Global Trends in Renewable Energy Investment 2012 is the fifth edition of the UNEP report, based on data from Bloomberg New Energy Finance, and has become the standard reference for global clean energy investment figures.
This year it shows that despite an increasingly tough competitive landscape for manufacturers, total investment in renewable power and fuels last year increased by 17% to a record $257 billion, a six-fold increase on the 2004 figure and 94% higher than the total in 2007, the year before the world financial crisis.
Although last year’s 17% increase was significantly smaller than the 37% growth recorded in 2010, it was achieved at a time of rapidly falling prices for renewable energy equipment and severe pressure on fiscal budgets in the developed world.
The REN21 Renewables 2012 Global Status Report, which has become the most frequently referenced report on renewable energy market, industry and policy developments, notes that during 2011 renewables continued to grow strongly in all end-use sectors — power, heating and cooling and transport. Renewable sources have grown to supply 16.7 % of global energy consumption. Of that, the share provided by traditional biomass has declined slightly while the share sourced from modern renewable technologies has risen.
In 2011, renewable energy technologies continued to expand into new markets: around 50 countries installed wind power capacity, and solar PV capacity moved rapidly into new regions and countries. Solar hot water collectors are used by more than 200 million households as well as in many public and commercial buildings worldwide.
The two publications were launched jointly by Achim Steiner, UNEP Executive Director, Mohamed El-Ashry, Chairman of REN21, Michael Liebreich, Chief Executive of Bloomberg New Energy Finance, and Professor Dr. Udo Steffens, President and CEO of the Frankfurt School of Finance & Management, host of the Frankfurt School — UNEP Collaborating Centre for Climate & Sustainable Energy Finance.
– Total investment in solar power jumped 52% to $147 billion and featured booming rooftop photovoltaic (PV) installations in Italy and Germany, the rapid spread of small-scale PV to other countries from China to the UK and big investments in large-scale concentrating solar thermal (CSP) power projects in Spain and the US.
– The United States surged back to within an inch of the top of the renewables investment rankings, with a 57% leap to $51 billion, as developers rushed to cash in on three significant incentive programs before they expired during 2011 and 2012. After leading the world for two years, China saw its lead over the US shrink to just $1 billion in 2011, as it recorded renewable energy investment of $52 billion, up 17%.
– India’s National Solar Mission helped to spur an impressive 62% increase to $12 billion, the fastest investment expansion of any large renewables market in the world. In Brazil, there was an 8% increase to $7 billion.
– Competitive challenges intensified sharply, leading to sharp drops in prices, especially in the solar market — a boon to buyers but not to manufacturers, a number of whom went out of business or were forced to restructure.
– Renewable power, excluding large hydro-electric, accounted for 44% of all new generating capacity added worldwide in 2011 (up from 34% in 2010). This accounted for 31% of actual new power generated, due to lower capacity factors for solar energy and wind farm capacity.
– Gross investment in fossil-fuel capacity in 2011 was $302 billion, compared to $237 billion for that in renewable energy capacity excluding large hydro.
– The top seven countries for renewable electricity capacity excluding large hydro — China, the United States, Germany, Spain, Italy, India and Japan — accounted for about 70% of total non-hydro renewable capacity worldwide. The ranking among these countries was quite different for non-hydro capacity on a per person basis: Germany, Spain, Italy, the US, Japan, China and India. By region, the EU was home to nearly 37% of global non-hydro renewable capacity at the end of 2011, China, India and Brazil accounted for roughly one quarter.
– Renewable technologies are expanding into new markets. In 2011, around 50 countries installed wind turbines capacity; solar PV capacity is rapidly moving into new regions and countries; interest in geothermal power has taken hold in East Africa’s Rift Valley and elsewhere; interest in solar heating and cooling is on the rise in countries around the world; and the use of modern biomass for energy purposes is expanding in all regions of the globe.
