The difference between clean energy, green energy and renewable energy
General definition
Green energy refers to energy that is friendly to the earth’s environment and does not cause environmental harm. Clean energy refers to energy that does not pollute the environment during the production of energy. Renewable energy is energy that can be regenerated repeatedly and has an endless supply.
Differences between the three
Renewable energy refers to energy extracted from natural resources and replenished at a rate that is meaningfully fast on human time scales to meet existing consumption. Green energy refers to energy that does not destroy, harm the environment, or emit pollutants. Examples of renewable energy include: hydropower, wind power, solar energy, geothermal energy, tidal energy, seawater temperature difference power generation, etc.
Most renewable energy sources are also green energy, such as solar energy, wind power, geothermal energy, water energy, tidal energy, etc. These energy sources can be endlessly replenished in nature, and will not damage the environment or produce pollution during use.
You read that right, nuclear energy is green energy, and both the EU and Taiwan officials believe so. According to the latest definition of the U.S. Department of Energy, nuclear energy, which is not a renewable energy source, will also be included in clean energy.
Note: When questioned on October 31, 2023, Taiwan Executive Yuan Chen Chien-jen stated that “nuclear power is green energy” and was optimistic about the development of nuclear energy into nuclear fusion.
The nature of this industry
The industry is still developing
With very few exceptions (such as nuclear energy), this industry is still in its early stages and is not yet fully technically mature. The implicit meaning is that the future industrial development potential is endless and the market is unlimited.
Closely related to regulations and policies
The biggest characteristic of the clean energy, green energy, and renewable energy industries is that they are closely related to the regulations and policies of various governments. There is no support from government regulations, policies, or government subsidies. At least so far, there are no exceptions in the world, and basically no company can survive.
The Joe Biden administration’s Inflation Reduction Act of 2022 allocates nearly $400 billion to clean energy development through direct funding and tax credits. The program has attracted more than $120 billion in project proposals, according to ING.
Regarding the importance of the Inflation Reduction Act, please see the analysis in another previous post of mine:”The impact of the Inflation Reduction Act on US stocks“.
Huge investment
Clean energy, green energy, and renewable energy, like traditional petrochemical energy, have complex and huge supply chains involving many upstream and downstream related companies. Therefore, they require huge capital investment and huge financing loans, otherwise they will not even be able to get started. There are no opportunities, which is the main reason why this industry currently relies on large amounts of government subsidies.
Dynamics of various countries
Since energy policy is the most basic requirement for industrial and economic development, countries around the world have formulated regulations, targets, and subsidy methods for clean energy, green energy, and renewable energy.
The disruption of Russian gas supplies after the invasion of Ukraine taught the EU a lesson. European Union lawmakers passed a bill last month boosting its 2030 renewable energy target.
Industry
Categories
Companies in this industry broadly fall into two categories: those that manufacture or deploy capital-intensive infrastructure such as wind turbines or solar panels, and those that develop new technologies.
Sensitive to interest rates
Renewable energy projects typically require large upfront capital to purchase equipment such as solar panels and wind turbines, which is then paid back over time through electricity sales. According to a 2020 U.S. government report, as many as 80% of such projects are financed with debt. Rising loan costs erode the expected returns on projects, making new developments less attractive.
Rising interest rates can also hurt riskier investments, such as emerging clean energy technologies. Bankers and investors use current interest rates to calculate how much future cash flows should be worth today. For highly speculative investments, whose value is mainly based on distant future cash flows, rising interest rates will cause their valuation to decrease.
Related companies encounter challenges
The most obvious example is the stock price of New Century Energy (ticker: NEE), the world’s largest renewable energy company, which fell sharply in 2023. There are many reasons, but the main reason is the U.S. interest rate hike.
Munich-based Siemens Energy (ticker: SMNEY ) withdrew its profit outlook in June after its wind energy unit reported frequent turbine component failures. The wind power business is suffering heavy losses, and the net loss in the 2023 fiscal year (as of the end of September 2023) may be as high as 4.5 billion euros, causing the stock price to plummet 35% in one day.
Siemens Energy can only ask the German government for help and ask the government Provide guarantee. Executives at Danish wind turbine manufacturer Vestas Wind Systems (ticker: VWDRY) warned that continued supply chain disruptions will extend into the second half of this year.
SolarEdge (ticker: SEDG), which produces photovoltaic inverters, lowered its revenue forecast in October 2023, causing its stock price to plunge a record 27% and triggering analysts from financial institutions such as Goldman Sachs and Deutsche Bank to lower their target prices. and ratings.
At the end of October 2023, the iShares Global Clean Energy ETF (ticker: ICLN) fell to its lowest level since July 2020, which just illustrates how difficult the current situation of companies in this industry is.
Tech monopoly gradually takes shape
Nuclear fusion
There is currently a unanimous global view that nuclear fusion will be the ultimate source of energy for mankind in the future. Regarding the current development status of this important energy source, please refer to my other blog article: “The current progress of nuclear fusion, and relevant companies” .
Solar energy
At present, the main supply chain of solar energy can be said to be controlled by relevant Chinese companies. Moreover, the strength of Chinese related companies in this field has caused collective concern and uneasiness in the United States and the European Union.
Wind power
The most critical ultra-large turbines in wind power are monopolized by several large European manufacturers. However, Chinese manufacturers have recently caught up and are gradually replacing the old European large manufacturers.
In November 2023, China Dongfang Electric Group just completed the world’s largest offshore wind turbine in Fujian, which is a proof of China’s strength in this field.
