Studies Highlight Growth in Renewable Energy

A pair of recent reports on the growth of renewable energy show how renewable sources are growing rapidly in response to global energy needs. They also show we have a long way to go to replace traditional energy sources. First, Exxon Mobil (XOM) has released its annual Outlook for Energy which forecasts energy demand until 2030. Here are some of the highlights:

• Global energy demand is forecast to grow at an annual rate of 1.3% per year, with the developing world growing a a 2% rate, and the developed at 0.5% per year.
• Hydrocarbons will make up 80% of energy use through 2030. Oil and gas will be 60% of the total energy use.
• Wind, solar and biofuels will have excellent growth of 9% per year. However, these sources now only provide 0.5% of world energy use and will be only 2% in 2030.

The U.S. Department of Energy; Energy Efficiency and Renewable Energy program [EERE] has released a preliminary report on the growth of renewable energy sources. This report has some good news on the growth of renewable energy. Renewable energy use is growing at greater than 10% per year world wide:

• Excluding large hydro-power, renewable electricity production grew 15% last year and now makes up 5.5% (237 gigawatts) of global energy production.
• Breaking down renewable sources, first the percentage of renewable power the source provides, and second the growth of production last year (if provided):
  • Wind power: 40% of renewable with 25% growth
  • Small hydro-power: 31%
  • Biomass fueled electricity: 18.5%
  • Geothermal: 4.2%
  • Grid connected Solar PV systems: 3.2% with 56% growth
  • Thermal Solar: no data given

The report shows growth rates for the various renewable energy sources:

• Wind: 25-30%
• Solar: PV 50-60%
• Solar Thermal: 15-20%
• Biofuels: 15-20%

Investments into new renewable power resources will total $66 billion for 2007 up from $55 billion in 2006 and $29 billion in 2005. As an investor, I am extremely interested in the long term potential of renewable energy. These number back up the potential of this sector. I also find the valuations of the better know stocks in this sector to be quite distasteful. If the company is profitable, the multiples are huge. If the company is still developing its technology, will it be profitable in the long run? Finally, many of the attractive renewable companies are only traded in Europe.

My choice to invest in the renewable sector is the ETF: Powershares Global Clean Energy Portfolio (PBD). PBD mirrors the WilderHill Global New Energy Innovation Index NEX. I like this index because it keeps a fairly even weighting of 80+ stocks from 20+ countries and is rebalanced quarterly. PBD is a component of this site’s 20 Stock Portfolio.

Disclosure: I currently do not have a position in PBD.

Comments

[alpha24seven]

A lot of these projections were predicated on a supportive energy bill. It just got pounded so these numbers are for all intent and purposes -- meaningless...

[HaroldKramer]

Not so fast Alpha... I feared getting killed by this regrettable Congressional (Republican) reaction, but the market is looking past this incident. Note that these performance numbers took place DURING the Bush administration - so why should they get any worse? The direction is clearly positive and the Republicans are not really in control longer term. Over 20 individual states have their own renewable programs and guidelines not to mention the EU. Bush is already irrelevant. He is only delaying the real bonanza to come. Today's (Dec. 14) positive market action (in solar stocks) in the face of the energy bill disaster and our (U.S.) sabotage of the Global Warming meeting in Bali is very encouraging. Knowledgeable investors see the long term mega trend.