More than $100 billion was invested in 2007 in new renewable energy capacity, manufacturing plants, and R&D – a true global milestone. Yet perceptions lag behind reality. The REN21 Renewables 2007 Global Status Report captures that reality. Lead author of the report Eric Martinot gives a selected overview.Renewable energy markets, industry, and investment have never grown faster than they did in 2007. An estimated US$71 billion was invested in new renewable power and heating capacity worldwide in 2007 (excluding large hydropower), of which 47% was for wind power and 30% for solar PV. Add to that over $10 billion in new solar PV manufacturing capacity, over $4 billion in biofuels plant additions, and at least $16 billion in research and development, and the total reaches over $100 billion for the first time in history. These investment flows also became more diversified and mainstream during 2006 and 2007, including flows from major commercial and investment banks, venture capital and private equity investors, multilateral and bilateral development organizations, and smaller local financiers.
Countries with the largest amounts of new capacity investment were Germany, China, the United States, Spain, Japan, and India.
Investment in Germany increased to over $14 billion in 2007, mostly for wind and solar PV. Investment in second-place China was $12 billion, mostly in small hydropower, solar hot water, and wind power, while the US was number three, with over $10 billion. Emerging markets are also capturing increasing shares of investment in new capacity, manufacturing facilities, and R&D, notably Brazil and India.
Furthermore, the years 2006 and 2007 saw investors worldwide pay much greater attention to companies in the renewable energy industry. This attention translated into higher stock valuations and more aggressive industry expansion. By mid-2007, worldwide at least 140 publicly traded renewable energy companies – or renewable energy divisions of major companies – had a market capitalization greater than $40 million each. The estimated total market capitalization of these companies and divisions in mid-2007 was more than $100 billion and the number of companies in this category jumped significantly over the year, from around 85 in 2006. Dozens of other companies appeared poised to become public and/or attain higher valuations, as initial public offerings (IPOs) and strong investment flows continued during 2007.
Sources of finance and investment now come from a diverse array of private and public institutions. From private sources, both mainstream and venture capital investment is accelerating, for both proven and developing technologies. The largest institutional investors and banks have been lending for renewable energy over the past several years, while venture capital financing for renewable energy exceeded $3 billion worldwide in 2006, and was likely substantially higher in 2007, particularly for solar PV and biofuels. The US led venture capital investment, with over 60% of the clean energy total during 2006, and a reported $800 million for biofuels alone.
Market and Industry Trends
Investment figures reflect strong market growth for a number of technologies and aggressive industry expansion. The period 2006-2007 saw accelerating investments in manufacturing plants for wind turbines and components, conventional solar PV, thin-film PV, concentrating solar thermal components, and conventional biofuels production. Solar hot water markets continued to grow in China, Europe, and some other countries. This period also marked the beginning of commercial investment in advanced cellulosic ethanol biofuels plants.
Wind power now accounts for the dominant share of global investment in renewable energy. Total wind power capacity grew by 28% worldwide in 2007 to reach an estimated 95 GW. Annual capacity additions by market size increased even more: 40% higher in 2007 compared to 2006. Wind markets have also become geographically broad, with capacity in over 70 countries. Even as turbine prices remained high, due in part to materials costs and supply-chain troubles, the industry saw an increase in manufacturing facilities in the US, India, and China, broadening the manufacturing base away from Europe with the growth of more localized supply chains. India has been exporting components and turbines for many years, and it appeared that 2006 and 2007 marked a turning point for China as well, with deals announced for the export of Chinese turbines and components.
Grid-connected PV continues to be the fastest-growing power generation technology, with 50% annual increases in cumulative installed capacity in both 2006 and 2007. An estimated 2.7 GW was added globally in 2007, compared with 1.6 GW in 2006, which brought cumulative grid-tied capacity to an estimated 7.8 GW – globally perhaps 1.5 million homes feeding PV power to the grid. Germany accounted for roughly half the global market in 2006 and was clearly still the leader in 2007. However, the Spanish solar PV market grew the fastest of any country during 2007, with an estimated 400 MW added, a four-fold increase over 2006 additions. Markets for grid-tied PV remain strong in Japan and in California and New Jersey in the US while other emerging markets include France, Greece, Italy, Korea, and several southwestern and eastern US states.
