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Chapter 6. Industry, Technology, and the Global Marketplace

Investment and Innovation in Clean Energy and Technologies

The fifth section of this chapter examines clean energy and energy-conservation and related technologies. Clean energy, like KTI industries, has a strong link to S&T. Clean energy and energy-conservation and related technologies—including biofuels, solar, wind, nuclear, energy efficiency, pollution prevention, smart grid, and carbon sequestration—have become a policy focus in developed and developing nations. These technologies are KTI and thus are closely linked to scientific R&D. Production, investment, and innovation in these energies and technologies are rapidly growing in many countries. Prompted by concerns over the high cost of fossil fuels and their impact on the climate, governments have developed various inducements, such as subsidies and tax incentives, and increased funding for clean energy R&D.

This section examines venture capital and total private financing data from Bloomberg New Energy Finance and public research, development, and demonstration (RD&D) data from the International Energy Agency (IEA). The IEA data discussed here cover RD&D. They are not comparable to the energy R&D data described in chapter 4, which focus on R&D.[31]

Commercial Investment

Global commercial investment in clean energy technologies, including early stage angel and venture capital investment and later-stage financing, was $160 billion in 2012 (figure 6-41).[32] Two technologies—wind and solar—dominate clean energy investment, with a combined share of 85% (figure 6-42).

Between 2005 and 2012, global clean energy investment rose from less than $30 billion to $159 billion (figure 6-41). The rapid rise of investment was interrupted by a dip during the global recession before climbing back to its level prior to the recession. This rise has been spurred by government policies to encourage clean energy financing and production and by falling costs in wind, solar, and other energy technologies. Global investment appears to have plateaued since the global recession due to several factors, including the sluggish global economy, cutbacks by many governments on subsidies, tax and other incentives for clean energy, and a substantial decline in natural gas prices due to hydraulic fracturing technologies.

Patterns and Trends in Developing Countries

In 2012, almost $100 billion in commercial investment in clean energy occurred in China and other developing countries, making up over 61% of global investment (figure 6-41). Clean energy financing in China was an estimated $61 billion, more than in any economy in the world (35% share of global investment). The comparable amount for other developing countries was $36 billion.

Between 2005 and 2012, clean energy investment in developing countries rose from $8 billion to nearly $100 billion (figure 6-41). The global share of developing countries climbed from about one-third of clean energy investment to nearly two-thirds during this period.

China was the primary driver of investment in developing countries; China's commercial investment rose exponentially from less than $2 billion in 2004 to $61 billion in 2012 (figure 6-41). The uninterrupted growth of clean energy investments in China reflects the government's policies targeted at wind and solar energy to make China a major world producer in these technologies and to reduce China's reliance on fossil fuels. Investment in wind energy, which was $28 billion in 2012, made up the largest share of China's investment between 2004 and 2012 (figure 6-43). Investment in solar also rose rapidly. It reached $27 billion in 2012, reflecting China's emergence as a major manufacturer of low-cost photovoltaic modules.

Clean energy investment in other developing countries has also risen rapidly, from $6 billion to $36 billion (figure 6-41). The rapid rise of investment in countries such as Brazil, India, Indonesia, and Mexico reflects the adoption of policies by these countries to encourage clean energy, lower costs relative to developed countries, and rapid economic growth and growing energy demand.

Patterns and Trends in Developed Economies

Investment in the United States, the EU, and other developed economies was $63 billion, 39% of global investment (figure 6-41). The United States and the EU, with from $27 billion to $29 billion each, tied as the second-largest locations of clean energy investment, behind China. Investment in other developed economies is much smaller, amounting to a collective $7 billion.

Between 2004 and 2012, clean energy investment in developed economies rose from $19 billion to $63 billion (figure 6-41). Investment has been volatile in the aftermath of the global recession. Investment rebounded in 2010 and reached a new high of $110 billion in 2011 before plunging to $63 billion in 2012, its lowest level since 2006.

After rising steadily prior to the global recession, U.S. investment fell sharply in 2008 before recovering to $32 billion in 2010, near its pre-recession level (figure 6-41). Investment spiked in 2011 to $45 billion before falling to $29 billion in 2012 due to the expiration of temporary financing provisions and subsidies. Wind and solar energy have led the growth of U.S. investment between 2004 and 2012 (figure 6-43). Wind investment reached $14 billion in 2012, closely followed by solar energy, which was $10 billion.

In the EU, the global recession had less impact on commercial investment compared to the United States (figure 6-41). However, investment fell by half in 2012 to $27 billion due to the EU's economic and financial crisis and sharp cutbacks in government support for solar and other clean energies in Germany, Spain, and the United Kingdom. Investment in solar energy in 2012 was $7 billion, less than half its level in 2008 (figure 6-43). Investment in wind energy was also down sharply.

