Global Trends in Renewable Energy Investment 2017 found that wind, solar and other renewables added 138.5GW to global power capacity in 2016, up by 8% from 2015. The added capacity is roughly the same as the world’s 16 largest existing power plants combined.
This has all been achieved at an investment level 23% lower than 2015, according to the report from UN Environment, the Frankfurt School UNEP and Bloomberg New Energy Finance.
“The question always used to be ‘will renewables ever be grid competitive’” said Michael Liebreich, founder of Bloomberg New Energy Finance. After the “dramatic cost reductions” of the past few years, unsubsidised wind and solar can provide the lowest cost new electrical power “in an increasing number of countries – sometimes by a factor of two” he said.
The proportion of electricity that came from renewables, excluding hydro, rose from 10.3% to 11.3%. Although the rise seems marginal, the research said this prevented the emission of an estimated 1.7 gigatonnes of carbon dioxide from entering the atmosphere.
Investment breakdown
The total investment was $241.6 billion (excluding large hydro) – the lowest since 2013. This was said to largely be down to the cost of clean technology falling: the average dollar capital expenditure per megawatt for solar photovoltaics and wind dropped by more than 10%.
“Ever-cheaper” clean tech provides a “real opportunity for investors to get more for less”, said Erik Solheim, executive director of UN Environment.
The largest investments in clean tech globally were made in solar, with $113.7 billion, which fell 34% from a record high in 2015. However, solar capacity rose to an all-time high of 75GW. Wind power saw $112.5 billion of investment globally, down 9%. New wind capacity fell to 54GW from the previous year’s high of 63GW.
This is in line with developments in the UK, said a spokesman from clean energy organisation Renewable UK told PE. Solar and wind have both seen “astonishing decreases in cost” because they have both had a “huge amount of investment and innovation” in the past few years, he said.
Acquisitions of clean technology assets saw another record high, rising to 17% to $110.2 billion. Investors hunger for existing wind and solar farms is a “strong signal for the world to move to renewables”, said Udo Steffens, president of Frankfurt School of Finance & Management.
Slowdown in investment
However, the report did reveal that there was a slowdown in investment from China (a drop of 32%) and Japan as well as drops of around 60% or more in emerging markets including Mexico, Chile, Uruguay, South Africa and Morocco. This was blamed on “slower than expected growth in electric demand”, as well as delays to auctions and financings.
Meanwhile, the US saw commitments slip 10% to $46.4 billion as developers slowed down on project, most likely down to attempts to benefit from the five-year extension of the tax credit system, said the report. Japan slumped 56% to $14.4 billion.
Europe, however, bucked the trend with a 3% increase in renewables to $59.8 billion, led by the UK ($24 billion) and Germany ($13.2 billion). Offshore wind dominated Europe’s investment ($25.9 billion) up to 53% thanks to ‘mega-arrays’ such as the 1.2GW Hornsea project in the North Sea, estimated to cost $5.7 billion.
Offshore wind has been able to reduce its costs by a third since 2012, a spokesman from Renewable UK told PE, and it recently met a UK government target four years ahead of schedule.
Challenges ahead
Recent figures from the International Energy Agency said that the switch to renewables was one of the main reasons for greenhouse gas emissions staying flat in 2016. However, it is unclear whether the rate of new renewable energy capacity will continue to grow year-on-year.
Continued Contracts for Difference (CfD) auction rounds in the UK will help increase capacity, said the Renewable UK spokesman. CfD’s pay a guaranteed price for electricity generated from projects such as offshore wind farms, with the cost added to consumer bills, which aims to give investors certainty to back low-carbon generation.
The UK government has committed itself to three CfD auctions during this Parliament. “We also need to find a way to take advantage of the low-cost of onshore wind and solar in the UK”, the spokesman said.
However, he stressed that government has done a “significant amount to support renewables”. “Since 2010 we’ve witnessed an historic transformation in our electricity infrastructure. The amount of renewable electricity we generate has gone from 7% to 25%,” he added. A second Contracts for Difference auction round for renewable energy has just opened.
Liebrich, founder of Bloomberg New Energy Finance, is also hopeful that renewable energy will outpace more traditional forms of energy generation globally. He said the UN report reveals “a whole new world”. “Even though investment is down, annual installations are still up; instead of having to subsides renewables, now authorities may have to subsidies natural gas plants to help them provide grid reliability,” he added.