Hedge fund managers may feel, as some of them did at a gathering in New York in the last week of May, that alternative energy – solar in particular – is risky business. With stocks of even some of the biggest market-traded solar companies not looking good in the short term, they can’t be blamed.
But development managers aren’t short-term traders driven by markets. Some 300 of them gathered in Bangkok, also in the last week of May, at a forum organised by the Asian Development Bank (ADB) and declared their faith once again in solar energy and said it was the way to go for an energy-hungry world. ADB cheered them along and said there was no need to listen to short-term pessimists.
Of course, short-term woes continue to plague alternative energy developers. High cost is still a damper. At the New York meeting, one speaker estimated wind power to be 50 per cent more expensive than natural gas. Besides, solar panels are too land-intensive and land isn’t always freely available to accommodate grid-scale projects. Storage questions are still a huge worry for the photovoltaic (PV) industry. Profits are uncertain. Public interest is minimal.
But the signs of long-term hope are strong and positive. PV prices are falling more rapidly than predicted. Global PV installations are doubling every year and slated to reach 71 Gw by 2014. Wind power hit 196 Gw last year, or two per cent of the global electricity supply. Governments are getting increasingly engaged. China, a big inspiration, accounted for more than half the 37.6 Gw of wind capacity installed in the world last year. The European Union could reach solar power grid parity – where the cost price would be the same as fossil fuels – as early as 2015. Researchers in the US are working on new ideas, like liquid silicone coating of roofs that will make solar systems more convenient and economical to use.
Above all, funding is more readily available, and I’m not talking of venture capital alone. The whole purpose of the Bangkok forum, the third in the series, was to declare once again that ADB is betting big on alternative energy – solar power in particular – and is ready to help even private initiatives in this respect. Two such projects are already underway in Thailand: a 73 Mw solar plant in Lopburi and a 38 Mw one in Ayutthaya. Both plants are scheduled to start producing electricity later this year.
Last year, ADB invested $1.8 billion in clean energy development, exceeding its $1 billion annual target for three years in a row. Come 2013, the target will increase to $2 billion a year, which should inspire more private investors to get in on a field that is very wide open. According to the Manila-based development bank, around 900 million people in developing Asia have no access to electricity, and solar energy is perhaps the most feasible alternative way to provide it. With less than 0.25 per cent of Asia’s overall electricity production currently sourced from sunlight, the potential is immense.
ADB’s goal is to help implement at least 3,000 Mw of solar power in the Asian and Pacific region over the next three years and, thus, create what it describes as a “virtuous” cycle of solar investments. It wants at least three per cent to five per cent of the region’s overall energy production to be sun-sourced in the near future.
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The task now is for governments to turn the alternative energy idea into a vigorous ground-level movement. Several things need to be done to make it happen, and the earlier a beginning is made, the better. Even as the main initiative lies with individual governments, ADB should be the primary motivator and play the role of a catalyst.
First, and foremost, an alternative energy map must be prepared for each country, delineating areas that have the best solar and wind potential, based on long-term sunshine and wind flow data. At the same time, land banks must be created specifically for alternative energy purposes for investors to choose from.
Second, since commercial-scale solar or wind energy has to be grid-bundled with conventional supplies, governments must prepare to establish smart grids and draft norms and regulations to operate them. Without a credible distribution infrastructure, investors won’t feel encouraged to put in their stakes.
Third, alternative energy solutions must be brought to wider public attention. Unless public interest grows, demand won’t, and so won’t investor initiative, government action, or product research. An alternative energy offensive is what’s needed, including the holding of alternative energy fairs as regular community events, where people could come face-to-face with alternative solutions.
And fourth, use of alternative energy, to the extent possible, should be made compulsory in all major building projects. Nations like China and South Korea are already into it in a big way, and ADB could influence others to speed up.