Clean Energy Investments Hit Record Highs in 2011, U.S. Clean Tech VC Funding Jumps 30%

Investments drive steady decline in cost of wind and solar power

Last year saw record levels of investment in solar, biofuels, and wind energy. Those 3 markets rose 31% to $246 billion, according to the Clean Energy Trends 2012 report (here) issued today by the research and advisory firm Clean Edge, Inc.

The report is filled with some great charts. For instance, if you thought clean tech VC investment in this country was petering out, it turns out reports of that death appeared to be exaggerated:

U.S.-based venture capital investments in clean tech increased 30 percent from $5.1 billion in 2010 to $6.6 billion in 2011, according to data provided by Cleantech Group. Clean Edge analysis found that clean-tech’s percentage of total U.S. venture capital investments accounted for a record 23.2 percent of total U.S. venture activity last year.

As you can see, clean tech venture investments in US companies are near an all time high — and almost a quarter of all venture investment. I can tell you that back in the mid-1990s, when I was helping to oversee the DOE’s billion-dollar Office of Energy Efficiency and Renewable Energy, we could only dream of VC investments some day matching our spending. Now it exceeds what we spend on R&D by a factor of 10.

The point is that increases in global and U.S. clean energy investment by the private sector — driven by government policy at the state and national level — drive private sector clean-tech VC investment.

And investment in key clean energy technologies is soaring:

  • The global market for solar photovoltaics (including modules, system components, and installation) increased from $71.2 billion in 2010 to $91.6 billion in 2011. While total market revenues were up 29 percent, installations climbed more than 69 percent from 15.6 gigawatts in 2010 to more than 26 GW worldwide last year. This 40-point discrepancy was due to rapidly declining solar costs. Crystalline solar PV module prices, for example, dropped more than 40 percent between 2010 and 2011, and Clean Edge projects that the cost to install solar PV systems will fall from an average of $3.47 per watt globally in 2011 to $1.28 within the next decade.
  • Wind power (new installation capital costs) totaled a record $71.5 billion in 2011, up 18 percent from $60.5 billion the prior year, and is projected to reach $116.3 billion in 2021. Last year’s global wind power installations equaled 41.6 GW, the largest year for global installations on record. China remained the global leader in new installations for the fourth year in a row, installing more than 40 percent of all global wind capacity, or 18 GW in total.

These investments have led to remarkable drops in the cost of wind and solar power:

Solar cells, which are mostly made from silicon (the same basic material used in manufacturing computer chips), are now exhibiting economies of scale seen in earlier high-tech revolutions such as personal computers and cell phones. Between 2007 and 2011, solar PV total system costs (including PV modules, balance of system components, and installation) dropped by more than half, with complete systems being installed globally in 2011 at an average $3.47 a peak watt or 14 to 23 cents per kWh. Contrary to Solyndra’s critics who say the industry isn’t ready for prime time, solar is, in fact, becoming increasingly cost-competitive (making it difficult for high-cost providers like Solyndra to survive)….

In less than a decade, Clean Edge projects that in 13 states (Alaska, California, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, New Hampshire, New Mexico, New York, Rhode Island, and Vermont) solar PV will be cost-competitive at the residential level without any subsidy requirements. And solar will become increasingly attractive with a likely explosion in a new breed of power providers (such as solar installers/financiers SolarCity, SunEdison, and SunRun) providing residential, commercial, and industrial customers with a hedge against fluctuating retail electricity rates tied to volatile prices of fossil fuels.

The study makes many important points about the value of government investment:

  1. The oil, gas, and coal industries still receive massive subsidies. Mature fossil fuel industries have historically received, and continue to garner, six times as many subsidies as the clean-energy industry globally. While subsidies might make sense for emerging sectors – that’s what subsidies have traditionally been used for – ongoing support for oil and gas industries no longer makes sense. Nor, according to groups like the International Energy Agency and World Bank, are they prudent from an economic, environmental, or energy security perspective.
  2. Venture capital is a risky, high-reward business critical to U.S. innovation. Venture backed companies, no matter what the industry, naturally come with a high-risk profile. For every VC-funded home run (think Google, Amazon, and Apple), VCs expect to back many other companies that don’t make it big or fail altogether. You can question whether government should be placing such bets, but there’s no denying that such risk is part of the American capitalist system, and something that’s historically been revered, not reviled, by business leaders and politicians alike.
  3. Nuclear power projects require considerably more in loan guarantees than renewables. Two new nuclear power plants at the Vogtle complex in Georgia recently received a conditional commitment for an $8.3 billion loan guarantee from the U.S. government. This loan amount is equivalent to more than 15 Solyndras, and the two plants alone equal nearly a quarter of all recent DOE loan guarantees. This one guarantee, based on its sheer size and the long history of nuclear power plant public opposition, delays, and closures, puts taxpayers at far greater risk than perhaps any other project.

The whole report is worth reading. It focuses on “five major trends for 2012”:

  1. The Few, The Proud, The Green: Military Leads Clean-Energy Deployment
  2. Japan Moves Toward Cleaner Post-Nuclear Future
  3. Deep Commercial Building Retrofits Reap Major Efficiency Savings
  4. Waste-to-Resource Breakthroughs Attract Attention – and Investment
  5. New Energy Storage Solutions Embolden the Grid

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7 Responses to Clean Energy Investments Hit Record Highs in 2011, U.S. Clean Tech VC Funding Jumps 30%

  1. Leif says:

    I helped and I love it! This last year my Solar PV and WA State production credit, will pay for all my electricity, stove and hot water gas, winter heat, and all my gas for my car! What did your “Wall Street” $25k do for you? On top of that, my investment helped to lower the cost of an equivalent system for you ~4% in one year. Employed local labor and WA materials. All my spending went to the local community first. Not a black hole tax free Swiss bank account. My community!

  2. CW says:

    Wow, that projected LCOE curve is definitely a hope-inspiring thing to look at! Thanks for this!

  3. Tom King says:

    Its not arriving fast enough to forestall a peak oil dip, but it will return things to an upward slope by 2025-2030.

  4. Anne van der Bom says:

    Investment in PV was larger than wind for the first time in history. Installed capacity not yet, but that will happen before 2015. Shortly after that, PV will be the dominant clean energy technology.

  5. Tom King says:

    Part of the energy storage for solar and wind might be in our electric cars. For example we might drive to to work, plug into the grid, and bring home enough extra power to do the laundry. Perhaps its time to start tracking total energy storage and total mobile energy storage.

  6. clays says:

    “The point is that increases in global and U.S. clean energy investment by the private sector — driven by government policy at the state and national level — drive private sector clean-tech VC investment.”

    That sentence makes no sense.

    Increases in private sector green investment drive private sector green investment?

  7. Dick Smith says:

    How do biofuels get into a clean energy chart? Doesn’t their energy cost during production make their emissions at about 80% of oil?