global developments in the sustainable energy markets

Global Developments in the Sustainable Energy Markets

Virginia Sonntag-O’BrienREN21 / UNEP SEFI

Local Renewables 2007Freiburg, 14 June 2007

An outcome of the Bonn renewables2004 conference

MISSION

Provide international leadership for the rapid expansion of renewable energy in developing

and industrial countries – based on the cooperation of stakeholders from the energy, development and

environment sectors.

• Strengthen policy frameworks for accelerating use of RE

• Facilitate appropriate use of RE in developing countries, including strengthening the regulatory environment and expanding access to public and private financing

• Build capacity to integrate, utilize, and regulate the use of RE at international, national, regional, and local levels

• Facilitate collection, analysis, and dissemination of information

Foster a sustainable energy finance community

that brings together financiers and catalyses

public-private alliances to share costs

and lower barriers to investment.

Provide Information • Facilitate Networks • Develop Partnerships

http://sefi.unep.orghttp://sefi.unep.org

The UNEP Sustainable Energy Finance Initiative

SOME FACTS AND PREDICTIONS

• Global warming trends very likely the result of human activities since 1750 (IPCC)

• Most of this impact the result of the use of fossil fuels

• The world needs more energy - 2/3 increase from 2001 - 2030 Experts predict doubling of energy use between 2000 and 2040, tripling by 2070, and quadrupling by 2100

• Most growth will take place in non-OECD countries

• Fossil fuels will account for 83% of overall increase in energy demand up to 2030 (IEA)

• Coal demand increases the most in absolute terms (China and India)

• Oil is expected to remain the dominant energy source worldwide (IEA base scenario)

• Renewable energy will account for 9% of power mix in 2030 (IEA WEO 2006)

• Energy demand must be better managed and reduced

• Energy users must shift to low-carbon technologies like RE

• New technologies must be developed that capture and sequester CO2

What does this mean?

SELECTED INDICATORS 2005 2006

Investment in Renewable Energy capacity (annual)

$39bn $52bn

RE power capacity - existing 182GW 204GW

Wind power capacity - existing 59GW 74GW

Grid-connected solar PV capacity (existing

3.3GW 5.0GW

REN21 RE Global Status Report 2007 (DRAFT)

Source: New Energy Finance

$70.9bn

$49.6bn

$27.5bn

2004 2005 2006

81% Growth

43% Growth

2006 figure is an NEF forecast


$70.9bn

$49.6bn

$27.5bn

2004 2005 2006

81% Growth

43% Growth

2006 figure is an NEF forecast

Figure 1: Global Investment in Sustainable Energy, 2004 - 2006Figure 1: Global Investment in Sustainable Energy, 2004 - 2006

Overall SE investment growing quicklyOverall SE investment growing quickly

• Investment has more than Investment has more than doubleddoubled in last two years. Further 20% increase forecast in last two years. Further 20% increase forecast for 2007, taking global investment to $85 billion.for 2007, taking global investment to $85 billion.

• Drivers go beyond the big threeDrivers go beyond the big three (oil prices, energy security, climate change) to include (oil prices, energy security, climate change) to include many more environmental mainstream issues.many more environmental mainstream issues.

VC/PEVC/PE Investment Soaring Investment Soaring

Figure 3: 2006 Venture Capital and Private Equity Investment by SectorFigure 3: 2006 Venture Capital and Private Equity Investment by SectorSource: New Energy Finance

$804m

$746m

$664m

$272m

$163m

$134m

$127m

$105m

$93m

$36m

$35m

$31m

$4mCarbon Markets

Marine

Hydrogen

Efficiency :Supply Side

Biomass and Waste

Fuel Cells

Services & Support (Clean Energy)

Power Storage

Smart Distribution

Efficiency :Demand Side

Wind

Solar

Biofuels

Mfc. Capacity Technology

figures are up until mid - December


• Venture Capital/Private Equity Venture Capital/Private Equity up 163%up 163% in one year. in one year. • BiofuelsBiofuels edged out solar and wind to raise the most risk capital in 2006. edged out solar and wind to raise the most risk capital in 2006. • Most investment in wind has been in Most investment in wind has been in manufacturing capacitymanufacturing capacity, not new technology., not new technology.• VCs shifting more to VCs shifting more to larger, later stage dealslarger, later stage deals. . • US dominates VCUS dominates VC transactions. Clean tech in the US now ranks 5 transactions. Clean tech in the US now ranks 5 thth in VC at 9.1%. in VC at 9.1%.• After the US, After the US, ChinaChina was the second largest recipient of Venture Capital. was the second largest recipient of Venture Capital.

