Joel Makower: Two Steps Forward: Clean Energy Trends 2006

My colleagues and I at Clean Edge have just released our fifth annual Clean Energy Trends report, showing the remarkable growth trajectory clean energy has taken -- and will continue to take.

In this year's free, downloadable report, Ron Pernick, Clint Wilder, and I describe five trends in the clean-energy world, and forecast the market growth of four technologies over the coming decade. In addition, our colleague, Rodrigo Prudencio of Nth Power, a leading venture-capital firm, offers an assessment of current trends in clean-energy venture investments.

Among the highlights:

Last year, the global market for biofuels -- biodiesel and bioethanol -- hit $15.7 billion, surpassing the markets for solar photovoltaics ($11.2 billion), wind power ($11.8 billion), and fuel cells ($1.2 billion). In ten years, biofuel markets will more than triple to $52.5 billion and will continue to eclipse the others (though not by much in the case of solar and wind).
Venture-capital investors last year poured $917 million, an increase of about 28 percent from 2004, into more than 80 private clean-energy companies. These investments represented more than 4 percent of the $21.7 billion U.S. venture capital market, up from 3.3 percent in 2004.
The three largest technology IPOs of 2005 were for solar companies: Q-Cells, SunPower, and Suntech Power. Combined, they raised more than $800 million (on the Frankfurt, NASDAQ, and NYSE exchanges, respectively), and by the end of their first trading day, each had market capitalizations exceeding $1.5 billion.

In total, we project the four clean-energy technologies we track -- biofuels, solar PV, wind, and fuel cells -- which equaled $40 billion in 2005, to grow fourfold to $167 billion within the coming decade.

It's not all smooth sailing, however: There remains turbulence in the clean-energy sector. The solar industry is experiencing growing problems, unable to gain access to enough silicon feedstock to keep pace with demand. It will continue to put pressure on upward pricing over the short term. Biofuels, while showing great promise, face obstacles, not the least of which is how to quickly ramp up widespread distribution channels. Growth of wind turbines, while currently expanding rapidly, could flag as well as short-term price increases due to high steel costs and shifting currency valuations. And mass adoption of fuel cells and hydrogen remain decades away.

But these are merely speed bumps on the road to a clean-energy future. We believe such obstacles are surmountable through a combination of incremental and breakthrough technology developments, the continued scale-up of manufacturing, and smart investments by corporations, investors, and governments. In short, we remain bullish on the prospects for most clean energy technologies.

The report also offers brief descriptions of five trends. Their titles: