Solar returns beat Treasuries, drawing investors from Buffett to Google

As reported By Christopher Martin Bloomberg News 3/21/12

NEW YORK – U.S. solar developers are luring cash at record rates from investors ranging from Warren Buffett to Google and KKR by offering returns on projects four times those available for Treasury securities.

Buffett’s Berkshire Hathaway Inc., together with the biggest Internet search company, private equity companies, and insurers MetLife Inc. and John Hancock Life Insurance Co., poured more than $500 million into renewable energy in the last year. That’s the most ever for companies outside the club of banks and specialist lenders that traditionally back solar energy, according to Bloomberg New Energy Finance data.

Once so risky that only government backing could draw private capital, solar projects now are making returns of about 15 percent, according to Stanford University’s Center for Energy Policy and Finance. That has attracted a wider community of investors eager to cash in on earnings stronger than those for infrastructure projects such as toll roads and pipelines. “A solar power project with a long-term sales agreement could be viewed as a machine that generates revenue,” said Marty Klepper, an attorney at Skadden Arps Slate Meagher & Flom, which helped arrange a solar deal for Buffett. “It’s an attractive investment for any firm, not just those in energy.”

With 30-year Treasuries yielding about 3.4 percent, investors are seeking safe places to park their money for years at a higher return. Solar energy fits the bill, with predictable cash flows guaranteed by contract for two decades or more. Those deals may be even more lucrative because many were signed before the cost of solar panels plunged 50 percent last year.

Buffett’s MidAmerican Energy Holdings Co. agreed to buy the Topaz Solar Farm in California from First Solar Inc. on Dec. 7. The project’s development budget is estimated at $2.4 billion and it may generate a 16.3 percent return on investment by selling power to PG&E Corp. at about $150 a megawatt-hour through a 25-year contract, according to New Energy Finance calculations. It will have 550 megawatts of capacity and is expected to go into operation in 2015, making it one of the world’s biggest photovoltaic plants.

“After tax, you’re looking at returns in the 10 percent to 15 percent range” for solar projects, said Dan Reicher, executive director of the Stanford center. “The beauty of solar is, once you make the capital investment, you’ve got free fuel and very low operating costs.”

The long-term nature of solar power purchase deals makes them similar to some bonds. And because a solar farm is a tangible asset, these investments also function much like those for infrastructure projects, with cash flows comparable to toll roads, bridges and pipelines, said Stefan Heck, a director at McKinsey & Co. in New York who leads the firm’s clean-tech work. Once a project starts producing power, investors can earn a return that’s “higher than most bonds,” he said. “There are a lot of pension funds with long-term horizons that are very interested in this space.”

Governments remain the biggest backers of the solar industry; President Obama’s administration suffered criticism for investing in Solyndra, a solar manufacturer that went bankrupt last year. Worldwide, the U.S. Treasury’s Federal Financing Bank was the biggest asset-finance lender for renewable energy companies in the past year, arranging 12 deals worth $11.2 billion, according to New Energy Finance. The Brazilian development bank BNDES, Bank of America, and Banco Santander followed.

In 2009, solar technology was so unfamiliar that few banks would back projects that required billions in upfront investment and wouldn’t begin producing revenue for years, Klepper said. The biggest financiers for the industry that year were Madrid- based Santander, HSH Nordbank of Hamburg and Banco Bilbao Vizcaya Argentaria of Bilbao, Spain, New Energy Finance said.

That year, the Energy Department began funding a program to guarantee loans for solar farms and other renewable energy projects that supported almost $35 billion in financing before winding down in September. The government’s endorsement assuaged investors’ concerns and built up a bigger community of people who understand how to make money from solar deals, said Arno Harris, chief executive officer of Sharp Corp.’s renewable power development unit Recurrent Energy.

“Solar is now bankable,” Harris said. “When solar was perceived as more risky, it required a premium,” and now it’s “becoming part of a much broader capital market.”

Long-term power-purchase contracts are the key to making solar a reliable investment, Harris said. Utilities in sunny states such as California, Arizona, and Nevada have agreed to pay premiums for electricity generated by sunshine.

