Renewable power: Developing markets are a ray of sunshine

If the dominant global theme of the 21st century has been the shift in dynamism and capability towards emerging economies, then 2012 has been the year in which that trend has hit the renewable energy industry.

While many developed economies that led the way in renewable energy are faltering, the enthusiasm from countries such as India, Brazil, South Africa and Saudi Arabia has been growing. More News From Financial Times
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Bill proposes big changes to electricity market However, China, the world leader in terms of investment in clean energy from 2009-10, applied the brakes last year and ceded top position to the US. This followed concerns in Beijing that the headlong rush into renewables was causing strains on the economy and electricity system. Analysts questioned the effectiveness of the heavy investment in wind power, given that a substantial minority of turbines were not connected to the grid. Nevertheless, China has also been raising the level of its ambitions for wind and solar power, including a push into the more challenging offshore wind starting in the next decade. The "sustainable energy for all" initiative begun at the start of the year by Ban Ki-moon, the UN secretary-general, encapsulates the idea that renewables can be a viable source of energy for poor and middle-income countries as well as rich ones. The initiative is open to the usual criticisms of well-meaning UN projects. However, by mobilising political and business support around its targets, which include doubling the share of renewables in the world's energy mix by 2030 from its present 15%, Mr Ban could play an important role in accelerating the industry's development. A commitment to increased use of renewable energy is likely to emerge as one of the "sustainable development goals" set as international targets at the UN's Rio+20 Earth Summit conference, in June. Among developed countries, that objective will meet a mixed reaction. Some are pushing hard for renewable energy, and a few have increased their efforts. Japan's Fukushima disaster last year has encouraged several, in particular Japan itself, to scale back their expectations for future nuclear generation, and to aim for more renewables. The European Union is still sticking to its target of deriving 20% of its energy from renewable sources by 2020. However, many countries including Greece, Italy, Spain and France have been reducing some of their renewable energy subsidies, particularly for solar power. In Germany, Angela Merkel's government is trying to push through a round of solar subsidy cuts in the face of opposition from state representatives in the upper house of parliament. In the US, the issue has become ferociously partisan. President Barack Obama's rhetorical and financial support for renewable energy has spurred his opponents to use it as a weapon against him. The tax credits and regulations that support renewable energy are under heavy attack from Republicans. But, with the shale revolution depressing the price of natural gas, which hit a 10-year low this year, it has become harder for renewable energy to compete without those supports. Emerging economies often take a more "strategic approach to energy", says Ben Warren, head of environmental finance at Ernst & Young, the professional services firm. E&Y's latest ranking of countries' attractiveness for investment in renewable energy include three emerging economies - China, India and Brazil - in its top 10. Other countries with ambitious schemes include Saudi Arabia, which plans a big expansion of solar power, and South Africa, which has a detailed renewables development plan. "These countries have an insatiable demand for energy as part of their development, so investment in renewables is easily justified," Mr Warren says. If a country's installed fossil fuel-based system is inadequate, the case for renewables can sometimes be made more easily, particularly for distributed local generation that is not handicapped by the lack of a comprehensive power grid and where the resources at hand, sunshine in particular, are often plentiful. However, the pressure to be cost-competitive with fossil fuels is, if anything, even greater in poorer countries. First Solar, the US solar panel manufacturer and project developer, said in May it had appointed a chief executive who would target new markets, but has stressed it is looking for "sustainable" markets not dependent on big subsidies. General Electric of the US, Alstom of France, Siemens of Germany and Vestas of Denmark, among others, have been pushing aggressively into Brazil, where the wind power market is growing fast, but where it is also keenly competitive. Some contracts were signed there last year to provide wind power at prices that were lower than for gas-fired generation. Emerging economies may want more renewable energy, but they do not want it at any price and political support has its limits. Mr Ban has said that the "green economy" - environmentally-friendly investment and technology - was still up for debate at Rio. "People understand that this is an important and very effective tool," he says. "But some developing countries [including the Alba group of Latin American countries such as Venezuela and Cuba] are suspicious that it is a tool to restrict their sustainable development." If renewable energy companies cannot demonstrate that their services are cost-effective, then they will not have a long-term future in emerging economies any more than in the developed world. ....................................................................... Power storage: solution to a perennial problem may be to take it with large doses of molten salt One of the abiding problems of the renewable energy business is power storage. The leading generation technologies, wind and solar, both suffer from intermittency. If the wind does not blow or the sun does not shine, you need back-up, typically fossil fuels. Anyone who can deliver an answer to the problem of how to store power cheaply on a big scale will make a huge contribution to the global renewables industry - and a fortune. The owners of California-based SolarReserve believe they have at least part of the solution. Its technology uses mirrors to focus the sun's energy to heat molten salt to about 540C, at which point it can be stored and released slowly to heat water to drive a steam turbine. This generates electricity at a steady rate for 10 to 16 hours a day, compared with a traditional photovoltaic cell that operates only during daylight. The technology, was tested with support of the US government in the 1990s, and is licensed by SolarReserve from Rocketdyne, now a subsidiary of United Technologies, the aerospace and engineering group. Of its first three projects, two are in the US. However, the most promising markets are generally abroad. SolarReserve has a presence in about 20 countries, and is working on projects in South Africa. It sees potential elsewhere, from Mexico to Saudi Arabia. By taking a USD 737m loan guarantee from the US federal government for its Crescent Dunes project in Nevada, SolarReserve has exposed itself to attack over the use of taxpayers' money for speculative projects using new technology. Kevin Smith, SolarReserve's chief executive, rejects such criticism, and describes the energy department's loan guarantees, begun under George W. Bush and made easier to obtain under Barack Obama, as "great". He says: "The rest of the world is expanding, while unfortunately the US is still arguing. But there is still a lot that is up for grabs outside the US."