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Chapter 6. Industry, Technology, and the Global Marketplace

Investment and Innovation in Clean Energy and Technologies

Clean energy and energy-conservation and related technologies, including biofuels, solar, wind, nuclear, energy efficiency, pollution prevention, smart grid, and carbon sequestration, have become a policy focus in developed and developing nations. These technologies are knowledge and technology intensive and thus are closely linked to scientific R&D. Production, investment, and innovation in these energies and technologies are rapidly growing in many countries. Prompted by concerns over the high cost of fossil fuels and their impact on the climate, governments have directed both stimulus funding and long-term investments into these technologies. Private investors have also shown increased interest.

This section will examine public research, development, and demonstration (RD&D) data from the International Energy Agency (IEA) and venture capital and total private financing data from Bloomberg New Energy Finance, by technology and key region. A sidebar, "Government Stimulus Funding for Clean Energy," will summarize various countries' initiatives related to clean energy as part of their stimulus measures or long-range policies. The IEA data discussed here cover research, development, and demonstration. They are not comparable to energy RD&D data described in Chapter 4, which focus on research and development.[33]

Commercial Investment

According to Bloomberg New Energy Finance, global commercial investment in clean energy and technology from all sources, including early-stage angel and venture capital investment and later stage financing raised from private equity and public capital markets, has risen rapidly from less than an estimated $20 billion in 2004 to nearly $154 billion in 2010 (figure 6-55).[34] This rise has been spurred by government policies, financial incentives, and funding to foster the development of clean energy production and technologies; falling costs in wind and solar energy; and investor perception that this area is ready for large-scale commercialization. The United States, EU, China, and other countries provided additional support of nearly $200 billion to this sector from stimulus funding to help spur recovery from the global recession (see sidebar, "Government Stimulus Funding for Clean Energy").

The United States generated an estimated $30 billion (19% global share) in clean energy commercial investment in 2010, placing it behind China and roughly equal to the EU (figure 6-55). After peaking at $34 billion in 2008, U.S. commercial investment declined sharply to $20 billion in 2009 during the global financial crisis before recovering in 2010 to reach nearly its pre-crisis peak.

China provided an estimated $54 billion in clean energy financing in 2010, more than any economy in the world (35% share of global investment) (figure 6-55). China's commercial investment rose exponentially from less than $2 billion in 2004 to $54 billion in 2010, surpassing the United States in 2009 and the EU in 2010. The uninterrupted growth of clean energy investments in China reflects the government's commitment to reduce China's reliance on fossil fuels, considerable financing from state development banks (less affected by the financial crisis than other countries/regions), low labor costs, and subsidies to encourage large renewable energy projects, particularly in wind and solar energy.

The EU ties with the United States in clean energy investment, providing an estimated $34 billion in 2010 (22% share of global investment) (figure 6-55). Clean energy investment in the EU has been spurred by government policies such as feed-in tariffs for solar power in Germany and Spain and large-scale investment in offshore wind by the UK. However, EU clean energy investment dropped from $50 billion in 2008 to $23 billion in 2010, reflecting the global recession and sharp cutbacks by Spain, the UK, and other EU countries in their support of solar and other clean energies.

Brazil and the Asia-8 have comparatively low activity in clean energy financing (an estimated $8 and $6 billion, respectively) (figure 6-55). India provides the largest amount of financing ($3.8 billion) from the Asia-8. Investment from both Brazil and the Asia-8 grew rapidly from 2004 to 2010, though from a low base. Japan provided less than $1 billion in clean energy investment in 2010, down sharply from $7 billion in 2004.

Wind technology is the largest recipient of global clean energy financing, with an estimated $99 billion (65% share of total investment) in 2010 (figure 6-56). Wind energy accounted for nearly 60% of total clean energy investment by the EU and the United States and more than 80% by China in 2010 (table 6-12).

China is the world's largest source of investment in wind technology with an estimated $45 billion in 2010, more than twice as much as the EU ($19 billion) and the United States ($17 billion) (table 6-12). China's rapid growth in this field, from less than $1 billion in 2004 to $45 billion in 2010, was spurred by aggressive government policies and comparatively low labor and financing costs. Solar is the second-largest clean energy technology area with an estimated $26 billion of investment in 2010 (17% share of global investment) (figure 6-56). Commercial investment in solar grew rapidly from less than $1 billion in 2004 to a peak of $34 billion in 2008 before falling to $26 billion in 2009–10. The fall in investment may reflect volatility in the price of photovoltaic modules and, in the case of the EU, reductions in government support and incentives in Germany, Spain, and other EU countries. The EU is the world's largest source of financing for solar with an estimated $11 billion in 2010, down sharply from $22 billion in 2008. The marked decline in EU financing reflects the recession and cutbacks by Germany, Spain, and the United Kingdom in government support and incentives for solar power. The United States is the second-largest source of financing in solar with $6 billion in 2010, up from $4 billion in 2009 but below the peak of $8 billion in 2008. China is the third-largest source of solar investment with $4 billion. Chinese investment in this area was negligible in 2004–05 before rising to $2 billion in 2006 and doubling to $4 billion in 2010.