In addition to rooftop installations, the growth of large-scale solar PV power plants accelerated during 2006 and 2007, including many new hundred-kW-scale and MW-scale plants. Spain now hosts the world’s two largest solar PV plants, at 20 MW each, in the cities of Jumilla and Beneixama in Murcia and Alicante regions respectively. There are over 800 plants worldwide with capacity greater than 200 kW and at least nine larger than 10 MW in Germany, Portugal, Spain, and the US.
The solar PV industry produced an estimated 3.5-3.8 GW of capacity in 2007, up from 2.5 GW in 2006. Investment in new PV manufacturing facilities was strong in Europe, Japan, China, Taiwan, and the US, with many new ventures reported. A number of companies announced plans to scale-up manufacturing with 1 GW scale ‘mega’ production plants. The industry also saw a boom in silicon production facilities, in response to shortages. By 2007, more than 70 silicon manufacturing facilities were being constructed or planned.
Thin-film PV still represents a small share of global solar PV production, about 6%-8% in 2006, but is gaining acceptance as a mainstream technology. Over 80 companies are now active in thin-film. Beyond the US and Europe, at least a dozen manufacturers in China, Taiwan, India, Japan, and South Africa are planning to expand thin-film production in the near future.
With these increases in wind and solar PV, coupled with more modest increases in biomass, small hydro, and geothermal, new renewables now represent 5% of global power capacity and 3.4% of global generation. These figures exclude large hydropower, which itself accounts for some 15% of global power generation. Renewable electricity generation capacity reached an estimated 240 GW worldwide in 2007, an increase of 50% over 2004. By comparison, total global power capacity of all forms was roughly 4,300 GW in 2006.
Meanwhile, the concentrating solar thermal power (CSP) industry finished a first round of new construction during 2006-2007, a resurgence after more than 15 years of commercial dormancy. Commercial plans in Israel, Portugal, Spain, and the US have led to new technology development and investment. Three plants were completed during the period: a 64 MW parabolic trough plant in Nevada, a 1 MW trough plant in Arizona, and an 11 MW central receiver plant in Spain. By 2007, there were over 20 new CSP projects around the world either under construction, in planning stages, or undergoing feasibility studies, the majority in Spain and the US but also in a number of developing countries. Several industry players are also planning new projects, including an agreement between Chinese and German partners to develop 200 MW in Inner Mongolia by 2012, as part of a broader commercial framework for 1 GW of CSP in China by 2020.
Renewables heating and biofuels
For hot water and heating, renewables contributions come from biomass power and heat, geothermal direct heat, ground-source heat pumps, and rooftop solar hot water and space heating systems. Solar-assisted cooling makes a very small but growing contribution.
Biomass heating for district heating systems and small-scale combined heat and power (CHP) plants is also growing in parts of Europe. More than 2 million ground-source heat pumps are used in 30 countries for building heating and cooling. Solar hot water is also booming; rooftop collectors provide hot water to nearly 50 million households worldwide. In Austria, Germany, and Sweden, more than 50% of the annually installed collector area is for combined hot water and space heating systems. However, China continues to represent the largest share, with 75%, of annual solar hot water capacity additions worldwide. Existing solar hot water/heating capacity increased to an estimated 128 GWth globally in 2007, up from 88 GWth in 2005, reflecting 20% average annual growth over the past two years (figures do not include solar heating of swimming pools).
Total ethanol production worldwide in 2007 reached an estimated 46 billion litres, up from 33 billion litres in 2005. Most of the increase in global production over the past two years can be attributed to production increases in the US, which has now surpassed previous ethanol leader Brazil. The US had over 130 operating ethanol plants and production capacity of 26 billion litres/year by the end of 2007, a 60% increase over 2005. Another 84 plants were under construction or expanding, which when completed would almost double production capacity. Brazil is continuing expansion plans begun in 2005, which would more than double its production, by adding 22 billion litres/year of new sugar plantations and ethanol production capacity by 2012.
