Sunny days ahead
billion, from 1.8 billion today. Their new lifestyles will require resources, including energy. This surge in demand will occur at a time when finding, developing, and extracting new sources of energy and resources will be increasingly challenging and expensive.
One pivotal question for the future of clean tech has been whether it needs regulatory support to thrive. To be sure, the withdrawal of subsidies in Europe hit the sector hard. But, even as Germany and Italy lost their first- and second-place rankings in terms of new solar-power installations, China and Japan took their place. Regulatory support has been effective in creating demand and allowing sources of renewable supply to reach scale. But such support has not always been economically efficient. One lesson from the German experience is that sudden changes in regulation can create peaks and valleys in demand that are not helpful to an industry that is still emerging. The biggest risk in many markets is not that subsidies and other supports will be withdrawn, but that the regulatory structure will not adapt as the sector develops.
As industries mature, the case for policy support weakens. And, indeed, solar power increasingly appears to be able to survive without regulatory help.
A thriving global marketplace goes a long way toward leveling the playing field across all resource options. During the last five years, dozens of solar manufacturing companies have failed, only to be replaced by stronger, more innovative, and more efficient players. More than one-quarter of cumulative global solar photovoltaic capacity was installed just in the past year. The International Energy Agency, which has been conservative regarding solar energy’s prospects, now expects it to be the world’s largest power source by 2050.
Nonetheless, concerns about the future of clean tech have made new projects more difficult to finance. But innovative new schemes, such as clean-tech bonds and third-party financing, are changing the picture. Third-party ownership, in which a company installs and maintains solar panels, in exchange for either a set monthly rate or a fixed price per unit of power, has driven up adoption rates in California, financing more than two-thirds of new installations in 2012 and 2013.
Meanwhile, clean-tech companies are becoming more sophisticated and creative. An entire new industry has been created around the use of information technology to reduce energy consumption.
All of this adds up to an industry that Bloomberg calculates reached $310 billion in investment last year. This is not a “niche” segment, but an asset-intensive industry on its way to commoditization. Clean tech is maturing and adopting proven management practices in operations, marketing, sales, and distribution. The shakeout in the clean-tech industry has been tough; but it has also been typical of emerging technologies, and, by weeding out the weaker players, it has made the sector more robust. This is a global segment meeting a growing global need. There is little room for doubt that the clean-tech industry can expect plenty of sunny days ahead.