That’s a lot of money, even for Google, which had $38 billion in revenues in 2011. The investments don’t appear to be core to the company’s mission of organizing information, and they have attracted criticism, as well as some careless reporting, implying that the Internet giant is exiting the alternative energy business.
Does Google have an energy policy? Does it need one?
Think about Middle-Eastern OPEC countries like Saudi Arabia, Iran, Iraq and the United Arab Emirates and what comes to mind? Is it the obvious: oil? Or is it solar energy, smart grids and green technology?
For a growing number of people in the Middle East and elsewhere, and for a growing number of reasons, the second answer is becoming a lot more common.
Perhaps the highest-profile example today is Masdar, the UAE-based initiative working to develop one of the world’s most sustainable planned cities: Abu Dhabi’sMasdar City. In partnership with the Massachusetts Institute of Technology, the city is also designed to become a global hub for clean technology research through its Masdar Institute for Science and Technology.
(Siemens, another partner in the initiative, just won an architectural award for its planned Masdar City headquarters, which is being designed to meet LEED Platinum sustainability standards.)
In Saudi Arabia, meanwhile, IDEA Polysilicon is targeting the world’s photovoltaics markets with plans to build a large-scale polysilicon plant in the city of Yanbu. Scheduled to begin operations in 2013, the facility is expected to be producing 12,000 tons of polysilicon a year by 2015.
“There is tremendous potential for solar energy in Saudi Arabia and the other states of the MENA (Middle East/North Africa) region, which enjoy a lot of sunshine, as solar power is extremely cost effective compared with other energy sources,” said Robert M. Hartung, CEO and chairman of Germany’s centrotherm photovoltaics, which is helping to engineer the Yanbu project.
Even Iran is eyeing a future based more on green than on black gold, especially as other nations have imposed sanctions on its oil exports. Reuters this week quoted Iranian Minister of Petroleum Rostam Qasemi as saying it’s time for the nation to begin developing a renewable-energy sector.
“Reliance on hydrocarbon resources in the long run is neither possible nor meets national interests,” Qasemi was quoted as saying. “Gradual reduction of oil consumption on the one hand and a revolutionary and swift move toward using renewable energies on the other hand are the only appropriate mechanisms which can help the country.”
While global politics might be helping to drive Iran’s green ambitions, other factors are also pushing the Middle East toward more sustainability. The specter of oil depletion is also creating more concern, particularly in Saudi Arabia, which is already finding itself keeping more of its oil at home to meet the energy needs of (and reduce the threat of unrest from) a rapidly growing population.
More and more, the part of the world that’s produced so much of the oil we all rely on appears to be coming to the realization that business as usual isn’t sustainable.
Middle East Electricity shines spotlight on booming energy sector; UAE forges ahead with power, water, energy projects worth US$34.2 billion
New power, water, and energy projects valued at US$180 billion are underway or at the planning stages in the Middle East, as the UAE forges ahead with 20 projects worth US$34.2 billion.
Spearheaded by the US$20 billion Nuclear Power Plant in Abu Dhabi, which began construction late in 2011, the UAE will be one of the most active markets in the power, water and energy sectors over the next two years, at a time when power demand across all GCC countries is expected to grow 8 to10 per cent annually.
Saudi Arabia holds the lion’s share of investment value in the region, due to the US$100 billion King Abdullah City of Atomic and Renewable Energy, which begins construction in 2013. The Kingdom also has a further 15 projects worth nearly US$9 billion currently underway, or due to begin in 2012.
PROJECT UPDATE – Long-standing plans to link the power grids of Arab countries, include the construction of a 1,370km link between Egypt and Saudi Arabia.
The link will include a 25km subsea cable, which will cross the Gulf of Aqaba. It will provide each country with spare power capacity during peak periods of demand.
Estimates suggest the benefits could be worth as much as $10bn over 20 years. Once the connection is complete, Gulf states could trade surplus electricity with customers in Europe.
Many of the world’s leading executives and investors believe in a strong connection between the economy and the environment. Talk of a “political battle” between the two major focal areas is mere “nonsense,” says Mark Vachon, Vice President of GE’s Ecomagination program.
Over $5 billion has been invested in renewable energy, efficiency and smart grid technologies as part of GE’s Ecomagination program. By 2015, GE plans to double investments in the sector to $10 billion. These investments have paid off handsomely, noted Vachon. With $85 billion in revenue, GE’s cleantech investments have doubled the performance of the rest of its portfolio.
The trend is undeniable. Investments in clean energy and related technologies are accelerating. In 2011, investments in clean energy trumped those in fossil fuels for the first time. In total, $260 billion was funneled into the clean energy sector. Since 2004, cumulative investment numbers over $1 trillion dollars.
Billionaire philanthropist Bill Gates is deeply concerned about the lack of investment in new agricultural research.
Investing in global agriculture is critical to the health and well-being of the world’s 7 billion people, including the nearly 1 billion that currently battle poverty and starvation. However, the European sovereign debt crisis and resulting austerity initiatives may put some long-term funding arrangements in jeopardy.
