Clean Energy Boom Forecast


Report predicts that global revenue from biofuel, solar, wind, and fuel cells will hit $167 billion in 10 years.
March 6, 2006

The market for biofuels, solar energy, wind power, and fuel cells is expected to quadruple in the next decade, a report Monday said, as the price of these alternative energies decline and the world becomes more concerned about the environmental impact of fossil fuels.



Collectively, global revenue from these fuels is seen growing to $167 billion by 2015 from $40 billion in 2005, according to the Clean Energy Trends report from Clean Edge, a Portland, Oregon-based research firm.



“If you look at the growth rates for wind, solar, and now biofuels, they are now growing more than 30 percent a year,” said Ron Pernick, a principal with Clean Edge. “It’s starting to look similar to the personal computer industry in the 1980s.”



When President George W. Bush said in his State of the Union address earlier this year that America was “addicted to oil” and needed to achieve energy independence through alternative energy sources, clean energy came to be perceived as “the new red, white, and blue,” according to Mr. Pernick.



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“America’s No. 1 oilman finally came around,” he said. “It’s very important what Bush did in the State of the Union, for the nation’s understanding of how important energy independence is to security issues. It’s not so much early leadership. The train was leaving the station and he had to get on it.”



The firm found that the market for biofuels alone, such as biodiesel and ethanol, reached $15.7 billion globally in 2005. The report projects that amount will grow to $52.5 billion by 2015. Biofuels are already up 15 percent over 2004 and exceeded wind and solar energy technology in revenue.



However, those markets are growing as well. Clean Edge forecasts that the market for solar photovoltaic energy technology, including modules, system components, and installations, will grow from $11.2 billion in 2005 to $51.1 billion by 2015.



Wind power has also been blowing in the right direction, with installations expanding from $11.8 billion in 2005 to $48.5 billion in 2015. Fuel cells and distributed hydrogen are on the rise too, increasing from $1.2 billion in 2005 to $15.1 billion by 2015.



Venture capitalists have been taking notice. Clean Edge teamed with Nth Power, an energy tech venture firm based in San Francisco, to chart the growth of VC funding in the clean tech sector.



They found that VC investors funded more than 80 clean energy companies in 2005, to the tune of $917 million. That represented an increase of about 28 percent from 2004. Clean energy investments totaled more than 4 percent of the $21.7-billion U.S. venture capital market, up from 3.3 percent in 2004.



“2005 marked a sharp rise in venture capital dollars invested in energy-tech companies,” said Rodrigo Prudencio, a principal with Nth Power.



Renewable Tipping Point

Renewables are now crossing a tipping point in terms of pricing, according to Mr. Pernick. Customers of Austin Energy’s GreenChoice and Xcel Energy’s Windsource were able to lock in their energy pricing while natural gas prices and surcharges went through the roof for other utility customers.



Prices of alternative energy products have been decreasing drastically. Wind power used to cost $0.30 per kilowatt hour in 1980 and now costs $0.03 or $0.04 per kilowatt hour.



About 4 million vehicles on U.S. roads run on a mix of ethanol and gasoline, and GM and Ford are starting to ramp up their production of flexible fuel vehicles (FFVs) that can run both on conventional and alternative fuels. GM plans to produce 400,000 such vehicles this year and Ford plans to make 250,000.



Countries such as Brazil, China, and India have been aggressively expanding their use of clean energy technology as well. “A lot of these countries are poised to leapfrog other nations, and we’re starting to see that happen,” said Mr. Pernick.



Global warming and climate change are also having an impact, forcing industry to put more resources into clean energy technology. The financial incentives are also there, with three of the biggest IPOs of the past year occurring in the solar energy industry: SunPower, Suntech, and Q-Cells.



The influx of capital is occurring within large corporations as well. General Electric’s acquisition of Enron Wind generated $2 billion in revenue in 2005. Toyota shipped more than 200,000 hybrid vehicles last year and now has a larger market cap than General Motors.



Hanging Back

Rona Fried, president of SustainableBusiness.com, pointed out, however, that companies and investors have not seen the same growth in the fuel cell and hydrogen sectors as they have with wind, solar, and biofuels. “Investors are hanging back because they see it’s a maybe,” she said.



Rob Wilder, president of WilderShares LLC and manager of the WilderHill Clean Energy Index, said his index has seen an increase of about 26 percent just since January 1. “We’re up far more than any other sector,” he said.



He noted that exchange-traded funds grew from $200 million to $400 million in two-and-a-half months. “Those metrics are good examples of the eyeballs drawn to clean energy,” he said.