Swiss power giant ABB makes $1 billion bet on a green energy boom

April 22, 2013
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Energy Shocks
April 22, 2013

Global investment in clean energy fell off in 2012—but that’s a blip, says a new report. The study released today by research firm Bloomberg New Energy Finance (BNEF) predicts that investors will pour $630 billion a year into green technologies by 2030.

That’s a 134% jump from the $269 billion invested last year. BNEF projects that renewable energy will account for 70% of new electricity capacity by 2030 and will generate 37% of all electricity worldwide, up from 15% in 2012, according to the report.

And ABB, the Swiss engineering giant, made a $1 billion bet on that future today. It said it would acquire Power-One, a California company that makes inverters that convert the electricity generated by photovoltaic panels to a form usable by the power grid.

“Solar and photovoltaic solar inverters is the fastest-growing and most attractive piece of the market,” ABB executive Ulrich Spiesshofer says in a video accompanying the company’s announcement. “There’s an additional opportunity now emerging in the emerging markets – China, in the Middle East particularly, also in some traditional markets like Japan.”

BNEF predicts that solar energy will comprise 24% of new electricity capacity by 2030.

The inverter industry is widely expected to consolidate, like the solar panel manufacturing business, which is struggling with overcapacity and crushing debt loads. French power giant Schneider Electric acquired inverter maker Xantrex in 2008 and last year Satcon, another inverter manufacturer, filed for bankruptcy.

As is often the case with such reports, BNEF report offered a range of scenarios for the growth in investment in green energy. Under the most conservative, which it calls the “Traditional Territory” scenario, investment will jump to $470 billion, while it would rise to $880 billion in the “Barrier Busting” projection. The most probable outcome is the $630 billion invested in what BNEF calls the “New Normal.”

So why such a sunny outlook? After all, in recent weeks BNEF has reported that global investment in renewable energy dropped 11% in 2012 and that it fell 22% first quarter of this year.

The short answer is that the boom and bust of recent years have both been driven by government subsidies that have shaped the fortunes of the renewable energy industry over the past decade, and which are set to shrink in the US. But the cost of producing wind and solar is coming down, and as they become more competitive with fossil fuels, the subsidies won’t matter as much.

The wild card, though, is America’s shale gas boom. Natural gas prices are around $4 per million Btu today, but BNEF assumes they will stabilize at $6 in the US, $9 in Europe and $11 in Asia.

“In spite of the recent news showing a downturn in clean energy investment since 2011, renewable technologies will form the anchor of new generating capacity additions, even under a less optimistic view of the world economy and policy choices,” Guy Turner, BNEF’s head of economics and commodities, said in a statement.

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