Read more: http://www.philly.com/philly/business/homepage/20120321_Solar_returns_beat_Treasuries__drawing_investors_from_Buffett_to_Google.html#ixzz1plWe9SD0
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Solar makes sense

As reported in Philadelphia Inquire May 30, 2011

With Pennsylvania
boasting the nation’s second largest number of solar-industry jobs, state
officials would be foolish to let the sun set on such a nascent but promising
industry. But that could happen due to a temporary mismatch between solar-energy
financing and market demand.

The construction of more than 4,000 solar projects has been a roaring
success, responsible for generating several thousand jobs at 600 solar
businesses. Growing that industry from scratch, with state and federal aid, also
boosted the use of nonpolluting and renewable energy. That will be particularly
helpful in meeting summer’s peak demand.

Yet, the boom in solar projects has outpaced the amount of solar energy
utilities are required to buy under the state’s alternative-energy rules. That
has depressed the value of solar-energy credits needed to provide a return on
photovoltaic solar systems, which have a steep, up-front price tag.

The best way for state officials to spur solar to new heights would be to
boost the modest solar-energy standard – now far lower than neighboring states,
at only 0.5 percent – by 2021. But last year, that idea ran into strong
opposition from Exelon and other utilities, coal producers, and business groups
– and a certain Republican candidate for governor.

Fortunately, a fellow Republican, State Rep. Chris Ross from Chester County,
unveiled a legislative proposal Tuesday that should be more to Gov. Corbett’s
liking. Ross would accelerate the amount of solar energy utilities are required
to purchase for the next few years, but leave the overall standard at just 0.5
percent. He would also follow other states by barring out-of-state solar
producers contributing to the solar glut in Pennsylvania.

The Ross proposal amounts to a tweak, but one that could be critical to
maintaining the state’s foothold in solar energy. Corbett and Republican
legislative leaders could fall back on tea-party ideological antagonism toward
so-called government mandates – or they could prove themselves progressive
enough to embrace a modest plan that makes sense for the state’s 21st-century
economy.

Lincoln Financial Field gets even greener

SOUTH PHILADELPHIA – November 18, 2010 (WPVI) — When you think of the Eagles you think GREEN – and we’re not just talking about the

The Eagles organization has long been committed to the environment and energy sustainability. Well, today the Eagles will take a bold move when they make Lincoln Financial Field the first major sports stadium in the world to generate its own electricity.

In the coming months the Linc will be outfitted with approximately eighty 20-foot tall spiral shaped wind turbines on the top rim of the stadium and 2,500 solar panels on the façade. Along with the state of the art power system, energy will be generated on-site.

The project will cost an estimated $30-million, but the Eagles expect to save an estimated $60-million in energy costs in the coming years.

The stadium will generate enough electricity to power 26,000 homes – far more than needed to power the stadium. So, the Eagles will be selling excess electricity back to the local power grid.

Two hundred people are expected to be employed to design and install the system. Six hundred more jobs are expected to be created because the Eagles are committed to using people from the local community through contractors and vendors.

More information on the project is scheduled to be released later today at Lincoln Financial Field by Eagles owner Jeffrey Lurie, Philadelphia Mayor Michael Nutter and NFL Commissioner Roger Goodell.

Officials to break ground on South Jersey solar farm, region’s largest

As reported in NJ BIZ

The Garden State’s status as a solar-energy leader will get a major boost Wednesday, when officials break ground on what will be the largest solar energy farm in the Northeast.

Con Edison Development, a subsidiary of Consolidated Edison Inc., and Texas-based Panda Power Funds plan to build a 20-megawatt solar farm on a 100-acre site in Pilesgrove. The installation, expected to go online in May 2011, will feature 71,400 solar panels and cost between $85 million and $90 million.

A rendering of the solar farm, which will be the largest in the Northeast.

Con Edison Development and Panda announced their intent to partner on solar projects in April.

Steve Tessum, vice president of east region management at Panda and manager of the Pilesgrove project, said South Jersey was chosen as the site in part because of the state’s support of solar energy.

“We did look at other states,” Tessum said. “Quite frankly, the regulatory climate in New Jersey is friendly to somebody who wants to own and develop a solar-power utility.”

The farm will be connected directly to the electrical grid via the Atlantic City Electric distribution system, said Mark Noyes, vice president of Con Edison Development.

