Renewable energy a ‘bright spot’ for US economy

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Alex Desbarres, Senior Renewables Analyst at Datamonitor and report author, says: “The economic and financial crisis should have dealt a devastating blow to the renewables industry, but that prospect failed to materialise as governments all over world called on public finances to shore up environmental policy goals and overcome chronic market failures.”

As a result, global investment in renewable energy only dropped by 6.5% in 2009. The drivers that propelled the sector for the past few years are still at work, leading Datamonitor to anticipate continued growth in 2010.

Desbarres adds: “Green stimulus and other public funding will serve their purpose as temporary measures, used mainly to meet the shortfalls of an enfeebled banking system. However, the need for public policy and public finance to power private capital investment in renewables has never been more pressing.

“The sector requires, more than ever, carefully designed, consistent policies and regulatory frameworks that will drive new levels of investment. Failing that, the US renewables industry could well decline in the coming years.”

Cautiously optimistic about wind

“Longer-term growth could however still be negatively affected by the vagaries of policy uncertainty and short-term incentives, the very nature of which discourage long-term investment in manufacturing capacity,” Desbarres says.

Datamonitor expects solar’s contribution to renewable energy to rise significantly in coming years as prices continue to inch towards grid parity. Any major moves at a regional, national or international level to regulate or price in greenhouse gas emissions will only accentuate this trend.

Biomass power is also expected to grow, largely on the back of its wide range of environmental, agricultural, and national benefits. “An appropriate mix of R&D, supportive policies, and market pull suggests the industry is now poised for growth,” Desbarres says.

Until recently, geothermal energy has shown considerable potential but only in areas where thermal water or steam is found concentrated at depths of less than 3 km in restricted volumes. Geothermal power opportunities may now exist in regions and applications thus far largely underexploited by the sector.

Marine and hydropower

In addition, Datamonitor believes that growth opportunities for the hydropower industry are the best they have been for the past three decades and that interest in ocean energy is now steadily growing. However, the mass scale deployment of US ocean energy now hinges on credible government-sponsored incentives, which alone, may not be sufficient to mature the technology.

The report finds that wave power technologies are typically developed by small companies, often start-ups, with high development costs and typical investment levels of only US$5-10 million. The lack of private-sector funding coupled with overall low levels of R&D investment in this nascent sector is also apparent, despite the fact that financial markets are now slowly thawing. “The outlook for the ocean power industry will improve as it learns from the wind and solar industries and from developments abroad”, concluded Desbarres.