Tag Archives: Japan

Clean energy technologies? No bubble bursting there. Future is growth, growth, growth

There was a clever headline in the satirical newspaper The Onionearlier this week that wouldn’t be so humorous if it wasn’t true.

“300 Million Without Electricity In India After Restoration Of Power Grid,” the headline read.

The article was referring to the massive power outage across India Tuesday that cut electricity to 670 million citizens, the equivalent of two Americas going dark. Without question, it was the largest blackout in world history.

What was so witty about the headline was how it drew attention to another problem too often overlooked in India. Even when the existing power grid is working fine, there are still 300 million people in that country lacking access to electricity, meaning no basic necessities like refrigeration, lighting, or the appliances we westerners take for granted.

Considering India has the world’s worst air pollution, as researchers at Yale and Columbia universities concluded earlier this year, The Onion’s blackout story carries two important messages: One, the third of India without electricity could benefit tremendously from community-level investments in solar, wind and other non-polluting energy sources; second, the two-thirds who are connected to the grid will now be urging their local and national governments to modernize India’s electricity system.

That usually means cleaning it up, making it smarter and more reliable, and investing in clean technologies — from Canada, perhaps — that make it more robust and efficient.

There are some commentators out there who like to point to very specific events as evidence that the clean energy and technology boom has gone bust. They point to the exaggerated Solyndra “scandal,” which saw the bankruptcy of the solar manufacturing start-up after it received — and had already burned through — funding that was secured via a $535 million (U.S.) loan guarantee from the U.S. Department of Energy.

It makes for great politics, but the reality is that companies do sometimes fail and the public does often have flesh in the game. It’s not unique to clean energy. The loan guarantee program, after all, was designed for high-risk bets. Looked at objectively, the program has actually outperformed expectations. Solyndra and a handful of others are falling stars in a galaxy of promise.

But Solyndra is just the start. Clean energy skeptics point to company closures and the collapse of many solar, wind and other cleantech-themed stocks. They cite how U.S. government stimulus spending for clean energy projects is coming to an end. They flag how several jurisdictions in Europe, which is dealing with unrelated economic problems, are reducing subsidies for renewable energy projects.

The green dream is dead — or dying. It’s the message you get when listening to those, mostly living in a North American bubble, who doubted the vision in the first place.

This cacophony ignores the incredible needs of countries like India, which is already among the top spenders in the world on clean-energy projects, having spent $10.2 billion on renewable energy in 2011. As the blackout suggests, the need to accelerate that spending has grown more urgent.

Japan, meanwhile, is embracing renewable energy in a big way in the aftermath of the nuclear disaster at Fukushima. It just launched its own feed-in-tariff program —similar to the one in Ontario —aimed at aggressively spurring solar, wind and geothermal development to help reduce the country’s dependence on nuclear power.

Bloomberg New Energy Finance reported this month that global investment in clean energy surged to $57 billion in the second quarter of 2012, up 24 per cent from the first quarter and carried largely by a stunning 92 per cent spending increase out of China. Investment is still down year-over- year —2011 wasn’t a great year generally, right? —but it’s on the upswing in 2012, hardly the sign of collapse.

That boost from China is expected to continue, particularly in solar. As part of its 12th five-year economic plan, released in 2011, China originally expected to increase solar installations 20-fold by 2020. Last month it decided to draw forward that target to 2015, when it hopes to have 21 gigawatts of solar power capacity in place —enough to supply all of Ontario on a sunny spring day.

Why is China moving in this direction? Economically, it carries long-term strategic importance. But China’s citizens are also growing fed up with unbearable air, water and soil pollution, so much so that there is a rise in violent protests breaking out across the country.

The reason why clean energy isn’t a fad or a bursting bubble is that global problems such as climate change, pollution, poverty, food scarcity, crumbling legacy infrastructure, and access to clean water aren’t going away anytime soon. Renewable energy and other clean technologies may not be the only solution, but they are a big and growing part of it.

Will nuclear help out? Maybe, but don’t count on it. Jeff Immelt, chief executive of General Electric, a big supplier of nuclear technology, told the Financial Times this week that it’s “really hard” these days to justify the cost of nuclear. “I think some combination of gas, and either wind or solar … that’s where we see most countries around the world going.”

