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  • Green energy is making big money-SanFran Chronicle

    Green energy is making big money

    David R. Baker, Chronicle Staff Writer
    Wednesday, March 12, 2008

    The alternative energy business is starting to make real money.
    Worldwide sales for companies specializing in biofuels, wind farms, solar panels and fuel cells grew 40 percent in 2007 to reach $77.3 billion, according to an annual report issued Tuesday by Clean Edge, a research firm that studies the green technology industry.
    That's significant revenue for an industry crowded with startups, many of which don't yet have finished products to sell. But other companies - including major corporations such as General Electric - have waded into the field, selling their wind turbines and solar panels around the globe.
    Revenue in the wind power industry alone jumped 68 percent in 2007 to reach $30.1 billion as new wind farms sprouted across the United States and China. Sales of ethanol and biodiesel, together, grew about 24 percent to hit $25.4 billion. Solar photovoltaic sales grew 30 percent, totaling $20.3 billion.
    As imposing as those figures might seem, they're small by the standards of the traditional energy business, especially when individual oil companies report annual sales greater than $100 billion. But for green tech, the increasing revenues suggest that the young industry is gaining traction.
    "Clean energy has moved from the margins to the mainstream, and the proof is in these numbers," said Ron Pernick, co-founder of Clean Edge. The firm, based in San Francisco and Portland, Ore., provides research to businesses and investors looking to profit from the green tech industry.
    Alternative energy companies are riding a wave of interest started by the rise in the price of oil, which has more than tripled in five years. Their fortunes also have been buoyed by concern about global warming, which most scientists blame on the carbon dioxide that comes from burning fossil fuels. Investors have been pumping money into alternative energy companies, many of them based in the Bay Area.
    With oil setting yet another all-time price record Tuesday - topping $108 per barrel - the report's authors expect alternative energy's rapid growth to continue. Clean Edge projects that the industry's annual, global revenues will hit $254.5 billion by 2017, while the industry will continue to soak up venture capital investments.
    "As the price of oil goes up, up and up, that obviously makes investments in clean energy alternatives more attractive to investors of all shapes and sizes," said Clint Wilder, one of the report's authors.
    And yet, alternative energy revenue remains a small piece of the world's overall energy market.
    For a sense of scale, look no further than the oil industry, which many alternative energy enthusiasts would love to replace. Exxon Mobil, the world's largest international oil company, reported $404.5 billion in sales last year - more than five times the entire alternative energy industry combined. And that's just one company.
    Alternative energy revenue "is a tiny fraction of what we spend on oil," said James Sweeney, an energy economist with Stanford University. "And that's not counting what we spend on natural gas and coal."
    But that disparity is one of the reasons entrepreneurs and investors are delving into alternative energy. They see room to grow.
    "People see these market niches available, and they're still niches, but niches have this wonderful way of growing over time," Sweeney said.
    Just how much they'll grow is difficult to predict.
    A lot will depend on federal policies concerning energy and climate change. The Clean Edge report's authors warned that if Congress doesn't renew tax credits used by renewable energy developers, companies that specialize in solar and wind power will be hard hit. The House has approved an extension, but the Senate so far has not.
    "If these credits are not extended by the time they expire at the end of this year, we could see the growth of solar and wind come to a standstill in the U.S.," Pernick said.
    All three leading presidential contenders have called for limiting carbon dioxide emissions and letting companies buy and sell credits to emit the gas. That kind of cap-and-trade system would increase the cost of energy derived from fossil fuels and make alternative energy sources more attractive.
    "What that will do to the economics of all these companies is it will make them all much more competitive," said Fred Krupp, president of the Environmental Defense Fund advocacy group and author of a new book on the alternative energy business, "Earth: The Sequel." Krupp was not involved in the Clean Edge study.
    "I would predict that the revenue growth is going to continue to explode," he said.
    The report also included a list of alternative energy trends to watch in 2008:
    -- Interest in the next generation of electric vehicles will continue to grow, driven in large part by innovations from small companies, not the major automakers.
    -- Geothermal power, which uses the Earth's heat to generate electricity, will continue its recent renaissance, particularly in the western United States.
    -- And foreign companies will become an increasing presence in the American wind power industry, building wind farms and manufacturing plants in the United States.
    E-mail David R. Baker at [email protected].

    This article appeared on page A - 1 of the San Francisco Chronicle