This morning the United Nations Environment Program released its 9th annual report on Global Trends in Renewable Energy Investment. The news is very good: 2014 was the best year ever for newly installed renewable capacity. The Frankfurt School–UNEP Collaborating Centre and Bloomberg New Energy Finance prepared the report.
In spite of the 50+% collapse in oil prices toward the end of last year, global investments in renewable energy scored big, with a 17% increase from 2013. (Largely due to lower cleantech prices resulting from economies of scale, the numbers had previously declined for two years.) Global 2014 investments reached $270 billion, 17% up from the 2013 total of $232 billion and only 3% below the 2011 all-time record ($279 billion).
Unprecedented solar expansion in China (mostly utility-scale projects over 1 MW) and Japan (smaller-scale projects) — comprising around half the world total — and strongest-ever investments in European offshore wind propelled the surge. In fact, solar and wind accounted for over 90% of all investment.
- Solar rose by a whopping 25% to $149.6 billion, its second-highest year ever, adding a record 46 GW of capacity.
- Wind rose by 11% to a record $99.5 billion, adding 49 GW, another record.
- Geothermal investments also rose, having a 27% increase to $2.7 billion. Biofuels, biomass, waste-to-energy, and small hydro all dropped somewhat.
Measured in terms of more conventional power, the record 103 GW of added renewable capacity equals approximately the same output capacity as all 158 nuclear power plant reactors in the United States. The figure compares to 86 GW in 2013, 89 GW in 2012, and 81 GW in 2011.
In terms of world energy generation, solar, wind, biomass and waste-to-power, geothermal, small hydro, and marine power made up an estimated 9.1% of world electricity generation, over half a percentage point up from 2013. Increasing equivalent fossil sources would have released about 1.3 gigatonnes of CO2 — or about twice the emissions of the world’s airline industry.
Says Achim Steiner, the UN’s Under-Secretary-General and UNEP Executive Director:
“Once again in 2014, renewables made up nearly half of the net power capacity added worldwide…. The growing penetration of renewable generation in the world’s developing economies is one of the important and encouraging aspects of the 2014 report.”
Renewables expanded rapidly into new markets in developing countries, where investments jumped 36% to $131.3 billion. China ($83.3 billion), Brazil ($7.6 billion), India ($7.4 billion), and South Africa ($5.5 billion) were all in the top 10 investing countries. In Indonesia, Chile, Mexico, Kenya, and Turkey, more than $1 billion each was invested. The total renewables investment in developed economies rose only slightly, by 3%, to $138.9 billion.
Viewing the results in terms of national totals, we see the Chinese investments last year being the highest: a record $83.3 billion, up 39% from 2013. The US made slightly less than half that amount, $36.3 billion. At $35.7 billion, Japan made its biggest total ever, 10% higher than in 2013. The latter statistic is especially important, considering that more Japanese problems with nuclear have surfaced during the past week.
Oil price impacts are only likely to influence areas like solar in oil-exporting countries and biofuels. It’s interesting to compare the trajectories for fossil fuel investment and for renewable over the past few years.
The report’s authors do see challenges remaining from policy uncertainty and structural issues in the electricity system as grids and utilities adjust to more wind and solar in the generation mix. However, investor confidence may sag if uncertainty arises about government support policies for renewables.
Says Michael Liebreich, Chairman of the Advisory Board for Bloomberg New Energy Finance:
Europe was the first mover in clean energy, but it is still in a process of restructuring those early support mechanisms. In the UK and Germany we are seeing a move away from feed-in tariffs and green certificates, towards reverse auctions and subsidy caps, aimed at capping the cost of the transition to consumers.
Southern Europe is still almost a no-go area for investors because of retroactive policy changes, most recently those affecting solar farms in Italy. In the US there is uncertainty over the future of the Production Tax Credit for wind, but costs are now so low that the sector is more insulated than in the past. Meanwhile the rooftop solar sector is becoming unstoppable.
The UNEP report cautions that major electricity market reforms like Germany’s Energiewende may be needed elsewhere if these positive steps for renewable energy continue. Nothing succeeds like success.
Other highlights of the 2014 UNEP report include these notes on financial investment mechanisms:
Although asset finance of utility-scale renewable energy projects went up 10% to $170.7 billion, the increase for small-scale projects of less than 1MW was even bigger at 34%, to $73.5 billion. Recent sharp reductions in solar system costs are making rooftop solar a more competitive option for businesses and households looking to generate part of their own power needs. The US, Japan and China had the biggest increases in small-scale project investment.
Among other investment categories, equity raising by renewable energy companies on public markets jumped 43% in 2014 to $15.1 billion, helped by the recovery in sector share prices between mid-2012 and March 2014, and by the popularity with investors of US ‘yieldcos’ and their European equivalents, quoted project funds.
Venture capital and private equity investment in renewable energy rallied to $2.8 billion last year, up 27% on 2013’s depressed figure, but still little more than a quarter of the record established in 2008. R&D spending on renewables edged up 2% to $11.7 billion, with corporate entities accounting for $6.6 billion and governments $5.1 billion.
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