Indonesia has set a target of attracting $160 billion in foreign investment over the next few years, and through recent deals with China and India, it is coming closer to achieving this goal.   China and India have agreed to finance billions of dollars worth of Indonesian infrastructure projects- including railways, road, ports and bridges – in exchange for coal.  The nature of the agreements is similar to the controversial “minerals-for-infrastructure” deals China has entered across Africa to secure access to that continent’s resources.

Leading purchasers of Indonesian coal are China, India, South Korea, Japan and Taiwan.  Indonesian production levels are predicted to rise nearly 90% to 480 million tons by 2020.

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China is faced with a daunting food challenge that has been getting worse as the population expands.  The nation posseses only 7% of global arable land, but must feed 22% of the world’s people.  Its per capita water supplies are only 25% of the world’s average levels.  China’s northern regions hold 18% of total water supplies and 65% of the nation’s arable land, but the climate in those areas has become drier over the years.

By the end of 2015, China’s population is expected to reach 1.39 billion, requiring a 4 million ton increase in annual grain supply over the next decade, but according to the Nature article, water limitations may reduce rice yields by 4 to 14%, wheat by 2 to 20% and corn by 0 to 23% by the middle of this century.

China’s agriculture minister acknowledges the nation faces a “formidable task” in meeting food demand in the face of growing resource scarcity.

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Changing climate and rainfall patterns have hit many of the world’s agricultural production regions hard, especially in regions of Africa and Asia.  Despite advances in irrigation technology, it is estimated that 66% of Asian agriculture is dependent on rainfall, and in Sub-Saharan Africa, that percentage is as high as 94%.

Experts are urging policy makers to help farmers improve storage systems and develop better water management skills.  “For millions of people dependent on rain-fed agriculture, reliable access to water can make all the difference between chronic hunger and steady progress toward food security,” said hydrologist Matthew McCartney.  “Just as modern consumers diversify their financial holdings to reduce risk, smallholder farmers need a wide array of ‘water accounts’ to provide a buffer against climate change impacts.”

The report warns against over-dependence on one source of water, and encourages governments in vulnerable regions to consider storage solutions big and small, from large-scale dams to local ponds, tanks and reservoirs.  “Even small amounts of stored water, by enabling crops and livestock to survive dry periods, can produce large gains in agricultural productivity and in the wellbeing of rural people,” said McCartney.

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U.N. climate chief Christiana Figueres calls this fund a “golden key” in the negotiations; an important tool to reassure poor nations that wealthy nations are serious about global warming mitigation.  The Fund aims to raise $100 billion a year in climate aid by 2020.

Although there is little hope of securing a binding legal treaty in Cancun, negotiators are optimistic about this “Green Fund” proposal.  However, Mexico’s Foreign Minister Patricia Espinoza warned that the climate aid fund is only one part of a broader climate package which needs attention.   Unresolved issues remain, including methods for clean energy technology sharing and mechanisms to protect vulnerable forest land.

U.S. climate envoy Todd Stern concurred, saying “We are not going to move on the Green Fund, and the $100 billion, if issues central to the Copenhagen Accord, including mitigation and transparency, don’t also move.”  Stern reiterated that President Obama is still committed to trimming U.S. greenhouse gas emissions by 2020, despite the Senate’s lack of progress in passing comprehensive climate legislation. The U.S. is the world’s only major developed nation without a legal cap on greenhouse gas emissions.

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The following is an excerpt from Clean Energy Trends 2010. To read the full report, please download the PDF file by clicking here

2009 will go down as one of the worst years in economic history. Overall venture capital spending fell to its lowest level in more than a decade. Initial public offerings (IPOs) in the U.S. continued at historic lows, with just 13 venture-backed IPOs in 2009 (up only slightly from a meager six venturebacked IPOs in 2008), according to Thomson Reuters and the National Venture Capital Association. Once stalwart financial and market leaders crumbled under new harsh economic realities, with many shuttering their operations or surviving as a mere shell of their former selves. Governments around the world, working to stave off a global depression, announced unprecedented commitments to stimulus programs to keep the global economy on life support.