Noyes said the arrangement with Panda is a 50-50 partnership: Panda is taking the lead in development, Con Edison will take the lead in operations and energy management, and construction will be split.

“The reason it makes sense to partner with Panda is, much like our background, they’re developers and they know how to develop projects, whether natural gas and oil, wind, solar,” Noyes said. “The development expertise is really what drives the development.”

Noyes said the property had originally been slated for the development of 67 homes, each with its own septic tank.

“The town opposed that type of taxing, from an environmental and economic standpoint,” Noyes said. “The construction of those homes never got through the planning board, so we were able to go in and acquire that land from the local player for this solar farm.”

Tessum said the solar farm doesn’t require any municipal infrastructure development, as the housing plot would have.

Con Edison Development said the installation is expected to generate enough electricity to power 5,100 homes.

E-mail Jared Kaltwasser at jkaltwasser@njbiz.com

Solar Battle Heats Up

New Jersey has set aggressive goals for its solar industry. The question now is can it afford to meet them.

By Tom Johnson, August 31 in Energy & Environment |6 Comments

By most accounts New Jersey’s solar industry has enjoyed a remarkable run in recent years, installing up to 180 megawatts of capacity, enough to vault it at one point to behind only California in the number of solar installations.

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Clean energy advocates credit the solar industry with creating more than 2,000 jobs, a number expected to climb to 3,500 by the end of the year. And the more than 200 firms involved in the industry boost their argument that a green economy can only bolster New Jersey’s prospects for growth.

Yet the industry is facing tough questions from the Christie administration. The concern is cost: How expensive will it be to meet aggressive goals to increase New Jersey’s reliance on solar energy, a situation some argue is driving up the price of electric power in a state that already has high energy expenditures.

The Solar Balancing Act

The focus on solar occurs as the state Board of Public Utilities is trying to pinpoint ways to reduce utility bills while complying with legislation that increases solar energy goals dramatically.

By 2026, a bill passed this past January directs the state to have solar capacity of 5,000 megawatts, roughly equivalent to the output of five nuclear power plants. At the same time, funding for clean energy programs is being sharply curtailed and the agency is rethinking the state’s energy master plan and its ambitious goals for renewable energy.

What is worrisome to skeptics is the cost of solar energy today is still much higher than conventional energy. They note that solar renewable energy certificates on the spot market sell for around $670, or the equivalent of 60 cents per kilowatt hour. (Solar certificates are the price owners of solar systems earn for electricity they generate.) In comparison, consumers pay about 11 cents per kilowatt hour for electricity generated by conventional power plants.

Supply and Demand

Many solar advocates are frustrated because the debate is losing sight of the benefits the sector has delivered to New Jersey. They concede the price for the solar certificates is too high, but argue it is a function of demand outstripping supply and insist prices will drop when supply and demand are more in balance.

“There’s been not enough credit to the local solar industry that has developed,’’ said Fred Zalcman, director of regulatory affairs in eastern states for SunEdison, a large solar firm. “It’s created a lot of local jobs.’’

Others are blunter. “We believe solar is falling out of favor with this administration,’’ said Dolores Phillips, executive director of the Mid-Atlantic Solar Energy Industries Association, noting only $3.2 million is allocated to the solar residential program in a straw budget proposal for next year. “Too many discussions are taking place behind closed doors.’’

Developing Solar Responsibly

To some, though, the debate is timely. If New Jersey is going to pursue aggressive solar targets, then it must do it responsibly and must do it recognizing what the impact will be on ratepayers, argued Steven Goldenberg, an attorney who represents manufacturers that use tremendous amounts of energy.

Terry Sobolewski, business development manager for SunPower, said the industry needs to make its case how the rapid development of the sector in New Jersey has created thousands of well-paying jobs here, and would continue to do so if the state stays on target to promote solar aggressively.

“Now, we’ve got 180 megawatts of installed solar and it’s created 3,500 jobs,’’ said Sobolewski, who suggested an even bigger bonanza of new jobs could be created if the state sticks with its target of 5,000 megawatts by 2026. “If you project forward, it’s a lot no matter how you slice it.’’

Lower Prices Expected

For those who argue solar is too expensive based on the spot prices being fetched by the solar certificates, Sobolewski said that argument assumes that is the price being paid for all certificates when it reflects about two-thirds of the market. Other solar certificates, which are earned under long-term contracts signed with suppliers, are averaging about $374, he said. “With more long-term contracts, the price will come down.’’

