Renewables will live to tell the tale

People are queueing up to invest in clean energy, through the credit crunch and beyond


Jeremy Leggett
guardian.co.uk,
Tuesday July 1, 2008

At the turn of the century, just before the last downturn, I was busy with some Swiss bankers setting up the world's first private equity fund for renewable energy. Many people professing to know something about energy markets thought we were wrongheaded. Renewable technologies mostly languished in cottage industries. Silicon Valley players, pre-occupied with what they didn't yet know would be the last days of the dot.com boom, generally weren't interested in investing. Electric utilities tended to believe the future would be run on gas. Car companies did a little dabbling in fuel cells or hydrogen if you were lucky. Today, everything has changed. In the solar industry, trade shows that looked like cottage industry fairs in 2000 now host giants of the digital revolution selling entire bespoke factories that by 2010 will have gigawatt-a-year capacities.
Investment is flooding into the renewables sector, not least from Silicon Valley. Investment in all kinds in renewables exceeded $100bn for the first time last year. Leading venture capitalists today scour no less than 50 attractive families of technologies for their cleantech investments. Electric utilities tend increasingly to go through the motions on nuclear, coal and carbon-capture, meanwhile placing ever-bigger bets on renewables. Car companies are showing a clear preference for electric battery vehicles, and hybrids.
I believe the renewables industry is going to survive the downturn very well. Indeed, it will be one of the few sectors to prosper. Everybody needs energy, even in the bad times.
In 2000, most of the people I met who were true believers in a renewable-powered future were environmental campaigners. Today, I meet true believers spanning a wide spectrum, including right across the business world. Wal-Mart, for example, has a plan to power all its stores, worldwide, with renewables. It is pressuring its suppliers, including a major client of my company Solarcentury, to follow suit. The financiers I work with on the Swiss investment fund are now one investment team among many. I see the excitement in the faces of the investment managers at every board meeting. Scottish and Southern Energy, Solarcentury's utility partner, has opted for an all-out drive to be the number-one renewables player in the UK. I feel the seriousness of their intent whenever I meet with their management.
One of the partners in one of the venture capital companies invested in Solarcentury is a former CIA director, James Woolsey. He has an explanation for what is going on. Two great drivers are gathering behind renewables markets, he argues. One is global warming. The other is energy security. You can believe in one, or the other, or both. You are a fool if you believe in neither. Jim is not alone in this view. As the CEO of Renault-Nissan recently put it, when announcing that his company would be focusing on electric battery vehicles: "We must have zero-emission vehicles. Nothing else will prevent the world from exploding."
In the media, the Economist is among the many organs that now understand what is going on. Yet I remember well how they scoffed a decade ago. At the Berlin climate summit in 1995, an editorial remarked: "Most actions (to cut carbon emissions) would pose a bigger threat to human wellbeing than does global warming." Last week, in contrast, we read the following about the prospect of replacing fossil fuels with clean energy: "Such a failure of imagination [the idea that we can't do it] has been at the heart of the debate about climate change." A special report on the future of energy is written throughout with optimism of the kind I espouse. "Some think alternative energy will be the basis of a boom bigger than information technology", the editorial concludes.
So I find myself – an ex Greenpeace campaigner who believed renewables could replace fossil fuels as long ago as 1990 – now, finally, squarely on the same sheet as the Economist.
The renewables industry I know best is photovoltaics (PV). The global market in PV grew by 67% last year. As the price of electricity and oil soars, the manufacturing cost of PV continues to fall. Many people in the PV industry now think "grid parity" – the time that solar electricity costs less than gas-and coal-fired electricity – is just a few years away, in all markets. True or not, it is inevitable now that grid parity will be reached. At that point a mass market will emerge at a speed that will amaze most people, embarrass supposed energy pundits, and leave cynical economists exposed for the blowhards they are.
All this raises one big question. Can the clean energy revolution unfold in time to save society from the worst impacts of the current energy-crisis/climate-crisis double crunch? The answer is "just maybe". Provided we mobilise as though for war, accelerate the trends already underway in clean energy, and price carbon the way we should if we truly believe that climate meltdown and/or energy supply threats could torpedo our economies.
But will we?