Thursday, April 10, 2014

Renewables Bright Future Despite 2 Consecutive Years of Clean Energy Declines

While some are suggesting that clean energy may be in decline, others are saying the future of renewables has never been brighter. After a record investment of $318 billion in 2011, they have declined steadily over the course of the last two years. In 2013 alone they decreased by 11 percent to $254 billion. The wind industry has seen declines in installed capacity. As reported in Cleantechnica, there were 35,467 megawatts (MW) of new wind turbine capacity installed globally in 2013, this represents a decrease of nearly 10,000MW compared to 2012’s installed totals.

While these declines are discouraging they should not be taken as early evidence of a general trend, particularly not in America. The declines can be attributed to sluggish global economic growth, uncertainty over the future of the US production tax credit (PTC) and the shale gas boom.

The combination of government regulation, price declines and industry maturation suggest that renewables can expect to grow well into the future. Renewable energy is now more price competitive with conventional power than it has ever been and this increasingly includes natural gas. Investors are reaping profits which should increase further investment. Public market financing is up by 176 percent and distributed generation is buoying growth in developing markets.

The situation is so promising that investment banking behemoth Citigroup hailed the arrival of what it called "the age of renewables" in a recent report.  To make their point they cited price parity of solar and wind with the full range of fossil fuels including natural gas.

What happens in the United States is significant for global totals because the US is the world's largest electricity market. According to an analysis released at the end of March and reported in Greentech Media, Citi says the big decision-makers within the US power industry are focused on "securing low-cost power, fuel diversity and stable cash flows, and this is drawing them to the increasingly attractive economics of solar and wind."

Citi’s report notes that gas prices are rising and becoming more volatile. This has made wind, solar and other renewable energy sources more attractive because they are not sensitive to fuel price volatility. Citi says solar is already becoming more attractive than gas-fired peaking plants, both from a cost perspective and a fuel diversity perspective. And in baseload generation, wind, biomass, geothermal, and hydro are becoming more economically attractive than baseload gas.

“We predict that solar, wind, and biomass continue to gain market share from coal and nuclear into the future,” the Citi analysts write. “As solar, wind, biomass, and other power sources gain market share from coal, nukes, and gas, the LCOE metric increasingly becomes important to the new build power generation decision-making,” it says.

Solar and wind are becoming more attractive for different reasons. While residential-scale solar is still new, Citi points out that it is already price competitive with residential electricity prices. “In 2013, solar was the second-largest source of new generation capacity behind natural gas -- its prospects look bright in 2014 and beyond as costs continue to decline and improve the LCOE picture," Citi Says

While the cost of wind continues to decline, the most promising development contributing to growth is the reduction in financing costs.

Citi was less optimistic about hydro, geothermal, and marine energy sources because of physical limitations. According to Citi, the future of both coal and nuclear look very bleak as they are priced out of the market.

© 2014, Richard Matthews. All rights reserved.

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