He and others argue the price of solar systems also will drop as technology improves. And as larger solar systems are built, economies of scale will drive the cost down further.

“Yes, solar is expensive right now, but we’re building an industry,’’ said Matt Elliott, clean energy advocate for Environment New Jersey. “It’s nothing new to subsidize a new energy source so long as the costs keep going down and the technology is improving.’’

Beyond the issue of the solar certificates, advocates argue when trying to assess the cost of various programs, the state ought to consider the benefits. For instance, solar power replaces electricity generated by peaking plants, which are the most expensive ways of producing power and increase the cost of electricity for everyone. Solar produces the most power on days when peak plants generally run, typically, the hottest summer days when the sun is shining.

Solar-Powered Plane Flies for 26 Hours

Solar Impulse, piloted by André Borschberg, flew for 26 hours and reached a height of 28,543 feet, setting a record for the longest and highest flight ever made by a solar plane.

By ALAN COWELL

Published: July 8, 2010

PARIS — Slender as a stick insect, a solar-powered experimental airplane with a huge wingspan completed its first test flight of more than 24 hours on Thursday, powered overnight by energy collected from the sun during a day aloft over Switzerland.

The organizers said the flight was the longest and highest by a piloted solar-powered craft, reaching an altitude of just over 28,000 feet above sea level at an average speed of 23 knots, or about 26 miles per hour.

The plane, Solar Impulse, landed where it had taken off 26 hours and 9 minutes earlier, at Payerne, 30 miles southwest of the capital, Bern, after gliding and looping over the Jura Mountains, its 12,000 solar panels absorbing energy to keep its batteries charged when the sun went down.

The pilot, André Borschberg, 57, a former Swiss Air Force fighter pilot, flew the plane from a cramped, single-seat cockpit, buffeted by low-level turbulence after takeoff and chilled by low temperatures overnight.

“I’ve been a pilot for 40 years now, but this flight has been the most incredible one of my flying career,” Mr. Borschberg said as he landed, according to a statement from the organizers of the project. “Just sitting there and watching the battery charge level rise and rise, thanks to the sun.” He added that he had flown the entire trip without using any fuel or causing pollution. The project’s co-founder, Dr. Bertrand Piccard, who achieved fame by completing the first nonstop, round-the-world flight by hot air balloon in 1999, embraced the pilot after he landed the plane to the cheers of hundreds of supporters.

“When you took off, it was another era,” The Associated Press quoted Dr. Piccard as saying. “You land in a new era where people understand that with renewable energy you can do impossible things.”

The project’s designers had set out to prove that — theoretically at least — the plane, with its airliner-size, 208-foot wingspan, could stay aloft indefinitely, recharging batteries during the day and using the stored power overnight. “We are on the verge of the perpetual flight,” Dr. Piccard said.

The project’s founders say their ambition is for one of their craft to fly around the world using solar power. The propeller-driven Solar Impulse, made of carbon fiber, is powered by four small electric motors and weighs around 3,500 pounds. During its 26-hour flight, the plane reached a maximum speed of 68 knots, or 78 miles per hour, the organizers said.

The seven-year-old project is not intended to replace jet transportation — or its comforts.

Just 17 hours after takeoff, a blog on the project’s Web site reported, “André says he’s feeling great up there.”

It continued: “His only complaints involve little things like a slightly sore back as well as a 10-hour period during which it was minus 20 degrees Celsius in the cockpit.”

That made his drinking water system freeze, the post said and, worst of all, caused his iPod batteries to die.

Energy funds raided to balance New Jersey budget

By Maya Rao Inquirer Staff Writer TRENTON –

 Last month, a state utilities board voted to allocate $15 million in federal stimulus money for grants to make businesses more energy efficient.

The money for the program, which seeks to lower New Jersey residents’ utility bills by reducing demand from the biggest users of the electric grid, should have come from a fee assessed on major commercial and industrial users since 2003.

 But the Retail Margin Fund, which holds that revenue, is empty – among the consequences of hundreds of millions of dollars in diversions from “dedicated” funds to help the state close a multibillion-dollar budget gap.

