Chapter 6 | Industry, Technology, and the Global Marketplace

Global Trends in Sustainable Energy Research and Technologies

Related Content

• Related Content-
• Patenting of Sustainable Energy Technologies
• Private Investment in Sustainable Energy Technologies
• Public RD&D Expenditures in Sustainable Energy Technologies
• Sustainable Energy Generation Capacity

Global private investment in sustainable energy technologies, including solar, wind, biofuels, geothermal, and energy smart—was $260 billion in 2016 (Figure 6-34).^​ Private investment consists of early-stage financing—venture capital and private equity ($7.5 billion)—and later stage financing ($252.1 billion)—asset finance (capital based on future expected income streams), public markets, reinvested equity, and small distributed capacity (Appendix Table 6-44).^​ Global private investment is far larger than government RD&D invested in these technologies (government RD&D was estimated at $12 billion in 2014).

Venture capital and private equity primarily finance nascent technologies and are important for understanding emerging technology trends. Global venture capital and private equity investment in sustainable energy technologies was $7.5 billion in 2016 (Figure 6-37). The United States attracted the most venture capital and private equity of any country ($3.5 billion in 2016). China attracted $2.2 billion, a record high and huge jump from the $0.5 billion investment in 2015. The five largest economies in the EU—France, Germany, Italy, Spain, and the United Kingdom—attracted a combined $0.8 billion. India attracted $0.4 billion. Energy smart ($4.2 billion) and solar ($2.3 billion) are the leading technologies for venture and capital and private equity investment with biofuels and wind receiving far smaller amounts (Figure 6-37 and Figure 6-38).

Although venture capital and private equity investment grew from $4.3 billion in 2013 to $7.5 billion in 2016, it remains far below its peak in 2008 ($12.4 billion) (Figure 6-37). The sharp decline in investment starting in 2011 has been attributed to the difficulty of venture capitalists raising new funds and the lack of getting a sufficient positive return on their existing investments in sustainable energy technology companies. Commercializing energy technologies such as solar, wind, and biofuels can be very risky and sometimes requires subsequent substantial and long-term financing to build demonstration plants. Investors in venture capital have become more risk adverse and expect returns within the relatively short time horizon of 2–4 years.

U.S. venture capital and private equity investment has paralleled the trend of global venture capital and private equity investment over the post-global recession period (Figure 6-39). The largest two technology areas have been energy smart and solar between 2011 and 2015. Both areas saw declining investments following the global recession but have recovered in recent years.

Later-stage financing is focused on the design and construction of utility-scale renewable energy power plants and installations (primarily solar) on commercial and residential buildings. Global later-stage private investment in sustainable energy technologies was $252 billion in 2016 (Figure 6-40 and Figure 6-41).^​ Two technologies—wind and solar—dominate sustainable energy technology investment, each with a share of about 40% (Appendix Table 6-44 and Appendix Table 6-45). Energy smart technologies are the third largest area (8%). China leads the world in attracting later-stage private investment in sustainable energy technologies (with a global share of 33%) followed by the EU (25%) and the United States (18%) (Figure 6-40).

Global later-stage investment in sustainable energy technologies fell 19% to $252 billion in 2016 compared to 2015, the deepest annual decline over the last decade (Figure 6-40 and Figure 6-41; Appendix Table 6-44). Solar had the deepest decline (35%) among technologies, falling from a record high in 2015 to $108 billion in 2016, and wind declined 10% to reach $111 billion (Appendix Table 6-45). Investment declined steeply in China (29%) and in Japan (51%) with a far more modest decline in the United States (8%). Investment in the EU increased by 14%. Both China and Japan have shifted some of their focus from building up energy capacity to efficiently managing and integrating existing energy capacity into electric grids (BNEF 2017).

Global sustainable energy technology investment following the global recession has fluctuated compared to the very rapid growth prior to the recession (Figure 6-40 and Figure 6-41; Appendix Table 6-45). The plateauing of global investment following the global recession has been due to several factors including the sluggish global economy, cutbacks by many governments on incentives to deploy sustainable energy, and rapid declines in costs of solar photovoltaics, which in turn have reduced the per-unit cost of investment in these technologies. As a result of these lower costs, solar generation capacity can grow despite lower current dollar expenditures.

