Abu Dhabi's first major solar power project, a field of panels at the edge of the capital, cost US$50 million (Dh183.6m) to build in late 2008. If the investment had been made 18 months later, the bill might have been up to 40 per cent less, according to solar price indexes.
So it goes in the renewable-energy industry, where the tens of billions of dollars of investment coursing through the sector and government policy changes can transform economic calculations overnight. In the case of solar energy, new production capacity for raw materials and panels flooded the market at the end of 2008, just as the economic crisis broke. The result was that prices for solar power systems fell as much as half by the following year, threatening some producers with bankruptcy but making the technology more competitive with cheaper fossil fuels.
If solar power grabbed the spotlight early last year, the past 12 months have been a crucial time for wind energy, with huge capacities added in China and the US and new turbine designs heralding the potential for immense wind parks built far out at sea. Weak economic growth, public scepticism about the science behind global warming and the failure of governments to reach agreement on cutting carbon emissions all served as challenges to the renewable-energy industry this year, but still the pace of growth has not let up, says Helene Pelosse, the interim director general of the International Renewable Energy Agency (IRENA). "Worldwide interest on renewable energy is not going backwards. On the contrary, I think it's increasing everywhere," she says. "Look at European countries, China, some African countries such as Kenya, and Japan."
Aside from hydroelectricity, wind energy is the most mature renewable technology and - in places with regular wind - comes closest to widely competing on a cost basis with natural gas and coal.
Global wind-energy capacity grew 31 per cent last year, adding a record 38,000 megawatts, according to the World Wind Energy Council. That is equivalent to the output of 27 nuclear reactors of the capacity ordered by Abu Dhabi last year. With every doubling of the world output of wind-generated electricity, greater economies of scale are expected to push production costs down by 10 per cent, according to the European Wind Energy Association.
Most important, Ms Pelosse says, the offshore wind industry has finally started to gather steam, with the US's first project receiving government approval and the announcement of several big projects in the UK that will make the country the leader in the burgeoning industry. "I think it's the kick-off," she says. "They are still struggling, but especially in Europe, they are trying to make it happen."
The wind tends to blow hardest far out at sea, but construction and operation costs in that environment are considerably higher. Rows of turbines are vulnerable to storms and waves that can tip them over or damage transmission wires. The industry stands to benefit immensely from huge new turbines that could produce 10mw each, doubling or tripling offshore output, says Peter Rae, the vice president of the World Wind Energy Association. A consortium of UK companies last week unveiled a new turbine design with two horizontally outstretched wings that span 275 metres from tip to tip. It would compete with two turbines of more conventional design from the US and Norway that would put turbines atop pedestals nearly 100 metres above the surface of the ocean.
The steep fall in solar panel prices last year propelled the market's development ahead by several years and put solar energy in closer contention to become a leading source of renewable power.
The European Photovoltaic Industry Association and a number of analysts say solar panels can already produce electricity at a cost competitive with conventional sources in parts of southern Italy, where the sun shines often and electricity tariffs are among the highest in the world. Japan and Hawaii will follow, reaching "grid parity" within several years, the group predicts. Bloomberg New Energy Finance, a renewables database, sees the best solar panels producing electricity at a cost of 15 US cents per kilowatt-hour by 2015, says Jenny Chase, the firm's lead solar analyst. That is less than the retail electricity price in most European countries and parts of the US.
"It's just the experience curve. The more you build, the cheaper it gets," she says. Solar panels, known as photovoltaics, convert sunlight directly into a current of electricity. But a different type of technology - solar thermal - that uses the heat of the sun has also made significant advances this year, says Ms Pelosse. Masdar, the Abu Dhabi Government's clean-energy firm, signalled it would move ahead with a Dh2.2 billion solar thermal project in the Western Region in partnership with two European firms.
Masdar oficials said the plant would be the largest of its type in the world and would produce electricity more cheaply than plants in Spain, the market leader. Abu Dhabi's project and plans for a plant in Morocco and advances in a grand scheme for European investors to import solar electricity from North Africa have awakened the small solar thermal power industry, Ms Pelosse says. "It's no longer just two, three isolated projects. You see we're now going for it in the MENA region," she says. "Before it was Spain, the USA, and that was it."
The two green alternatives to oil in the transport sector - biofuels and electricity - are still far from making significant commercial inroads without generous government support. Biofuels at most will displace 10 per cent to 15 per cent of the market for traditional transport fuel in the next 10 years, while batteries for electric cars remain prohibitively expensive, says Ernest Moniz, the director of the energy programme at the Massachusetts Institute of Technology.
"Liquid fuels are just so special for transportation that I think that's the last fossil fuel to be displaced," he says. "It's very hard to see, in my view, a material penetration of either plug-in electric vehicles or fully electric vehicles by say 2030. The time scales don't add up." Two major car makers, General Motors and Nissan, plan to introduce electric cars by the end of this year. Mostly because of battery costs, both models will cost more than $30,000, even with a generous tax credit.
Meanwhile, biofuels, which were hit hard by the sudden drop in oil prices last year, are not expected to reach the supply targets set by western governments, according to the International Energy Agency (IEA), a Paris-based organisation representing energy-importing countries. World biofuels supply will grow by 33 per cent by 2015 to reach 2.4 million barrels a day - about the same as the daily oil production of the UAE, the IEA said in a forecast in June.
Most of that will come from corn, sugar cane and other farmed crops, heightening concerns that production of biofuels is affecting global food supplies. So-called second-generation fuels - those made from waste products such as sawdust - are developing slower than previous forecasts, the IEA said. @EMail:email@example.com