Trends in Renewable Energy

Mathias Ressel, Investment Manager at bmp Ventures on … Trends in Renewable Energy

Renewable energy has seen a tremendous growth in importance ever since the passage of the German Renewable Energy Sources Act (EEG: Erneubare-Energien-Gesetz) in 2000; this has happened even as incentives from the state have been scaled back considerably. Whereas the renewable energy market had previously been dominated by private households and companies running solar parks and wind turbines, today more and more businesses, spanning a wide range of industries, are discovering this field for themselves. This is partly because of regulatory concerns, but it’s also often due to economic considerations, which are becoming more relevant as the costs associated with renewable energy systems continue to decline. At the same time, the use of renewable energy sources tends to have positive effects on a company’s image. Depending on the application, the payback time for renewable energy systems is, in many cases, less than five years, making it a very attractive prospect for companies. The only real disadvantage is the high cost of the initial investment, but if a company has a good credit rating there are some quite reasonable financing options available.

From among all the renewable energy sources available, many companies still choose to produce electricity themselves using their own photovoltaic systems. As storage batteries have become more affordable, power can be used independently of when it’s generated. On top of that, commercial storage batteries allow peak demand to be capped, making it possible to significantly reduce energy costs on a case-by-case basis compared to electricity from the local power grid. The costs of photovoltaic systems have significantly decreased over the past few years, from €6,000/kWp in 2006 down to well under €2,000/kWp.

Storage batteries are also experiencing a cost degression. Whereas a few years ago storage batteries were barely affordable from an economic standpoint, the initial outlay for powerful, efficient lithium-ion batteries is today below €1,000/kWh, and dropping! Our portfolio includes both Calyxo (a manufacturer of PV modules) and TESVOLT (a manufacturer of storage batteries), two companies that serve this market well with their excellent products.

But renewable energy is about more than just producing electricity. For instance, there are also mature technological solutions for converting (waste) heat into cold using the physical principle of adsorption or absorption. This form of renewable energy is interesting not just because of how it might be used for air-conditioning systems, but also for a variety of other areas where waste heat is readily available (e.g., from industrial processes or the operation of a combined heat and power plant) as well as a need for cold/cooling. Recently, industrial companies have been employing the use of such technologies more and more, reducing the need for cooling units that rely on conventional compressor technology, which require large amounts of electricity. This helps to improve the company’s energy balance (or rather, its eco-balance). One of the businesses in our portfolio, InvenSor GmbH, is especially well positioned as a supplier of small and mid-sized adsorption cooling systems.

I am convinced that, in the near future, there will be additional pioneering developments for us to pursue. Here are just a few thoughts on this:

  • Prices will continue to drop indefinitely. The price of storage batteries will get even lower, thanks to increases in production capacity (especially at Tesla and Samsung) and the scaling effects that come with it. Cost-efficient, high-performance cell concepts currently under development will only increase this downward trend.
  • Even though many potential cost-cutting measures for PV systems have indeed been removed in recent years, we can still expect to see reduced prices at the module level. Advances in technology and optimization of existing technology will lead to higher levels of efficiency for PV modules while production costs remain more or less the same, giving manufacturers some latitude to lower their prices. As prices continue to drop, we will see a significant increase in the use of PV systems, particularly in combination with energy storage systems. Even today, government support for renewable energy is of secondary importance, and with continued cost degression, it will soon become irrelevant in a business’s decision to invest in renewable energy.
  • In the future, new software solutions will contribute to the increased efficiency of renewable energy facilities. This will also include solutions that integrate several different consumers at the same time while being able to distinguish between them for billing purposes. This calls for complex solutions with a mind to building a “smart grid”, especially when it comes to guaranteeing the long-term stability of the power grid.
  • Right now, the buzzword “e-mobility” is something everyone’s talking about. But we’re not going to see the mass production of electric cars until there’s an infrastructure that offers cars a convenient power supply (quick and available everywhere). At least in Germany, our current infrastructure is unable to fulfill these demands even at a rudimentary level, and doing so will require a considerable investment. At that time, it will be important to ensure that renewable energy plays an increased role in this expanded power grid. We’re also going to need to pick the right charging infrastructure. For example, it might be possible to charge cars using induction loops (built into roadways or parking lots). It still remains to be seen whether the idea of powering trucks using overhead wires, currently being tested, will actually take hold.

In conclusion, it can be stated that the energy transition connected with the use of renewable energy sources has only just begun.

The potential here is enormous, and it will completely change the world as we know it. We are very excited to take part in these developments, particularly by making new investments in the companies involved in them.