Which countries are winning the race to invest in renewables?

NB: this is my editorial from the March/April issue of Renewable Energy Focus magazine, which is now out. If you don't subscribe yet, it's free, so feel free to subscribe here.

Global clean energy finance and investment grew significantly in 2010 to US$243 billion, a 30% increase from 2009, according to new research - Who’s Winning the Clean Energy Race? (2010 Edition) - released by The Pew Charitable Trusts and data provider Bloomberg New Energy Finance.

The generating capacity from renewable energy increased to 388 GW (an increase of 60 GW over 2009). Renewable capacity has now overtaken the amount of nuclear power installed worldwide.

Wind power continued to be the favoured technology for investors at US$95 billion. But the solar sector also experienced significant growth in 2010, with investments growing 53% to a record US$79 billion, with more than 17 GW of new generating capacity globally. Germany accounted for 45% of global solar investments.

This report is effectively a dashboard – showing the growing influence that renewable energy is having on the energy sector in general. Topline numbers such as these indicate how far the renewables industry has come in a short space of time, and, importantly, in spite of the economic crisis that has proved crippling to many industries and countries.

But the game now is about much more than simply displacing fossil fuels for the benefit of the environment. Countries across the world are jockeying for position in order to get their slice of the economic benefit pie that growing renewable energy installed capacity brings.

The report gives a great insight into which countries are seizing the initiative.

China for example continued to solidify its position as the world’s clean energy powerhouse. Its record US$54.4 bn was up 39% from 2009. As has happened in many industries, China is doing what it does best in order to sew up a global manufacturing supply chain for solar and wind. China’s dominance in exporting PV modules – not to mention the wind turbines it is making for its own domestic market – is well documented. As is the current spat between China and the U.S. (which has complained to the WTO citing frustrations with Chinese subsidies and ‘non-transparency’).

Good old Germany – the renewables pioneer - rose to second place out of the G-20 nations, after experiencing a 100% increase - to US$41.2 bn. Italy is another success story, attracting US$13.9 bn in clean energy financing, rising to fourth in the table (from eighth in 2009). In fact the report noted that Italy is the first country to achieve grid parity for solar energy. In contrast to China, creating a local demand for renewable energy (i.e. through the German feed-in tariff) rather than directly subsidising manufacturing, has lead to a healthy return in terms of jobs and investment for countries like Germany that moved early.

Trouble ahead in some markets

Some countries (and potentially interesting markets) continue to struggle in the face of political adversity however.

The U.S. for example, which had maintained the top spot until 2008, fell to third with US$34 billion, despite having the highest VC (early stage) funding of any nation (three quarters of the G-20 total). The U.S will hope that its focus on early stage technology investment will help it unearth the future game changing technologies to transform the energy space.

But experts worry that as current policy stalemate impacts adversely on demand, investors – as well as manufacturing companies and human capital - may go elsewhere.

The UK experienced the largest decline among the G-20 nations, falling from fifth to 13th, though Bloomberg New Energy Finance ceo Michael Liebreich pointed out that this is in part due to the massive investment in 2009 resulting from the offshore wind Round 2 program – not being replicated in 2010. But with a potential solar policy u-turn on the table, together with an Electricity Market Reform (EMR) that looks designed to subsidise nuclear power and disadvantage offshore wind, dark clouds are looming in the UK (in the latest issue, there is a fascinating comment from Dr David Toke, which looks at how the EMR is simply a way of the UK Government obscuring its new support for nuclear power).

Most countries have now made their play. And even though there are still windows of opportunity to capitalise on renewable energy development for the good of national balance sheets, they won’t last forever. Which countries will be able to look back in 10 years time, safe in the knowledge that they did everything they could to benefit from the growth in renewable energy?

The jury remains out in some countries.

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