Spend a few days prowling the packed exhibition floor of Abu Dhabi's World Future Energy Summit, and you might forget that the global economy is suffering through an existential crisis that has overshadowed just about everything else including climate change. Booths showing off the technology of Chinese solar companies and German wind businesses buzz with visitors. Conference panels on biofuels or green design are half-empty, but that's only because attendees are busier cutting deals.
Over 16,000 visitors came to the summit, nearly 50% more than the previous year. And at the center of it is Abu Dhabi's own Masdar Initiative named after the city of Masdar, a newly built green metropolis designed to be a center for clean technology. Even though the petroleum-rich emirate is suffering through plummeting oil prices now a little over $40 a barrel, down a hundred dollars from a half a year ago its leaders say they remain committed to expanding Masdar. "The current financial crisis has absolutely no impact on our planned projects," says Sultan Ahmed Al Jaber, Masdar's imposing CEO. "Our appetite is still the same." (See the top 10 green ideas of 2008.)
But in reality, the global economic downturn has hardly left the nascent alternative energy sector untouched. Developers here say that financing for new wind farms and solar plants remains all but frozen, halting tentative plans in the U.S. and Europe to expand clean power. The WilderHill New Energy Index a fund that tracks the stock performance of selected clean tech companies is down more than 60% since its peak in November of 2007, slammed by the double blow of the loss of venture capital and the reduced urgency for energy alternatives as the price of oil has tumbled. Clean tech startups have already shed jobs, and weaker ones are certain to go under. "The financial crisis has hit us harder than anyone would have imagined," says Marcel Brenninkmeijer, the chairman of Good Energies, a global clean tech investment fund. "We just can't get financing."
So will low-carbon enterprises be abandoned as capital floods to safer, established industries and the heat goes off global warming, or is it, as Brenninkmeijer still insists, "the business of the century"? The signs from Abu Dhabi say we could see both. For all the excitement generated here by President Barack Obama, who pledged in his inaugural speech to "harness the sun and the winds and the soil," the short-term outlook for renewables is as grim as it is for other capital-intensive industries, if not more so. (See the 50 best inventions of 2008.)
The generous government subsidies that helped support the rapid growth of alternatives in countries like Spain and Germany are being scaled back just as the technologies have taken off. At the moment, Germany has some 60% of the solar panels in the world, thanks in part to the so-called feed-in tariff, which guarantees that utility companies will buy renewably generated power at above market rates. But further growth could stall. Corn ethanol in the U.S. which many environmentalists believe doesn't deserve the term "renewable" has cratered, also hurt by rapidly falling gas prices. Most of all, however, clean tech businesses generally lack the political weight to jostle for the bailout funds won by older and bigger industries like the automobile manufacturers. "It's just tough for them to be heard," says Steve Sawyer, the director general of the Global Wind Energy Council.
But despite short-term forecasts that could leave their balance sheets a sea of red, the general mood in Abu Dhabi was as sunny as the weather. That's because in the long term, developers of renewables know they'll win. Climate change aside, the simple fact that energy demand will continue growing rapidly once the downturn has ended means that new supplies will be needed. And no one including oil giants of the Middle East believe that fossil fuels alone will meet that gap. "This is absolutely going to scale big," says Frank Mastiaux, the CEO of the E.ON, a major German energy company that is poised to more than triple its renewable business over the next five years.
If governments truly decided to tackle climate change and with Obama in charge, they're poised to do so the potential is unlimited. "By 2015 we'll be talking about energy in a very different way," says Vinod Khosla, the veteran Silicon Valley venture capitalist. "Smart entrepreneurs are poised to thrive."
Of course, that depends on international will to reduce carbon emissions and its easy to see how fears of economic pain today could trump climate risks that many people now alive won't be around to see, especially for politicians hired and fired on election cycles. Brave leaders will have to think ahead, as former British Prime Minister Tony Blair said in the summit's closing speech. "It's right now, at the instant when our thoughts are centered on the economic challenge, that we must not set to one side the challenge of global warming, but instead resolve to meet it and put the world on path to a sustainable future." Wise words though easier to say once out of office and a reminder that the final fate of renewables will be decided not by economic capital, but the political kind.