– In the power sector, renewables accounted for almost half of the estimated 208 gigawatts (GW) of electric capacity added globally during the year. Wind power and solar photovoltaic (PV) accounted for almost 40% and 30% of new renewable capacity, respectively, followed by hydropower (nearly 25%). By the end of 2011, total renewable power capacity worldwide exceeded 1,360 GW, up 8% over 2010; renewables comprised more than 25% of total global power-generating capacity (estimated at 5,360 GW in 2011) and supplied an estimated 20.3% of global electricity.
– At least 118 countries, more than half of which are developing countries, had renewable energy targets in place by early 2012, up from 96 one year before, although some slackening of policy support was seen in developed countries. This weakening reflected austerity pressures, particularly in Europe, and legislative deadlock in the US Congress.
– Despite all the additional investments, share prices in the renewable energy sector had a dismal 2011 in the face of overcapacity in the solar and wind manufacturing chains and investor unease about the direction of support policies in both Europe and North America.
"There may be multiple reasons driving investments in renewables, from climate, energy security and the urgency to electrify rural and urban areas in the developing world as one pathway towards eradicating poverty-whatever the drivers the strong and sustained growth of the renewable energy sector is a major factor that is assisting many economies towards a transition to a low carbon, resource efficient Green Economy" says Mr. Steiner.
"This sends yet another strong signal of opportunity to world leaders and delegates meeting later this month at the Rio+20 Summit: namely that transforming sustainable development from patchy progress to a reality for seven billion people is achievable when existing technologies are combined with inspiring policies and decisive leadership," he said.
"It is essential to continue government policies that support and nurture the sector’s growth, and to de-escalate damaging trade disputes. Otherwise," he warned, "the low-carbon transition could weaken just at the point when exciting cost reductions are starting to transform the economics."
Says Dr. El-Ashry: "Despite the continuing economic crisis in some key traditional markets, and continuing political uncertainties, more renewable energy was installed last year than ever before. Policies helped to drive renewable energy forward. Policy development and implementation were stimulated by the Fukushima nuclear catastrophe in Japan, along with improvements in renewable energy costs and technologies. As a result, renewable energy is spreading to more countries and regions of the globe. Globally there are more than 5 million jobs in renewable energy industries, and the potential for job creation continues to be a main driver for renewable energy policies."
Bumps in the road
Faced with plunging green energy technology prices and economic austerity measures, many governments slashed their renewable subsidies and allowed other support schemes to expire. The result was a succession of company failures and factory closures in 2011-2012, including five significant solar manufacturers in the US and Germany.
According to Mr. Steiner, "Today’s over-capacity situation in some renewables sectors, particularly solar, provides the opportunity to upscale deployment in new markets at costs few thought possible only a few years ago. This is particularly attractive to the many developing countries where much of the population has little or no access to modern energy services."
Says Prof. Dr. Steffens: "Renewables are starting to have a very consequential impact on energy supply, but we’re also witnessing many classic symptoms of rapid sectoral growth — big successes, painful bankruptcies, international trade disputes and more. This is an important moment for strategic policymaking as winners in the new economy form and solidify."
Adds Mr. Liebreich: "We are entering a fascinating period, with clean energy’s costs starting to be competitive with fossil fuels. The challenge for policy-makers is to reduce support mechanisms at just the right pace — too fast and the long-term future of the industry will be harmed. Too slow and you do the world’s taxpayers and energy consumers a great disservice."
"Right now we are seeing a lot of pain on the supply-side as prices are being compressed, but it is important to remember than installers, generators and consumers are benefiting. It is all part of the maturing of the sector," he says.
"In 1903, the United States had over 500 car companies, most of which quickly fell by the wayside even as the automobile sector grew into an industrial juggernaut. A century ago, writing off the auto industry based on the failures of weaker firms would have been foolish. Today, the renewable energy sector is experiencing similar growing pains as the sector consolidates."
The industry’s image in the investor community has been harmed by a number of high-profile supply-chain company failures, he says. At the same time, he points out, Germany’s solar installations hit a new record peak output of 22GW at the end of May — equivalent to around one quarter of the country’s total power demand.
Renewables: an increasingly important contributor to world energy supply
In more and more countries, renewable energy represents a significant and rapidly growing share of total energy supply.