Biomass/waste was the third-largest area of investment, with an estimated $11 billion in 2010 (figure 6-56). After rising rapidly from $4 billion to $10 billion from 2004 to 2006, investment leveled off at $10–11 billion from 2006 to 2010. Biofuels is the fourth-largest area of investment, with $6 billion in 2010. Investment in this sector is down sharply from its $23 billion peak in 2006 due to excess capacity and overinvestment, particularly in the U.S. ethanol sector; volatility in the price of oil; and falls in the prices of corn and other commodities used in biofuels production.[35] U.S. investment slid from $9 billion in 2006 to $1 billion in 2010, and EU investment also fell sharply (table 6-12).

Venture Capital Investment

Venture capital investment is a useful indicator of market assessment of future technology trends. As an important source of financing for new firms, it may indicate nascent areas of clean energy technologies.

Data from Bloomberg New Energy Finance show that global venture capital investment in clean energy rose rapidly, more than quadrupling from an estimated $1 billion in 2004 to $4 billion in 2010, after a sharp recession-induced dip in 2009 (figure 6-57). The United States is the main provider of venture capital financing for clean energy technologies, with more than 90% of global investment in 2010. The EU, China, and other Asian economies have been negligible sources of venture capital.

Two major technology areas, energy smart/efficiency and solar, dominate global venture capital investments in clean energy, receiving an estimated $2 billion and $1.5 billion, respectively (figure 6-58). The energy smart/efficiency category covers a wide range of technologies from digital energy applications to efficient lighting, electric vehicles, and the smart grid that maximizes the energy efficiency of existing energy sources and networks.

The attractiveness of these technologies may be enhanced by sizable public R&D funding. In addition, energy efficiency technologies are less capital intensive than other clean energy technologies, have a shorter time horizon than most other energy technologies, can be applied to a wider range of energy products and services, and are less reliant on government incentives or subsidies that may be withdrawn. This sector has also benefited from increased U.S. public research spending. Investor interest has been in electric cars and the smart grid, both of which have received U.S. stimulus funding.

Biofuels is the third-largest technology in terms of venture capital investment, with a share of 10% in 2010 (figure 6-58). Wind energy has received less than 5% of venture capital investment, far less than its dominant share in total commercial investment.

Public Research, Development, and Demonstration Expenditures in Clean Energy and Technologies

According to IEA data, the estimated amount of global public R&D and demonstration (RD&D) investment for clean energy and related technologies was $16.7 billion in 2009 (figure 6-59). Clean energy RD&D includes solar, wind, ocean, nuclear, bioenergy, hydrogen, fuel cells, carbon capture and storage, and energy efficiency.[36]

Nuclear energy was the largest area, receiving $5.3 billion in 2009, one-third of total RD&D (figure 6-59). RD&D funding for nuclear energy has remained relatively flat during the 2000s. The next two largest areas are energy efficiency and renewable energy (solar, wind, ocean, bioenergy), which each received about $4 billion in public RD&D. Other power and storage was third, receiving $1.6 billion (figure 6-59). Renewable energy had the fastest growth between 2000 and 2009, more than quadrupling from $900 million to $3.9 billion. Growth was also rapid in hydrogen and fuel cells, which increased from $32 million in 2002 to $900 million in 2009.

The United States in 2009 had the largest investment in clean energy RD&D; its $7.0 billion accounted for 42% of global RD&D (figure 6-60). However, this figure included one-time funding from the American Recovery and Reinvestment Act (ARRA). For much of the 2000s, U.S. public investments had been the third largest behind the EU and Japan, which in 2009 invested about $4.0 billion each, nearly a quarter each of global RD&D.

Global public RD&D investment more than doubled between 2000 and 2009 from $8.2 billion to $16.7 billion (figure 6-60). Increases in funding in the United States and the EU propelled growth after 2003; Japan's public RD&D expenditures stayed flat during this period. More recent U.S. data show a sharp decline in U.S. clean energy RD&D investment from $7.0 billion in 2009 to $4.4 billion in 2010, when ARRA funding declined (figure 6-61).

U.S. energy-related RD&D funding across technologies has been volatile (figure 6-62). Energy efficiency, including smart grid, and renewable energy were the two largest areas, each receiving about 30% of funding in 2010. In the renewable energy area, biofuels received the largest share of funding, followed by solar and smaller amounts for wind and ocean energy. The shares of energy efficiency and renewable energy jumped starting in 2009 because most ARRA funding was allocated to these two areas. Nuclear is the third-largest area, receiving 20% of expenditures. Nuclear had been the largest area for much of the 2000s but received scant funding from ARRA, resulting in its share falling from 36% in 2008 to 20% in 2010.

