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Clean Energy Growth

Zero to $250 Billion in a Decade

Written by Nick Hodge
Posted April 8, 2011

Fresh off a two-day stint in Toronto where I attended an energy finance forum, I have to say I learned as much in my conversations with attendees as I did sitting in the audience, feverishly taking notes as CEO after CIO after project financier rattled off data and projections about clean energy deals.

A few of these events are held each year — London, Wall Street, San Francisco, New Delhi — and serve to bring together movers and shakers in an industry that's gone from zero to $250 billion in a decade.

As such, there are tons of young companies, seasoned veterans, funds, bankers, lawmakers, and more — all scrambling to play the game and make the rules at the same time, with serious money at stake.

To say it's complex doesn't do it justice...

We often think it's just about putting up turbines and panels and flipping the switch.

But if you peel off the protective label, you'll find it's about lending risk mitigation, tax liability, amortization, debt and equity financing, and politics.

And understanding how it all works is your key to profits as the world scrambles to deploy cleantech resources.

Quick Stats

Solar Resource Map

click image to enlarge

When it comes to cleantech, America is like that popular kid in high school...

It's rich, well-liked, not worried about the future, and in 10 years, it will be surpassed by all its peers.

To understand the future of energy, you have to look outside our borders...

Consider that Germany installed 25 times more solar than California in 2010, despite Cali's solar resource being 70% better.

Germany installed 7,000 Megawatts (MW) to the United State's 905 MW last year, and Germany has a solar resource on par with Alaska.

It's embarrassing.

So is a chart of Bonn-based SolarWorld AG (XETRA: SWV) versus Massachusetts-based Evergreen Solar (NASDAQ: ESLR)...

SolarWorld vs. Evergreen Solar

Due to lack of support, Evergreen recently announced it would export its manufacturing to China.

The Canadians and Europeans I spoke to simply can't understand that. They're finding new prosperity in clean energy while America is seemingly dying on the vine...

Germany's solar market alone generated $20 billion in revenue last year. Ontario will spend $16 billion in the next four. And it's creating jobs and prosperity.

One speaker suggested the U.S. renewables market was anemic. Most lament the fact that our nation has some of the best wind and solar resources in the world — and we're failing to develop them with the necessary urgency.

~~SIGNUP_EAC~~

What They Know

It's simple.

They know traditional energy resources are finite and come with extremely high external costs. They know once installed, clean energy projects have no fuel inputs. And they know the earlier you start, the better off you'll be.

Since Germany started diligently installing solar in 1991, they also know the best models to make it work.

And this is the biggest piece the U.S. has failed to grasp.

It's called a Feed-in-Tariff or FiT program, wherein a guaranteed rate is paid for new clean energy capacity. It helps cleantech companies do a few things:

  • recover initial investment and operational costs

  • generate a reasonable profit

  • offer policy stability to reduce risk

Together, these three things help stimulate growth, jobs, and energy security.

For investors who know the main players, it also means solid investments in the energy of the future.

The FiT model is proven to work. About 90% of the world's installed solar is in countries that offer such a program.

Iceland and Norway get 100% of their electricity from renewables. Quebec gets 97%. Canada has so much spare electricity capacity, it sends about 40 Terawatt-hours per year to the U.S. — and makes billions of dollars doing so.

The U.S. gets about 10% from renewables (only 3%, generously, if you don't count hydro), and continues to wonder about our energy future while the answer stares us in the face.

What You Need to Know

You need to know that supporting the introduction of renewables is only a contentious issue in the United States. And that largely has to do with the power of traditional energy juggernauts and their impact on policymaking.

You need to know the smart money is betting on clean energy, and that will drive returns for investors like you.

I'll cover this in more detail next week, but massive asset managers are beginning to bet on clean energy for future cash flow returns.

I'm talking about life insurance companies, fund managers, and pension funds. These are entities that look for long-term, reliable, low-risk, cash-generating assets... And they're increasingly betting on cleantech by the billions.

They realize — as all good investors do — the winning approach is a balanced approach.

In the coming years, you'll need to do the same.

Call it like you see it,

Nick Hodge

Nick Hodge
Editor, Energy and Capital

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