South Africa, India buck renewables slowdown, in shift away from coal

Renewable energy investment has made a slow start to 2015, with the latest figures from Bloomberg New Energy Finance showing that most of the world’s economies charted a drop in Q1 transactions from 2014 levels – but for a few notable exceptions.

According to BNEF statistics from the January to March period, global investment in clean energy was $50.5 billion in the first quarter of 2015, down 15 per cent from Q1 2014, as deal-making slowed in big markets including China, Europe and Brazil.

Needless to say, this slowdown included Australia, which has virtually stagnant in the past 18 months. The entire Asia-Oceania region (which does not include China or India) started the year with a 15 per cent fall in renewables investment to $11.2 billion.

Several countries managed to buck the renewables slow-down, however – most notably South Africa, where investment surged to $3.1 billion from almost nothing in 2014, providing the quarter’s strongest growth; and in India, where investment rose 59 per cent to $1.6 billion.

Like Australia, these two countries are heavily reliant on coal for their power supply. But unlike Australia, the BNEF figures suggest they are doing something about it.

“Since 2012, South Africa has emerged as one of the most important centres for clean energy investment, as it seeks to expand power capacity and take advantage of its sunshine and wind resources,” said BNEF analyst Luke Mills.

“The first quarter saw the financing of a series of large projects in solar thermal, wind and PV that won through in the latest round of the country’s auction program.”

Not so in Australia, though, which last year fell off the list of the Top 10 countries for renewables investment after a horror year of policy uncertainty drove an 80 per cent “plunge” in 2014 utility-scale financing – from $2.1 billion in 2013 to $330 million.

As reported at the start of the month, Australia’s protracted RET negotiations – among other policy twists – had even caused a decline in small-scale solar financing, according to BNEF, which was down 11 per cent in 2014, despite “robust solar resources and a well-developed installation industry.”

The UK, meanwhile, was the stand-out EU country for Q1 investment, which BNEF said was up 12 per cent year-on-year to $4.3 billion, due to a flurry of PV projects fuelled by the 31 March deadline for for solar accreditation under the Renewables Obligation program.

The US was another to chart investment growth, albeit just a 2 per cent rise to $9.6 billion. The rest of the Americas dropped 17 per cent to $2 billion, except for Brazil, which slid 62 per cent to $1.1 billion.

Elsewhere in Europe, BNEF’s Q1 figures show that investment slipped 30 per cent compared to first quarter 2014, while investment in China fell 24 per cent to $11 billion.

Often the year’s weakest quarter for clean energy investment, BNEF noted that Q1 2015 – while down sharply from the $67.6 billion investment in Q4 2014 – was also lower than Q1 2014′s $59.3 billion. The last quarter to show a weaker figure was Q1 2013, with $43.1 billion.

“The big question, of course, is whether and how hard clean energy investment would be hit by the slump in oil and gas prices,” said Michael Liebreich, chairman of the advisory board at BNEF.

“These figures indicate the answer is not so much.”

“But there’s a lot of ground still to cover this year,” Liebrich added. “No one knows whether the oil price is going to bounce back or collapse further. There is good momentum towards some sort of climate deal in Paris in December. And there are certainly plenty of ground-breaking developments in the low-carbon sector, from solar at six US cents per kWh, to storage, energy efficiency, electric vehicles and smart grid.

Looking at the different types of investment for the quarter, BNEF found that asset finance of utility-scale renewable energy projects fell 19 per cent in Q1 from a year earlier, to hit $27.9 billion.

The largest asset finance deals included $1.3 billion for Germany’s 322MW Nordsee One offshore wind project, $888 million for the 100MW Xina Solar One solar thermal complex in South Africa and $427 million for the 300MW Apex Kay wind farm in Oklahoma, US.

Investment in small distributed capacity, mostly rooftop solar, rose 11 per cent in Q1 2015, compared to year earlier, reaching $20.3 billion, with Japan, the US and China the most active markets.

By sector, the Q1 2015 investment figures show solar up 7 per cent from a year earlier, at $31.8 billion, wind down 30 per cent at $15.1 billion, biomass and waste-to-energy up 94 per cent at $1.7 billion, and biofuels down 64 per cent at $447 million. Investment in energy smart technology companies slumped 91 per cent to $281 million.