Renewables Anecdotes and Implications
1) In the last month, several interesting news items on solar, focusing on the Middle East. First Solar has joined the Desertec (www.desertec.org) consortium, which plans to construct a massive ($500 billion investment) network of solar-powered electric generation capacity, in Northern Africa, to supply Europe. Siemens, ABB, and a collection of household industrial companies are involved in the group. Solar module manufacturing investments are underway in Egypt, UAE, and Qatar, generally funded by Sovereign Wealth Funds. Chatter (and logic) lead to the potential for a sizable commitment by Saudi Arabia in a homegrown solar manufacturing/construction industry. The Saudi Government subsidizes natural gas to provide cheap electricity and desalinated water for its population. The degree of this subsidy is not significant at $20 oil and $3 gas, but is shockingly high at $80. In effect, the government is using $80 oil to generate electricity and water — roughly $0.13/kwh real cost of power. In other words, the oil price required to make a profit, generating electricity at Saudi market rates, is $3/bbl!!! A gigawatt of solar would save over 25 million barrels of oil over a 20 year life — an NPV of $1 billion on the incremental crude sales. When natural gas was cheap (associated gas from producing oil wells), this was not an issue. However, recent exploration disappointments, plus outside bids for gas development, which priced new gas at $5/mcfe, may be tipping the scales. The point here is that there are numerous markets for which renewable power options are attractive investments. This may occur in free markets with ‘true costs’ of carbon (Europe), NIMBY, clean power or otherwise constrained zip codes (California, Hawaii, Japan), regions where indirect subsidies create economic options (Middle East). The multiyear transition (2009-2014?) from heavy subsidization to grid parity may be volatile, but the intersection of cheaper renewable power and (possibly) rising hydrocarbon costs is still more likely than not.
2) A global consultant has published a survey of clean energy spending patterns. Datamonitor forecasts investment up 35% this year (global). In 2009, China invested $34.6 billion in low carbon energy (primarily solar and wind). The US spent $18.6 billion.
3) I am gathering more anecdotes on the rising level of interest by pension funds in investing in renewable energy projects with PPA’s in place. Call for details.