 Budget documents show that environmental and clean-energy programs designed to reduce New Jersey household and commercial utility bills are being hit particularly hard, with about $400 million rerouted into the state’s general fund.

The state raided $128 million from the Retail Margin Fund, which is generated by fees from commercial and industrial users, in the fiscal year that ended June 30, and will take $14 million under the $29.4 billion budget signed into law last week.

Greg Reinert, spokesman for the Board of Public Utilities, said the fund had never spent the money collected over the years.

 Today, he said, “there’s nothing left in it.” Just last year, the state enacted a law authorizing the fund to spend $60 million on combined-heat-and-power grants for businesses. The program aimed to help the state develop 1,500 megawatts of cogeneration capacity by 2020.

 Assemblyman Upendra Chivukula (D., Somerset), a primary sponsor of the 2009 law, criticized the shift of $15 million in stimulus money to fund the cogeneration program as a one-shot fix. The fund is paid into by business customers “who are hurting with higher energy costs.

 By taking their money away and not giving it back to them, to balance the budget, it’s totally inappropriate,” he said. Chivukula grilled the sponsor of the bill authorizing the diversions from that and other environmental funds on the Assembly floor during last Monday’s marathon legislative session. Yet Chivukula provided one of the handful of Democratic votes needed to pass the measure, citing “the spirit of bipartisanship.” “Given the dire circumstances we’re facing in New Jersey with revenue shortfalls, we have little or no choice” but to look to other areas “to make this budget balanced,” Assemblyman Joseph Malone (R., Burlington), the bill’s sponsor and a previous critic of budget raids, told Chivukula.

The moves concern lawmakers and environmental advocates alike. “One of the problems is that this isn’t taxpayer money. . . . It was ratepayer money that had been set aside and dedicated to clean energy that helps people save money and helps create jobs and helps reduce pollution, so it was a no-win situation for the environment, the economy, and the people of New Jersey,” said Matt Elliott, the global-warming and clean-energy advocate for Environment New Jersey.

 “Once they get used to robbing these funds,” said Jeff Tittel, director of the New Jersey Sierra Club, “they may continue to rob them because it becomes easy – and that is going to mean higher electric costs for consumers, fewer jobs in a time when we need to grow our economy, and more air pollution.”

The largest diversion comes from the Clean Energy Fund, which annually takes in about $250 million, an average of $20 per New Jersey household, through a charge on utility bills. The fee stems from the 1999 utility deregulation under Republican Gov. Christie Whitman.

Revelations that the administration of Gov. Jon S. Corzine rerouted $30 million from the fund in 2009 drew outrage from several South Jersey lawmakers. Assemblymen Vincent Polistina and John Amodeo, Republicans from Atlantic County, lambasted the move as “Exhibit A of budget-balancing gimmicks.” Sen. Diane Allen (R., Burlington) called for an end to the practice.

 But those same lawmakers closed out fiscal 2010 by voting to authorize a $158 million diversion from the fund, and an additional $10 million this fiscal year.

In interviews, the three legislators said they continued to oppose raiding funds, but described their votes as necessary in a difficult fiscal climate.

Polistina blamed the Democratic Corzine administration, saying it had “overestimated revenues so badly that we were left with very little options, and at this point it seemed like the best way to try to close the shortfall that was created by Corzine.”

The moves have also upset the industry: The Mid-Atlantic Solar Energy Industries Association sued the Christie administration in May, saying diversions of clean-energy money were unconstitutional. Reinert said the impact of the diversions from the Clean Energy Fund had been softened by the BPU’s recapturing $61 million that had been set aside but never spent on various projects.

He said the BPU had actually increased funding for a successful home energy audit program. Taking money from dedicated funds is a longtime, if controversial, practice under administrations of both parties in Trenton.

State leaders gave approval last week to dip into funds dedicated to spinal-cord and breast-cancer research, disability payments, and economic development. They authorized diverting $10 million set aside to make state buildings more energy efficient, and tapping the recycling fund for $7 million, the same amount diverted last year. The budget also says that “all revenues from fees and fines collected by the Department of Environmental Protection . . . shall be deposited into the state general fund without regard to their specific dedication.”

