Global Renewable Energy Investment Drops, But Installed Capacity Rises

Renewable energy investment fell year-over-year in 2013, down 14 percent, but the drop belies some heartening news for market participants and clean energy supporters. In short: Renewable energy's share of overall power generation continues to grow, and more renewable energy generation capacity is being brought online at much lower cost, solar energy generation capacity in particular.

According to the latest global renewable energy annual report from the Frankfurt School-United Nations Environment Programme Collaborating Centre (FS-UNEP) and Bloomberg New Energy Finance, global renewable energy investment totaled $214 billion in 2013, a second consecutive year of decline and 23 percent below a 2011 peak. Even so, renewable energy accounted for 43.6 percent of new power capacity, while renewable energy's share of worldwide electricity generation rose to 8.5 percent from 7.8 percent in 2012.

There were several other reasons for optimism regarding the outlook for renewable energy, according to FS-UNEP-BNEF's, “Global Trends in Renewable Energy Investment 2014.” For one thing, some 1.2 billion metric tons of carbon dioxide (CO2) emissions were avoided as a result of renewable power generation last year. But that's not all.

Solar and renewable energy: A virtuous cycle

Reductions in the installed costs of solar, wind and other renewable energy systems is driving a virtuous feedback cycle, with wind, solar and other renewable energy systems now competitive, or cheaper, than conventional fossil fuel-fired electricity generation in a growing number of countries and markets.

Solar energy investment did fall sharply in 2013, down 20 percent to $114 billion year-over-year. Other developments across the solar energy value chain illustrate how the confluence of advances in technology and manufacturing, along with a little help from supportive government policies and regulatory frameworks, is now being leveraged to greater effect by private and public sector organizations around the world, however.

Sharply lower costs for solar photovoltaic (PV) systems drove installations to a record-high 39 gigawatts (GW) in 2013, according to FS-UNEP-BNEF's latest report. More solar PV capacity was installed last year than in 2012 (31 GW) and for less money, the report authors highlight.

Another positive development in the solar energy sector was improved profitability for manufacturers, whose profit margins – despite record-high demand – were being squeezed to, and beyond, the point of insolvency and bankruptcy. This had a two-fold knock-on effect for the share prices of clean energy companies -- which staged a 54 percent recovery -- and prompted a surge in public share offerings on stock exchanges.

Wind energy investment fell just 1 percent worldwide last year, to $80 billion, and there were some strong positive signs looking ahead. Of particular note, even on an unsubsidized basis, installing new wind power capacity is now cost-competitive with the lowest cost fossil fuel-fired (typically coal) electricity generation, if not even cheaper, in a larger number of countries around the world. And that's not even considering the other benefits and advantages of wind energy, such as its zero-fuel cost, zero running greenhouse gas emissions and essentially zero water use.

Investment in geothermal energy development was the only renewable energy sector covered in the report (large-scale hydroelectric is excluded) to rise in 2013, increasing a sharp 38 percent to $2.5 billion. Biofuel investment dropped 26 percent to $5 billion, the lowest tally in nine years, while that for biomass and waste-to-energy systems fell 28 percent to $8 billion. Investment in small hydroelectric (less than 50 MW) dropped 16 percent to $5 billion.

Emerging markets driving renewable investment growth

In large markets around the world, Europe's investment in deploying renewables tumbled 44 percent to $48 billion and China's, though down 6 percent to $56 billion, surpassed Europe's for the first time. U.S. renewable energy investment dropped 10 percent to $36 billion, while Brazil's dropped 54 percent to $3 billion -- its lowest since 2005. India's renewable energy investment fell 15 percent to $6 billion, according FS-UNEP-BNEF's report.

Regionally, renewable energy investment for the Asia-Oceania region excluding China and India surged 47 percent higher, to $43 billion, with Japan's investment in renewable energy shooting 80 percent higher to $29 billion excluding R&D. Renewable energy investment in the Americas excluding the U.S. and Brazil also rose, gaining 26 percent to reach $12 billion.

Uncertain economic and regulatory outlooks – including initiatives to curtail the construction of new fossil fuel-power capacity and reduce CO2 emissions – also contributed to a decline in fossil-fuel power generation investment in 2013. Yet, even amidst the rising frequency, intensity and costs of extreme weather events and atmospheric CO2 measurements surpassing the 400 parts per million-level, investment in fossil-fuel power generation still exceeded that for renewable energy in 2013.

Renewable vs. fossil fuel-power investment

Including large-scale hydroelectric power, investment in renewable energy capacity, at $227 billion, came in below gross investment in fossil-fuel power, which came in at $270 billion, the report authors highlight. When factoring out fossil-fuel-power replacement investment, investment in renewable energy was about double, however.

Accounting for a growing share of worldwide power generation capacity and new additions, more consumers, businesses, governments and public sector organizations are recognizing the vital, and increasingly valuable, benefits rapid deployment of renewable energy brings to economies and societies. More can, and needs, to be done, however, according to renewable energy proponents.

As the world's preeminent multilateral organization, the United Nations (U.N.) is working to increase the momentum behind renewable energy's development and growth.

Writing in the foreword to the FS-UNEP-BNEF report, U.N. Secretary-General Ban Ki-Moon stated,

“To expand on these trends, we need better policy mechanisms, more public finance and more private investment. That is why, on 23 September 2014, I am convening a Climate Summit at United Nations Headquarters in New York.

The Summit will engage world leaders at the highest level – from governments, business, finance and civil society – to catalyse ambitious action on the ground as well as accelerate political momentum for a universal, legal climate agreement.”

The U.N. Secretary-General went on and said the Climate Summit “is an opportunity for public and private actors to rise to the challenge and work together in a ‘race to the top’ to develop the policies and solutions that will reduce greenhouse gas emissions and support adaptation and resilience.”

Image credits: FS-UNEP Collaborating Centre-BNEF, "Global Trends in Renewable Energy Investment 2014