Is the renewable energy boom slowing down?

Algal strains used for biofuels, the only area of renewable energy that didn’t disappoint last year.
Algal strains used for biofuels, the only area of renewable energy that didn’t disappoint last year.
Image: AP Photo/Jeff Chiu
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The numbers are in on 2012 and it was not the best of years for renewable energy, according to a report released today by market research firm Clean Edge.

After years of breakneck growth, the value of global wind industry installations rose by just $2.3 billion from the previous year to $73.8 billion in 2012. Worldwide wind capacity jumped to a record 44,700 megawatts, but that was only about 8% up on the previous year.

The value of photovoltaic installations actually fell for the first time, from $91.6 billion in 2011 to $79.7 billion in 2012, as solar panel prices continued to plummet and Chinese manufacturers grappled with overcapacity. Total solar capacity hit a record 30,900 megawatts in 2012 but revenues fell for the first time in a dozen years.

Biofuels were the one bright spot, with the market growing to $95.2 billion in 2012 from $83 billion the previous year.

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Last year “proved to be an unsettling and difficult year for clean energy,” the report’s authors wrote. “High-profile bankruptcies and layoffs plagued many clean-tech companies, overall venture investments retreated in the face of increasingly elusive returns, and the industry was begrudgingly transformed into a partisan wedge issue during the highly contentious US presidential campaign.”

So why does the green energy business seem to be in something of a funk? The shale gas boom is one reason, allowing investors and utilities to look forward to a cheaper, cleaner-burning fossil fuel that can provide power around the clock. The upheaval in the Chinese solar industry, home to 80% of the world’s photovoltaic manufacturing, and the failure of US startups developing next-generation solar technology to gain ground has also unnerved investors. And advanced biofuels have yet to make a commercial impact.

Still, Clean Edge estimates that the global wind, solar and biofuels market will grow from $248.7 billion in 2012 to $426.1 billion in 2022. And to put 2012 in perspective, the value of the worldwide wind market a decade ago was just $4 billion, the solar market was worth $2.5 billion, and the biofuels market was too small for Clean Edge to measure.

Venture capitalists’ enthusiasm for green technologies has waned as the market has grown and renewable-energy projects have reached the kind of size that needs more heavyweight funding. Total investment dropped from $5 billion in 2012 from $6 billion in the previous year.

Luckily, investors like Warren Buffett have stepped into the void. Buffett’s MidAmerican Energy Holdings, for instance, recently acquired two California solar power plants for $2 billion while Google has invested $200 million into a Texas wind farm. Google alone now has invested in renewable energy projects that generate 2,000 megawatts of electricity, enough to power 500,000 average American households at peak output—or a whole lot of server farms.