $30 billion towards achieving the three objectives. The European Bank for Reconstruction and Development, for example, has committed $8 billion in energy efficiency projects in Eastern Europe and Central Asia over the next three years. Private banks are also involved, as the Bank of America has set a ten-year, $50 billion environmental business goal, much of which is expected to support clean energy projects. Based on historical performance, BofA conservatively estimates that this should equate to approximately $35 billion in Sustainable Energy for All‘s focus areas.
What can green investors conclude from these commitments? First, the idea of clean and sustainable energy is gaining in political prominence. Second, a great many businesses and investors are determined to invest large sums of money in clean energy. Some companies, like Microsoft, are even internalizing this investment strategy to make sure that their business operations take advantage of the available opportunities. And governments have realized that their investments can serve as magnets to help attract the private investment dollars that gain more momentum with each passing day.
Outside the Big Tent: Rio+20 Side Events
While the major announcements at Rio+20 took the headlines, a number of so-called “side events” at the conference represented trends in thinking that will have an impact on the future growth of clean energy. For instance, the Global Green Growth Institute (GGGI) was converted into an international organization during Rio+20. The GGGI is dedicated to pioneering and spreading a new model of economic growth that simultaneously targets key aspects of economic performance and environmental sustainability. A related effort is the Low Emissions Development Strategies (LEDS) Global Partnership, a network of more than 50 countries, international agencies, and technical institutes working together to advance low-emissions development, including comprehensive approaches that highlight the key role of energy.