The Investor's View of Renewable Energy

Solar and Wind are the investors' favorite renewable energy types. The United Nations UNEP publish an insightful yearly publication on investments in renewable energy. This is interesting because this cuts through the nice talk and zooms in on where the money flows.

Global investments in 2011 in billion USD in different types of renewable energy. Right hand figures show 2011 growth on 2010.

It is interesting to see that Solar and Wind run with the majority of the investments. Of total investments in 2011 of 257 BUSD, solar and wind represent 90%. Solar has seen an extraordinary growth in 2011, contrary to all other types of renewable energy except small hydro. The investments are a result of national energy policies and subsidies as well as developments in technology and costs.

Global investments in billion USD in 2011 by region.

Europe emerges as the region with the largest investments in RE, whereas China is the country with the largest investment. China invests mainly in wind, whereas in Europe solar PV especially in Germany and Italy is the favorite technology.

Levelised costs of different renewable energy technologies, costs in USD/MWH, Q1 2012 vs Q1 2011

Compared to my previous post this report has much more up to date data. It is interesting to note that solar PV is currently getting more competitive as we speak with more than 30% reduction in cost in only one year. This is quite extraordinary, and is due to the overcapacity and shake out that is currently happening in the solar industry.We can see that several RE technologies (wind, hydro and landfill gas) are now competitive towards conventional energy, which is also the reason why these are prefered by China and other developing countries that cannot afford the luxury of choosing RE over conventional just because it is "cleaner". This is encouraging reading that confirms that RE is competitive in many cases and costs continue to fall in many cases. Actually RE investments are only trailing slightly behind investments in conventional energy.

There are other problems associated with renewable energy such as the fact that the most popular solar and wind are variable in nature and are therefore challenging to manage. This is an issue we will have to look at in a later post.

What is the Cost of Renewable Energy?

What is the cost of renewable energy? This is the question that politicians should be asking themselves before they compose their energy policy. Obviously there are a lot of variables that influence the answer here. Technologies are developing all the time so efficiency is likely to improve over time - and thus the cost will fall. In wind energy the costs are being driven down by size, the latest and largest wind mill to date was erected in August 2012 in Denmark, a Siemens giant at 6 MW and 196 meters height.

World's largest Windmill 2012. Credit: Ingeniøren

Subsidies, tax exemptions as well as unit compensation is likely to change over time, as politicians change policies. Unit costs are influenced by the size of the investment, but also by the life time of the investment as well as the operation and maintenance costs. In some cases there are fuel costs that can change over time as demand and supply can change over the life time of the investment, in other cases (wind, solar, hydro and wave) the "fuel" generally is free, but can vary in quality and quantity.
With this list of variables it is clear that it can be difficult to compare different technologies. But we would still like the answer, thank you very much. So how about this chart from Alt Energy Stocks:

Cost comparison of different renewable energy technologies. status 2009. Credit: altenergystocks.com

The chart dates back from 2009 and is based on a California context. Interesting to see that solar comes out as a very expensive type of energy. Surely the Solar PV industry shakeout has changed this picture a bit. But is it enough to defend the big move Germany has made into solar? Resulting in a record 40% supply of national energy production on one sunny day in May 2012.

Installation price of solar PV plants in Germany have fallen 50% since 2009 after the industry shakeout. Credit: Bundesverband Solarwirtchaft.

This is surely an interesting subject that I hope to revisit soon, so we can get more facts on the table.