Renewable energy never went away, but worries about the staying power of government subsidies certainly took their toll on investments in this space last year.

This year, several of the leading solar stocks have shone brightly, and new data suggests that production of renewable energy continues to grow quickly from a low base.

The recently released BP Statistical Review of World Energy 2013 and REN21’s 2013 Renewables Global Status Report (GSR) provide a comprehensive view of the global markets for renewable energy. (Disclosure: I have been a reviewer for the GSR for the past three years.) This week I look at trends in solar photovoltaics (PV) and wind power. Next week I will delve into the rest of the renewable energy sector.

Overview

The theme across nearly every sector of renewables was continued strong growth, albeit at a slower rate than in recent years. Bucking that trend was global production of biofuels, which actually contracted in 2012 and new installation of concentrating solar power (CSP), which grew at a faster rate than the previous five-year average.


Source: REN21’s 2013 Renewables Global Status Report

Renewable power generation was up 15.2 percent percent in 2012, slightly lower than in previous years but still higher than the long-term historical average. Wind energy provided most of the growth, with China leading the pack with an increase of 34.6 percent over 2011. The strongest rate of growth was seen in solar power generation, which increased by 58 percent over 2011. (Note that the previous graphic was for capacity, and the following is for actual power generation).



Biofuels suffered a setback in 2012 as the expiration of the federal ethanol tax credit at the end of 2011 and a Midwestern drought in the summer of 2012 caused ethanol production in the US to decline by 4.3 percent. This resulted in a global biofuels production decline for the first time since 2000.

Solar PV

In 2012, solar photovoltaics crossed the 100 gigawatt (GW) mark for installed capacity. Installed capacity of solar PV grew by 42 percent in 2012, down from the annual 5-year average growth rate of 60 percent. Consumption of power derived from solar PV advanced by 58 percent over 2011.

Germany was the world leader in the consumption of solar PV, using 28 terawatt hours (TWh) and accounting for 30.1 percent of the global total. Italy and Spain were the second- and third-largest consumers, and the European Union (EU) as a whole accounted for 76 percent of global solar PV consumption.

Investors are probably curious about which companies are enabling these phenomenal growth rates. The next graphic shows the top 15 solar PV module manufacturers in 2012. The market is highly fragmented, with no dominant producer. As I have pointed out before in discussing the explosive growth of the corn ethanol industry, companies can still go bankrupt despite the robust growth rates. If the barriers to entry are low, the margins are thin. I would caution investors to make sure they understand the risk factors of any industry before making an investment.

Source: REN21’s 2013 Renewables Global Status Report

The share price of the leading US solar PV maker, First Solar (Nasdaq: FSLR), was slightly down in 2012, but is up 54 percent so far in 2013. On the other hand, a number of high-profile solar power companies have gone bankrupt, most recently Nanosolar, which tried to make thin-film solar panels but never delivered on the hype.

Wind Power

Globally, installed wind power capacity reached 283 GW in 2012. This represented a 19 percent gain over 2011’s year-end capacity, and was slightly lower than the 25 percent average growth rate over the most recent five-year period. Consumption of wind power in 2012 was 521 TWh, an 18 percent increase over 2011.

The US led the world in consumption of wind power in 2012 with 141.5 TWh — 27 percent of the global total. China was second with 100 TWh, but its 34.6 percent increase over 2011 was over twice as great as the 16.3 percent increase in the US. Spain placed third with 49 TWh of consumption, and was the only country in the Top 3 in both solar PV and wind power consumption. Germany ranked in the Top 5 for both solar and wind, but actually lost ground in 2012, consuming 6 percent less wind power than in 2011. 

Source: REN21’s 2013 Renewables Global Status Report

Wind power has proven to be a more controversial renewable option than is solar power, with people protesting on the basis of aesthetics, noise, and/or risks to birds. The primary opposition to solar has been on the basis of cost, but with costs continuing to fall I believe that solar power will continue to see much stronger growth rates than wind power over the next decade.

Cumulatively, wind and solar power contributed 0.9 percent of global electricity consumption in 2007, rising to 2.7 percent of global electricity consumption in 2012. But it is important to note that the strong growth rates over the past five years have yet to make much of a dent in the fossil fuels used in electricity consumption. Between 2007 and 2012, global consumption of wind and solar power increased by 437 TWh. However, total global electricity consumption over that time period increased by 2,581 TWh. Thus, global demand continues to outpace the contributions of wind and solar power, despite their impressive growth rates.

Plotted against the overall background of electricity consumption, it becomes clear that it’s going to take a long time for wind and solar to make major contributions toward the world’s electricity demand. The renewable options are barely visible above zero in the following graphic.

In next week’s issue of The Energy Letter, I will examine some of the other renewable options, such as geothermal, biofuels and various ocean energy technologies.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

Portfolio Update

Refiners Buck Bad News

In last week’s issue of The Energy Strategist we laid out the difficult market environment for refiners, who’ve seen the cost of their domestically sourced crude surge of late, eroding the margin on refined products.

We also noted that several key refining stocks were near key technical levels after retreating to the vicinity of their 200-day moving average.

Refining stocks enjoyed a decent relief rally amid a broader market advance Thursday, aided by a dip in crude prices. But those gains reversed in after-hours after Valero (NYSE: VLO) issued a profit warning. The big, geographically diversified refiner forecast second quarter net income of 80 to 90 cents a share, well shy of the $1.27 per share analysts were expecting even after factoring out 12 cents in newly unveiled one-time charges. Valero blamed “significantly lower discounts for heavy sour crude oil, higher natural gas costs, higher costs to comply with the Renewable Fuels Standard, and turnaround and maintenance activity at the Quebec City, McKee, Meraux, and Port Arthur refineries.”

Higher crude costs, natgas costs and the mounting expense of complying with the regulatory mandate on renewable fuels are industry-wide problems, and the warning smacked all of the refining stocks in after-hours trading. But those losses reversed early into Friday’s session, suggesting the market had been way ahead of analysts in lowering its earnings expectations.

Still, don’t look for a big rally in this sector any time soon, at least not until most refiners report quarterly results early next month. Crude prices remain high after two straight big weekly draws from US inventories, while the increased volume of refinery runs of late could signal the rush to lock in crude costs before they surge further rather than a lasting pick in demand.

Crude may well get discounted in the fall as August marks the seasonal peak in global demand. If it retreats because of plentiful North American supply, refiners may once more enjoy a discount to global prices. But if the correction comes because the global economy has faltered, expect refiners to get hit hard. And nothing that’s happened in the last week has made one of these scenarios more likely than the other. Continue to Hold MPC, TSO and HFC.

— Igor Greenwald