Global Clean Energy Investment Drops As Equipment Costs Fall, States New Report



By Ilario D'Amato

This article was originally published on The Climate Group and is republished with permission.

 

LONDON: New investment in clean energy fell to US$287.5 billion last year, 18% lower than the record of US$348.5 billion in 2015, a new report from Bloomberg New Energy Finance (BNEF) states.

 

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The report highlights how this reduction is in part due to the simultaneous, unstoppable fall in the cost of renewable sources. It also shows that while investment dropped, new building of clean energy projects increased – particularly in offshore wind.

 

“The ongoing improvements in renewable power technologies, such as solar photovoltaics (PV) systems and wind turbines, means that the world is producing more megawatts of green energy for the same amount of money. That’s a powerful driver for change, underlines Damian Ryan, Acting CEO, The Climate Group.

 

A GREEN SURGE

 

In 2015, almost a quarter of global electricity came from renewables, the capacity of which surpassed coal for the first time, the International Energy Agency (IEA) shows.

 

However, while renewable power expanded at its fastest-ever rate, coal was still the largest source of global electricity production, making up 40.7% of the total, as opposed to 22.3% from renewables due to the intrinsic, intermittent nature of solar and wind power.

 

https://www.theclimategroup.org/sites/default/files/styles/content_image__full_width/public/images/bnef_investment_2017.jpg?itok=0wyRqpFh

New investment in clean energy by region 2004-16 (US$bn) – from BNEF's report "Global trends in clean energy investment 2016"

 

Investment in clean energy stalled in Europe, the Middle East and Africa last year (US$80 billion, from US$81 billion in 2015), while in the Americas it showed a decline of around 14% (US$73 billion, from US$85 billion), the BNEF report indicates.

 

Whilst Asia-Pacific nations led on investment in renewables for the eighth year in a row, they also saw an overall year-on-year reduction; from US$183 billion in 2015 to US$135 billion last year. The report also highlights a marked cooling in the two key markets of China and Japan.  “China was booming for the past 10 years,” explains Michael Eckhart, Managing Director & Global Head of Environmental Finance and Sustainability, Citigroup, in an exclusive Climate TV during the International Renewable Energy Agency (IRENA) General Assembly 2017.

 

Now China has decided to cut back the deployment of new infrastructures for renewable power because they need to ‘absorb’ what they’ve already put in place, he says, “so they reduced it, and that’s very disruptive.”

 

Japan also scaled down its clean investments by 43% this year, Michael Eckhart points out. This is due to the fact that in recent years, after the Fukushima accident, the government put in place a bold but short-term policy of incentives on renewable energy, to account for the closure of its nuclear plants.

 

ACCELERATING PROGRESS

 

Meanwhile, investment in clean energy is increasing in other places, including South-East Asia and Africa, Michael Eckhart emphasizes. “We have all the different markets coming up and down,” he says, “but when you add them all up, plus the cost of equipment coming down, we have the same megawatts installed for less price.”

 

He also highlights how 93% of all today’s clean investment comes from countries that are members of the Organisation for Economic Co-operation and Development (OECD) plus the emerging economies of Brazil, Russia, India, China and South Africa (BRICS).

 

If the world needs to invest about US$1 trillion per year until 2030 to avoid catastrophic effects induced by climate change, as the International Energy Agency underlines, then the most developed countries only have to double their investment to get to that level.

 

However, the scale of such investment for developing countries to reach this goal is much more challenging – an immediate 25-fold scale-up. “That’s the challenge right there,” says Eckhart. “We have a huge financing challenge.”

 

Therefore, he concludes, good policies are essential to reach the level of clean energy investment necessary for steering the world toward a net-zero emissions future by 2050 – the science-based target to avoid the worst effects of climate change.

 

WINDS OF CHANGE

 

As in previous years, wind and solar made up the majority of renewables investment, the report states. In particular, offshore wind surged last year, due to capital spending commitments of almost US$30 billion – up 40% on the previous year – as well as bigger turbines and improved economics.

 

Solar PV technology is also benefiting from a dramatic fall in equipment prices – around 80% between the end of 2009 and the end of 2015, IRENA states. This research also indicates that there is substantial room for improvement in deploying PV – since it currently supplies less than 2% of global electricity, growing six-fold from around 8 gigawatts (GW) in 2009 to about 47 GW in 2015.

 

 

“Here at IRENA we have witnessed over the last two days the phenomenal growth that we’ve seen in renewable energy worldwide,” said Adnan Z. Amin, Director-General, IRENA, during the 7th General Assembly of its organization this year.

 

“We are living through a very exciting period, where the global energy system is going through a major transformation. This transformation not only has the possibility to take us to a low-carbon, climate-safe future; it also has the possibility to generate investment, growth and incomes at higher rates than we’ve seen.”

“The fall in renewable energy costs is spurring a race towards the inevitable net-zero economy of the future,” concludes Damian Ryan, “and companies and communities that at the forefront of the race today will reap the benefits of this transformation to a new, cleaner, sustainable world.”

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