A global revolution is slowly transforming the world’s energy market, with traditional transnational fossil fuel conglomerates facing future changes that will transform their previously cozy environment, whether they like it or not.
Renewable energy, starved from the outset of funding, a foundling left at the door of the world’s rising energy needs, has reached adolescence and has begun to attract investment from beyond the traditional hydrocarbon-based market dominant companies.
Sez who?
PricewaterhouseCoopers., a titan of Wall Street.
PwC noted in its annual analysis of merger and acquisition (M&A) transactions in the sector shows that deal values worldwide in 2011 totalled $53.5 billion, up 40 percent from 2010 rates. According to PwC, in 2011 one in every three transactions last year involved solar and the overall value for that sector rose 56 percent to $15.8 billion.
Contributory factors?
According to PwC, a “reappraisal” of the role of nuclear following the March 2011 Fukushima disaster in Japan provided an “extra impulse for renewable generation in certain markets.” Most significant, for the first time, $ billion plus transactions dominated emergent energy markets, as solar, wind and energy-efficiency agreements overtook fossil fuel’s traditional rival, hydropower, as motivating substantial agreements for the first time.”
Fukushima’s hammer-on effect not only blindsided Japan’s traditional reliance on nuclear power but Germany as well, which saw German Chancellor Angela Merkel announce on 30 May 2011 that Germany, the world's fourth-largest economy and Europe's biggest, would shutter all of its 17 nuclear power plants between 2015 and 2022. Indicating the depth of the German commitment to seek alternative sources of power, Germany's Kreditanstalt fur Wiederaufbau (German Development Bank) announced its intention to underwrite renewable energy and energy efficiency investments in Germany with $137.3 billion over the next five years,
As the battle heats up between a petroleum-natural gas behemoth seeking to quash its renewable upstart, the issue will devolve down to two issues – cash and access.
Renewable energy sources have traditionally been starved of investment capital for a number of reasons, not least of which is the investment community has been heavily behind the coal/hydrocarbon power brokers.
But EU renegades continue their divestment away from traditional coal/hydrocarbon sources of power, with Scots law firm McGrigors noting that investment in British onshore wind power is “soaring to new heights.”
Perhaps the ultimate deal breaker for traditional sources of power, quite aside from EU interest in renewables, lies in the Third World and its rising interest in biofuels.
A dominant feedstock battle is fiercely raging between algae, jatproha and camelina, the three leading contenders, but once the barrier of price equivalency with a barrel of oil is definitely breached, expect third World production of biofuels to soar, and the investment costs are a fraction of offshore drilling.
So, overview?
The Industrial Revolution was fuelled by coal, which in turn ceded its supremacy to oil. Now the wheels are turning yet again to renewable energy. While nuclear power might have provided a useful accoutrement, the March 2011 Fukushima nuclear debacle has sidelined hydrocarbon’s “big business” traditional ally, perhaps for good.
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Renewable power is rising as a useful alternative to traditional power sources, from the EU and the Third World, and those looking to understand the shapes of the 21st century’s rising energy needs should pay increasing attention, and, if they want their investment profits in an ever more uncertain world, do their homework.
By. John C.K. Daly of Oilprice.com
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