Patenting of Clean Energy and Pollution Control Technologies

USPTO patents granted in clean energy and pollution control technologies can be classified using a new taxonomy developed for this purpose. The taxonomy classifies patents involving bioenergy, nuclear, wind, solar, energy storage, smart grid, and pollution mitigation. The number of patents in these technologies jumped to a record high in 2010, which may mostly reflect USPTO efforts to speed up processing of applications (figure 6-63 and appendix table 6-66).[37] (For a more detailed description of how this taxonomy identifies clean energy and pollution control patents, see the section in Chapter 5, "Identifying clean energy and pollution control patents.") U.S. resident inventors were granted about 45% of the 6,100 clean energy and pollution control technology patents in 2010, continuing the advantage of non-U.S. inventors in these fields since 2000.[38] The decline in the U.S. share of U.S. patent awards since 2000 suggests increased foreign technological capabilities in this area.

Among non-U.S. inventors, Japan, the EU, and South Korea, in that order, are the main recipients of U.S. patents for clean energy and pollution control technologies, with a collective share of 84% of patents granted to all non U.S. inventors (figure 6-64 and appendix table 6-66). Japan received 43% (down from more than 50% in the early 2000s); EU inventors received 30% (down from 36% in 2000). South Korean inventors received 12% of these non-U.S. inventor patents, up steeply from 3% in 2000. No other country has a substantial share of U.S. patents in this area.

Clean energy and pollution control technology patents comprise four broad areas: alternative energy with 3,000 patents granted, energy storage with 1,000 patents, smart grid with 500 patents, and pollution mitigation with 1,900 patents (table 6-13 and appendix tables 6-67, 6-68, 6-69, and 6-70). The proportion of clean energy patents rose from 26% in 1995 to 49% in 2010, with major share gains by fuel cell and losses by nuclear patents (appendix tables 6-71 and 6-72). Energy storage patents advanced from 8% to 16%, and pollution mitigation technologies declined from 58% to 31%, driven by share losses of air quality, water quality, and recycling (appendix tables 6-73, 6-74, and 6-75).

Patent technology activity indexes measure the world share of a region, country, or economy in clean energy and clean technologies relative to its world share in patents in all technologies. A ratio greater than 1 signifies that patents by a region/country/economy are concentrated in a particular technology (table 6-14).

In clean energy patents, the U.S. has a high concentration in bioenergy and solar technologies and relatively low patent activity in fuel cells, hybrid vehicles, and wind energy (table 6-14 and appendix tables 6-45, 6-71, 6-76, 6-77, 6-78, and 6-79). The EU has relatively high concentrations in bioenergy, wind, and nuclear and relatively low concentration in electric hybrid technologies (appendix table 6-72). Japan has a high concentration of patents in electric hybrid technologies and fuel calls, but relatively low activity in bioenergy, nuclear, and solar. South Korea's concentration of patent activity is low across the range of clean energy.

The United States and EU have relatively low concentrations of patents in energy storage because of their low activity in battery technology, but this is an area of high concentration for Japan and South Korea (table 6-14 and appendix tables 6-45, 6-68, and 6-80). Despite its overall low concentration of patents in energy storage, the United States has a high concentration of patents in hydrogen power and storage (appendix table 6-81).

In smart grid, the United States has a high concentration of patents, the EU has a slightly above average concentration and Japan and South Korea have relatively low concentrations (appendix tables 6-45 and 6-69).

In pollution mitigation technologies, the United States has a slightly above average concentration of patents, with very high concentration in clean coal and slightly higher concentration in carbon capture and storage (table 6-14 and appendix tables 6-45, 6-82, and 6-83). The EU has a particularly high concentration of patents in air pollution, carbon capture and storage, and solid waste (appendix tables 6-73 and 6-84). Japan has a relatively low concentration in this area, with the exception of air pollution. South Korea has relatively low concentrations in all pollution mitigation technologies.

Notes

[33] The IEA manual states: "The IEA concept of Energy RD&D differs from the Frascati concept of R&D, in that (i) it focuses on energy related programmes only; (ii) it includes "demonstration projects"; and (iii) it includes state owned companies. …The energy RD&D data collected by the IEA should not be confused with the data on government budget appropriations or outlays on R&D (GBAORD) collected by the OECD Directorate for Science, Technology, and Industry for the socio-economic objective 'Production, distribution and rational utilisation of energy'…" See IEA (2011), http://www.iea.org/stats/RDD%20Manual.pdf, pp. 16–17.
[34] Bloomberg's data include investment in renewable energy, biofuels, energy efficiency, smart grid and other energy technologies, carbon capture and storage and infrastructure investments targeted purely at integrating clean energy. Investment in solar hot water, combined heat and power, renewable heat, and nuclear are excluded, as are the proceeds of mergers and acquisitions (which do not contribute to new investment).
[35] See UNEP 2009, p. 18, for a discussion of the biofuels sector.
[36] The IEA has no official definition of clean energy. This discussion includes public RD&D in energy efficiency, renewable energy, nuclear, hydrogen and fuel cells, CO2 capture and storage, and other power and storage technologies.
[37] The USPTO initiated a green technology pilot program on December 7, 2009, that expedites processing of some applications related to green technologies. For more information, see http://www.uspto.gov/patents/init_events/green_tech.jsp.
[38] See note 28.
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