Growth of global renewable energy capacity is continuing its steady climb, a report has found, accounting for 44 per cent of newly added generating capacity in 2013, despite a 14 per cent drop in spending marking a second straight year of decline in clean energy investment.
The report – Global Trends in Renewable Energy Investment 2014, released on Monday by the Frankfurt School, UNEP and Bloomberg New Energy Finance — found that investment in renewables fell to $US214.4 billion in 2013, a year-on-year drop of $US35.1 billion.
The slump is attributed to the falling cost of clean energy technology, as well as policy uncertainty in countries such as Australia – an issue, the report notes, that also depressed investment in fossil fuel generation in 2013.
But the report’s authors are keen to point out that, beyond this apparent drop in spending, there are plenty of positive indicators for the global renewable energy market; not least of all a 26 per cent surge in solar PV installations in 2013, with the total addition of 39GW – the most ever, even as solar investment dropped 23 per cent to $104 billion.
“The business model is getting better and better,” said Ulf Moslener, a professor at the Frankfurt School of Finance & Management and editor of the report. “The value-for-money trend for renewables is improving – and in the traditional sources, it’s deteriorating.
“A nice comparison would be the telecom industry,” Moslener in an interview on Monday. “Wasn’t there a time at the beginning when it was very expensive? The costs went down, and that didn’t necessarily mean the end of cellphones.”
In the case of solar, the cost of panels has plunged 60 per cent in the past three years, so while some investors wary of policy uncertainty have pulled back, says Moslener, others have taken advantage of improvements in technology and financing.
“Smart investors are making money on this,” said Michael Liebreich, chairman of the advisory board for BNEF, who compiled the data for the UNEP report.
Speaking on a conference call about the report on Monday, Liebreich put about three-quarters of the decline in clean-energy investment over the last two years down to cost reductions.
“There’s a lot of noise and smoke,” he said. “But the fact is, on the demand side, you have smart investors like Warren Buffett who are building this stuff.”
The report points to the end of a four-and-a-half year, 78 per cent decline in clean energy stocks, which bottomed out in July 2012 and then gained 54 per cent in 2013, as many solar and wind companies moved back towards profitability after a painful period of over-capacity and corporate distress.
“Lower costs, a return to profitability on the part of some leading manufacturers, the phenomenon of unsubsidised market uptake in a number of countries, and a warmer attitude to renewables among public market investors, were hopeful signs after several years of painful shake-out in the renewable energy sector,” said Liebreich.
China provides another bright spot in the report, having spent more on renewable-energy investments ($56 billion) in 2013 than in the whole of Europe ($48 billion) for the first time.
The world’s second-largest economy spent at least $50 billion in each of the last three years, according to the report, with solar installations more than tripling to 12GW in 2013, up from 3.6GW in 2012.
The report also notes a deepening involvement of long-term investors such as pension funds, insurance companies, wealth managers and private individuals in the equity and debt of wind and solar projects.
“Part of their new engagement was through clean energy bond issuance, which set a new record of US$3.2 billion raised in 2013, as well as via new types of financing vehicles including North American ‘yield companies’ and real estate investment trusts,” it says.
“But the star performer among investment types in 2013 was public market equity-raising by renewable energy companies, which jumped 201 per cent to US$11 billion. This was the highest since 2010, spurred on by the rally in clean energy share prices and institutional investors’ appetite for funds offering solid yields.”
