After two years of declines investments in renewable energies have once again registered an upward trend in 2014 with US$270 billion invested, according to UNEP’s 9th annual Global Trends in Renewable Energy Investment 2015.
Drivers of this have included a boom in solar installations in China and Japan totalling US$74.9 billion between those two countries, and a record US$18.6 billion of final investment decisions on offshore wind projects in Europe.
Declining renewables costs
Perhaps even more significant, according to the report is that due to declining technology costs, particularly of wind and solar photovoltaics – which together accounted for 92% of the investment – a record 103GW of new renewable capacity was installed in 2014. This compares with 86GW in 2013, 89GW in 2012 and 81GW in 2011.
As a result in 2014 wind, solar, biomass and waste-to-power, geothermal, small hydro and marine power contributed an estimated 9.1% of world electricity generation, up from 8.5% in 2013. This meant that last year the world electricity system emitted 1.3Gt of CO2 – roughly twice the emissions of the world’s airline industry – less than it would have if that 9.1% had been produced by the same fossil-dominated mix generating the other 90.9% of world power.
“Once again in 2014, renewables [excluding large hydro] made up nearly half of the net power capacity added worldwide,” says Achim Steiner, UN Under-Secretary-General and Executive Director of UNEP. “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.”
The Chinese factor
China saw by far the biggest renewable energy investments in 2014, with a record US$83.3 billion, up 33% from 2013. The US was second at US$38.3 billion, up 7% on the year though still below its all-time high reached in 2011. Third came Japan, at US$35.7 billion, 10% higher than in 2013 and its biggest total ever. India was up 14% at US$7.4 billion, and Brazil 93% higher, at US$7.6 billion.
Investment in Europe advanced less than 1% to US$57.5 billion. Nevertheless, there were seven billion-dollar-plus financings of offshore wind projects, boosting the investment totals for the Netherlands, the UK and Germany. These included, at the euro equivalent of $3.8 billion, the largest single renewable energy asset finance deal ever, outside large hydro – that of the 600MW Gemini project in Dutch waters.
New renewables markets
A key feature of 2014 was the continuing spread of renewable energy to new markets. Investment in developing countries, at US$131.3 billion, was up 36% on the previous year and came the closest ever to overhauling the total for developed economies, at US$138.9 billion, up just 3% on the year.
Indonesia, Chile, Mexico, Kenya, South Africa and Turkey were all in the billion-US dollar-plus club in 2014 in terms of investment in renewables. Others such as Jordan, Uruguay, Panama, the Philippines and Myanmar were in the US$500 million to $1 billion range.
Renewables challenges ahead
Despite the turnaround in 2014, multiple challenges remain for renewables, according to the report.
These include policy uncertainty in markets such as the US and the UK, retroactive policy changes in countries such as Italy and Romania, and concerns about grid access for small-scale solar in Japan and some US states. There are also structural challenges in the electricity system as grids and utilities in many countries struggle to cope with the increasing penetration of wind and solar in the generation mix.
The most daunting challenge was, at first sight, the impact of the 50%-plus collapse in the oil price in the second half of 2014. However, although the oil price is likely to dampen investor confidence in parts of the sector, such as solar in oil-exporting countries, and biofuels, in most parts of the world, oil and renewables do not compete for power investment dollars. Wind and solar sectors should be able to carry on flourishing, particularly if there is continued cutting of costs per MWh.