Venture Capital Investment

Venture capital investment is a useful indicator of market assessment of nascent and future trends in clean energy technologies. Global venture capital investment in clean energy was $4.4 billion in 2012, making up 3% of commercial financial investment (figure 6-44). The United States is the main location of venture capital financing for clean energy technologies, with more than 80% of global investment in 2012.

Among the technology areas, energy smart and efficiency technologies make up nearly half of venture capital financing (figure 6-45). The energy smart and efficiency category covers a wide range of technologies, from digital energy applications to efficient lighting, electric vehicles, and the smart grid that maximizes the energy efficiency of existing energy sources and networks. Two other technology areas—solar and biofuels—accounted for about 20% each of all venture capital financing.

After rising rapidly to reach $5 billion prior to the global recession, venture capital investment plunged in 2009. It then rebounded from $4 billion to $5 billion in 2010–12 (figure 6-44). Between 2004 and 2012, three technology areas—energy smart and efficiency, solar, and biofuels—led growth (figure 6-45). Biofuels grew the fastest among these technologies, but from a low base, to reach $0.9 billion. Solar rose from less than $0.2 billion to reach $1.0 billion. Energy smart and efficiency, the largest technology area, grew from $0.8 billion to $2.0 billion.

U.S. venture capital investment in the energy smart and efficiency and the solar areas is likely a result of several factors, including American Recovery and Reinvestment Act of 2009 (ARRA) funding of R&D in these technologies and U.S. loan guarantees for companies operating in these areas. In addition, energy efficiency technologies are less capital intensive than other clean energy technologies, have a shorter time horizon than most other energy technologies, can be applied to a wider range of energy products and services, and are less reliant on government incentives or subsidies that may be withdrawn.

Public Research, Development, and Demonstration Expenditures in Clean Energy Technologies

Major developed economies invested an estimated $13.0 billion on public RD&D in clean energy and nuclear technologies in 2011 (table 6-11; figure 6-46). Clean energy technologies include renewables (solar, wind, ocean), bioenergy, hydrogen, fuel cells, carbon capture and storage, energy efficiency, and other power and storage.[33]

Nuclear energy was the largest area, receiving $5.6 billion in 2011, nearly one-third of total RD&D (table 6-11). The next two largest areas are energy efficiency and renewable energy (solar, wind, ocean, bioenergy), which received $3.6 and $2.4 billion, respectively. The fourth largest, other power and storage, received $1.1 billion.

The United States and Japan are the largest investors in clean energy and nuclear RD&D, with each spending $4.0 billion in 2012 (figure 6-46). The EU is the next largest, with expenditures of $2.6 billion. Three other countries—Canada, South Korea, and Australia—had significant expenditures. Canada's RD&D was $1 billion, and Australia and South Korea each spent between $500 million and $600 million.

Between 2004 and 2008, clean energy and nuclear RD&D rose steadily to reach $12 billion in 2008 before spiking up to $17.6 billion in 2009 due to stimulus spending in the United States and the EU (table 6-11; figure 6-46). Clean energy and nuclear RD&D fell in 2010 and 2011 with the fading of stimulus spending to reach $13.1 billion in 2011. Trends among the individual technology areas varied between 2004 and 2011:

  • CO2 capture and storage had the fastest growth, rising from $100 million to $1.1 billion.
  • Spending on renewable energy nearly tripled to reach $3.6 billion.
  • Energy efficiency expenditures rose by 50% to reach $2.4 billion.
  • Nuclear energy declined from $5.2 billion to $4.6 billion.

The United States outpaced the EU and Japan in growth of clean energy and nuclear RD&D during this period (table 6-12; figure 6-46). U.S. RD&D rose from $1.5 billion in 2004 to $2.8 billion in 2008 before surging to $7.1 billion in 2009 due to ARRA spending. Renewable and energy efficiency received the bulk of ARRA spending, which temporarily increased spending in each technology area by about $1.5 billion. U.S. RD&D dropped in 2010 and 2011 to reach $4.0 billion, $2.5 billion higher than its RD&D in 2004. The EU's RD&D increased from $2.2 billion in 2004 to reach a stimulus-induced high of $5.0 billion in 2010 before dropping to $2.6 billion in 2011, still 18% higher than its level in 2004. Japan's RD&D declined from $4.5 billion to $3.9 billion.

