Warming to Clean Energy Part 1: The Economics



A quick look at the numbers suggests that the economics of clean energy are improving: Globally, investments in clean energy went from $30.1 billion in 2004 to 48.9 billion in 2005 and were roughly 63.3 billion in 2006, an increase of 30 percent. Even more striking, venture capital investment in U.S. based clean technology companies more than doubled from 2005 to 2006, nearing 2.5 billion. Economically, even without a price assigned to carbon, renewable energies are considerably more competitive today then they were during the 1970’s. Since then, the price of wind energy has fallen from 80 cents to between three and nine cents per kilowatt-hour, compared to 3 to 5 cents pe kilowatt-hour for coal. The U.S. Energy Information Administration said in a 2006 report that the price of a new wind power plant was not significantly different from one powered by natural gas or coal, and could be cheaper than a nuclear plant. The global average price per kilowatt-hour of solar electricity is currently between 35 to 45 cents, but with current subsidies, a 10-kilowatt system in a place like New Jersey can be paid back within around 10 years. Furthermore, the new technology of concentrating solar power (CSP), a system that uses mirrors and mobile panels to track the sun, promises to cut that timeline by more than half.





From the New York Times

The improving economics and the prospect of looming carbon legislation are transforming clean technologies into a mainstream investment option. Goldman Sachs has about $1 billion invested in renewable energy, and Silicon Valley venture capitalists, the folks who fueled the Internet boom of the late 1990’s, are pouring their money into this field as well. For instance, the forward-looking investment firm Kleiner Perkins Caufield and Byers, which helped build such household names as Sun Microsystems, Amazon, and Google, will be investing at least $200 million in the area over the next two years.

These pioneering investors are interested in making money now, but they are also pouring it into longer-term clean technology options, such as fuel cells, which have the potential to displace the internal combustion engine.While the cost of fuel cells has fallen in the past few decades to a few thousand dollars per kilowatt-hour, it needs to be between $50 and $100 per kilowatt-hour to compete with the internal combustion engine. Just as California’s Zero Emissions Vehicle mandate has fueled much of the work on fuel cells in the U.S. to date, a limit on carbon emissions would be a powerful incentive to bring this technology to market.



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