Europe Warming to Renewable Energy, While U.S. Lags Further Behind

The U.S. share of global production of photovoltaic cells has dropped from 45 percent in 1996 to 8 percent today.

Published: 02-Jan-2006

inmax_bound="true">The United States has not joined the Kyoto Protocol to cut greenhouse gases, but the pact nevertheless is boosting sales for American companies that market "clean" energy technologies.

The spread of renewable-energy standards — particularly in Europe — propelled by the treaty, and the surge in oil and natural gas prices have triggered a boom in business for solar and wind energy companies.

When Solar Integrated Technologies opened an office in Germany last spring, for example, the salespeople were allocated enough solar roofing material to provide 1 megawatt of power. In six weeks, they were sold out. Within a month, they had orders for 16 megawatts more.

"It's a no-brainer to do business in solar in Europe," said Jon Slangerup, chief executive of Solar Integrated, whose 120 employees are producing about one mile of solar roofing panels a week at a plant in South Los Angeles. "The only question is: How much can you allocate and how fast can you install it?"

In Germany, the world's leading solar energy market, farmers are replacing crops with fields of solar panels, thanks to a government buyback program for renewable energy that spurred 150 percent growth in solar installations in 2004.

Britain, France and Spain also have introduced aggressive plans to reduce their production of carbon dioxide and other heat-trapping gases over the next decade.

"Every available module is going to Germany," said Rhone Resch, president of the Solar Energy Industries Association in Washington, D.C. "It's Googlelike growth."

Falling behind

A world leader in renewable energy less than a decade ago, the United States is now viewed as a laggard. At the United Nations Climate Change Conference in Montreal last month, Canadian Prime Minister Paul Martin accused the U.S. of lacking a "global conscience" for refusing to sign the Kyoto treaty, which requires developed countries to slash their greenhouse gas emissions below 1990 levels by 2012.

Craig Stevens, a spokesman for the U.S. Department of Energy, said the Bush administration recognized that climate change was a "serious long-term issue."

But he said the best way to address that concern was by developing cleaner, more environmentally friendly forms of fossil-fuel-generated energy and nuclear power.

Stevens said renewable energy would be an "important part" of the nation's energy mix, which was why the government was planning to invest $391 million this year in solar, wind, hydroelectric and geothermal energy projects.

Some state and local governments don't think the Bush administration is moving fast enough. Twenty states have established standards to guarantee that a certain portion of the energy they use comes from renewable-energy sources.

California is already the world's third-largest market for solar energy and the nation's leading producer of wind-generated power.

The state agreed last month to spend an additional $300 million in subsidies to put solar energy panels on as many as 1 million rooftops over the next 11 years.

"California clearly has been a U.S. leader," said Ron Pernick, co-founder of Clean Edge, a West Coast energy consulting company that predicts that the market for solar photovoltaics, wind power and fuel cells will reach $15 billion a year by 2014.

Unless domestic production expands quickly, Californians hoping to jump aboard the solar bandwagon could face lengthy delays, according to solar experts. They said the strong demand from Europe had taken up much of the U.S. production.

Investors are scrambling to get a piece of the renewable-energy action, sending the stocks of California companies such as Solar Integrated and Clipper Windpower soaring. Both companies are listed on the London Stock Exchange's Alternative Investment Market, where investors have shown a strong appetite for "green" companies.

Slangerup, who had just returned from a European investment tour, said governments in Europe were betting that having a strong renewable-energy base would be a competitive advantage in the future.

Using subsidies

Solar Integrated produces a commercial roofing material that uses photovoltaic cells to produce about 4 watts of electricity per square foot. Although it costs more to produce a kilowatt of electricity with this method, companies can use government subsidies to offset their capital outlays. Those include a 30 percent federal tax credit on the cost of installation, rebates from the state and renewable-energy credits that can be used to offset fees or fines.

"You turn a roof into a performing asset that has a guaranteed energy stream over 20 years," said Slangerup, whose customers include Coca-Cola Co., PepsiCo, Wal-Mart Stores and commercial real estate developer ProLogis. "It becomes a real powerful selling proposition."

He predicted that the cost of solar systems would drop by two-thirds over the next five years, thanks to technical improvements.

Prices even out

Rising natural gas prices have made wind technology another increasingly attractive option. In 2004, wind power companies reportedly spent close to $3 billion installing 2,500 megawatts of new capacity in the U.S., a 40 percent increase over the previous year, according to Patrick Caramante, vice president of U.S. operations for British-based Garrad Hassan, one of the world's leading wind energy research companies.

Jim Dehlsen, founder of Clipper Technology, said, "The U.S. market has come to life" now that wind turbines can produce a kilowatt of electricity for 4.5 to 5 cents, compared with 9 to 9.5 cents for a new natural gas turbine project.

More jobs?

Some people complain about the visual blight and noise wind turbines create. But Dehlsen said wind power generation was far less damaging to the environment than fossil fuels, which produce high levels of greenhouse gases.

In addition, wind power could bring jobs to depressed farming and industrial areas. Dehlsen said. Germany, in less than six years, has installed enough wind projects to generate 14,000 megawatts of power and employ 75,000 people.

"The U.S. has a huge wind energy resource," he said. "There are four states alone ... that could supply all of the electricity needs of the country."

Although most of his sales have been in the U.S., Dehlsen sees huge opportunities in Europe and the developing world. He said he was negotiating deals in Eastern Europe, Latin America and China, with an eye on capturing 12 percent to 15 percent of the global market.

But Dehlsen and other renewable-energy advocates said the lack of government support was threatening U.S. technological leadership, pointing to reduced support for the National Renewable Energy Lab in Golden, Colo., the primary provider of government research funds.

Stepped-up interest from venture capitalists and Wall Street investors has provided seed money for entrepreneurs in the U.S.

But once they have mastered the technology, many companies are shifting their manufacturing to countries where governments provide investment incentives and an assurance of long-term demand.

Smaller share

The U.S. share of global production of photovoltaic cells has dropped from 45 percent in 1996 to 8 percent today, according to the Solar Energy Industries Association.

Evergreen Solar, one of the nation's leading solar companies, developed its modules at a facility in Marlboro, Mass., where it employs 250 people. But the company sells three-quarters of its product in Germany and plans to invest more than $50 million in a production plant there that will employ 400 people.

"We will eventually build a plant here in the U.S.," said Tim Woodward, a board member of Evergreen and managing director of Nth Power, a San Francisco-based venture capital company.

"But the market demand is not great enough here for us to justify really expanding aggressively in the U.S. market."

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