Ontario may want to reconsider plans for new nukes at Darlington.

Fact is, renewable energy costs are falling fast, and that’s part of the reason there are layoffs, profit warnings, bankruptcies and falling share prices in the industry. Subsidies are supposed to gradually fade away, something the fossil fuel industry hasn’t learned after 100 years of handouts.

There was oversupply in clean energy equipment. Weak companies are struggling and some are failing. Those intent on surviving figure out how to innovate, adjust, enter new geographic markets and come out stronger – the cycle is not unique to clean energy.

“Any emerging market will experience growth problems and will have winners and losers. And the losers’ problems do not necessarily indicate the absence of a long-term market,” says Craig Tighe, a partner with global law firm DLA Piper. “Were that the case, the loss of Palm and Handspring would mean that the smart phone market is not sustainable, which is manifestly not the case.”

Growth in clean energy is happening. What’s changing is the pace of that growth and the players who get to benefit.

There’s no bubble bursting here.

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies.

Guest Post: Glen Estill on Ontario’s local content controversy

Japan is appealing Ontario’s Green Energy Act procurement policies to the World Trade Organization, on the basis that the Ontario content requirement violates international trade agreements. Japan’s interest is obvious. It is a major supplier of solar panels, with major brands such as Sanyo, Kyocera and Sharp playing a major role in the world markets. It will be interesting to see the interaction between Canada’s federal government and Ontario on this one. After all, the federal government doesn’t have jurisdiction over electricity procurement.

I have an undergrad degree in economics. I understand that freer trade generally results in all parties paying less for products. And generally, when products cost less, more are used. Instead of products being produced where it can be done most cost effectively, trade barriers, like the Green Energy Act’s Ontario procurement requirements, result in smaller production runs for local markets, less economies of scale, and higher costs. So should we support Japan’s appeal?

The answer is a difficult, but resounding no. The problem with energy markets, and electricity in particular, is they are not governed by normal supply and demand and competition. Rather, they are, and have been for a century or more, governed by politics. We get our energy, and electricity, from where the governments decide. In Canada, think of the development of Ontario Hydro by Sir Adam Beck, or the building of the TransCanada pipeline, or the nationalization of the electricity system in Quebec. Think of Ontario and the federal government’s investment in the oil sands, or Hibernia, or the National Energy Policy of the Trudeau years. Think of the Nuclear Liability Act which shields nuclear power operators from liability, passing it to taxpayers. So energy is not governed by competitive economics. It is governed by politics.

And that is why protectionism makes sense for renewable energy. Germany has widespread adoption of all types of renewable energy, from biogas, to wind, to solar. And they have hundreds of thousands of jobs dependant on the renewables business. When the German government tried to change the renewables policies a few years ago, they had 10,000 workers demonstrate in front the Bundesstadt. The policies didn’t change.

“We all would agree barriers to trade in these areas do penalize the planet,” Mr. Lamy, Director General of the WTO said. In normal economics, if prices are higher, less are deployed, which penalizes the planet, because less clean energy is produced. But he is wrong. It is true, with less trade barriers, prices for renewable energy might be lower. But that is not what drives procurement policies. Jobs do. Jobs are a large part of what has driven the Green Energy Act. And indeed, it may not exist without the jobs. And jobs are being created in the renewables sector at a rapid rate, with announcements of a wind turbine blade plant, many fabricators working on solar hardware, several panel manufacturers etc. Thousands of jobs have already been created.

Further, if you accept the contention that policy drives energy choices, and that jobs drive policy, then you could also argue that perhaps the adoption of renewable energy would be less, as the policies would not be in place to drive renewables without the ability of a jurisdiction to drive local jobs. And with less renewable energy adoption around the world, volumes would be lower, and costs could indeed be higher than they are today.
At the end of the day, jobs foster political support. And politics is all that matters in energy markets. Lets hope Japan comes to its senses and instead of appealing to the WTO decides to encourage their solar panel makers to invest in Ontario, as others are doing.

Glen Estill is president and CEO of wind energy company Sky Generation Inc.