The beginning of serious commercial investment in second-generation biofuels was another milestone during 2006-2007. Government support tied to private investment was an important factor. Canada created a C$500 million (US$507million) fund to invest in private companies developing large-scale facilities for ethanol from cellulose. Japan allocated ¥15 billion ($130 million) in 2006 for R&D, pilot projects and market support, while the US announced in early 2007 that it would invest up to $390 million in six cellulosic ethanol production plants over the coming four years, with total capacity of 500 million litres/year. The world’s first commercial wood-to-ethanol plant also began operation in Japan in 2007. Other commercial-scale plants using wood and agricultural wastes are planned to be completed during 2008 and 2009 in several countries, including Japan, the Netherlands, Sweden, and the US.
Biodiesel production jumped to an estimated 8 billion litres globally in 2007, a doubling from 2005’s 3.9 billion litres. Half of world biodiesel production continued to be in Germany. Significant production increases also took place in Italy and the US. In Europe, biodiesel gained broader acceptance and market share. The biodiesel industry opened many new production facilities during 2006-2007 and continued to expand in Argentina, Belgium, Czech Republic, France, Germany, Italy, the Netherlands, Poland, Portugal, South Africa, Spain, Sweden, and the UK. And, plans for new biodiesel plants and/or increased palm oil and jatropha plantations were announced in several countries during 2006-2007, including Brazil, Bulgaria, India, Indonesia, Malaysia, the Philippines, and Singapore.
One consequence of these market and industry trends is an increase in jobs worldwide from renewable energy manufacturing, operations, and maintenance. Such jobs exceeded 2.4 million in 2006, including some 1.1 million for biofuels production.
There was a flurry of policy activity to support renewable energy during 2006 and 2007. One clear trend is that more and more countries are enacting new policy targets for renewable energy, or strengthening and extending existing targets.
Policy targets now exist in at least 66 countries worldwide, including all 27 European Union countries, 29 US states and DC, and nine Canadian provinces. Most targets are for shares of electricity production, primary energy, and/or final energy by a future year and the majority aim for the 2010-2012 timeframe, although an increasing number aim for 2020 and beyond. In addition, targets for biofuels as future shares of transport energy now exist in several countries.
The European Commission in 2007 adopted new binding targets for 2020, including 20% of final energy consumption and 10% of transport fuels. These new targets extend the existing targets of 21% of electricity and 12% of primary energy by 2010. Country-by-country targets for 2020 were proposed by the European Commission in January 2008, but are still to be confirmed by member countries.
In September 2007, China confirmed its target for 15% of primary energy by 2020, as well as many technology-specific targets. Besides China, several other developing countries adopted or upgraded targets during 2006-2007, bringing to 22 the number of developing countries with national targets. For example, Argentina set a target of 8% of electricity from renewables excluding large hydro by 2016; Egypt revised upward its previous target of 14% of electricity to 20% by 2020; the province of the Western Cape in South Africa set a target of 15% of electricity by 2014; and Uganda enacted targets through 2017 in a new 2007 renewable energy strategy.
Policies to promote renewables have also proliferated in recent years. At least 60 countries – 37 developed and transition countries and 23 developing countries – now have some type of policy to promote renewable power generation. The most common policy is the development of a feed-in tariff and by 2007, at least 37 countries and nine states/provinces had adopted feed-in policies.
During 2006-2007, new feed-in policies were enacted by the state of South Australia, the province of Ontario in Canada, Argentina, Croatia, and Thailand. Revisions to existing policies occurred in many countries, for example Austria, Germany, Indonesia, Portugal, and Spain. Meanwhile, states and provinces considering new feed-in policies include West Bengal in India, British Columbia in Canada, and California and Michigan in the United States.
Many new feed-in tariffs targeting solar PV also appeared during 2006-2007. In Europe, for example, Italy’s new policy targets 3 GW by 2016. The country’s policy adopts an increasingly common provision: tariffs are 5 eurocents/kWh higher for building-integrated rather than ordinary installations. France re-evaluated its policies and increased tariffs to 30 eurocents/kWh for cities, with a 25 eurocents/kWh bonus for building-integrated installations. Greece’s new renewable energy law provides 40-50 eurocents/kWh depending on system size and location. Outside of Europe, South Korea added PV to its existing feed-in policy, in conjunction with a target of 100,000 rooftop installations by 2011; the state of South Australia established a A$44 cents/kWh (US41 cents/kWh) tariff; and both Argentina and India enacted feed-in policies that provide the equivalent of US30 cents/kWh.
