Clean Energy in the Emerging Markets

I took two days this week to travel to New York, where I attended the Euromoney Renewable Energy Finance Forum - Wall Street for the fourth time.

The main take-away was this: The U.S. is severely at risk of losing its economic superiority to developing nations.

Here's why...

Leap-frogging the laggard

By 2025 the vast majority of mega-cities will be located in emerging markets:

Those blue dots represent cities with a population greater than 10 million.

The U.S. will only have two of them — New York and L.A. — and they're already built.

The rest will be in South America, Africa, and Asia — the Mumbais, Sao Paolos, and Manilas of the world.

And all these developing nations know one thing: They need cheap electricity to thrive, to power homes and schools and computers and factories and businesses and datacenters.

And you know what? They're doing it — and much faster and more efficiently than we are.

Examples? I've got plenty...

In 1980, only 7% of Indonesia's 155 million people had access to electricity.

Today, 60% of Indonesia's 260 million have access. And by 2025, 90% of its 300 million people will be grid-connected.

South Africa has connected 2.5 million households to the grid in the past seven years. They've installed one kilometer of new transmission line every 5 minutes since 2003.

In Africa as a whole, 50% of new infrastructure deployed in the next decade will be dedicated to power generation and transmission.

Vietnam has connected 400 people per hour to the grid for the past 15 years. And don't bother checking that math. I did, and it's correct.

And these countries aren't building an outdated energy network like we have here in the States...

They're bypassing coal and leap-frogging us to a clean energy future.

See ya later, suckers

There are currently six billion people on this planet. There will be 9 billion of us by 2050.

According to the CIA World Factbook, countries with the highest population growth rates include the United Arab Emirates, Niger, Kenya, Rwanda, and plenty of other nations centered around the equator, where there are vast natural resources: solar, biomass, and yes, oil and natural gas.

And their growing populations are hungry for energy. Around the world, 1.6 billion people still lack basic access to electricity.

But that's changing to our detriment.

Take Saudi Arabia, for example, the world's largest oil producer. It's currently building 6 new cities and 70% of its population is under 25 years old.

If they keep up this growth, they'll be using two-thirds of their vast oil reserves domestically.

And they certainly don't want to do that — not when they can sell it to us at $70 per barrel or better.

So what are they doing?

They're rapidly developing their immense solar and geothermal resources, aiming to run their country with renewable power while selling their oil to us.

It's brilliant.

We're blowing our chance to reduce our dependence on oil and coal — we have 5% of the global population and use 25% of the world's oil — while the counties that sell us that oil are transitioning to renewables.

And it's not just the Saudis...

The UAE has committed $22 billion — much of it petrodollars that we sent them — to developing renewable energy.

Kenya will develop 4,000 MW of clean energy in the next 20 years. Ghana is exploiting its palm oil resources. Tanzania is emerging as a sugar ethanol leader.

Perhaps the best example is Papua New Guinea (PNG), where Exxon Mobile (NYSE: XOM) is leading a $15 billion project to bring the county's 22.5 trillion cubic feet of natural gas to market.

But PNG doesn't want the gas... They want the revenue from the gas to build out clean infrastructure; harnessing their hydro, geothermal, and biomass resources as they sell the gas to the U.S. and the rest of the world.

The message is clear: You guys go ahead and waste time with coal and oil. Pay us for it while we beat you to a clean energy future.

And that's why almost half of the $214 billion expected to be invested in clean energy this year will be deployed outside the U.S. and Europe, with China getting the lion's share.

This chart says it all:

If this doesn't get you fired up, I don't know what will.

Call it like you see it,

Nick

P.S. I heard someone say the conference that if you want to create a policy to destroy your energy industry, you'll do what the U.S. has done for the past 15 years. No other country is making our mistakes, especially China. They already have the world's largest wind market and produce 50% of solar materials worldwide. They also have 3 of the 10 biggest wind companies and 6 of the top 10 solar companies. We've got to put our money there if we want to profit.