Patenting of Clean Energy and Pollution Control Technologies

USPTO patents granted in clean energy and pollution control technologies can be classified using a taxonomy developed for this purpose. The taxonomy classifies patents involving bioenergy, nuclear, wind, solar, energy storage, smart grid, and pollution mitigation. The number of patents in these technologies jumped to a record high in 2012, which could reflect USPTO efforts to speed up processing of applications (figure 6-47; appendix table 6-57).[34] (For a more detailed description of how this taxonomy identifies clean energy and pollution control patents, see the sidebar in chapter 5, “Identifying Clean Energy and Pollution Control Patents.”) U.S. resident inventors were granted slightly less than half of the 8,800 clean energy and pollution control technology patents in 2012, continuing the advantage of non-U.S. inventors in these fields since 2003.

Among non-U.S. inventors, Japan, the EU, and South Korea, in that order, are the main recipients of U.S. patents for clean energy and pollution control technologies, with a collective share of 44% of total patents granted (figure 6-47; appendix table 6-57). Japan received 22%, and EU inventors received 16%. South Korean inventors received 6% of total patents, up from 2% in 2003. Patents granted to inventors in China and Taiwan have been increasing rapidly, although from a low base. In 2012, China's and Taiwan's shares of total patents were 2% each, up from 1% or less in 2003.

Clean energy and pollution control technology patents comprise four broad areas: alternative energy, with 5,000 patents granted; energy storage, with 1,000 patents; smart grid, with 800 patents; and pollution mitigation, with 2,000 patents (table 6-13; appendix tables 6-586-61). The proportion of alternative energy patents rose from 27% in 1997 to 59% in 2012, with major share gains by fuel cells and solar patents. Pollution mitigation technologies declined from 56% to 23%, driven by share losses of air and water quality.

Patent technology activity indexes measure the world share of a region, country, or economy in clean energy and clean technologies relative to its world share in patents in all technologies. A ratio greater than 1 signifies that patents by a region, country, or economy are concentrated in a particular technology (table 6-14).

In alternative energy patents, the U.S. has a high concentration in bioenergy and solar technologies and relatively low patent activity in fuel cells, hybrid vehicles, and wind energy (table 6-14; appendix tables 6-626-66). The EU has relatively high concentrations in bioenergy, wind, and nuclear and a relatively low concentration in electric hybrid technologies (appendix table 6-67). Japan has a high concentration of patents in electric hybrid technologies and fuel cells but relatively low activity in bioenergy, solar, and wind. South Korea has a high concentration in fuel cells but low concentrations in bioenergy, solar, and wind.

The United States and the EU have relatively low concentrations of patents in energy storage because of their low activity in battery technology, but this is an area of high concentration for Japan and South Korea (table 6-14; appendix tables 6-59 and 6-68). Despite its overall low concentration of patents in energy storage, the United States has a high concentration of patents in hydrogen power and storage (appendix table 6-69).

In smart grid, the United States has a high concentration of patents, the EU has a slightly above-average concentration, and Japan and South Korea have relatively low concentrations (table 6-14; appendix table 6-60).

In pollution mitigation technologies, the United States has a slightly above-average concentration of patents, with high concentrations in carbon capture and storage and in cleaner coal (table 6-14; appendix tables 6-61, 6-70, and 6-71). The EU has a particularly high concentration of patents in air pollution and a high concentration in carbon capture and storage (appendix table 6-72). Japan has average patenting activity in this area, with high concentrations in air pollution and in carbon capture and storage. South Korea has relatively low concentrations in all pollution mitigation technologies (appendix tables 6-736-75).

[31] The International Energy Agency (IEA) manual states: “The IEA concept of Energy RD&D differs from the Frascati concept of R&D, in that (i) it focuses on energy related programmes only; (ii) it includes 'demonstration projects'; and (iii) it includes state owned companies. . . . The energy RD&D data collected by the IEA should not be confused with the data on government budget appropriations or outlays on R&D (GBAORD) collected by the OECD Directorate for Science, Technology, and Industry for the socio-economic objective 'Production, distribution and rational utilisation of energy'” (IEA 2011:16–17).
[32] Bloomberg's data include investment in renewable energy, biofuels, energy efficiency, smart grid and other energy technologies, carbon capture and storage, and infrastructure investments targeted purely at integrating clean energy. Investment in solar hot water, combined heat and power, renewable heat, and nuclear are excluded, as are the proceeds of mergers and acquisitions (which do not contribute to new investment).
[33] The International Energy Agency has no official definition of clean energy. This discussion includes public research, development, and demonstration in energy efficiency, renewable energy, nuclear, hydrogen and fuel cells, CO2 capture and storage, and other power and storage technologies.
[34] The U.S. Patent and Trademark Office initiated a green technology pilot program on 7 December 2009 that expedites processing of some applications related to green technologies. For more information, see