In an interview prior to the World Economic Forum in Davos, Gates warned industrialized nations considering making cuts to already constrained agricultural research budgets to reconsider. Failing to fund research in new crop science and irrigation efficiency, for example, could impede important progress that has already been achieved.
“The big choice is whether the crisis in the rich-country governments will cause them to stop increasing the aid that’s been so key to reducing disease, improving food availability for the poorest, and bringing down the number who suffer from AIDS or malaria or malnutrion,” Gates said.
Currently, $3 billion a year is set aside for agricultural research into improving seven key staple crops on which nearly the entire world depends. This figure, Gates remarked, “should easily be double what it is.”
“The national security and economic opportunity benefits of helping these countries out is quite significant,” said Gates,
Urging more investment from rich nations, Gates continued, “if you don’t fund the agricultural system, you leave these billion that wake up every day wondering if they’re going to get enough food.”
Based on Global Fund Exchange research and estimates from the Food and Agriculture Organization (FAO), we see a sizable gap in agriculture investments in the developing world.
The developing world faces extraordinary challenges in keeping up with new demand for food. As a result of regional population expansion and the decline in arable land, investment in agriculture must rise by 47% to approx $280 billion a year says the FAO.
Governments and investors worldwide are identifying agriculture as one of the mega macro investments spheres of our time. For more information on how we identify opportunities in agriculture, please visit us here.
Big Spenders: the outlook for the oil and gas industry in 2012 is an Economist Intelligence Unit report which analyses the oil and gas industry outlook from the point of view of top-level operators, including CEOs and other board-level executives and policymakers. The report has been commissioned by GL Noble Denton.
Their research drew on two main initiatives. A global survey of senior executives was conducted in October and November 2011, involving 185 executives from a range of companies across the oil and gas industry. These executives were very senior: one in three was a CEO or managing director of their company. To complement the findings of the survey, a series of interviews was carried out with leading industry figures between October and December 2011.
Oil and gas industry confidence is rising. In a survey which formed the basis of last year’s report, 76% of respondents said they were either highly or somewhat confident about the business outlook for their company over the next 12 months. Twelve months later, that figure has grown to 82%. Backing this up, we find a large rise in the share of respondents who describe themselves as highly confident about the next 12 months. Only 8% of respondents describe themselves as pessimistic about the outlook for 2012.
This optimism does not mean that executives are sanguine about the industry’s prospects, however. Rising costs and increasing regulation are both big concerns. Moreover, the outlook for the global economy remains deeply uncertain and, if global economic conditions deteriorate, oil and gas companies will have to scale back their spending commitments accordingly.
Increased optimism will feed through into capital spending increases. According to our survey, nearly two-thirds (63%) of respondents are planning to invest either somewhat or substantially more over the next 12 months, whereas in last year’s survey that figure was just 49%. There has also been a shift in where companies see the greatest opportunities for revenue growth. Last year South-east Asia came top of the pile, with North America second, the Middle East and North Africa third and the Far East fourth. This year the rankings have changed, with North America top, the Far East second, South-east Asia third and Latin America fourth.
Rising operating costs emerge as the main barrier to growth. When questioned in detail about costs, more than 50% of respondents say that they expect an increase in wages over the next 12 months. The second-biggest concern is the rising cost of contractors, with 54% expecting costs to increase, compared with only 11% anticipating a decline.
The upstream remains the core focus for spending. A majority of respondents identify the upstream as the key area for business growth in 2012, meaning that exploration will be a major beneficiary of increased investment. Our survey shows that 41% of industry professionals expect to see increased investment in exploration activities over the year, with only 4% anticipating a decline.
Risk remains a key challenge. A combined 55% of respondents confirm that in the aftermath of the 2010 oil spill in the Gulf of Mexico, drilling permits have become harder to obtain. Even more decisively, an overwhelming majority of respondents (82%) agree that in the post-Macondo period regulatory issues have become more important. The survey shows that increasing regulation is regarded by more than 30% of respondents as the main challenge for their company over the next 12 months, exceeded only by the impact of rising operating costs and the shortage of skilled professionals.
Unconventionals have revolutionised North America’s gas sector, but progress has been much slower elsewhere. The advent of projects such as the Marcellus, Barnett, Haynesville and Fayetteville shales has created a supply glut that has affected global prices. Development has been slower elsewhere because the ‘perfect storm’ that made shale gas a scalable reality in the US is not as powerful in other geographies.
There is some scope for optimism for refiners. After a dismal few years the downstream sector is showing some signs of life, at least in the US. Refining profitability has improved in the US, where robust margins have resulted from a revival of consumption of refined products. But Asia and Europe remain in the doldrums.
Key Takeaway: effective July 1 2012, the new scheme will impose a fixed carbon tax of A$23/ton on the country’s top 500 polluters, which will then be supplanted by a market-based cap and trade mechanism from July 2015 onward.