States from California to Connecticut are raiding dedicated funds to offset enormous budget deficits. Rhode Island this year decided it was a violation of state law to divert cap-and-trade revenue from the Regional Greenhouse Gas Initiative, which is an agreement among 10 Northeast states to cut carbon emissions. New York and New Hampshire, however, took millions from their RGGI funds this year.

New Jersey is redirecting $65 million in RGGI money to its general fund. Sen. Jeff Van Drew (D., Cape May) said the moves meant a lack of investment in the future, given that New Jersey has been “on the cutting edge of clean energy.”

He withheld his support for the budget last year out of numerous concerns about raiding dedicated funds, and has sponsored a resolution to bar the practice through a state constitutional amendment. He nonetheless voted to authorize the diversions last week, explaining: “We have to move forward in New Jersey.

We have to put out a message that we can’t have a [government] shutdown.”

Our Perspective:

I find this article to be really distuurbing. It just continues to validate my view that the system is broken. We have been caught up in greed and abandoned our ideals to be self serving. We have to rethink our efforts and start thinking outside the box.

The status quo is not working. The politicians are not serving our best interest. There must be a better way and we have to start electing people who our true to our ideals and will work to make this world a better place. Stop putting bandaids on everything.

Solar Panels Up, Up and Away on Utility Poles

by Julie Dengler 05.MAR.10
It’s a bird, it’s a plane — it’s a solar panel?
Residents of many local towns may have recently noticed panels being installed about 15 feet up on residential utility and street-light poles. The panels are five feet by two and half feet, and weigh about 60 pounds. By the end of 2013, 200,000 panels will have been installed throughout New Jersey.

PSE&G sources say that their “investment is the largest pole-attached solar installation in the world … New Jersey has more installed solar capacity than any state except California.” New Jersey estimates its solar power capacity at 40 megawatts of “pole-mounted solar.” Karen Johnson, media spokesperson for the company, estimates one megawatt as enough energy to power approximately 800 homes.
The work is part of a renewable energy program approved for PSE&G by federal regulators last July. It is called Solar 4 All, and is estimated to be a $515 million investment on the part of PSE&G in New Jersey over the next three years. The goal of the program is to move the state closer to meeting an energy master plan requirement of 4.4% (or 80 megawatts) of solar energy use in the electric grid by 2020.
PSE&G says, “The installations will be paid for by PSE&G electric customers. The first year bill impact for the average residential customer will be roughly 10 cents a month.”
Currently, panels are being placed on pre-selected PSE&G-owned utility and street light poles only. Negotiations to share space with Verizon-owned poles are planned.
According to the PSE&G fact sheet on the installation (available at http://www.PSEG.com), poles that qualify for the panel meet several criteria, besides being owned by the utility company. PSE&G is selecting poles that can support the units, face in a southerly direction and have no more than one transformer already on the pole.
The Retrospect caught up with two contracted installers from Riggs Distler and Company, Inc. this week, while they installed a new panel on a pole on Haddon Avenue. Derwin Booker said that the project is keeping his union, and the contractor he works for, busy. While he has been working on installs in Collingswood and Haddon Township, he also worked on the recent installs along Kings Highway in Cherry Hill.
All of the panels are equipped with GPS (Global Positioning Satellite receivers), and each faces exactly 193 degrees south-southwest in order to maximize solar power collection, explained Booker. He said that specific poles were selected from the millions of utility and street poles throughout New Jersey. The panels are equipped with what he called an aggregator, which communicates the collection rates of 10 to 15 panels at a time, back to a main data collection site, so that the rate of energy per cluster of panels can be measured and tracked.
All of the solar energy collected by the panels flows back into the electronic grid as power. Booker commented that the additional energy generated can help in heavy electrical use periods – like summertime, when air conditioners are running — when service is at risk of brown-outs.
Additionally, PSE&G explains, “The installations will generate Solar Renewable Energy Certificates (SRECs). PSE&G will sell any SRECs it generates to offset program costs. PSE&G will sell the power into the PJM (Pennsylvania-Jersey-Maryland) wholesale grid and will receive federal tax credits – which will also be used to offset the cost to customers.”

