Geoff Nesbitt, CEO of Verditek, explores the rise in renewable energy resources.
In the year 2000, global warming had been a popular talking point for some time and the environment was rising higher on government agendas. That same year, the International Energy Agency would forecast in its 2000 IEA world energy outlook that the share of renewable power resources in global power generation would be only 3% by the year 2020.
We’re yet to reach 2020, but five years short of this marker, the 2015 IEA world energy outlook revealed a wildly different result. By the year 2013, the share of the renewable energy sources in the total world power production had grown to 22% and the updated prediction for the year 2020 estimates that the renewables will represent more than a quarter of the global share. The rise in renewable power resources seems unstoppable.
Clean technology appears to be following the same cycle that characterises all emerging technologies: we have passed the excitement, inflated expectations, and consolidation phases. The sector is now entering the phase of stability and the resumption of growth. One of the most important factors of growth is achieved. Clean technology is now commercially viable.
In the past, regulatory support has been vital in helping the growth of renewable power resources in global power generation. It was effective in creating demand and helped the sources of renewable supply to reach the scale. It helped for the solar-power industry to globally grow at an average annual rate of 57% since 2006.
But, as the clean technology sector matured, the need for policy support weakened. Solar power and other renewables are now able to survive without regulatory help, and ‘traditional’ solar technology which is still a seemingly recent development, is becoming outdated compared to lightweight options that are entering the market.
In residential and commercial sectors, we should expect to see a sharp increase in solar adoption as the lighter weight and smaller format of these solar modules makes them cheaper to transport and install. Unlike traditional panels which are heavier and bulkier and aren’t generally moved or re-purposed once installed, the lightweight solar modules can easily be re-positioned and re-used.
The cost of traditional solar panels has meant that many users have had no option but to lease. However, the interconnectivity of lightweight solar modules means enough excess energy can be created through solar facades to sell back to the grid, making the adoption of solar profitable for residential and commercial buyers and increasing the feasibility of paying for the technology outright rather than leasing.
Future demand for renewable resources
Our planet is supporting an ever-wealthier population, increasing the necessity for sustainable solutions. The number of middle-class consumers is expected to rise to some three billion in the next 20 years. The lifestyles of both our younger and future generations will push demand for available resources. The reach of the clean power sources over fossil fuels and other outdated technologies is also obvious in terms of new capital sources.
Private investors are increasing their engagement in energy technology and new sources of capital are creating a ‘valley of opportunity’ for the energy entrepreneurs, as recently analysed in a Stanford research paper. In addition, initiatives by governments incentivise investment in clean technologies. The insurance and reinsurance industries are also keeping up with the global clean power trends. Recent product innovations in these industries offer more efficient and more effective support in managing risks in clean technology ventures.
Technical performance guarantees, warranty insurance or liquidated damage solutions can significantly increase the success of project finance structures. These risk transfer solutions are important for everyone involved in clean technology. They improve revenue and capital protection as well as forecasting of cash flows.
With all this in mind, it is no wonder that Bloomberg calculated that the sector has reached $310 billion in investment. The clean technology sector has grown into an asset-intensive industry on its way to commoditisation. Clean technology is a global segment that is meeting a growing global need. We can expect plenty of sunny days ahead for the clean technology sector.
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