A major solar push by China and record investments in offshore wind in Europe helped to drive a 17 per cent surge in annual global renewable energy investment in 2014, according to a new report, putting an end to a two-year market decline.
UNEP’s 9th annual Global Trends in Renewable Energy Investments report, prepared by the Frankfurt School–UNEP Centre, and Bloomberg New Energy Finance, has found that the global renewable energy spend totalled $270 billion in 2014, up from $232 billion in 2013 – a rebound made all the more remarkable by the challenge from sharply lower oil prices.
The 17 per cent jump marks the the first annual increase in dollars invested in and committed to renewables (excluding large hydro-electric projects) in three years – and sits just 3 per cent below the all-time record spend of $279 billion in 2011.
The report, released on Wednesday, also named 2014 as the best year ever for newly installed renewable energy capacity, with a total of 103GW generating capacity added around the world – nearly half of the net power capacity added worldwide, and an amount equal to the output of all 158 nuclear power plant reactors in the US.
This compared to 86GW of renewables capacity added in 2013, 89GW in 2012 and 81GW in 2011.
The report notes that the continuing sharp decline in technology costs – particularly in solar but also in wind – meant that every dollar invested in renewable energy bought significantly more generating capacity in 2014.
But according to UN Under-Secretary-General and Executive Director of UNEP Achim Steiner, the growing penetration of renewable generation in the world’s developing economies has been one of the most important and encouraging aspects of the 2014 report.
According to the report, China saw by far the biggest renewable energy investments last year — a record $83.3 billion, up 39 per cent from 2013.
The US was second, at $38.3 billion – 7 per cent rise on the year (although below its all-time high reached in 2011), and Japan third, at $35.7 billion – a 10 per cent jump on 2013 and the nation’s biggest total ever.
As in previous years, says the report, the 2014 market was dominated by record investments in solar and wind, which accounted for 92 per cent of the overall spend.
For the year, investment in solar jumped 25 per cent to $149.6 billion – the second highest figure for solar ever – while wind investment increased 11 per cent to a record $99.5 billion.
In 2014, some 49GW of wind capacity and 46GW of solar PV capacity were added worldwide, both records.
In the solar sector, the “dominant feature” according to the report was the “unprecedented expansion in China and Asia, who between them invested $74.9 billion in solar in 2014 – around half the world’s total.
“In China, utility-scale projects of more than 1MW made up about three-quarters of the solar investment of $40 billion, which was a 45 per cent increase on the previous year,” said the report.
“In Japan, on the other hand, investment was dominated by small scale projects of less than a megawatt, which accounted for 81 per cent of a total solar investment of $34.8 billion, a 13 per cent increase on 2013.”
An offshore wind boom in Europe, meanwhile, resulted in seven $1 billion-plus projects reaching “final investment decision” stage in 2014.
Among these, the $3.8 billion 600MW Gemini installation off the cost of the Netherlands was the largest non-hydro renewable energy plant to get the go-ahead anywhere in the world.
Offshore wind projects worth $18.6 billion were financed globally in 2014 – a 148 per cent jump on the previous year, and 45 per cent more than the next highest year, 2010. Most of this total – $16.2 billion – was in Europe with China accounting for the remaining $2.4 billion.
“These climate-friendly energy technologies are now an indispensable component of the global energy mix and their importance will only increase as markets mature, technology prices continue to fall and the need to rein in carbon emissions becomes ever more urgent,” said UNEP’s Steiner.
“The growing penetration of renewable generation in the world’s developing economies is one of the important and encouraging aspects of the 2014 report.”
Beyond China, Brazil ($7.6 billion), India ($7.4 billion) and South Africa ($5.5 billion) all ranked in the top 10 investing countries, while more than $1 billion was invested in Indonesia, Chile, Mexico, Kenya and Turkey.
In contrast, the total renewables investment in developed economies rose only 3 per cent to $138.9 billion. In Europe, despite the booming offshore wind sector, investments hardly changed at $57.5 billion.
Australia, meanwhile, featured mainly due to its “plunge” in utility-scale financing, which fell to $330 million in 2014 from $2.1 billion in 2013 – “hit by indecision over the future of the country’s renewable energy target.”
This policy uncertainty had even caused Australia’s small-scale solar financing to decline in 2014, the report said, down 11 per cent “despite its robust solar resources and well-developed installation industry.”
It had also seen Australia fall off the list of the Top 10 countries for renewable energy investment (see table below), said the report – alongside Italy, dragged down by retroactive subsidy changes.
In their place, the Netherlands had risen to number nine on that list, after charting the year’s fastest growth – 266 per cent – to $6.4 billion.
With Australia as its main example, policy uncertainty – including the sudden withdrawal or restructuring of feed-in tariffs – was named in the report as one of the biggest ongoing challenges to renewable energy investment worldwide, alongside structural issues facing the electricity system.
Indeed, according to Udo Steffens, President of the Frankfurt School of Finance and Management, the erosion of investor confidence caused by increasing policy uncertainty was of even more concern to future investment in renewables than the 50 per cent-plus collapse in the global oil price in the second half of last year.
“Oil and renewables do not directly compete for power investment dollars,” said Steffens. “Wind and solar sectors should be able to carry on flourishing, particularly if they continue to cut costs per MWh. Their long-term story is just more convincing.”
Michael Liebreich, Chairman of the Advisory Board for Bloomberg New Energy Finance, said that Southern Europe was still “almost a no-go area” for renewables investors because of retroactive policy changes, most recently those affecting solar farms in Italy.
Beyond this, the report noted that governments had also struggled to produce policy measures that kept up with the advance of renewables and its knock-on effect on the rest of the electricity system.
“If these positive investment trends are to continue it is increasingly clear that major electricity market reforms will be needed of the sort that Germany is now attempting with its Energiewende energy transition,” the report warned.
“The structural challenges needing to be overcome are not simple ones, but are of the sort that have only arisen because of the very success of renewables and their over $2 trillion of investment mobilized since 2004.”
The report noted that in Australia and the US, utilities had tended to follow one of three paths in reaction to the growth of renewables: fight, flight and adapt.
Key Highlights of the report:
* Over US$2 trillion invested in renewables between 2004 to 2014
* Invested last year: $270 billion (equal to the GDP of Finland), up 17% from 2013 (and reversing a two year dip in investments, 2012-2013)
* A record 103 Gigawatts of energy generating capacity added by renewables in 2014 (equal to the generating capacity of all 158 nuclear power plant reactors in the USA)
* Wind, solar, biomass and waste-to-power, geothermal, small hydro and marine power contributed an estimated 9.1% of world electricity generation in 2014, up from 8.5% in 2013. Had the same amount of electricity been produced using the fossil-dominated mix generating the other 90.9% of world power, some 1.3 gigatonnes of CO2 – roughly twice the emissions of the world’s airline industry – would have been produced
* The Chinese made by far the biggest renewable energy investments last year – a record $83.3 billion, up 39% from 2013. The US was second at $36.3 billion, up 7% on the year but well below its all-time high reached in 2011. Third came Japan, at $35.7 billion, 10% higher than in 2013 and its biggest total ever.
* Solar and wind accounted for 92% of all investment – solar jumped 25% to $149.6 billion, the second-highest figure ever; wind investments rose 11% to a record $99.5 billion.