Later-stage investment in China fell 29% in 2016 to $84 billion following 13 years of uninterrupted growth (Figure 6-40; Appendix Table 6-44). The sharp decline of investment in 2016 reflects the government paring back its incentives for building solar and wind energy capacity and focusing on investing in its electric grids and reforming the power market to efficiently utilize its existing wind and energy capacity.^​ In addition, the plunging cost of solar photovoltaics has sharply raised the amount of solar energy capacity produced per dollar of investment. The rapid growth of sustainable energy technology investment between 2002 and 2015 has been driven by the government’s policies and generous incentives targeted at wind and solar energy to make China a major world producer and build up its energy capacity in these technologies. Between 2013 and 2016, investment in solar drove China’s growth in later stage sustainable energy technology investment (Figure 6-42; Appendix Table 6-44). Solar investment climbed from $27 billion to $39 billion, making China the leading country in solar investment. China’s rapid rise reflects its emergence as a major manufacturer of low-cost photovoltaic modules and rapidly growing installation of utility scale and residential solar in China. China had modest growth in investment in wind energy (from $26 billion in 2011 to $35 billion in 2016) (Appendix Table 6-45).

EU investment in 2016 rose 14% to reach $64 billion (Figure 6-40; Appendix Table 6-44). Between 2013 and 2016, investment in the EU rose from $53 billion to $64 billion, driven by a $22 billion increase in wind investment driven by several large wind offshore installations (BNEF 2017) (Figure 6-42; Appendix Table 6-45). The EU surpassed China during this period to become the world’s largest recipient of wind investment. Solar investment declined by $15 billion during this period. The big drop in EU investment between 2011 and 2013 reflects a mix of factors including retroactive cuts in support for existing solar projects in Spain and other countries, cutbacks in incentives to deploy solar and wind energy, the economic downturn in Spain and southern European countries, the slowdown in solar investment in Germany and Italy, and the big fall in the cost of solar photovoltaics (Appendix Table 6-44).

U.S. sustainable energy technology investment fell 8% (from $51 billion to $46 billion) in 2016 (Figure 6-40; Appendix Table 6-44). Investment in the United States has fluctuated between $34 billion and $51 billion in the post-global recession period. The changing status of two key federal government tax incentives, the Production Tax Credit (PTC) for wind and the Investment Tax Credit (ITC) for solar, has been a key factor in the fluctuation of U.S. investment over the last several years.^​ Solar investment has been the main component of U.S. investment between 2013 and 2016 due to deep declines in the cost of photovoltaics, which have increased solar generation per unit of investment, and the adoption of leasing and other innovative financing methods that have lowered the cost of residential solar installation (Figure 6-42; Appendix Table 6-44).^​

Investment in Japan fell by half in 2016 to reach $16 billion following rapid growth between 2011 and 2014 (Figure 6-40; Appendix Table 6-45). The sharp drop in solar investment drove the steep decline in Japan’s sustainable energy technology investment (Figure 6-42). Japan, like China, is cutting back on building large-scale solar installations and shifting toward managing and integrating their existing solar energy capacity into its electric grid (BNEF 2017). Sustainable energy investment in Japan soared between 2011 and 2015 largely because of generous government incentives for solar investment enacted in response to the government’s push to diversify energy sources in the wake of the Fukushima nuclear reactor accident in 2011.

