Investors turning away from green energy

Big investors are confident that fossil fuels will remain a key energy source for years down the road, writes Michael McDonald, and the number of clean energy patents – a proxy for innovation – fell last year.

Stringer/Reuters/File
Workers handle solar panels in Jiuquan, China, in this July 14, 2013 file photo.

Investors looking for the next “big thing” could be forgiven for being a little unsure about the state of the green energy revolution.

While some commentators are optimistic about the technological progress in the field, new data is starting to raise some doubts. Recently, The Guardian noted that the number of renewable energy patents has fallen drastically over the last few years. The number of clean energy patents filed fell from 35,590 to 20,655 between 2012 and 2014. (Related: Oil Still At Risk Of Geopolitical Turmoil)

Patent filings are often used as a proxy for innovation. With filings down, entrepreneurs may be finding it harder and harder to uncover new ways of producing clean energy.

The recent fall off in innovation looks to be traceable to solar energy which makes up roughly two-thirds of patents filed in the clean energy space. As the margins on solar panels have plummeted due to oversupply coming out of China, research and development has also fallen drastically. Of course, austerity in Europe is not helping much either as countries there limit or cut-off subsidies for renewable power.

At the same time as innovation is faltering in clean energy, big investors seem to be shifting more money into a more conventional energy revolution. In recent months as the oil markets have collapsed, numerous private equity funds have expressed interest in investing in the area. These investors appear confident that fossil fuels and oil in particular are still going to be important sources of energy for many decades to come. Even notable angel investors like Mark Cuban are not as focused on clean energy as they are on other emerging technological waves. (Related: Texas Floods Affect Some Oil Wells, Refineries Mostly Unaffected)

The lack of innovation and shifting investment priorities of major investors threatens to undermine the clean energy future that the US government so fervently believes is coming. Unless there are bigger tech breakthroughs, it will likely take decades for clean energy to make any real headway against the existing energy infrastructure. It simply does not make sense from a profitability standpoint to tear down an existing energy production system unless the replacement is dramatically more profitable. Cost reductions for current iterations of clean tech may only offer marginal cost savings over fossil fuels, even in the future.

 

Perhaps the best indication of the slow progress of the clean energy revolution is that many cite the biggest clean energy innovation of the last few years as being financial rather than technological. While it is certainly true that solar panel lease options have made adoption dramatically easier, easy financing alone can’t make the world a greener place.

The International Energy Agency estimates that the world needs to invest $1 trillion annually in green energy in order to avoid a climate crisis. So far that is not happening. While investment in 2014 did rise to $270B, this is still roughly a quarter of what the United Nations and IEA say is needed, and that increase comes after several years of falling investment. (Related: Top 4 Oil Companies For Dividend Investors)

In the US, interest is much greater in fracking and other unconventional fossil fuel sources, while Europe seems more worried about its financial problems than investing in green tech. Even in China, investment has been volatile, up some years and down others.

It is impossible to say if the volatility in investment is driving a fall in patents and innovation, or if the lack of innovation is driving sporadic investor interest; either way though, it does not look like the green energy revolution is growing as fast as once expected.

By Michael McDonald of Oilprice.com

More Top Reads From Oilprice.com:

Original story: http://oilprice.com/Alternative-Energy/Solar-Energy/Investors-Turning-Away-From-Green-Energy.html

Source: http://oilprice.com/

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.