When Will Renewable Energy Companies Overtake Traditional Energy Companies?

Robert F. Kennedy Jr. brought more attention to this question with his prediction, repeated over the last several months, that clean energy would overthrow energy incumbents within the next decade. “We’re going to democratize the energy system in this country and take it away from the incumbents over the next 10 years,” he said at the Solar Power International conference in Anaheim last October.

As a new year — and new decade — begins, many hope it will launch a new era of growth and profit for renewable energy after a year of financial suffering. It's also a time when companies, as well as individuals, traditionally take stock of where they are and set new goals and resolutions. So it seems like a fitting time to examine this question and take a look at various predictions of when this might happen.

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One of the most obvious ways to attempt to answer the question is by looking at how much of the world's energy comes from renewables today. According to the International Energy Agency's World Energy Outlook in 2008, renewables made up 18 percent — or 3,470 terawatt hours — of the global electricity generation in 2006, with most of that coming from hydroelectric and wind power. In the same report, the agency forecast renewable-electricity generation would overtake natural gas, becoming the world's second-largest source of electricity after coal, "soon after 2010." According to those predictions, renewables are on track to account for 4,970 terawatt hours in 2010 and more than 7,700 terawatt hours, or 23 percent of the global electricity production, in 2030.

That expected growth might have been slowed by financial difficulties this year. According to the 2009 World Energy Outlook, investment in renewables-based power generation "fell proportionately more than that in other types of generating capacity" in late 2008 and early 2009. The report forecast that investment in those projects may have declined by nearly one-fifth this year, and would have dropped by almost 30 percent without government stimulus packages worldwide. Even if renewables do still overtake natural gas by 2015, that isn't an apples-to-apples comparison as it compares all types of renewable electricity, including hydro, wind, solar and more, to only one type of fossil fuel.

Looking at the numbers for just one type of renewable energy, such as solar, for example, shows renewables are far behind in total production. Adam Krop, vice president for equity research at Ardour Capital Investments, said his company estimates that solar will likely only be about 1 percent of the total global electricity generating capacity for the foreseeable future — and that's an aggressive target. In the United States, which is a small solar market today, solar electricity accounts for only 0.01 percent of the total, he said, but could grow to 0.5 percent by 2020. "Growing from 0.01 percent to 0.5 percent still represents rapid growth, but growing to the size of conventional energy companies is not likely," he said.

As independent analyst Peter Lynch puts it, "If the solar industry doubled every year for the next 20 years, it wouldn't even be a significant number."

Meanwhile, an early release of this year's U.S. Department of Energy's International Energy Annual forecasts that the electricity generated from renewables worldwide will match that of natural gas in 2015, but sink slightly below it through 2030 (see chart here titled “Figure 6:World Electricity Generation by Fuel”). Renewables make up a much smaller portion of the total energy (not just electricity) usage, however. According to the report, renewables made up only 41.5 quadrillion Btu of the total world energy consumption compared with 28.5 quadrillion Btu for nuclear, 115.5 quadrillion Btu for natural gas, 136 quadrillion Btu for coal and 175.2 quadrillion Btu for liquids, including biofuels.