On 29 January 2009, the World Economic Forum released the report "Green Investing: Towards a clean energy infrastructure". In overview, the report identifies the ongoing struggles to meet climate change targets, the key forms of clean energy, and the impact of the financial crisis on investment in the industry.
The report takes a very positive view of future development towards increased clean energy, despite discussion of the challenges in the current financial climate. It highlights business opportunities in the energy sector with high abatement potential whilst also enabling investors to sustain long term corporate assets and shareholder value. It also discusses how policy decisions may have an impact on investment into renewable energy.
Clean energy is defined as renewable and green energy sources. Therefore, the report discusses energy sources from wind farms through to sugar based ethanol. There is also particular focus on the impact of the current financial crisis and how this will impact on business willingness to invest in such schemes which arguably carry a higher level of risk and require a high level of initial investment before any revenue can be capitalised. Clean energy
The report identifies 8 large scale clean energy sectors expected to significantly contribute to the clean energy infrastructure. These are listed in the report as follows:
- onshore wind;
- offshore wind;
- solar photovoltaic;
- solar thermal electricity generation;
- municipal solar waste-to-energy;
- solar based ethanol;
- cellulosic and next generation bio fuels; and
- geothermal power.
The report provides an overview of the status of areas of energy in comparison to their fossil fuel partners. For example, clean electricity provision is increasing, now accounting for just under ¼ of the total 190GW of power generation capacity worldwide.
In sunny parts of the world, photovoltaic electricity costs may now be comparable to daytime retail electricity prices without subsidy.
Wind power appears to be the best comparable source of energy, as it is already cost competitive in some parts of the world. Geothermal power and waste-to-energy are also proving to be competitive, reportedly cheaper than coal power and also natural gas.
As the renewable energy industry expands there is more opportunity to benefit from economies of scale and, therefore, the clean energy becomes more affordable and more in demand. Clearly the credit crunch is causing panic in all industries and indeed areas of life; therefore, it is inevitable that this will be a debated issue in the energy and climate change markets. Capital costs in the current climate versus reduced costs in the long term are the cause of much of the debate in this paper.
Significant investment has been identified as essential in order to achieve emissions targets to avoid severe climate change by 2050.
The International Panel on Climate Change believes that extreme input needs to be made into clean energy in order to limit the average increase in temperature of 2°C per year. This temperature increase is still considered by some to be dangerous. However, achieving this minimum level means decreasing CO2 emissions by 60% between now and 2050 – no small feat.
New Energy Finance's Global Future's analysis provides that a minimum investment of US $515bn annually is required in order to achieve some control of climate / temperature changes. The report notes that a surge in investment has already begun: In 2004 clean energy investment was $33bn, which increased to $143bn by 2007; however there is clearly a significant deficit between the figure mooted and the figure being invested.
The financial crisis & clean energy investment
There was a minor reduction in investment in the clean energy industry from 2007 to 2008. However the report highlights the changing levels throughout the year, proving the overall figure to be misleading. During the first half of the year investment boomed, closely followed by a large slump during the second half of the year, particularly in the last quarter. The figures for 2008 to 2009 will be interesting to compare.
Monetary stimulus in the form of a drop in global interest rates should have improved the situation. Europe however, is still lagging behind the United States according to the report. Governments account for 35–45% of economic activity in all of the world's largest economies. Therefore the report suggests that there should be increased public procurement for clean energy projects.
Private sector businesses outside the utilities and energy intensive industries require very different treatment in relation to committing to clean energy. There is less incentive to spend money on an overhead which can be obtained more cheaply. This, the report suggests is an area that could be addressed through regulation or codes of practice, such as clean energy targets etc.
The overriding principle in order to achieve this target now, the report indicates, is to provide stable investment and opportunities for clean energy in a simple manner. To promise customers an overly subsidised service will only lead to a lack of sustainability for the future.
Yvo de Boer, Executive Secretary of the UNFCCC, Connie Hedegaard, Minister of Climate and Energy for Denmark, and Lord Nicholas Stern, among many others – including senior business and NGO representatives and Members of the World Economic Forum’s Global Agenda Council on Climate Change – issued a statement urging the link of the economy and climate agendas in 2009. They warn against complacency in the UN climate talks, due to conclude in December in Copenhagen to replace the Kyoto Protocol.
They urge business, governments, experts and civil society groups to come together to design “win-win” projects and collaborations – projects that are good for the economy in the short term and that help to tackle climate change in the longer term.