The large expansion of investment and deployment of sustainable energy technologies over the last decade has led to rapid growth in renewable energy generation capacity (Figure 6-36). Renewable energy capacity excluding hydropower jumped from 130 gigawatts in 2006 to 912 gigawatts in 2016.^​ Despite the decline in sustainable energy technology investment, the world added a record 137 gigawatts of renewable energy capacity excluding hydropower in 2016. Solar and wind have driven the surge in renewable energy capacity, accounting for more than 90% of the increase in capacity of all renewable energy sources except hydropower over the last decade. Solar and wind generation capacity added a record amount of 130 gigawatts in 2016 (Figure 6-43). Although global sustainable energy technology investment has plateaued following the global recession, sustainable energy capacity has continued to increase because the deployment of solar and wind projects already under construction and the rapidly falling costs of solar photovoltaics that have greatly increased the amount of solar energy generated per investment dollar.^​

China has led the world in increasing solar and wind generation capacity. Between 2010 and 2016, China added a cumulative 200 gigawatts of solar and wind generation capacity with China nearly reaching the capacity of the EU (Figure 6-43). Despite the sharp fall in sustainable energy technology investment, the EU added a cumulative 137 gigawatts in capacity. The United States (82 gigawatts) added far less than China and the EU.

Global public investment in RD&D in sustainable energy technologies—renewables, energy efficiency, capture and storage of CO₂, nuclear, fuel cells, and other power and storage technologies—was an estimated $12.0 billion in 2014 (Figure 6-35 and Figure 6-44; Appendix Table 6-46 through Appendix Table 6-55).^​ Nuclear was the largest area ($3.5 billion), followed by energy efficiency ($3.3 billion) and renewables ($3.0 billion). These technologies typically require costly investment to construct testing and demonstration plants that businesses are unwilling to finance and thus require substantial public funding.

Global public RD&D has steadily declined following the global recession after spiking at $16.2 billion in 2009 because of stimulus spending by the United States under the American Recovery and Reinvestment Act of 2009 (Figure 6-35; Appendix Table 6-46). Between 2011 and 2014, global public RD&D declined from $14 billion to $12 billion (Appendix Table 6-46 through Appendix Table 6-55). Nuclear declined by 19% to reach $3.5 billion. Renewables fell 23% to reach $3.0 billion with a steep decline in solar (39%). CO₂ capture and storage declined by nearly a third to reach $0.8 billion. Energy efficiency increased slightly (10%) to reach $3.3 billion.

The United States surpassed the EU in 2014 to become the world’s largest investor in public RD&D despite the 12% decline in U.S. investment between 2011 and 2014 (Figure 6-35; Appendix Table 6-46). The fall in U.S. public RD&D investment between 2011 and 2014 resulted from steep declines in renewables (26%) and nuclear energy (32%) (Appendix Table 6-47 and Appendix Table 6-50). In renewables, solar funding plunged 71% to $0.1 billion (Appendix Table 6-51). Expenditures on biofuels rose 41% to reach $0.5 billion (Appendix Table 6-53). Funding for energy efficiency technologies rose 40% to reach $1.3 billion (Appendix Table 6-48).

EU investment in RD&D fell 22% between 2011 and 2014 to reach $3.6 billion with declines across all technology areas (Figure 6-35; Appendix Table 6-46 through Appendix Table 6-54. The EU’s cutbacks in RD&D funding, particularly in renewable energy coincide with fiscal austerity in many EU countries and the sharp declines in subsidies and other incentives to deploy solar and wind generation.

Japan’s RD&D fell 10% between 2011 and 2014 to reach $2.7 billion (Figure 6-35; Appendix Table 6-46). Nuclear energy fell 17% to reach $1.4 billion and was far below its level in 2009 (Appendix Table 6-47). Japan’s government has cut funding to nuclear RD&D in the wake of the Fukushima accident in 2011 and has diversified its energy sources, including increasing its generation of solar energy.

Patents are a partial indicator of invention and are used as a measure of the invention capacity of countries or to help identify nascent technologies that could be commercialized. In some technologies, including energy, venture-backed firms obtain patent protection for technologies they intend to commercialize. This section uses patent activity at the U.S. Patent and Trademark Office (USPTO). It is one of the largest patent offices in the world and has a significant share of applications from and grants to foreign inventors because of the size and openness of the U.S. market. (See Chapter 8 for a discussion of the limitations of using patents as an indicator of inventiveness and information on USPTO patents.)

