Global Developments in the Sustainable Energy Markets

1. Global Developments in the Sustainable Energy Markets Virginia Sonntag-O’Brien REN21 / UNEP SEFI Local Renewables 2007 Freiburg, 14 June 2007

2. An outcome of the Bonn renewables2004 conference MISSION Provide international leadership for the rapid expansion of renewable energy in developing and industrial countries – based on the cooperation of stakeholders from the energy, development and environment sectors.

3. Strengthen policy frameworks for accelerating use of RE • Facilitate appropriate use of RE in developing countries, including strengthening the regulatory environment and expanding access to public and private financing • Build capacity to integrate, utilize, and regulate the use of RE at international, national, regional, and local levels • Facilitate collection, analysis, and dissemination of information

4. The UNEPSustainable Energy Finance Initiative Foster a sustainable energy finance community that brings together financiers and catalyses public-private alliances to share costs and lower barriers to investment. http://sefi.unep.org Provide Information • Facilitate Networks • Develop Partnerships

5. SOME FACTS AND PREDICTIONS • Global warming trends very likely the result of human activities since 1750 (IPCC) • Most of this impact the result of the use of fossil fuels • The world needs more energy - 2/3 increase from 2001 - 2030 Experts predict doubling of energy use between 2000 and 2040, tripling by 2070, and quadrupling by 2100 • Most growth will take place in non-OECD countries • Fossil fuels will account for 83% of overall increase in energy demand up to 2030 (IEA) • Coal demand increases the most in absolute terms (China and India) • Oil is expected to remain the dominant energy source worldwide (IEA base scenario) • Renewable energy will account for 9% of power mix in 2030 (IEA WEO 2006)

6. What does this mean? • Energy demand must be better managed and reduced • Energy users must shift to low-carbon technologies • like RE • New technologies must be developed that capture and • sequester CO2

7. REN21 RE Global Status Report 2007 (DRAFT)

8. Figure 1: Global Investment in Sustainable Energy, 2004 - 2006 Overall SE investment growing quickly • Investment has more than doubled in last two years. Further 20% increase forecast for 2007, taking global investment to $85 billion. • Drivers go beyond the big three (oil prices, energy security, climate change) to include many more environmental mainstream issues.

9. VC/PE Investment Soaring • Venture Capital/Private Equity up 163% in one year. • Biofuels edged out solar and wind to raise the most risk capital in 2006. • Most investment in wind has been in manufacturing capacity, not new technology. • VCs shifting more to larger, later stage deals. • US dominates VC transactions. Clean tech in the US now ranks 5th in VC at 9.1%. • After the US, China was the second largest recipient of Venture Capital. Biofuels $804m Solar $746m $664m Wind Efficiency Demand Side : $272m Smart Distribution $163m Power Storage $134m Services & Support (Clean Energy ) $127m Mfc. Capacity Technology $105m Fuel Cells Biomass and Waste $93m $36m Efficiency Supply Side : $35m Hydrogen Marine $31m $4m figures are up until mid - December Carbon Markets Source: New Energy Finance Source: New Energy Finance Figure 3: 2006 Venture Capital and Private Equity Investment by Sector

10. Public stock markets have opened to RE • Public markets up 140% in one year. • Solar PV is the big winner on public capital markets. • European stock markets are the main destination for IPOs. Figure 4: Public Market Investment by Sector

11. Continued growthuncorrelated to other sectors Technologies and projects RE confused as only technology stocks Clean energy stocks volatile, but doing well Figure 5. WilderHill New Energy Global Innovation Index (NEX) • More corrections are expected, as happened in May 2006, but few predict crash. 325 AMEX Oil 275 NASDAQ S&P 500 NEX 225 175 125 AMEX Oil, NASDAQ, and S&P 500 rebased – 30 December 2002 =100 75 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Source: New Energy Finance, AMEX

12. Financing for projects is still mostly for wind • Wind is still the big winner at raising asset financing for projects. • China the third largest location for asset financing, after US and Spain. Other Renewables $1.3bn Biofuels $6.4bn Biomass & Waste Wind $3.6bn $15.2bn Solar $1.4bn Figure 6. 2006 Asset Financing by Sector Source: New Energy Finance

14. VC/PE Investment in Energy Efficiency 2001-2006Source: New Energy Finance

15. SOME OBSERVATIONS Measured by capital investment, renewable energy is already amuch larger sectorthan current energy production figures indicate.Recent capital build up is not a sign of short-term volatility, but part of a longer trend. The trend has continued through the first half of 2007.

16. CHALLENGES Investment in energy still policy-driven and public priorities are not only climate change, but also energy security and energy access Developing countries have fast-growing energy demand and unstable capital markets, which skews investment towards fossil fuel generation (proven, understood, large-scale, less capital intensive) Regulatory frameworks needed that accelerate and reward investment to scale up deployment of sustainable energy technologies at a pace and to a level necessary to impact climate change

17. To do at the local levelEncourage local industries to invest in R&D for sustainable energy technologyWork with local finance institutions to develop awareness & capacity to engage in the sustainable energy sectorCollect data and use it to influence policy

18. REN 21 Renewables Global Status Report 2007to be released July 2007?www.ren21.netUNEP SEFI/New Energy FinanceGlobal Trends in Sustainable Energy Investment 2007to be released on 21 June 2007www.sefi.unep.org THANK YOU!