clean energy trends 2008

Excerpts from Clean Edge, inc. Clean Energy Trends 2008 Report

Amid a challenging economic outlook—plummeting housing prices, rising foreclosure

rates, record-high oil prices, sinking consumer confidence, looming recession—2007

was another banner year for clean energy, with no signs of a slowdown in 2008.

Solar, wind, biofuels, geothermal, energy intelligence, hybrid- and all-electric vehicles,

advanced batteries, green buildings, and other clean-energy-related technologies and

markets provided bright spots in an otherwise sluggish economy.

Clean Edge, which has been tracking the growth of clean-energy markets since 2000,

reports a 40 percent increase in revenue growth for solar photovoltaics, wind, biofuels,

and fuel cells in 2007, up from $55 billion in 2006 to $77.3 billion in 2007. For the first

time, three of these are generating revenue in excess of $20 billion apiece, with wind

now exceeding $30 billion. New global investments in energy technologies—including

venture capital, project finance, public markets, and research and development—have

expanded by 60 percent from $92.6 billion in 2006 to $148.4 billion in 2007, according

to research firm New Energy Finance.

2007 was another

banner year for clean

energy, with no signs

of a slowdown

in 2008.

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Further proof of clean tech’s move from marginalized to mainstream is abundant. A growing number of governments announced plans to generate electricity from renewables.

Corporations continued to jump on, if not lead, the race to transition to a cleaner, greener economy. Venture capitalists in the U.S. invested $2.7 billion in the clean-energy sector, representing more than 9 percent of total VC activity. Clean energy indices outpaced the broader markets in 2007. For example, the NASDAQ® Clean Edge® U.S. Liquid Series index (co-developed by Clean Edge and NASDAQ) was up 66.67 percent last year, compared with 3.53 percent for the S&P 500 index and 9.81 percent for the NASDAQ Composite index.

According to Clean Edge research:

n Biofuels (global production and wholesale pricing of ethanol and biodiesel)

reached $25.4 billion in 2007 and are projected to grow to $81.1 billion by

2017. In 2007 the global biofuels market consisted of more than 13 billion

gallons of ethanol and 2 billion gallons of biodiesel production worldwide.

n Wind power (new installation capital costs) is projected to expand from

$30.1 billion in 2007 to $83.4 billion in 2017. Last year’s global wind power

installations reached a record 20,000 MW, equivalent to 20 large-size 1 GW

conventional power plants.

n Solar photovoltaics (including modules, system components, and installation)

will grow from a $20.3 billion industry in 2007 to $74 billion by 2017. Annual

installations were just shy of 3 GW worldwide, up nearly 500 percent

from just four years earlier.

n The fuel cell and distributed hydrogen market will grow from a $1.5 billion

industry (primarily for research contracts and demonstration and test units)

to $16 billion over the next decade.

Clean energy, while still a fraction of global energy supplies, is scaling up. In 2007,

global cumulative installed wind power capacity exceeded 94,000 megawatts (MW)

and the solar industry surpassed the 10,000 MW mark with new additions of 20,000

MW and 2,821 MW respectively. Total global biofuels production reached more than 15

billion gallons last year, with the U.S. accounting for nearly half of all global output.

The current scale-up is an encouraging sign, offering the promise for manufacturers,

installers, and developers to bring down costs and leverage economies of scale.

The opportunity hasn’t escaped the attention of legendary oil and gas investor and

prospector T. Boone Pickens. He recently announced plans to build the world’s largest wind farm at 4,000 MW, with an estimated development price tag of around $10 billion. “I have the same feelings about wind,” Pickens told the New York Times, “as I had about the best oil field I ever

found.”

Hawaii is also serious about scale. The state’s Republican governor, Linda Lingle, has

announced plans to get 70 percent of the state’s energy from renewables by 2030 and

is partnering with the U.S. Department of Energy to reach that goal. This is more than

double the most ambitious targets set by any other U.S. state.

Singapore, vying to be a new center for clean-tech industry, is playing the scale card as

aggressively as anybody. Last November, Norway-based REC announced plans for a 1.5

gigawatt solar solar manufacturing facility—the largest in the world—to be built 30 minutes

from downtown Singapore. Neste Oil of Finland is building the world’s largest biodiesel

facility there, at a planned output of 250 million gallons a year.

Such ambitions around clean-energy development would have seemed pie-in-the-sky

just a few years ago, but are now becoming business as usual for a range of traditional

stakeholders within government, industry, and finance.

If Europe’s experience in this decade is any indication, we could be moving into an era

where coal and nuclear begin to contract instead of expand. Unlikely as that may seem,

especially with approximately one new coal plant being brought online each week in

China and India, it’s hard to overlook the European experience.

Parts of Europe, such as France, generate more than half of their power from nuclear,

but since the beginning of the decade the EU has added 47,000 MW of new wind energy

compared with just 9,600 MW of coal and only 1,200 MW of nuclear, according to Platts

PowerVision and the European Wind Energy Association.

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Perhaps even more telling, 2007 saw net capacity additions of 8,504 MW for wind, whereas both coal and nuclear saw net capacity reductions, of 750 MW and 1,203 MW, respectively.