Natural gas
Natural gas is a clean energy source and a type of petrochemical energy. However, its disadvantage is that it is too expensive compared with traditional petrochemical energy sources such as coal or oil.
Hydrogen
For this part, please refer to the explanation of my previous blog article: “Current progress of hydrogen energy and relevant companies”.
Nuclear energy
I have introduced nuclear energy in the book “The Rules of 10 Baggers“: Section 3-7, pages 168-169.
For Nuclear energy discussion, please read my previous post “Current developments in Nuclear Energy and related companies“.
Geothermal
The U.S. Department of Energy states that geothermal energy is almost inexhaustible. As a renewable energy source, it can be used as a base load at any time and can flexibly generate electricity at any time according to demand.
In addition to power generation, geothermal energy can also be used directly as a source of hot water and heating energy, and as a source of energy for air conditioning through heat pumps. For the direct use part, there were 21 facilities that directly used geothermal energy in the United States in 2017. Supply 45 million.
In terms of geothermal heating and cooling, the current application scale in the United States is about 16.8 billion yuan, equivalent to supplying 2 million households. If technological development and the potential of U.S. geothermal resources can be fully utilized, the scale is expected to be expanded to 14 times , supplying 28 million households, accounting for 23% of the US residential air conditioning market in 2050.
In the past, technical factors, lack of geological data, and administrative obstacles, such as land acquisition and other related issues, seriously hindered the development of geothermal in the United States. If these problems begin to be actively resolved, the development of geothermal in the United States will be much faster than it is today. Among them, Enhanced Geothermal System (EGS) technology will be the key.
Enhanced geothermal system means that the local thermal resources themselves do not have corresponding steam or hot water to be used, and the ground is injected from the water landscape. Cold water enters hot dry rock formations, and after heating, the hot water or steam is extracted from production wells to generate electricity, which can greatly expand the application scope of geothermal power generation.
It is estimated that by 2050, geothermal power generation in the United States will increase 26 times compared with today’s scale, with a total power generation capacity of 60 gigawatts, accounting for 3.7% of the total installed power generation capacity in the United States by then. The actual power generation will account for 1% of the total installed power generation capacity in the United States. As much as 8.5% of the total annual power generation.
In addition to technological breakthroughs, in fact, the biggest obstacle to the development of geothermal in various countries is often regulations. Land acquisition and licensing are often classified as the same as other industries with greater environmental damage, or even more complex.
The complicated review process is time-consuming and leads to a surge in administrative costs.
Ocean
Ocean Energy Systems, an intergovernmental cooperation agency established by the International Energy Agency, estimates that by 2050, more than 300 gigawatts of ocean energy may be deployed globally. But ocean energy potential depends on location, taking into account current strength, grid or market access, maintenance costs, shipping, marine life and other factors.
Ocean current
The advantage of ocean currents lies in their stability. Since there is almost no fluctuation in flow speed and direction, there is a capacity factor of 50% to 70%, about 29% for onshore wind power and about 15% for solar power. Capacity factor is a measure of how often a system generates electricity, but installing systems underwater is more complex than on land, as underwater systems must be strong enough to withstand the aggressive and harsh conditions of deep ocean currents.
Japan is the first country in the world to successfully test ocean current power generation.
Tides and waves
Wave energy in Japan is mild and unstable all year round. Areas with strong tides are often areas with busy shipping. Seawater temperature difference power generation is suitable for tropical areas with large temperature gradients. One of the advantages of deep ocean currents is that they do not restrict ship navigation. IHI’s goal is to achieve a power generation capacity of 2 trillion from deep-sea currents, equivalent to 60% of Japan’s current power generation, and to begin commercialization in 2030.
The O2 turbine, the world’s largest tidal energy device that weighs 680 metric tons and looks like a ship, has been successfully connected to the grid to generate electricity in 2021. The tidal energy equipment of the Scottish company Orbital Marine Power is often on the route of large ships. Before the company changed its name and was still called Scotrenewables TidalPower, it developed the 2 MW floating tidal turbine equipment SR2000, which looks like a water thunder. The power generation capacity reached 3GWh in the first year of testing. After changing its name to Orbital Marine, large ships such as Orbital O2 were launched.
Sea water temperature difference
Ocean temperature difference power generation mainly uses the principle of heat exchange to generate electricity. First, the higher temperature ocean surface water is extracted, and the refrigerant liquid (such as ammonia) with a very low boiling point in the heat exchanger is evaporated and gasified, and then the turbine is driven to generate electricity, and then the ammonia liquid is introduced into another heat exchanger and passed through the insulation The pipeline condenses the liquid state with the coldness of deep seawater, completing a cycle.
Japan is also exploring other methods of using the ocean to generate electricity, including tidal energy, wave energy and ocean thermal energy conversion. Ocean thermal energy uses the temperature difference between cold and warm sea water to generate electricity. Mitsui Lines has invested in the British wave energy company Bombora Wave Power.
It has also invested billions of yen in seawater temperature difference power generation and will start operating a 100kW demonstration facility in Okinawa in 2022. Kyushu Electric Renewable Energy Department began a 650 million yen test this year to generate 1 megawatt of tidal energy around five islands in the East China Sea. Although tidal currents do not operate 24 hours a day, they are stronger than deep ocean currents.
The UK’s Global OTEC has taken the first step towards achieving the first commercial-scale seawater temperature difference power generation in 2025.
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