But signs of hope have begun to emerge for the clean-tech sector. From Beijing to Seoul, and Washington, D.C. to Brussels, clean energy has become a driving force for economic recovery. Approximately $100 billion of the $787 billion stimulus package in the U.S. will go to clean-tech investments and activities; South Korea’s “Green New Deal” is estimated to commit $84 billion to clean-tech investments by 2013; and China, by some estimates, could end up spending $440 billion to $660 billion toward its clean-energy build out over the next ten years. And while total venture activity was down, clean energy’s percent of the total continued to increase, to 12.5 percent of total venture activity in 2009 in the U.S. alone.

Against this backdrop, combined global revenue in 2009 for solar photovoltaics (PV), wind power, and biofuels expanded by 15.8 percent over the prior year, reaching $144.5 billion. All three sectors saw an increase in total deployment, with increased revenue for both biofuels and wind power. Solar, however, saw its first decrease in total revenue over the prior year since Clean Edge began tracking global revenues in 2000. This was a direct result of the rapid decline in solar PV pricing (see “Steep PV Price Drops Redefine the Solar Industry” on page 10).

According to our research:

* Biofuels (global production and wholesale pricing of ethanol and biodiesel) reached $44.9 billion in 2009 and are projected to grow to $112.5 billion by 2019. In 2009 the biofuels market consisted of more than 23.6 billion gallons of ethanol and biodiesel production worldwide.

* Wind power (new installation capital costs) is projected to expand from $63.5 billion in 2009 to $114.5 billion in 2019. Last year’s global wind power installations reached a record 37,500 MW. China, the global leader in new installations for the first time, accounted for more than a third of new installations, or 13,000 MW.

* Solar photovoltaics (including modules, system components, and installation) will grow from a $36.1 billion industry in 2009 to $116.5 billion by 2019. New installations reached just more than 7 GW worldwide in 2009, a sevenfold increase from five years earlier, when the solar PV market reached the gigawatt milestone for the first time. But because of rapidly declining solar PV prices, industry revenue between 2008 and 2009 was down about 6 percent – from a revised $38.5 billion in 2008 – as solar prices dropped from an average $7 peak watt installed in 2008 to $5.12 peak watt installed last year.

Together, we project these three benchmark technologies, which totaled $124.8 billion in 2008 and grew 15.8 percent to $144.5 billion in 2009, to grow to $343.4 billion within a decade.

U.S. Venture and Global Clean-Energy Investments:

In 2009, U.S.-based venture capital investments in energy technologies declined from $3.2 billion in 2008 to $2.2 billion in 2009, according to Bloomberg New Energy Finance. However, as a percent of total VC investments, energy tech grew from 11.4 percent in 2008 to 12.5 percent in 2009. This represented the largest share in the history of the clean-energy asset class.

The global growth rate in clean-energy investments, across a wide range of investment categories, declined as well, impacted by the overall economic climate. However, government investments helped soften the blow and clean-energy investments still remain at near-historic levels. According to New Energy Finance, new global investment in clean energy declined from $155.4 billion in 2008 to $145.3 billion in 2009. This figure includes investments made by VC and private equity investors; public market activity (IPOs, etc.); project financing; asset financing; government research & development; and corporate research, development, & deployment.

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These concessions are expected to eventually yield additional hundreds of millions of dollars in revenues.

The Chilean geothermal market is at its nascent stages, with only one major project underway, developed by Italian utility Enel.  However, other geothermal companies such as Ram Power, Magma Energy and Ormat have been looking into geothermal resources in Central and South America.

Chile, with its 4,300 mile long mountain range, provides many interesting locations for energy exploration.