Sustainable energy technology patents comprise four broad areas: alternative energy, energy storage, smart grid, and pollution mitigation (Appendix Table 6-56 through Appendix Table 6-60). These broad categories are further divided into finer technology areas (Appendix Table 6-61 through Appendix Table 6-74). (For more information on this classification of sustainable energy patent technologies, which was developed by the National Science Foundation [NSF], please see Identifying Clean Energy Supply and Pollution Control Patents.^​)

U.S. resident inventors were granted 43% of all sustainable energy technology patents in 2016 (Figure 6-45; Appendix Table 6-56). The next four largest recipient economies were Japan (20%), the EU (16%), and South Korea (9%). Although the global leader in attracting sustainable energy technology investment, China accounts for a relatively small share (3%) of USPTO sustainable energy technology patents (Figure 6-46).

The number of patents in these technologies has risen in line with the rapid growth of all USPTO patents since 2009 (Figure 6-45; Appendix Table 6-56).^​ Six technologies—solar, hybrid and electric vehicles, smart grid, fuel cell, battery, capture and storage of carbon and other greenhouse gases—led the growth of sustainable energy technology patents between 2009 and 2016 (Figure 6-47; Appendix Table 6-59, Appendix Table 6-61, Appendix Table 6-63, Appendix Table 6-64, Appendix Table 6-67, and Appendix Table 6-70).

U.S. sustainable energy technology patents more than doubled between 2009 and 2016 to reach 4,700 patents led by growth in four technology areas—hybrid and electric vehicles, solar, smart grid, and energy storage (Figure 6-45; Appendix Table 6-56, Appendix Table 6-58, Appendix Table 6-59, Appendix Table 6-63, and Appendix Table 6-64).

Patents granted to inventors outside the United States, primarily in Asia, grew faster than those granted to the United States, resulting in U.S. global share declining from 49% in 2009 to 43% in 2016. Japan’s patents more than doubled to reach 2,200, led by growth in solar, hybrid electric, and battery (Figure 6-45; Appendix Table 6-56, Appendix Table 6-63, Appendix Table 6-64, and Appendix Table 6-67). The number of EU patents tripled, resulting in the EU’s share edging up from 14% to 16% (Figure 6-45; Appendix Table 6-56). Four technologies—solar, hybrid electric, smart grid, and wind—drove overall growth (Appendix Table 6-59, Appendix Table 6-63, Appendix Table 6-64, and Appendix Table 6-65).

South Korea’s patents more than quadrupled to reach 1,000 resulting in its global share nearly doubling to reach 9% (Figure 6-45). Growth was very rapid in energy storage, solar, hybrid/electric, and battery technologies (Appendix Table 6-58, Appendix Table 6-63, Appendix Table 6-64, and Appendix Table 6-67). Patents granted to China and Taiwan have increased rapidly, though from a very low base (Figure 6-46; Appendix Table 6-56).

The patenting technology activity index indicates the extent to which a country specializes in that area. This indicator is indexed to 1.00, which represents the world level, meaning that a score above 1.00 shows that a country produces more of its patent output in the given technological area than the global proportion, whereas a score below 1.00 shows that a country produces fewer patents in this technological area than the global proportion. Technologies with an activity index of 1.2 or more are defined here as relatively more concentrated. (See Chapter 8 for a discussion on the limitations of using the patenting technology activity index.)

The United States has a relatively high concentration of patenting in bioenergy and cleaner coal (Figure 6-48; Appendix Table 6-62 and Appendix Table 6-69). The EU has a relatively high concentration in wind and nuclear energy (Figure 6-48; Appendix Table 6-65 and Appendix Table 6-66). Japan has a relatively high concentration in hybrid and electric vehicles, fuel cells, and hydrogen production and storage (Figure 6-48; Appendix Table 6-61, Appendix Table 6-64, and Appendix Table 6-68). South Korea has an extremely high concentration in batteries (6.3) and fuel cells (2.4) and a relatively high concentration in solar, hybrid and electric vehicles, and nuclear energy (Figure 6-48; Appendix Table 6-61, Appendix Table 6-63, Appendix Table 6-64, Appendix Table 6-66, and Appendix Table 6-67).