Falling costs expected to spur renewables to 50% of generation capacity

01 Falling costs expected to spur renewables to 50% of generation capacity

Following up last week’s report on a fall in global cleantech investment, Bloomberg New Energy Finance predicts that due to the plunge in the cost of wind and solar power, renewables are forecast see a tripling of investment by 2030, leading to a 50% market share of the world energy supply.

According to the report, annual spending on clean-energy projects may rise to $630 billion at the end of the next decade from $190 billion last year. This is a 37% increase from an estimate in November 2011 and means renewables would account for half of all generation capacity by 2030.

“The apocalyptic views about what it will cost to shift the world to renewable energy simply aren’t true,” Michael Liebreich, chief executive officer of New Energy Finance, said in an interview. “Three years ago, we thought wind and solar would be cheap as chips, and they’ve even gone below that.”

Global Energy Use by Source BNEF supply Falling costs expected to spur renewables to 50% of generation capacity

image courtesy of Bloomberg New Energy Finance

 And for more positive news for cleantech investment, Cambridge Associates reported that cleantech investment by venture capital firms produced a gross internal rate of return (IRR) of 6.6% through the end of the third quarter 2012, and a gross total value to paid in capital multiple of 1.2x. While the numbers are certainly not spectacular, the analysis shows that reports of cleantech as a black hole of investment are decidedly misinformed

Cambridge’s analysis was based on a data set of over 1,200 deals for 644 companies since 2000. The deals represented over $21 billion in capital from 302 venture capital funds and 106 private equity funds, with nearly three-quarters of the dollars disbursed to U.S. companies. Cambridge broke down cleantech into four sectors; renewable power development (11.4% IRR), energy optimization (8.9%), renewable power manufacturing (4.6%), and resource solutions (1.5%).

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