In jurisdictions where feed-in tariffs do not exist, capital subsidies or tax credits for solar PV are becoming another common policy at national, state, local, and utility levels, typically for 30%-50% of installed costs, for example in Australia, Sweden, the US, and the UK.
At least 44 states, provinces, and countries have enacted renewable portfolio standards (RPS), also called renewable obligations or quota policies. Most RPS policies require renewable power shares in the range of 5%-20%, typically before 2012, although more recent policies are extending targets to 2015, 2020, and even 2025. In the US, five states enacted new RPS rules during 2006-2007, bringing the total number of US states with policies to 25, plus the District of Columbia, as well as four states with policy goals. Canada has three provinces with RPS policies and seven more with planning targets, and India has at least six states with RPS policies. In late 2007, China also announced RPS mandates, including 3% of power generation and 8% of power capacity from non-hydro renewables by 2020.
Two important policy developments for renewable electricity occurred at the federal level in the US during 2006-2007. The first was extension of the US production tax credit (PTC) through to the end of 2008 (now 2 cents/kWh), along with further legislative discussion about longer-term extensions to 2013. Second, a landmark national open-access transmission rule puts renewable energy on more equal footing with conventional electricity.
There are many other forms of policy support for renewable power generation, including capital investment subsidies or rebates, tax incentives and credits, sales tax and value-added tax exemptions, energy production payments or tax credits, net metering, public investment or financing, and public competitive bidding.
Hot water from renewables
Policies for solar hot water have grown substantially in recent years. In particular, mandates for solar hot water in new construction represent a recent trend at both national and local levels. Spain’s 2006 national building code, which requires minimum levels of solar hot water and solar PV in new construction and renovation, was followed by solar hot water mandates in several other countries during 2007. For example, India enacted new energy conservation codes for residential buildings, hotels, and hospitals, requiring at least 20% of water heating capacity from solar. Korea now requires that a 5% minimum share of investment cost be spent on renewables for new public buildings larger than 3000 m2. China issued a plan to mandate solar hot water in certain types of new construction nationwide shortly. And, Germany’s Renewable Energies Heating Law will require new residential buildings, starting in 2009, to obtain at least 14% of household heating and hot water energy from renewables. The Law also carries requirements for building retrofits.
Municipal governments have also been enacting solar hot water mandates at the local level. Seventy cities in Spain now have such mandates, and new examples include the Chinese city of Rizhao, which mandates solar hot water in all new buildings, and Shenzhen, with mandates for new residential buildings below 12 stories high. The city of Nagpur in India requires solar hot water in new residential buildings larger than 1500 m2. Similarly, Brazil’s largest city, São Paulo, adopted mandates in 2007 for new buildings larger than 800 m2.
Capital subsidies, grants, or tax credits for solar hot water are now a common policy instrument in many states and at least 19 countries, typically in the range 20%-40% of system cost. Other types of policies also exist; for example, the city of Betim, in Brazil, is installing solar hot water in all new public housing. And a number of countries in north Africa and the Middle East were developing or implementing policies and programmes, including Tunisia, Morocco, Egypt, Jordan, and Syria.
Policies for biofuels increasingly are taking the form of blending mandates. Mandates can now be found in at least 13 Indian states/territories, nine Chinese provinces, nine US states, three Canadian provinces, two Australian states, and at least 17 countries at the national level. Most blending mandates require 10%-15% ethanol with gasoline or 2%-5% biodiesel with diesel and most are fairly recent, enacted over the past
2-3 years. Recent examples include Canada’s mandates, E5 by 2010 and B2 by 2012, the Philippines’ mandates for B1 and E10 by 2010, and a national mandate in the UK starting in 2008.
In addition to mandated blending, several new biofuels targets and plans appeared during 2006-2007. A new US renewable fuels standard requires blending of 36 billion gallons (136 billion litres) of biofuels per year by 2022, extending a previous standard of 7.5 billion gallons (28 billion litres) by 2012. The UK has a similar renewable fuels obligation, targeting 5% by 2010. Japan’s new strategy for long-term ethanol production targets 6 billion litres/year by 2030, while South Africa’s new biofuels strategy targets 4.5% biofuels. Portugal and France both adopted a target of 10% of transport energy from renewables, by 2010 and 2015 respectively.
