Q&A: Who's winning the clean tech race?

Wed Nov 17, 2010 2:09am EST

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This is the seventh and final story in a series on major climate change themes.

By Leonora Walet

Nov 17 - The world's low carbon energy market is expected to treble in a decade, and analysts say major economies including Japan, the United States and China will be jostling for a slice of the market likely to be worth $2.2 trillion by 2020.

Mounting pressure on land, water and energy as a result of growth in emerging economies and world population will add momentum toward a more efficient global economy, says HSBC.

Annualized capital investment in a low carbon market would grow from $460 billion in 2010 to $1.5 trillion in 2020, with the biggest market expansion expected in Asia.

WHO'S WINING THE CLEAN TECH RACE?

By region, the low carbon energy market will grow fastest in China, which will leap-frog the United States but still trail the European Union, which has set itself tough renewable energy, emissions and efficiency targets by 2020.

The European Union has an early lead in the market, although other economies are catching up fast. China and the United States led the world in new clean energy and infrastructure investment in 2009, at $34.6 billion and $18 billion respectively.

Together, they accounted for the top five clean-tech initial public offerings last year. And although Germany is in third place in new clean technology patents worldwide in 2009, the other four countries in the top five are the US, Japan, China and South Korea, according to London-based research group Chatham House.

The European Union still leads in installed clean energy projects, followed by the US. China has made huge strides in clean tech and would remain among the world's largest markets for clean tech in many years to come.

WHICH CLEAN POWER TECHNOLOGY IS WINNING?

Renewable energy provides nearly a fifth of the world's electricity generation now. But it could account for a third of total electricity generation by 2035, the International Energy Agency said.

Wind and hydropower will supply the most renewable power over the next 25 years, with hydropower likely as the dominant source over the period, said the agency.

Electricity produced from solar photovoltaics increases rapidly, though its share of global generation reaches only around 2 percent by 2035.

Analyst predict the world will see increased investment in geothermal power, which taps heat trapped below the earth's surface to run turbines and generate power, a well as other emerging technologies such as concentrated solar power and ocean energy. But their development will likely be slow, with the technologies marginally contributing to total energy generation.

IEA said total investment in renewable energy for power generation may reach $5.7 trillion by 2035. Investment needs are greatest in China, which has now emerged as a leader in wind power and photovoltaic production, as well as supplier of renewable energy equipment.

CAN RENEWABLE ENERGY COMPETE WITH FOSSIL FUELS ON COST?

Renewable energy would require government subsidies for many years to make it cost competitive against fossil fuels.

According to IEA, government support worldwide reached $37 billion in 2009 for generation-based renewables, and $20 billion for biofuels.

Going forward, subsidies for the sector could grow to $205 billion, or 0.17 percent of global gross domestic products by 2035, the IEA said.

The cost to generate onshore wind is at $48 megawatt per hour (MWh) to $163, while offshore wind costs about $101 to $188 per MWh, according to IEA estimates based on projects for commissioning in 5 years. Solar photovoltaic can cost about $215 per MWh.

Though costs are expected to trend downwards over time, competing with conventional electricity prices, currently at $30 to $40 per MWh, would be tough. Rising prices for carbon amid earth's limited supply of oil and gas could work toward making clean energy cost-competitive.

(Reporting by Leonora Walet; Editing by Ed Lane)

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