In the United States, renewable energy (including large hydro) provided 12.7% of total domestic electricity in 2011, up from 10.2% in 2010, and 9.3% in 2009. An estimated 39% of electric capacity added in 2011 was from renewable sources, mostly wind power. Renewable energy sources accounted for about 11.8% of U.S. domestic primary energy production, for the first time surpassing the 11.3% from nuclear power).
China again led the world in the installation of wind turbines and was the top hydropower producer and leading manufacturer of PV modules in 2011. Wind power generation increased by more than 48.2% during the year.
In the European Union, renewable energy accounted for more than 71% of total electricity generating capacity additions in 2011, with solar PV alone representing nearly half (46.7%) of new capacity coming on stream.
Germany remained the third biggest market for renewable energy investment. Renewable sources met 12.2% of total final energy consumption and accounted for 20% of electricity consumption (up from 17.2% in 2010 and 16.4% in 2009).
As the world marks the UN "International Year of Sustainable Energy for All," the REN21 Renewables 2012 Global Status Report includes a special focus on rural renewable energy, based on input from local experts working from around the world. Renewable energy is seen increasingly as a means for providing millions of people with a better quality of life through access to modern cooking, heating/cooling and electricity.
The impressive deployment of all renewable energy technologies combined with dramatic cost reductions and significant technology advances in recent years create an important opportunity for rural renewable energy development that points to a brighter future. However, further efforts will be necessary to reach the UN’s outlined objectives: annual investment in the rural energy sector needs to increase more than fivefold to provide universal access to modern energy by 2030.
Closing the gap with fossil fuels
The price of all major renewable energy technologies continued to fall in 2011 — to the point where they are challenging fossil-fuel sources, even before climate, health and other benefits are factored in.
The dominant reason for the price declines was that manufacturer margins were compressed as the industry continued the shift from a period of under-capacity a few years ago, to overcapacity now as growing demand failed to keep up with a surge in supply.
The most spectacular price plunge was in PV cells, whose average price fell from $1.50 per Watt in September 2010, to $1.30 per Watt by January 2011 and $0.60 per Watt by the end of the year, according to the Bloomberg New Energy Finance Solar Price Index. This fed into a fall in PV module prices of nearly 50% between the start of 2011 and the beginning of this year.
Onshore wind turbines showed a similar, although less dramatic, trend. In 2011, prices for turbines to be delivered in the second half of 2013 were 25% lower than for devices delivered in the first half of 2009, according to the Bloomberg New Energy Finance Wind Turbine Price Index.
While 2011 saw significant falls in the costs of generating a MWh of power from onshore wind (down 9%), and from PV technologies (down more than 30%), the cost of electricity generated by fossil-fuel sources changed less in most parts of the world — despite the sharp falls in US natural gas prices due to the increased use of "fracking," a hotly contested form of resource extraction.
Based on current trends, it is predicted that the average onshore wind farm project worldwide will be fully competitive with combined-cycle gas turbine generation by 2016 even in the US, as gas prices are expected to rebound to a point where they cover the cost of extraction. At present, this is true only of a minority of wind farm projects, those that use the most efficient turbines in locations with superior wind resources.
In solar, analysis suggests that the cost of producing power from rooftop PV panels for domestic use is already competitive with the retail (but not the wholesale) daytime electricity price in several countries including Germany, Denmark, Italy and Spain, as well as the state of Hawaii.
Policy environment drives development
REN21’s analysis found that stable renewable energy policies continue to be a driving force behind the development of green power capacity.
At least 118 countries — more than half of them in the developing world — have now established renewable energy targets. These include shares of total primary energy, total end-use energy, electricity generation (typically 10-30%), heat supply, biofuels as shares of road transport fuels, and total installed capacities for specific technologies.
Support for renewable power generation remains the most popular policy option with at least 65 countries and 27 states now having feed-in-tariffs (FITs).
Most policy activities in 2011 involved revisions to existing FITs, at times under controversy and involving legal disputes.
FIT payments vary widely among technologies and countries but are generally trending downwards, mostly due to lower technology costs than expected.