Power Play: Is it renewable energy

5th January 2012

The energy community hoped that 2012 would be calmer than its predecessor. There was unrest in the Arab world, the temporary withdrawal of Libya from the oil markets as the country battled to free itself from the rule of Colonel Gaddafi and a global reassessment of the long-term viability nuclear power following the Fukushima disaster in Japan.


Too much oil in one place…

Yet, if anything, the New Year brings an even more uncertain environment. Oil prices have risen after Iran threatened to shut the Straits of Hormuz, through which a fifth of the world's oil flows. The threat may be largely a case of sabre-rattling in the face of further sanctions that will restrict its own ability to sell oil, but it highlights the concentration of global energy reserves in the Middle East, the vulnerability of those supplies to disruption and therefore the vulnerability of the industrialised and industrialising worlds to any disturbance in one of the world's most volatile regions.


…And not enough certainty in others

At the same time, investors should be nervously casting an eye towards the alternative suppliers – Brazil's huge pre-salt reserves present massive technological challenges and Canada's oil sands face huge environmental issues. Of the current large suppliers outside the Gulf, Venezuela's Hugo Chavez had a cancer scare last year and seems to have no succession strategy in place, while in Russia, Vladimir Putin's strategy of succeeding himself is under threat from an increasingly restive electorate.

And if the events of the last few years, from global financial crisis to the Gulf of Mexico oil spill to the death of Kim Jong-Il, have taught us anything, it is that not only can the unexpected happen but it can have momentous consequences.


Not Enough: Only 3.3% of the UK's energy comes from renewable sources

All these developments highlight the importance of developing alternative sources of supply and of reducing our dependence on oil and gas imports. At the same time, in the UK, we have an imperative to cut carbon emissions to meet EU targets and tackle climate change. These targets seem relatively modest – just 15% of energy coming from renewable sources by 2020. Yet government figures show that in 2010, that figure was only 3.3%.


A big number: $1 trillion invested in clean energy

All is not lost, however. Analysts Bloomberg New Energy Finance recently announced that $1 trillion has been invested in clean energy since 2004. "Even for the energy world, it's a big number," the analysts said, "and one that grew quickly". It is a number that is likely to continue to grow quickly – in all sorts of areas, renewable technologies are reaching a critical mass, even if some of the indicators of this are slightly counterintuitive.


Going Down: BP loses out to cheap Chinese Solar Panels

The withdrawal of UK oil company BP from the solar industry after four decades may look like a worrying development, but it is in fact an acknowledgement that – thanks to massive investment by the Chinese – the industry has reached sufficient scale that "BP had no obvious competitive advantage apart from access to finance," according to BNEF.

An ongoing trade dispute between the US and China over alleged dumping by the Chinese of solar modules, which looks set to be extended to wind turbines as well, is obviously not good news but it does suggest a set of industries and technologies that are maturing fast and moving into the mainstream.

As Motley Fool points out, "according to a recent study done by Queen's University and Michigan Technological University, we've passed grid parity in many locations". The falling cost of solar (down 70% since 2008) might not be good news for individual solar companies, but it's got to be good news to energy consumers facing ever higher prices for oil and gas.


Going Up: £2.5bn UK investment in green tech creates 12,000 jobs

Back in the UK, the government announced that almost £2.5bn has been invested in renewable energy in the fiscal year to date, which ends in March. But perhaps more importantly, this investment is estimated to have created 12,000 jobs at a time when little else is going right in the UK or European economies. It is this number that suggests the UK will see the deployment of renewable technologies expand more rapidly in years to come.


More from Mindful Money:

Durban Climate Conference: a step in the right direction?

How far can ethical investing really go?

A Brief History of Socially Responsible Investing (SRI)

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