BNEF’s Liebreich: 2014 Will Be Turning Point for Clean Energy Investment

That clean energy must ultimately replace traditional forms of energy will become the mainstream view this year, according to a recently published Bloomberg New Energy Finance whitepaper by Michael Liebreich.

“For over a hundred years the orthodox view of the energy system prevailed . . . In 2014 the tables will turn. Change will be the default assumption, and it will be up to the proponents of orthodoxy to argue why they disagree” says the report.

This was just one of Liebreich’s many positive predictions for the green energy sector in 2014 included in the paper. This increase in the number of people favoring clean energy change, including the media, will be accompanied by more spending on the sector and the start of a new five year cycle, he says.

Clean Energy Investment

Another of his broad conjectures is that clean energy investment will be close to $300 billion – an 18 percent increase over the $254 billion that, according to Bloomberg’s estimate, was made in 2013. Among Liebreich’s reasons for thinking this are his expectations for rises in the number of wind and solar installations around the world and YieldCos – public and private companies structured to hold a diversified bundle of clean energy assets.

Green Bonds & Solar

While $14 billion worth of clean energy project bonds were issued last year, in 2014, already roughly $1.7 billon worth of such bonds have been issued by the European Investment Bank, the World Bank and Export Developmental Canada combined. Liebreich expects a surge of green bonds of $20 billion or higher in 2014.

It is likely that growth will also continue in solar companies’ stock prices due to further increase in photovoltaic demand, as well as profit improvement for PV manufacturers, says Liebreich. He expects new solar capacity to be in the 44-51GW, compared to 39GW last year, thanks to demand from China, Japan, the U.S. and Germany in that order. While the U.S. continues to develop the residential and the small commercial PV sector¸ growth will also be fueled by standalone PV projects in more remote locations, predicts Liebreich.

In many parts of the world, increased use of solar power is causing issues for utilities and politicians, as the non-solar customers are being forced to pay for the fixed cost of renewable energy infrastructure. To solve this problem, Liebreich predicts that utilities will charge solar customers access charges. Already, in the U.S., fees were charged to new solar customers in Arizona. In the same vein, Germany has backed plans to charge renewable energy plant operators fees for electricity they generated and Spain is proposing fees on domestic PV.

Wind Power

Bloomberg’s team predicts a doubling of gigawatts of onshore wind power to be installed in Brazil, South Africa, Mexico, Chile, Uruguay, Japan and other countries outside of North American and Europe. And he expects a “watershed year” for offshore wind in Europe.

Electric Vehicles

Electric vehicle sales will grow to 300,000, compared to 200,000 in 2013.

Smart Grid Investment

As for smart grid investments, Liebreich anticipates that they will remain stable at $15 billion following China and North America’s first wave of smart metering deployments. In Europe specifically, however, Liebreich thinks smart grid will grow due to mandated meter developments. Also, he expects smart grid deployment to grow in Japan.

U.S. utilities will start to adopt smart grid analytics software for energy efficiency and demand response programs.

U.S. Policy

Regarding cleantech policies, Congress is most likely to wait to address the PTC – the key wind subsidy – until after November elections.

President Obama will continue to try to regulate coal-fired power plants, while the EPA will finalize regulations on both new and old power plants. The laws for existing power plants, which will be released this summer, are sure to shut down the nation’s oldest and least efficient coal burning plants.

Clean Energy Cost Benefits

Smart grid investments will produce real savings and service improvements for customers. Low cost wind and solar power will spread to more parts of the world and awareness of the inexpensiveness of utilizing such kinds of power will grow.

Regarding the natural gas markets, he believes the U.S. market will remain oversupplied, and that prices will fall below $4/MMBtu (from $5). And there will be more data on shale gas deposits outside of the U.S, in Poland, Mexico and China particularly.

Liebreich’s 2013 Crystal Ball

These are all only predictions of course. In a similar report published last year, it is worth nothing that Liebreich got a lot right about the world of clean energy in 2013. However, his crystal ball failed him a few times.

In Liebreich’s piece on his 2013 predictions, he admits having been wrong about prediction that clean energy investment would recover. What actually happened in 2013 was that clean energy investment fell by 12 percent. However, he points out, that he did correctly predict rising share price valuations of clean energy stocks, with 40% more public capital raised and share prices up over 60%.

He also wrongly predicted that plug-in hybrid EVs would remain more popular than pure battery vehicles. In actuality, the pure battery vehicles overtook half the market in 2013.

But Liebreich correctly predicted that shale gas prices would increase as the U.S. focused on more of an “all of the above” energy strategy, and the rise of small scale solar.

Among his other conjectures that proved true were the start of asset -backed solar securitization and REITS that bring in new capital sources to the clean energy sector, that solar would remain the dominant investment and that China, Africa and Latin America would drive much of the growth in solar. However, solar in Africa ended up dropping.

Additionally, he forecast that 50MW of stationary fuel cells would be commissioned in the U.S. and Korea in 2013 – with U.S. and South Korea having commissioned 52.5MW and 73.1MW, respectively.

To read the full Bloomberg New Energy Finance whitepaper, click here

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