Cleantech sector gaining steam – despite regulatory and other setbacks.

Sara Hastings-Simon, Dickon Pinner, and Martin Stuchtey of McKinsey: “….Is cleantech failing? In a word, no. Rather, the sector has experienced a cycle of excitement followed by high (and often inflated) expectations, disillusionment, consolidation, and then stability as survivors pick up the pieces.” “We’ve seen this before with other once-emerging technologies, such as cars, railroads, elevators, oil, and the Internet. Much of cleantech is just leaving its disillusionment or consolidation phase. For example, in transport, Tesla Motors is looking good; Fisker Automotive went into bankruptcy in 2013. In energy, SunPower is making healthy margins and SolarCity raised $450 million in 2013, but over a hundred other solar companies are gone. The shakeout is brutal—and typical. It has weeded out weaker players, making the industry as a whole more robust. Despite the rough patch, annual growth is at double-digit rates.
It’s also important to look beyond financial statements. Global wind installations, for example, have soared about 25 percent a year since 2006 (exhibit). And global commercial investments in clean energy have more than quadrupled, from nearly $30 billion in 2005 to about $160 billion in 2012. Even countries with vast reserves of oil and coal—in the Middle East and Central Asia—recognize that they can’t miss out and are developing substantial programs for renewables. Meanwhile, the average real cost per oil well has doubled, and new mining discoveries have been flat, despite high investment. And, clearly, new ways are needed to meet the needs of the 1.3 billion people who lack electricity and of the 2.7 billion who rely on traditional biomass, such as wood and dung, for cooking.
….It’s important to remember, too, that the cleantech space is diverse; it cannot be painted with a broad brush. We looked at 16 important clean technologies and found that while every single one has made progress over the past decade, some are moving much faster than others. Just over half of them—advanced building technologies, advanced agriculture, food life-cycle optimization, grid analytics, grid-scale storage, intelligent transport, next-generation vehicles, solar PVs (photovoltaics), unconventional natural gas, and water treatment—could become truly disruptive to the incumbent industries. The others have enormous potential and could well succeed, but without disrupting the status quo.
….Solar provides evidence both for and against the need for continued regulation. Given budget concerns, a number of countries have cancelled or reduced subsidies, and growth has slowed. But the larger point is that solar is still growing. For example, Germany has cut its feed-in tariffs to encourage renewables production, and its strategy ofEnergiewende—a long-term effort to deploy renewables, move away from fossil fuels, and phase out nuclear power—has had some troubles. But the use of renewables continues to grow. Globally, solar installations have risen by 57 percent a year, on average, since 2006. One lesson is that sudden changes in regulation can create peaks and valleys in demand, and that isn’t helpful to establish an industry on a sound footing. But the point is that while regulation can be and has been helpful to launch clean technologies, it is no longer critical in many sectors.”