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 Renewable Energy?

A lot of people get a bit confused, when they hear about renewable energy. The energy part most people understand, but what is really renewable? The term renewable energy comes as an alternative to finite energy sources also known as petroleum or mineral oil in its wider sense. In the time perspective of the human being the energy that we pump up or extract from the interior of our planet are finite and exhaustible and NOT considered renewable.

So what is renewable energy? If we turn to people already in the market as authorities on this subject in this case Kachan & Co, the inventor of the cleantech term they have recently published their revised definition of renewable energy. They consider renewable energy to consist of the following 11 technologies: 

- Wind

- Solar

- Renewable fuels (biofuels)

- Marine

- Biomass

- Geothermal

- Fuel Cells

- Waste-to-Energy

- Nuclear

- Emerging (osmotic power and kinetic power)

- Measurement and Analytics

In fact Kachan & Co seem to get a bit carried away, maybe because they come with a cleantech perspective. In my objective nuclear cannot be included as a renewable energy source. Nuclear can be argued to be relatively clean, but the source of energy is mined and finite and thus does not fit the definition. Fuel cells also seems a bit out of place. Kachan argues that fuel cells today are not just storage of energy, but also generation of heat and power. However, it seems that Fuel Cells is more a technology that is a special case of one or more of the previous categories. Measurement and Analytics, is also a category that we can safely take away. For some reason Kachan is not mentioning Hydro. I have marked with red the Kachan technologies that I cannot accept in my understanding of renewable energy.

If we cross check with Wikipedia they are a bit more conservative, as they are only listing six different sources of renewable energy: wind, solar, biofuels, biomass, geothermal and hydro. Our last authoritative source of definition is the International Energy Agency that use the same categories as Wikipedia but add a seventh the Marine.

I agree with all of the categories used by the International Energy Association. For the purpose of this blog I shall be using also the emerging as well as the waste-to-energy technologies in my definition. The emerging technologies seem still to be quite exotic, whereas the Waste-to-energy in my opinion is an important source of energy, which it would be wrong not to take into the energy mix.

So my list looks like this, and these will be the subjects that will be considered in more detail in this blog going forward:

- Wind

- Solar

- Renewable fuels (biofuels, liquid and gaseous)

- Marine

- Biomass

- Geothermal

- Hydro

- Waste-to-Energy

- Emerging (osmotic power and kinetic power)