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Policy and industry analysts warn that if the costs of these new technologies are not commensurate with that of coal, China’s clean tech push may fizzle and fail to attract the private sector investment it needs for long term success.

“The government must gradually lift fossil fuel prices while granting incentives to non-fossil fuels to establish a long-term price signal,” said Wang Yi, deputy head of Policy and Management at the China Academy of Science.  Without changes in tariff structures, there would be little incentive for private firms to invest, analysts warn.

State-run firms would be the only ones able to operate at a loss as “they are the ones who can afford to lose money,” said Lin Boqiang, head of Center of Research on Energy Economics at Xiamen University.  “The private sector can’t afford waiting around for 5 to 10 years operating at a loss.”

China’s low-carbon energy potential is enormous.  The government is aiming for a 45% cut in carbon intensity from 2005 levels by 2020 and a 15% increase in share of renewable vs. primary energy consumption.  Certain estimates say that China is ready to build at a minimum 20 nuclear power plants over the next 5 years, each with a capacity of 2GW.

Coal, however, is the elephant in the room.  Providing 80% of all electricity for its growing economy, China is the world’s #1 coal user.  It constructs, on average, one new coal-fired power plant every week.  Switching away from such a plentiful albeit highly polluting resource will be difficult for the economic giant.

On top of that, China has been making improvements to its coal plants to make the burning process cleaner.  These generators are called supercritical plants, and they produce approximately 15% less CO2 that conventional plants at about $500-$600 per kW less than in developed OECD nations.

China has overtaken the U.S. as the world’s top emitting country, and it faces tremendous pressure from the international community to wean itself off its coal addiction and get serious about reducing its emissions levels.

Foreign firms such as nuclear Areva of France, wind power equipment producers Gamesa of Spain, U.S.-based First Solar and India-based Suzlon are just a few that will be waiting to see how China’s investment plans develop and how it meets this coal-pricing challenge.

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The funding support, coming in the form of subsidies and loan guarantees, will accelerate over the years, eventually reaching €290 million/year by 2014.  The program aims to attract an additional €2 billion from private investors and other research groups.

France’s extensive use of nuclear-fired plants has contributed to the country’s claim to 90% low carbon electricity.  However, President Sarkozy’s administration is furthering efforts to develop renewable energy sources such as solar and wind.  The new funding will also support sustainable transportation initiatives and smart grid technology developments.

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After a 2 ½ year-long environmental review, the Beacon Solar Energy Project will be constructed on a 2,012 acre plot of former farmland.  Solar thermal plants generate electricity by using long trays of parabolic mirror to reflect the sun’s rays and heat a tube of liquid.  The super-heated liquid then creates stem to fire a turbine which generates electricity.

“I hope this is the first of many more large-scale solar projects we will permit.  This is exactly the type of project we want to see,” said an Energy Commission member.

However, the Beacon project still has more hurdles to overcome, including environmental concerns about impact on limited water supplies and vulnerable wildlife.  Beacon must also secure a contract to sell the electricity they generate.  The project supporters are optimistic about obtaining this type of contract, considering California’s utilities are required to purchase 20% of the electricity from renewable sources by 2020.

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Corn-based ethanol has been criticized as an energy-intensive fuel source with a very large carbon footprint.  Competition between corn crops grown for food and crops grown for fuel production has been a major concern.

Cellulosic ethanol, on the other hand, can be made from just about any crop or plant matter that has a high concentration of cellulose, which means that waste crops, stalks, leaves and husks can be turned into fuel.  Technology developments and a drop in the price of necessary enzymes for the fuel conversion process has helped cellulosic ethanol production more economical, and therefore more practical as a major-scale substitution for gasoline-based liquid fuels.

Besides providing a major boost to the Brazilian cellulosic ethanol industry, these deals will allow the smaller companies to access broader markets and sources of capital.  The partnerships also demonstrate continued interest of Big Oil in “next-generation” biofuels as the wave of the future.

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