Even though oil prices remain relatively low, solar energy investment has become politically popular around the world. Governments from Australia to China have ambitious solar agendas, and government support for the solar industry could help accelerate growth. To learn more about why solar energy is heating up around the world, see the following excerpt from Money Morning Senior Editor, Jason Simpkins.
Obama announced Tuesday that he is making California’s standard for vehicle fuel efficiency and greenhouse gas emissions the new national standard.
Under Obama’s new proposals, vehicles would be 30% cleaner and more fuel efficient by 2016. And that’s just the beginning.
The President’s budget incorporated $646 billion in revenue from capping global-warming pollution, while allocating $150 billion to renewable energy investment over the next 10 years, making his green-funding initiative the largest such effort in U.S. history.
Among other things, Obama’s recent stimulus package provides a tax credit of up to 30% for home solar installations.
The Obama administration also advocates a policy that would require 25% of U.S. electricity demand be met by renewable energy by 2025. The President has the support of the Democrat-led Congress. U.S. Sen. Jeff Bingaman, (D – N.M.), Chair of the Senate Energy and Natural Resources Committee, is working on legislation that aims to make 20% of U.S. energy demand renewable by 2021.
While a renewable energy policy was largely neglected by the administration of George W. Bush, Obama’s effort can hardly be described as partisan. It is more representative of a shift in political ideology that arose when gas prices soared above $4 per gallon last summer.
A recent Gallup Poll showed that the majority of Americans support higher fuel efficiency standards such as those Obama announced Tuesday. In March, 80% of Americans said they favored higher fuel efficiency standards for automobiles.
Currently, just 28 states have renewable energy goals, but with the Obama administration’s effort and a shift in public opinion, it won’t be long before all 50 are enacting their alternative energy mandates.
According to a study by Allianz Global Investors, 78% of investors think green technology could be the “next great American industry,” and 97% of investors believe the development of alternative fuel sources will remain important even if oil prices remain relatively low.
And statistics bear that out. Venture capitalists invested $4.1 billion in alternative energy projects in 2008 – a 54% increase from the year prior, according to a report by PricewaterhousCoopers. What’s more, 45% of that money went to solar projects, compared to 23% in 2007.
“Alternative energy’s rise isn’t going to be smooth, but it’s going to be one of the great new growth industries,” Steven Berexa, managing director of research for RCM Informed, an Allianz subsidiary, told Kiplinger’s Personal Finance magazine.
A Global Industry
In addition to the United States, solar energy is gaining traction around the world.
After subsidizing 2,400 MW of solar projects last year, the Spanish government will subsidize an additional 500 MW this year. Japan aims to create more than 100,000 new jobs in its solar industry as part of an effort to jumpstart its flailing economy. Proposals for solar energy plants are also being considered in the Middle East and northern Africa.
Even BrightSource’s Woolard has attributed some of his company’s success to its overseas operations.
“PG&E looked hard at what we’d done,” Woolard told The San Francisco Chronicle. “They looked at the results from our plant in Israel, and that built a lot of confidence that we were meeting milestones and delivering.”
Most recently, Australia announced plans to build a solar power station that will rival BrightSource’s Southern California operation. The network is expected to produce about 1,000 MW of energy, but won’t be operational until at least 2015.
“We don’t want to be clean energy followers worldwide, we want to be clean energy leaders worldwide,” Prime Minister Kevin Rudd told the Financial Times.
The Australian government hopes renewable energy will account for 20% of the country’s power grid by 2020. Rudd said the government intends to spend about $1 billion (A$1.4 billion) of the $3.6 billion (A$4.7 billion) it has pledged to clean energy initiatives over the next decade.
Like in the United States, the Australian government hopes its alternative energy initiative will be a catalyst for private investment. John Connor, head of the Sydney-based Climate Institute, told the FT that Australia’s clean energy plan will drive an estimated $15.5 billion (A$20 billion) in private investment.
Another country with an ambitious solar agenda is China. A country with notoriously high greenhouse gas emissions, China installed about 50MW of solar capacity last year, more than double the 20 MW in 2007, Renewable Energy World reported.
Beijing plans to expand the installed capacity to 1,800 MW by 2020, as the demand for new solar modules in China could be as high as 232 MW each year from now until 2012.
This article has been reposted from Money Morning. You can view the article on Money Morning’s investment news website here.