2016 Sees Dips in Renewable Investment Levels

(3BL Media/Justmeans) — According to Bloomberg New Energy Finance (BNEF), global investment in renewable energy dropped 18% last year to a total of $287.5 billion. This could be sobering news indeed on Donald Trump’s inauguration, considering the indications that Trump has a preference for fossil fuels. Has the reversal already begun?

It’s worth looking into the numbers before jumping to conclusions. There were several factors that contributed to the decline. It’s important to keep in mind that because costs are dropping so fast, the installation of the same amount of renewable power this year would have cost less than it did last year. In fact, data from the Solar Energy Industries Association (SEIA) shows that solar prices in the US dropped by 19% for the 12 months ending September 30th.

That is, in fact, what happened. According to Veronika Henze at Bloomberg, purchased clean energy capacity grew from 127.6GW to 139 GW, an 8.9% increase, even as overall dollars fell. In fact, purchased solar capacity grew by 30% while wind saw a 10% drop. It shows that just following the dollars can, at times, be misleading. Bear in mind that the purchased capacity could take a year or more before it’s installed, particularly in the case of wind. A record level of 70GW of solar was installed last year as well, though wind installations were down 10.3% at 56.5GW. That was still the second highest annual figure ever.

There were other reasons  for the decline as well.

Investment in renewables dropped in both China and Japan, by 26% and 43% respectively. According to Justin Wu, head of Asia for BNEF, “After years of record-breaking investment driven by some of the world’s most generous feed-in tariffs, China and Japan are cutting back on building new large-scale projects and shifting towards digesting the capacity they have already put in place.”

Presumably, by digesting it, he means connecting it and integrating it into their grid, which is where considerable investment is now going. This then, in a central planning economy, is simply a pause, in which, says Wu, “The government is now focused on investing in grids and reforming the power market so that the renewables in place can generate to their full potential.”

While China anticipates continued growth, particularly in utility-scale projects, Japan’s market, going forward, will consist primarily of  “rooftop systems installed by consumers attracted by the increasingly favorable economics of self-consumption.”

There were several bright spots, the largest of which had to be offshore wind, where, as we noted earlier, oil companies have begun investing. They were clearly not the only ones. According to BNEF, capital spending on offshore wind hit $29.9B. That’s up 40% over the previous year. Clearly this is a technology that is finally taking off with the benefit of improved economics, bigger turbines, increased installation knowledge and public acceptance.

Jon Moore, BNEF’s CEO had the following to say: “The offshore wind record last year shows that this technology has made huge strides in terms of cost-effectiveness, and in proving its reliability and performance. Europe saw $25.8bn of offshore wind investment, but there was also $4.1bn in China, and new markets are set to open up in North America and Taiwan.”

The biggest offshore wind installation yet was Dong Energy’s 1,200 MW Hornsea array  in the North Sea, which came online last year at a cost of $5.75B.

Europe, which was another bright spot, was up 3% overall at $70.9bn, helped by offshore wind and also by the massive onshore Fosen wind project in Norway, a complex of six wind farms with a capacity of. 1GW, singed off at a cost of $1.3bn.  When completed, it will be the world’s fourth largest of its kind. China’s 6GW Gansu Wind Farm in China, currently under construction, will be the largest, at least for the time being.  European investment saw slight increases or modest investment declines among those countries with significant existing capacity, such as the UK, Germany and France, while newer players like Belgium, Denmark, and Sweden saw large percentage increases. The UK made the largest investment of $25.9B, up 2% from last year, while Belgium’s $3B was up 179% and Denmark’s $2.7B was an increase of 102% from the previous year.

Elsewhere, US investment dropped 7% to $58.6B. India remained flat at $9.6B with some large solar projects underway. Canada was down 46% to $2.4B.

Things did not go well in developing countries either. According to Bloomberg this was because projects that won auctions did not receive financing by the year’s end. South Africa, Chile, and Uruguay all saw declines between 59 and 80% with investment levels below $1B. Brazil eased down 5% with $6.8B

Jordan was a bright spot among emerging markets, breaking the $1bn barrier for the first time, while increasing its clean energy investment 147% to $1.2bn.