PEW - Clean Energy Race, spending.

As I mentioned, we have recently spent our first trillion dollars on clean energy, resulting in 565GW of installed capacity, or in 2011 a spend of $250B resulted in 43GW of new capacity.

From an energy point of view, it is interesting to see where all this money is being spent. Since we looked at the sector while designing the index, it is possible to use the same method to compare the global clean energy sector against the Australian public investment  breakdown. The charts below show the market capitalisation of the sectors currently in the Clean Energy Index, showing that Australian public investors are by far most interested in solar, followed by Storage fuel cells. Below that is the current worldwide installed capacity of renewables, which shows wind is far in the lead, followed by hydro (which is not captured in the Clean Energy Index), then solar.

The only significant difference here is the difference between solar and wind - the large differences between Fuel cells (probably excluded from PEW, since they generally use non-renewable energy sources) and Hydro (excluded from the Index for no good reason, except perhaps the lack of new opportunities for Hydro in Australia). Despite the Index having a heavy lean towards Solar, the reality in Australia is not so different from the global installed capacity Solar has a current installed capacity of 1.3GW, while Wind has a capacity of 2.3GW. within the index, there is only one Wind company (Infigen IFN) and they report a capacity of 0.5GW, which means that the remaining 1.8GW is owned privately. I'll come back to the division between public and private ownership, but lets look at the betting on Solar vs Wind energy.

On the PEW homepage for this report, they have generated an infographic showing all the countries involved  in the survey colour coded depending on which of the two has the larger currently installed capacity. With the exception of Italy (solar) and a few countries where Biomass energy is leading, Wind is currently the predominant energy source for renewables in most countries. Looking at the graph above, it is possible to see why - until 2010, more money was pouring into wind. In 2010 investment was neck and neck, but in 2011, the investment in Solar has gone through the roof (no pun intended).

This is largely due to investment in the USA, Italy and Germany. Here is a quote from the report:

"A significant portion of the country’s clean 

energy investments in 2011 was directed toward 

large, utility-scale solar power plants that will add 

to America’s installed capacity in the coming years.  

As a result, financings in the United States were 

high, while deployment lagged those countries 

with concentrated investments in wind (e.g., China) 

and small distributed photovoltaic projects (e.g., 

Germany, Italy, and Japan).  ... but 

deployments in Germany and Italy were more than 

four times greater than in the United States."

Presumably the US investment in solar will drop off in the coming years while it's deployment ramps up. What is also interesting is that the increase in solar spending belies a much greater increase in the deployment in solar, given the widely reported 50% drop in the costs of small scale solar panels due to the economies of scale being achieved in China (and the concurrent closing of solar cell plants in Australia and the USA).

Small scale investment (primarily through roof top solar installations) has to be in a boom phase - G20 investment grew by 25% in 2011 (or 900% over the last five years) 62% of the 2011 investment was in Italy  and Germany alone, it will be very interesting to see what happens in 2012, but based on the number of door-knock sales of solar in Australia or the job-ads for said doorknockers, I would guess that 2012 will be a big year for small scale solar installations - some of which will have a growth effect on the Clean Energy Index, where the companies have an arm or a link into the retail sales of solar panels. I think the negative impact of moving production to China will be largely constrained in the 2011 period.

The last thing I notice from the report is that new public finance in 2011 shrank in comparison with both 2009 and 2010, back to levels of 2006 (see chart below). This relates to capital raising through the share market, which I noticed a small amount of through the Index while I was paying attention, and which is reflected in the fact that the market capitalisation of the Index fell less than 1% while the weighted price declined by greater than 11% over the same period - the difference being made up by the release of additional shares by companies in the index.

The reports puts the reason for a reduced amount of capital raising down to the dramatic cost-reduction of equipment and the increasing competition in the sector, neither of which are good news for anyone invested in the sector, but perhaps the industry will bounce back after the restructuring of 2011.