$4.4bn

$2.5bn

$1.2bn

$1.2bn

$0.5bn

$0.4bnBiomass & Waste

Other Renewables

Other Low Carbon

Wind

Biofuels

Solar


$4.4bn

$2.5bn

$1.2bn

$1.2bn

$0.5bn

$0.4bnBiomass & Waste

Other Renewables

Other Low Carbon

Wind

Biofuels

Solar


Figure 4: Public Market Investment by SectorFigure 4: Public Market Investment by Sector

Public stock marketsPublic stock markets have opened to RE have opened to RE• Public markets Public markets up 140%up 140% in one year. in one year. • Solar PVSolar PV is the big winner on public capital markets. is the big winner on public capital markets.• European stock marketsEuropean stock markets are the main destination for IPOs. are the main destination for IPOs.

Figure 5. WilderHill New Energy Global Innovation Index (NEX)Figure 5. WilderHill New Energy Global Innovation Index (NEX)Figure 5. WilderHill New Energy Global Innovation Index (NEX)Figure 5. WilderHill New Energy Global Innovation Index (NEX)

Source: New Energy Finance, AMEX

75

125

175

225

275

325

Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06

AMEX Oil

NASDAQ

S&P 500

NEX

AMEX Oil, NASDAQ, and S&P 500 rebased – 30 December 2002 =100

RE confused as

only technology stocks

Technologies

and projects

Continued growth

uncorrelated to other sectors

Clean energy stocks Clean energy stocks volatilevolatile, but doing well, but doing well

• More More corrections are expectedcorrections are expected, as happened in May 2006, but few predict crash., as happened in May 2006, but few predict crash.

Figure 6. 2006 Asset Financing by SectorFigure 6. 2006 Asset Financing by SectorFigure 6. 2006 Asset Financing by SectorFigure 6. 2006 Asset Financing by Sector


$1.3bn

$15.2bn

$1.4bn

$3.6bn

$6.4bnBiofuels

Biomass & Waste

Solar

Wind

Other Renewables

Financing for projectsFinancing for projects is still mostly for wind is still mostly for wind

• WindWind is still the big winner at raising asset financing for projects. is still the big winner at raising asset financing for projects.• ChinaChina the third largest location for asset financing, after US and Spain. the third largest location for asset financing, after US and Spain.

$1094m (65/71)

$710m (62/73)

$441m (54/58)

$404m (49/57)

$477m (28/31)

$452m (26/31)

2001 2002 2003 2004 2005 2006

Efficiency: Demand SidePower StorageSmart DistributionEfficiency: Supply Side

VC/PE Investment in Energy Efficiency 2001-2006 Source: New Energy Finance

Investment in new renewables Investment in new renewables generating capacity - generating capacity - $21.5bn$21.5bn

Investment in new technology & Investment in new technology & manufacturing capacity - manufacturing capacity - $25.2bn$25.2bn

Means that investors are expecting strong growth for RE

IEA WEO2006: RE (ex hydro) will IEA WEO2006: RE (ex hydro) will provide provide 11%11% of new capacity of new capacity additions between 2004 and 2015additions between 2004 and 2015

Wind alone provided 10% of new capacity in 2006 and its growth has been >9x faster than the power sector as a whole (24.5% vs 2.6%)

IEA WEO2006: RE will account for IEA WEO2006: RE will account for 9%9% of power mix in 2030 ( of power mix in 2030 (12%12% under under Alternative ScenarioAlternative Scenario

That would require RE growth rate to drop from >20% in 2006 to 8%.

SOME OBSERVATIONS

Measured by capital investment, renewable energy is already aMeasured by capital investment, renewable energy is already a much much larger sectorlarger sector than current energy production figures indicatethan current energy production figures indicate..Recent capital build up is not a sign of short-term volatility, but part of a Recent capital build up is not a sign of short-term volatility, but part of a longer trend. The trend has continued through the first half of 2007.longer trend. The trend has continued through the first half of 2007.

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Investment in energy still policy-driven and public priorities are not only climate change, but also energy security and energy access

Developing countries have fast-growing energy demand and unstable capital markets, which skews investment towards fossil fuel generation (proven, understood, large-scale, less capital intensive)

Regulatory frameworks needed that accelerate and reward investment to scale up deployment of sustainable energy technologies at a pace and to a level necessary to impact climate change

CHALLENGES

To do at the local level

Encourage local industries to invest in R&D for sustainable energy technology

Work with local finance institutions to develop awareness & capacity to engage in the sustainable energy sector

Collect data and use it to influence policy

THANK YOU!

REN 21 Renewables Global Status Report 2007to be released July 2007?

www.ren21.net

UNEP SEFI/New Energy Finance Global Trends in Sustainable Energy Investment 2007

to be released on 21 June 2007www.sefi.unep.org

global developments in the sustainable energy markets

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