Australia’s parliament recently enacted landmark Clean Energy Act legislation designed to set a price on carbon emissions.
Australia boasts the most emissions-intensive developed economy, but sources less than 10% of electricity generation from renewables.
To date, Renewable Energy Certificate (REC) oversupply, low wholesale power prices, and carbon pricing uncertainty have constrained substantive RE adoption. Over the next several years, however, the government anticipates a 50% escalation in wholesale electricity prices (to A$45/MWh) and up to a 60% rebound in REC prices (to A$55−65/MWh).
Coupled with the carbon tax value (equivalent to roughly A$23/MWh), this will move renewable ventures into a more profitable realm. The Clean Energy Act also calls for an A$10 billion fund to facilitate utility-scale RE project execution from 2013–2014 onward. These combined elements strengthen the business case for RE investment.
Proposed Carbon Tax
To start on 1 July 2012
500 companies affected
Agriculture, forestry and land are exempt
Compensation for polluters
Market-based trading scheme kicks in from 2015
Target to cut 159m tonnes of CO2 by 2020
That said, low power purchase agreement prices (falling below A$100/MWh) have recently frozen wind pipelines of leading IPPs (i.e. Acciona, Infigen). While utilities/retailers are currently better-positioned to capture Australian wind market share, few are able or willing to leverage balance sheet financing.
These trends suggest that prior to a REC price rebound and Clean Energy Fund disbursement (2013-2014), balance sheet/joint financing should drive most investment.
Cleantech is maturing, growing, and doing reasonably well. In 2011, for the first time, power plants operating on solar, wind, and biomass energy garnered more investment than those powered by natural gas, oil, and coal — $187 billion for renewables compared to $157 billion for fossil fuels, according to Bloomberg New Energy Finance. The group predicted that renewable energy investments will double over the next eight years.
The perception is quite different, at least in the political arena, where it is believed that cleantech was a promise that largely failed, like universal health care or a balanced federal budget. After all, 2011 saw a few spectacular swan dives by promising companies, several of which had received US government funding, at least one of whose name is destined to be synonymous with wasteful taxpayer subsidies. The prevailing narrative is that solar and other clean technologies have not lived up to their promise and remain costly and unreliable, out of reach for most mainstream uses.
The facts, however speak for themselves:
Solar energy, for all the high-voltage company failures, hit record growth in the United States — more than 1,000 megawatts installed during the first three quarters of 2011, compared with 887 MW in all of 2010, according to GTM Research and the Solar Energy Industries Association (SEIA). The solar market grew globally, as well. According to a report by GTM Research and Bridge, India is facing a perfect storm of factors that will drive solar photovoltaic adoption at a “furious pace over the next five years and beyond.” And NDP Solarbuzz forecast that in 2011, China would surpass United States and Japanese solar installations for the first time.
2011 was also a boom year for wind energy, which now provides 20 percent of electricity in Iowa and South Dakota, according to the American Wind Energy Association, and at key moments surges to 50 percent in Colorado. The market research firm Lucintel predicts that the world market for wind energy will grow at a compound annual rate of 12 percent for at least the next five years. In some parts of the world – Brazil, for example — the price of wind energy is now below that of natural gas.
All this turmoil notwithstanding, the United States became a net exporter of solar products to the tune of $1.8 billion in 2010, according to GTM Research and the SEIA, primarily through sales of solar manufacturing equipment and polysilicon, solar modules’ main ingredient.
A drought looms in Niger. The alarm bells are already going off. A recent assessment shows families in the worst hit areas are already struggling with around one third less food and money than is necessary to survive the year. Millions of people are threatened by this food crisis.
For countries such as Niger, which have to import a lot of food to feed their populations, a global rise in food prices can have a life and death impact. Already, crops are falling way below expectations, due to poor rains.
What we cannot forget is that the problems in the Global North are inextricably linked with those in the South. Almost 60 per cent of African exports go to the US and Europe, two of the regions worst hit by the economic crisis. Reduced aid budgets in developed countries, rising oil prices and declining trade decrease poor countries’ abilities to prepare for and offset against future disasters, such as the one we saw in East Africa in 2011
At the World Economic Forum in Davos, Switzerland, the world’s political, economic and business elite are clamoring to have their opinions heard – and the world’s media is here to listen. In Niger, they are trying to tell us something too. But nobody is listening.
Yesterday’s article by Jasmine Whitbread, the CEO of Save the Children International draws attention to the looming disaster in Niger and the Charter to End Hunger, a global call to action written by leading international aid agencies, asserting the need to step up efforts to confront the humanitarian and political challenges. The charter shows that we need to be better at preventing these disasters from happening in the first place, and contains a five-point plan to prevent future hunger crises from being allowed to develop.
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Last year, Google invested more than $915 million in clean energy projects — solar, wind and transmission.
Many of the world’s leading executives and investors believe in a 
Billionaire philanthropist Bill Gates is deeply concerned about the lack of investment in new agricultural research.
