Wind and Biofuel Revenues Grew in 2009, but Solar Dimmed

For most industries, 2009 will be remembered as one of the worst economic years in history. But it was a year in which the global clean-energy market -- including revenue from solar photovoltaics, wind power and biofuels – grew 11.4% to reach $139.1 billion, according to a report that research firm Clean Edge released Tuesday.

That doesn't mean clean-energy companies have made it out of the recession unscathed. Solar revenues decreased for the first time since Clean Edge began tracking the clean-energy industry a decade ago, falling 20% to $30.7 billion from $38.5 billion in 2008. The decline came in spite of worldwide installations that jumped to nearly 6 gigawatts in 2009 from more than 4 gigawatts in 2008, according to Clean Edge. (Solarbuzz, another research firm, counted 6.43 gigawatts last year and 5.95 gigawatts in 2008.)

The reason for the drop in revenues is plunging prices. Increased solar-manufacturing capacity, combined with the economic downturn and a Spanish market that shrank from an estimated 1.2 gigawatts in 2008 to 500 megawatts in 2009 because of a smaller federal incentive program, have combined to push prices down significantly. The average installed cost for photovoltaic systems fell from $7 per peak watt, meaning the capacity to produce one watt of electricity under ideal conditions, in 2008 to slightly more than $5 per peak watt in 2009 – and as little as $3 per watt for some of the largest projects, according to the Clean Edge report.

Lower Prices Taking a Toll on Manufacturers

That's good news for new solar customers, as installations have reached their lowest prices yet. Californians, for example, can buy 1-kilowatt solar-power systems for as little as $7,000 in some areas, according to California Solar Initiative numbers. (If you live in the Golden State, you can calculate your estimated price at Solar California.)

But while lower prices will likely continue to lead to growth in solar installations, the news is less welcome for those solar companies that are struggling to make money. Many companies reported falling margins and income in 2009. German manufacturer Q-Cells, the world's largest solar-cell maker, saw a breathtaking 1.35 billion euros ($1.8 billion) in losses last year -- compared to an income 190.6 million euros in 2008 -- as sales fell by more than a third to 801 million euros.

A few companies have been able to reduce their costs, maintain healthy margins and gain market share during the downturn. One of the most obvious examples is thin-film solar star First Solar (FSLR), which posted a 41.5% gross margin and net income of $141.6 million, or $1.65 per share, in the fourth quarter of 2009. Those numbers represented a 12.4% decline in the gross margin, year over year, but a net income increase of 7%.

Clean Energy Is a Key Player in Nations' Economic Recovery Plans

Overall, Clean Edge sees signs of hope for the clean-tech sector, which it forecasts will soar to $325.9 billion by 2019 (see chart, above). One big sign has been huge government stimulus spending on clean energy around the world, especially in China, which has become the world's largest photovoltaic manufacturer and which could end up investing $440 billion to $660 billion in clean energy over the next 10 years, according to Clean Edge.

"Governments around the world continue to see clean energy as a key player in their economic recovery plans," report co-author Ron Pernick said during a conference call press conference Tuesday morning. "Many industry proponents say the conversation needs to shift away from climate toward energy and national security and economic competitiveness."

Also, while U.S. venture investment in energy technologies fell to $2.2 billion in 2009 from $3.2 billion in 2008, investments declined far less than in other sectors, according to Bloomberg New Energy Finance. Indeed, the company found that energy technology became the largest venture category last year, making up 12.5% of venture investments, compared to 11.4% in 2008. Different groups, including the Cleantech Group, Greentech Media, Ernst & Young and PricewaterhouseCoopers and the National Venture Capital Association, have reported widely varying venture-capital figures for clean technology.

All together, clean energy has fared better than many other industries. "We weren't down as much as we might have imagined a year ago," Pernick said. But companies are still feeling the recession, and even though markets are starting to recover, the industry will face its share of challenges in the year ahead – not least of which is continuing price pressure. As Pernick put it, we're witnessing "the advent of the commoditization of cleantech."