Tonight I attended an interesting talk on the changing energy landscape with Michael Liebreich, founder of Bloomberg New Energy Finance (BNEF), a company that provides information and analysis on the energy system for the financial sector, industry and policy makers. I’ve teased out some of the highlights and thoughts I got following his talk.
Some clean tech trends
Competitive pricing within sight
In several parts of the world, electricity from wind is now competitive with fossil fuel generated power, without subsidies. Solar is not yet competitive, but it’s getting there. Electric vehicles are expected to become competitive on a total cost of ownership basis by 2020 (although this still leaves us with the problem that most people fail to buy on a total cost of ownership basis, but that is a topic for another post).
Investment down, but expected to rise again
If we consider investment in clean energy (mostly wind and solar) over time, the trend is impressive: The annual investment of 254bn US dollars in 2013, was about 5 times the amount invested in 2004. However, investment in clean energy peaked in 2011, and is down globally. This is mostly due to a massive drop in Europe following policy changes. That said, installations have not dropped as much, as some of the decline in investment fall is attributed to falling prices (since 1976 the price of solar panels has decreased by an astonishing 99%!) Moreover, investor confidence in the sector remains strong: BNEF’s clean energy index keeps seeing positive growth, as investors expect investment on the ground to increase again.
China leading on investment
Currently, China is the leading investor in clean tech, and last year, 68% of their new electricity capacity was from renewables. To my surprise, despite currently investing heavily in coal, by mid-2020s China is expected to be a net dismantler of coal plants.
Some general lessons for sustainability
In addition to the specific renewable energy insights, I think there are some more general lessons for sustainability that can be teased out from Michael’s presentation.
Lesson 1: Avoid policy uncertainty
Policy uncertainty is the biggest issue for investors, as it is difficult to incorporate into valuation models (they can deal better with technology and price risks). Therefore, avoiding this uncertainty should be the top priority for policy makers who want to encourage investment into clean energy and wider areas of sustainability. For example, the retroactive policy changes to renewable energy support in Europe a few years ago led to investors avoiding other sectors as well, due to the reduced trust in the policy environment overall. This illustrates that sustainability specific policies can have wider implications in attracting investment.
Lesson 2: Creative destruction is a part of the transition
The resistance of the incumbents in our system such as the oil and gas companies is clearly a barrier to progress, and sometimes I think it seems they have too much power for us to shift the system. But Michael argues that we are reaching a tipping point, and those who don’t adapt will die. Although it might take some time, he believes that “solar is to utilities what social media is to newspapers”, and the same pattern will apply to other parts of the sustainability system. (To better understand creative destruction and disruption, I reiterate my recommendation for Christensen’s presentation and book).
Lesson 3: Technology is not the barrier
The technology is there, and costs are falling rapidly. The challenge lies in policy, social acceptance and financial innovation to invest in the new technology and new business models.
As a final note, I think this quote is something to keep in mind for all of us in the sustainability space:
“It is not a problem, it is a task”
– German lawmaker faced with the massive changes in the country’s energy system
beasustainable 
Reblogged this on Green Living 4 Live.