It’s not just Europe. In the U.S., which gets half of its electricity from coal-fired plants,

more than 50 new coal plants have been put on hold because of legislative and investor

concern about greenhouse gas emissions. Wall Street has loudly sounded the

alarm on coal in anticipation of federal carbon emissions caps in the next presidential

administration and Congress. Citigroup, JPMorganChase, and Morgan Stanley have issued

strict new guidelines for coal investments, noting that “investing in CO2-emitting

fossil fuel generation entails uncertain financial, regulatory, and environmental liability

risks.” Kohlberg Kravis Roberts, Texas Pacific Group, and other investors made

their $45 billion buyout of TXU contingent upon the Texas utility scrapping plans for

8 of its 11 planned coal plants.

Even in China, which currently gets around 80 percent of its electricity from coal,

the move toward renewables is palpable. The government has plans on the drawing

board for 120 GW of new renewables by 2020—more than ten percent of total

projected energy demand— three times its plans for new nuclear power. Putting aside carbon constraints, pollution, and other environmental issues, looking at pure costs alone paints a

very compelling picture for emerging renewables. The average upfront capital costs for

a 1 GW nuclear plant currently range between $2 and $6 billion. Compare this to 1 GW of

geothermal and wind power at less than $2 billion and 1 GW of solar at between $5 and $10

billion, and the move towards renewables makes economic sense.

To be sure, not all the news has been positive for clean energy. The growth sector faces

a number of challenges that could significantly impact the future for clean-energy

markets, including:

n the rising impact of biofuel production on food supplies and commodity

agriculture prices;

n the need to conduct accurate environmental and life-cycle analysis for a

range of renewables and conventional sources in order to understand the true

impact of investment and development decisions;

n constrained credit markets and access to finance which could derail cleantech

projects that require project financing/debt equity;

n uncertain U.S. policies around production tax credits for renewables and

carbon regulations, which could hinder or eliminate growth;

n a global economic recession which could curtail spending across a range of

industries, including clean tech.

However, U.S.-based venture capital investments in energy technologies more than quadrupled

from $599 million in 2000 to $2.7 billion in 2007, according to New Energy Finance

(with supporting data from Clean Edge and Nth Power). As a percent of total VC

investments, energy tech increased from 0.6 percent in 2000 to 9.1 percent in 2007.

Between 2006 and 2007, venture investments in the U.S. clean-energy sector increased

by more than 70 percent.

According to New Energy Finance, new global investment in all clean-energy sectors

soared to $148.4 billion in 2007, up 60 percent from $92.6 billion tracked in 2006.

This figure includes investments made by VC and private equity investors; public market

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activity (IPOs, etc.); project financing; asset financing; government research &

development; and corporate research, development, & deployment.

While this investment figure is significant, we could see continued growth in coming

years. The International Energy Agency, an intergovernmental body focused on energy

policy, has estimated that $16 trillion needs to be invested by 2030 (or about $600 billion/

year) to meet the growth in projected demand for new electricity and fuel sources

worldwide. In a carbon constrained world, we expect that an increasing percentage of

that expenditure will be focused on renewables and efficiency technologies.

As American baseball icon Yogi Berra put it, “The future ain’t what it used to be.” That

certainly seems to be the case when forecasting the energy industry. Instead of the

once-conventional vision of cheap coal, inexhaustible supplies of oil, and unlimited

nuclear power, we now have cities choking on power plant emissions,

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$100 barrel crude, and nuclear proliferation and radioactive waste nightmares. The future doesn’t

belong to the incumbents, but to a range of emerging technologies that are reshaping

the global economic landscape.

We live in interesting times: the transition from a reliance on high-carbon energy

sources to low- and zero-emission technologies. The trend, we believe, is incontrovertible.

Clean Edge, Inc., with offices in the San Francisco Bay Area and Portland, Ore.,

a leading research and publishing firm that helps companies, investors, and policymakers

understand and profit from clean technologies. Founded in 2000 by environmental and

high-tech business pioneers Ron Pernick and Joel Makower, Clean Edge and its network

of partners and affiliates offer unparalleled intelligence and insight into the clean-tech

sector. Among its many activities, the company publishes the annual Clean Energy Trends

report, produces the annual Clean-Tech Investor Summit (along with IBF), and maintains

the NASDAQ® Clean Edge® U.S. indexes, which track U.S.-listed clean-energy companies.

To keep abreast of the latest clean-tech news, access industry reports, learn more

about our annual summit and stock indexes, or sign up for our e-newsletter, visit www.

cleanedge.com, email us at info@cleanedge.com, or call 503-493-8681.

Clean Edge, Inc.

Clean Edge or its principals have provided consulting services or hold equity in the following

companies mentioned in this report: Delaware Power Systems, GE, GM, Intrago,

and Miasolé. Furthermore, the information contained in this report is not intended to be

used as a guide to investing, and the authors make no guarantees that any investments

based on the information contained herein will benefit you in specific applications, owing

to the risk that is involved in investing of almost any kind.

A complete copy of the report can be found at www.cleanedge.com

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