– Copyright 2010 The Retrospect

Bill Gates: We need global ‘energy miracles’

By John D. Sutter, CNN //

// -1) {document.write(‘February 13, 2010 — Updated 0103 GMT (0903 HKT)’);} else {document.write(‘February 12, 2010 8:03 p.m. EST’);}
// ]]>February 12, 2010 8:03 p.m. EST

Long Beach, California (CNN) — Microsoft Corp. founder and philanthropist Bill Gates on Friday called on the world’s tech community to find a way to turn spent nuclear fuel into cheap, clean energy.

“What we’re going to have to do at a global scale is create a new system,” Gates said in a speech at the TED Conference in Long Beach, California. “So we need energy miracles.”

Gates called climate change the world’s most vexing problem, and added that finding a cheap and clean energy source is more important than creating new vaccines and improving farming techniques, causes into which he has invested billion of dollars.

The Bill & Melinda Gates Foundation last month pledged $10 billion to help deploy and develop vaccines for children in the developing world.

The world must eliminate all of its carbon emissions and cut energy costs in half in order to prevent a climate catastrophe, which will hit the world’s poor hardest, he said.

“We have to drive full speed and get a miracle in a pretty tight timeline,” he said.

Gates said the deadline for the world to cut all of its carbon emissions is 2050. He suggested that researchers spend the next 20 years inventing and perfecting clean-energy technologies, and then the next 20 years implementing them.

The world’s energy portfolio should not include coal or natural gas, he said, and must include carbon capture and storage technology as well as nuclear, wind and both solar photovoltaics and solar thermal power.

“We’re going to have to work on each of these five [areas] and we can’t give up on any of them because they look daunting,” he said. “They all have significant challenges.”

Gates spent a significant portion of his speech highlighting nuclear technology that would turn spent uranium — the 99 percent of uranium rods that aren’t burned in current nuclear power plants — into electricity.

That technology could power the world indefinitely; spent uranium supplies in the U.S. alone could power the country for 100 years, he said.

A “traveling wave reactor” would burn uranium waste slowly, meaning a 60-year supply could be added to a reactor at once and then not touched for decades, he said.

Gates also called for innovation in battery technology.

“All the batteries we make now could store less than 10 minutes of all the energy [in the world],” he said. “So, in fact, we need a big breakthrough here. Something that’s going to be of a factor of 100 better than what we have now.”

Gates called for more investment in climate-related technology. He said he is backing a company called TerraPower, which is working on an alternate form of nuclear technology that uses spent fuel.

Money that goes into research and development will pay bigger returns than other investments, he said, especially if money goes into energy sources that will be cheap enough for the developing world to afford.

Clean energy technologies must be installed in poorer countries as they develop, he said.

“You’d be stunned at the ridiculously low costs of innovation,” said Gates, who received a standing ovation for his remarks.

If he could wish for anything in the world, Gates said he would not pick the next 50 years’ worth of presidents or wish for a miracle vaccine.

He would choose energy that is half as expensive as coal and doesn’t warm the planet.

China Leading Global Race to Make Clean Energy

By KEITH BRADSHER

Published: January 30, 2010

Shiho Fukada for The New York Times

Components of wind turbines at a factory in Tianjin, China. Shifting to sustainable energy could leave the West dependent on China, much as the developed world now depends on the Mideast.

TIANJIN, China — China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world’s largest maker of wind turbines, and is poised to expand even further this year.

As China takes the lead on wind turbines, above, and solar panels, President Obama is calling for American industry to step up.

China has also leapfrogged the West in the last two years to emerge as the world’s largest manufacturer of solar panels. And the country is pushing equally hard to build nuclear reactors and the most efficient types of coal power plants.

These efforts to dominate the global manufacture of renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.

“Most of the energy equipment will carry a brass plate, ‘Made in China,’ ” said K. K. Chan, the chief executive of Nature Elements Capital, a private equity fund in Beijing that focuses on renewable energy.

President Obama, in his State of the Union speech last week, sounded an alarm that the United States was falling behind other countries, especially China, on energy. “I do not accept a future where the jobs and industries of tomorrow take root beyond our borders — and I know you don’t either,” he told Congress.

The United States and other countries are offering incentives to develop their own renewable energy industries, and Mr. Obama called for redoubling American efforts. Yet many Western and Chinese executives expect China to prevail in the energy-technology race.

Multinational corporations are responding to the rapid growth of China’s market by building big, state-of-the-art factories in China. Vestas of Denmark has just erected the world’s biggest wind turbine manufacturing complex here in northeastern China, and transferred the technology to build the latest electronic controls and generators.