Fuel tax exemptions and production subsidies have also become important biofuels policies. The largest production subsidies exist in the US, where the federal government provides a US14 cents/litre tax credit for ethanol blending through 2010, and a US12 cents/litre tax credit for biodiesel through 2008. Canada and some US states also offer production incentives. Biofuels tax exemptions exist in at least 10 EU countries, a number of US states, and a range of other countries, including Argentina, Australia, Bolivia, Brazil, Canada, Colombia, Paraguay, and South Africa.
Below the national and state/provincial level, municipalities around the world are also setting targets for future shares of renewable energy, many in the 10%-20% range. Numerous cities are enacting policies to promote solar hot water and solar PV, and are conducting urban planning that incorporates renewable energy. And, some cities have established carbon dioxide reduction targets. Several major cities made new commitments during 2006-2007. For example, London announced a target to reduce carbon dioxide emissions by 20% by 2010, relative to 1990 levels, and by 60% by 2050. New York City plans policies to encourage solar installations and distributed generation and Tokyo proposed an ambitious target of 20% of total energy consumption in the city by 2020, to be formally adopted in 2008 as part of Tokyo’s ‘Environment Basic Plan.’
Many smaller cities around the world also adopted new policies during 2006-2007. For example, the city of Freiburg in Germany increased its carbon dioxide reduction target to 30% by 2030. Some local governments in the UK now require
renewables for all new buildings over a specific size. In Canada, Vancouver set a goal that all new construction in the city should be carbon neutral by 2030, and Toronto enacted a C$20 million ‘Green Energy Fund.’ In the US, Boulder in Colorado passed the first US carbon tax on electricity purchases, and Austin in Texas adopted a resolution for a stronger renewable portfolio standard of 30% by 2020.
Boulder also resolved that all municipal buildings should obtain 100% of their energy from renewables by 2012. Other examples of cities that have decided to purchase 100% green power for municipal government buildings and operations include Portland in Oregon, Santa Monica in California, and Woking in the UK – which aims for 100% by 2011. Other US cities purchasing green power for municipal government needs (typically 10%-20%) include Chicago, Los Angeles, Minneapolis, and San Diego. In addition to green power, some cities also require biofuels in public transport and/or municipal vehicles, such as Betim in Brazil, and Stockholm, in Sweden.
Onward to our renewable future
Today, there is unprecedented policy leadership at national, state/provincial, and local levels in many places around the world. That policy leadership, coupled with high levels of investment and industry growth, means that renewables are more central to our global energy future than ever before. The Renewables Global Status Report reveals strong ongoing trends and staggering daily developments. It is impossible to capture everything, but the overall picture is clearly visible, and helps keep perceptions of renewable energy in line with the constantly-changing reality, as well as pointing to further areas requiring more detailed understanding.
Renewable energy has never been more relevant as concerns become stronger about energy security, fossil fuel prices, climate change, air pollution, supply sufficiency, and other issues that renewables are uniquely poised to address. Ongoing trends strongly suggest that our future will be a renewable one.
Eric Martinot is a senior research fellow with the Worldwatch Institute and a senior visiting scholar with Tsinghua University in Beijing.
You can contact Eric Martinot at [email protected]
The Renewables 2007 Global Status Report is available for free from www.ren21.net and www.martinot.info. The report is the product of an extensive international collaboration sponsored by the REN21 Renewable Energy Policy Network, with the Worldwatch Institute in lead role as producer and Eric Martinot as lead author and research director. Thanks to the German government for financial support and to over 100 researchers, correspondents, and reviewers around the world who contributed to the 2007 edition of the report. Many of the 2007 figures cited in the report are pleliminary estimates subject to confirmation.
Figure 1. Annual investment in new renewable energy capacity, 1995-2007
Figure 2. Average annual growth rates of renewable energy capacity, 2002-2006
Figure 3. Solar PV, existing global capacity, 1995-2007
Figure 4. Renewable capacities, developing world, EU, and top six countries, 2006