Q2 Clean Energy Investments Continue To Lag Behind 2014

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Bloomberg New Energy Finance has released figures showing that clean energy investment sat at $53 billion in the second quarter of 2015, continuing to lag behind 2014 figures.

Global Headwinds

2014 was a big year for clean energy investment, but that trend has certainly not continued through to 2015. Investment numbers for Q1 were revised to stand at $54.4 billion, dropping a little bit further to Q2’s $53 billion mark, which itself was a catastrophic 28% down compared to the $73.6 billion recorded in Q2’2014.

“The first two quarters of 2015, taken together, have seen investment down 18% compared to the first half of last year,” said Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance. “It is possible that the Q1 and Q2 2015 figures will be revised up a bit in due course as some more deals are disclosed, but we have been predicting since January that this year would see lower investment than 2014 because of the strong dollar.”

Bloomberg New Energy Finance (BNEF) points to global headwinds constricting the investment market such as the sudden rise in the US currency over the past 12 months forcing down the dollar value of deals struck in other countries, and the volatility of share prices, particularly in China, restricting equity-raising by clean energy-specific companies from both public market investors and venture capital (VC) and private equity (PE) funds.

Global Bright Spots

There continue to be bright spots in the overall darkness, but these are difficult to focus on considering the seeming negative shift in investment figures.

“In the medium term, we expect investment to resume its strong growth,” Liebreich added. “Our New Energy Outlook 2015, published in June, forecast that two thirds of the $12.2 trillion investment in generating capacity globally between now and 2040 will be in renewables, as costs per MWh for solar and wind grind downwards.”

Specifically, BNEF points to highlights such as two big European offshore wind financings, a record quarter for investment in Chile, and the continued improvement of small-scale solar.

Small-scale solar saw investment figures increase by 29% on Q2’2014, reaching $20.4 billion, and putting small-scale solar projects of less than 1 MW on track to hit a record this year, with countries such as the US, Japan, and China, as well as numerous developing countries betting heavily on the improved cost-effectiveness of rooftop solar PV technology.

Two big-name European offshore wind farms completed financing in the second quarter amounting to nearly $4.2 billion between them. The 402 MW Veja Mate German wind farm is being developed in the North Sea, and is owned by the Highland Group Holding Limited company. The second wind farm that completed financing in Q2 was the E.ON Rampion 400 MW offshore wind project, being developed off the Brighton coast in England, in the English Channel.

Chile continued to see impressive investment in renewable energy, with $1.3 billion being diverted towards wind and solar. This is the largest investment figures Chile has ever achieved, with the country making the most of its plentiful renewable energy resources.

Global Investment Figures

China was unsurprisingly the leading investment country, with $15.5 billion worth of commitments. While it marks a 14% increase than in the first quarter, but down significantly by 36% from 2014’s second quarter. Of the $15.5 billion, solar accounted for $6.4 billion, which itself is made up of one-third small-scale projects and two-thirds utility-scale.

The US saw investment figures worth $9.4 billion, down 4% on their first quarter and similarly down 21% on Q2’2014. Japan came in at third with $8.1 billion, largely thanks to small-scale solar, down 12% on the first quarter of 2015 and 10% on the second quarter of 2014.

Global Investment Distribution

The largest category of investment in the second quarter was asset financing for utility-scale project, wind farms, and other large-scale projects, amounting to $30.9 billion, which is down 3% on the first quarter and a whopping 41% on Q2’2014.

Following asset financing was spending on small-scale projects of less than 1 MW, which reached $20.4 billion, the same as Q1 and down 29% on a year earlier. Coming in at third place was public market investment in clean energy, which reached $2.9 billion, up 26% on the first quarter for a change, but still down 41% from the same quarter of 2014.

Most dramatically, venture capital and private equity investment in specialized clean energy companies which totaled a measly $564 million, which was down 31% on Q1 and down 60% on the second quarter of 2014. These figures are in fact the weakest in any quarter since the third quarter in 2005 for the VC and PE segment, and distressingly far below the peak of $4.2 billion in the third quarter of 2008.

“The low VC/PE total reflects the fact that technologies such as wind and PV are now far more mature, and less open to challenge from young companies,” said Luke Mills, clean energy economics analyst at Bloomberg New Energy Finance. “However, there is a great deal of early-stage investor interest still in other areas such as power storage and home energy management that could translate into more deals if the wider markets settled down.”