Clean-energy tea leaves show choppy growth

NEW YORK--Economic and policy problems have placed a few potholes in front of the fast-growing clean-technology business.

Forecasts for clean-technology adoption all point upward these days, buoyed by high double digits growth rates in sectors like wind and solar power over the past several years.

But a panel of financial experts here at the Renewable Energy Finance Forum on Thursday detailed several challenges to scaling clean technologies beyond their current niche status of about 2 percent of energy in the U.S.

"The fundamental drivers have never been better," said Michael Liebreich, the CEO of New Energy Finance. "But the credit markets have been a problem, and (government) policy is stop-go, and not just in the U.S."

Interest in clean tech--anchored in high energy prices, global concerns over the environment, and countries' desire for more energy security--has led to huge movements of capital into technology start-ups, renewable-energy projects and the like.

Performance on Wall Street, as a whole, has been great as well. "In 2007, almost nothing went wrong," said Liebreich.

But the credit crunch at the end of last year put a damper on some deals, particularly those that rely on debt equity, such as biofuel plants. The pace of money flows have largely returned, but ongoing credit problems still linger, Liebreich said.

A lot of money needed
As it stands, the capital demands to commercialize clean technologies are far too low to meet existing U.S. government targets, never mind greenhouse gas emission reduction or energy independence goals, said Andy Karsner, the assistant secretary of energy efficiency and renewable energy at the Department of Energy.

He estimates that between $50 billion and $100 billion annually is needed to commercialize energy technologies. Last year, there was $14.1 billion spent. To get more financiers to invest in clean energy means transitioning from an industry driven by tax credits to more traditional project finance, he argued.

"It's not a business (model) that permanently scales to handle national and global objectives," Karsner said.

More troubling is the "erratic" nature of federal renewable energy policy, which Karsner lambasted. He said many policymakers don't understand how markets work, a situation that is slowing the commercialization of federally funded clean-energy research.

"Where would we have been without erratic policy? We must end the yo-yo...and hold Congress to account," he said.

An important tax credit that is set to expire at the end of this year. Attempts to renew the investment tax credit--which affects both residential renewable energy and large-scale projects--have been defeated several times.

The prospect of the tax credit not being renewed is already stalling business, and it could cost the clean-energy industry thousands of jobs, according to estimates.

Scott Sklar, a renewable energy policy expert and president of consulting firm The Stella Group, predicted that the potential loss of jobs from an expiring tax credit will force Congress to extend the policy for one year. He gives it a 50 percent chance of getting a two-year extension.

Also required for consistent clean-energy investment is a price on carbon dioxide emissions in the form of climate change regulations, said Liebreich.

Standardization
Apart from policy and financial issues, the clean-technology business needs to mature in a number of ways, speakers said.

The wind industry, for example, is suffering from supply chain problems that have pushed up prices about 40 percent in less than two years and stretched product delivery time out from 5 months to 13 months, said Liebreich.

Renewable energy products also don't have the same maintenance and service infrastructure that other industries have, said Sklar. Things like solar and wind installations need to have remote monitoring so operators know if there are performance problems in real time.

"I am stunned that we don't have modularity and standardization. We cannot scale this industry without standardization, Sklar said. "We need better data on wind and solar resources...We still have a long way to go."

Still, demand for clean technologies remains strong, and adoption will continue. For example, the electricity transmission grid needs modernizing to provide more reliable energy, said Sklar.

Wind is expected to be the fastest growing form of renewable energy around the world, said Eric Martinot, a senior researcher at the Institute for Sustainable Energy Policies. Solar power adoption could skyrocket in many places in the world once solar panels become cost-competitive with retail electricity prices within five years, said Liebreich.

But the business conditions for companies in the field have gotten harder, said Michael Eckhart, president of the American Council on Renewable Energy, which put on the conference.

"The difference is that in the past year, everyone would make money. Now we have a competitive marketplace, and half of you will win and the other half won't," he said.