“You have to move fast with the market,” said Jens Tommerup, the president of Vestas China. “Nobody has ever seen such fast development in a wind market.”

Renewable energy industries here are adding jobs rapidly, reaching 1.12 million in 2008 and climbing by 100,000 a year, according to the government-backed Chinese Renewable Energy Industries Association.

Yet renewable energy may be doing more for China’s economy than for the environment. Total power generation in China is on track to pass the United States in 2012 — and most of the added capacity will still be from coal.

China intends for wind, solar and biomass energy to represent 8 percent of its electricity generation capacity by 2020. That compares with less than 4 percent now in China and the United States. Coal will still represent two-thirds of China’s capacity in 2020, and nuclear and hydropower most of the rest.

As China seeks to dominate energy-equipment exports, it has the advantage of being the world’s largest market for power equipment. The government spends heavily to upgrade the electricity grid, committing $45 billion in 2009 alone. State-owned banks provide generous financing.

China’s top leaders are intensely focused on energy policy: on Wednesday, the government announced the creation of a National Energy Commission composed of cabinet ministers as a “superministry” led by Prime Minister Wen Jiabao himself.

Regulators have set mandates for power generation companies to use more renewable energy. Generous subsidies for consumers to install their own solar panels or solar water heaters have produced flurries of activity on rooftops across China.

China’s biggest advantage may be its domestic demand for electricity, rising 15 percent a year. To meet demand in the coming decade, according to statistics from the International Energy Agency, China will need to add nearly nine times as much electricity generation capacity as the United States will.

So while Americans are used to thinking of themselves as having the world’s largest market in many industries, China’s market for power equipment dwarfs that of the United States, even though the American market is more mature. That means Chinese producers enjoy enormous efficiencies from large-scale production.

In the United States, power companies frequently face a choice between buying renewable energy equipment or continuing to operate fossil-fuel-fired power plants that have already been built and paid for. In China, power companies have to buy lots of new equipment anyway, and alternative energy, particularly wind and nuclear, is increasingly priced competitively.

Interest rates as low as 2 percent for bank loans — the result of a savings rate of 40 percent and a government policy of steering loans to renewable energy — have also made a big difference.

As in many other industries, China’s low labor costs are an advantage in energy. Although Chinese wages have risen sharply in the last five years, Vestas still pays assembly line workers here only $4,100 a year.

China’s commitment to renewable energy is expensive. Although costs are falling steeply through mass production, wind energy is still 20 to 40 percent more expensive than coal-fired power. Solar power is still at least twice as expensive as coal.

The Chinese government charges a renewable energy fee to all electricity users. The fee increases residential electricity bills by 0.25 percent to 0.4 percent. For industrial users of electricity, the fee doubled in November to roughly 0.8 percent of the electricity bill.

The fee revenue goes to companies that operate the electricity grid, to make up the cost difference between renewable energy and coal-fired power.

Renewable energy fees are not yet high enough to affect China’s competitiveness even in energy-intensive industries, said the chairman of a Chinese industrial company, who asked not to be identified because of the political sensitivity of electricity rates in China.

Grid operators are unhappy. They are reimbursed for the extra cost of buying renewable energy instead of coal-fired power, but not for the formidable cost of building power lines to wind turbines and other renewable energy producers, many of them in remote, windswept areas. Transmission losses are high for sending power over long distances to cities, and nearly a third of China’s wind turbines are not yet connected to the national grid.

Most of these turbines were built only in the last year, however, and grid construction has not caught up. Under legislation passed by the Chinese legislature on Dec. 26, a grid operator that does not connect a renewable energy operation to the grid must pay that operation twice the value of the electricity that cannot be distributed.

With prices tumbling, China’s wind and solar industries are increasingly looking to sell equipment abroad — and facing complaints by Western companies that they have unfair advantages. When a Chinese company reached a deal in November to supply turbines for a big wind farm in Texas, there were calls in Congress to halt federal spending on imported equipment.

“Every country, including the United States and in Europe, wants a low cost of renewable energy,” said Ma Lingjuan, deputy managing director of China’s renewable energy association. “Now China has reached that level, but it gets criticized by the rest of the world.”