October 20, 2008

Upheaval spawns innovation. With the country in the midst of economic turmoil, it must now concentrate its resources on rebuilding enterprise and creating jobs. The mission is to increase the nation's energy mix and in doing so, bring down those prices.

Pessimism abounds, but the nation's energy future is perking up in the long-term. Predictions from all corners are that green energy's share of the generation pie will expand, all of which is now precipitated by a rapid growth in the level of clean technology investing. Indeed, the technologies that underscore wind, solar and energy efficiency are winning market acceptance and have become among the best performers.

Now that the U.S. Congress has passed legislation that extends the tax breaks given to renewable investments, there's hope. Solar credits, for example, will be prolonged until 2016, which is something the industry says will create 440,000 new jobs and inspire $230 billion in investments. The breaks given for certain efficiency upgrades will also be extended until 2009 while wind developers will receive a one-year production tax credit extension that is now valued at 2 cents per kilowatt-hour of electricity produced.

"Incentives work because they offset the initial purchase cost, while paving the way to greater energy savings down the road, which is good for consumers, the economy and the environment," says Stephen Yurek, president of the Air-Conditioning, Heating, and Refrigeration Institute.

Advocates of such government incentives also tout them because they generate jobs and all at a time when the global community is wrestling not just with economic troubles but also with a way reduce fossil fuel usage. According to the Worldwatch Institute, the renewables sector now employs globally about 2.3 million people.

Germany, Spain and Demark are leaders in this area, it says, noting that this emanates from strong government support. With more progressive leadership across the globe -- policies that push renewable energy and energy efficiency -- it says that green jobs could expand by the millions in the decades to come. Its best case scenario projects global wind power employment to increase to as much as 2.1 million in 2030 while solar photovoltaic job creation would generate as many as 6.3 million new jobs by 2030.

A similar study sponsored by the United Nations' Environment Program pegs job growth in all renewable energy fields to be 20 million over several decades. It says such an expansion would be predicated on an aggressive, global approach to curbing greenhouse gas emissions. That would involve both a massive shift from fossil fuels to cleaner forms of generation as well as to cleaner burning forms of transportation fuel.

"Government officials now have yet another reason to put the full weight of their support behind renewables," says Michael Renner, senior researcher for Worldwatch. "In addition to protecting our planet and phasing out an increasingly limited resource, policies that support renewable energy also support job creation."

Bright Spot

To be sure, the clean technology sector has had its ups-and-downs. In the early 2000 time period and during national economic downturn, investors retrenched. And the same thing could happen again given the current economic uncertainty. That is, venture capitalists and Wall Street may shirk at investing in nascent enterprises with huge debt ratios.

But as energy issues and specifically those centered on climate change gain an increasing share of public's attention, investment in green technologies, generally, should continue to grow. For its part, the corporate community is doing everything from building new energy efficient dwellings to retrofitting existing ones with modern equipment. Those companies are becoming part of the trend not just because they seek better ways to do business but also because they see it as beneficial to their own bottom line.

The global consulting firm Ernst & Young surveyed 150 global companies and found that 90 percent of them were involved with some type of climate change initiative. As such, those businesses had planned to a combined $276 billion over the next 10 years to achieve their objectives. Basically, a lot of firms that had been allocating investments to high-tech in the late 1990s are now creating clean tech divisions. GE, for example, has allocated $2 billion just to its wind unit.

One of the consulting firm's previous studies had concluded that 51 percent of institutional investors -- those with the deepest pockets -- said that they sometimes or always consider companies' environmental policies before deciding whether to risk their capital. The nation's biggest pension fund, CalPERS, says that it is pumping $200 million into clean energy technologies over the next several years.

Altogether, Ernst & Young says that clean technology ventures had grown from 1.6 percent of all investments in 2003 to 11 percent in 2008. Global venture capital investment in those assets is expected to exceed last year's record of $3 billion. To accelerate investment, the firm says that more partnerships and collaboration is needed among multinationals, emerging clean-tech companies and governments.

"It will be winter before it is spring," says Scott Livingston, managing director for Axiom Capital in New York City. "The sun will come out again especially for those invested in green technologies."

Times are definitely difficult, but the basic market fundamentals that lie beneath the energy economy are firmly established. It's about improving air quality, expanding fuel choices and mitigating price hikes. With the backing of their national governments, global enterprises are allocating more capital to clean technologies, all of which adds opportunities and jobs. It's the one bright spot in an otherwise dreary time.

More information is available from Energy Central:

Policies to Spur Solar - Looming Innovations Merit Nurturing, EnergyBiz, Sept/Oct 2008

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Ken Silverstein EnergyBiz Insider Editor-in-Chief
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