Surges in investment in offshore wind energy in Europe, and solar power in China and the US, helped to drive the 2014 global clean energy total up 16% to $310bn.
Clean energy investment rose for the first time in three years in 2014, overcoming a slump in oil prices that unsettled the outlook for the industry.
New funds for wind, solar, biofuels and other low-carbon energy technologies gained 16 percent to $310 billion last year, according to Bloomberg New Energy Finance. It was the first growth since 2011, erasing the impact of lower solar-panel prices and falling subsides in the U.S. and Europe that hurt the industry in previous years.
The industry benefited from a number of trends that will be challenging to replicate this year. Funding surged because of a 32 percent expansion in China’s commitment to renewables, as well as a record $19.4 billion committed to offshore wind projects that were years in the making. Money also flowed into electric cars, especially for Tesla Motors Inc., just before cheaper gasoline prices reduced forecasts for that segment.
“Healthy investment in clean energy may surprise some commentators, who have been predicting trouble for renewables as a result of the oil price collapse,” said Michael Liebreich, chairman of the advisory board of the London-based researcher. “Our answer is that 2014 was too early to see any noticeable effect on investment. The impact of cheaper crude will be felt much more in road transport than in electricity generation.”
While there may be hiccups ahead for electric cars and offshore wind, the biggest bits of the renewable energy industry are still expanding. BNEF expects installations for solar and wind power to grow about 10 percent this year.
The findings ease concerns that the oil price rout that began in the middle of last year would lead to a sharp reduction in funds for low-carbon energy, which is more costly than fossil fuels. The WilderHill New Energy Global Innovation Index, which tracks 105 clean-energy equities, has tumbled almost 19 percent since March.
“This increase in renewable energy investment demonstrates the resilience of the sector in the face of tumbling oil prices,” said Ben Warren, head of environmental finance at the consulting firm EY. “This trend is set to continue as technology around renewables becomes more affordable. The increasing role that renewable energy plays in emerging markets will also help ensure sustainable growth for the sector.”
Seven offshore wind projects worth more than $1 billion each obtained financing in 2014, driving funding for the wind energy industry up 11 percent to a record $99.5 billion. The outlook for further developments has dimmed in recent months because the technology remains among the most costly for power.
“It may be difficult in 2015 to match” the overall investment if only because of the scale of the cash that came forward for offshore wind last year, said Angus McCrone, a senior analyst at BNEF in London.
A surge in solar everywhere had the biggest impact on the total result for 2014. Investment in projects that generate electricity from the sun rose 25 percent to $149.6 billion in 2014, its highest share of the total ever.
Driving solar was China’s support both for photovoltaic installations and its panel manufacturers, which dominate the industry. Also, the rise of rooftop panel installers such as SolarCity Corp. and “yieldcos,” companies that channel dividends to investors from operating solar projects, broadened the paths for money to flow into the industry.
Unshaken by Oil
“Technologies such as solar are much more cost competitive now so you might not see as much pressure from low oil prices,” said Lit Ping Low, assistant director for sustainability and climate change at PricewaterhouseCoopers LLP. “Investment in clean energy will at least hold its own, if not continue to rise this year.”
Sales of electric vehicles probably will be first to feel the impact of cheaper oil, which has reduced the cost of gasoline and made conventional cars more economical.
Investment in biofuels, which are blended with gasoline to help cut emissions, was one of the few clean-energy segments to suffer a decline, dropping 7 percent to $5.1 billion.
What BNEF calls energy smart technologies, including power storage, efficiency products and electric cars, rose 10 percent to $37 billion last year.
China was the biggest single contributor among the major markets for renewable energy, increasing its investment to $89.5 billion, the BNEF report showed. The nation has become the top market for solar power and one of the largest for wind after ladling out support for the industries to diversify its energy supplies.
The U.S. boosted its investment 8 percent to $51.8 billion, the most since 2012. Japan, which has become the second-biggest market for solar power, lifted funding for renewables 12 percent to $41.3 billion. In Europe, which led the industry in installations in the first decade of this century, investment grew 1 percent to $66 billion despite funding for offshore wind.
Reflecting a shift away from large, centralized power stations to smaller, local facilities, investment in so-called distributed power swelled 34 percent to $73.5 billion. That will weigh on utilities that are under pressure to replace fossil-fuel or nuclear power stations with more intermittent and smaller low-carbon facilities.
New equity raised for clean energy companies on the public markets grew 52 percent to $18.7 billion driven by a succession of U.S. and U.K.-listed yieldcos and project funds.
World clean energy investment rebounded strongly in 2014, boosted by demand for large-scale and rooftop solar photovoltaics on the back of its greatly improved competitiveness, and by the financing of a record $19.4bn of offshore wind projects.
Authoritative annual data, published today by Bloomberg New Energy Finance, show that global investment in clean energy was $310bn last year. This was up 16% from a revised $268.1bn in 2013, and more than five times the figure of $60.2bn attained a decade earlier, in 2004, albeit still 2% below the all-time record of $317.5bn reached in 2011 .
The jump in investment in 2014 reflected strong performances in many of the main centres for clean energy deployment, with China up 32% to a record $89.5bn, the US up 8% to $51.8bn (its highest figure since 2012), Japan up 12% to $41.3bn, Canada up 26% at $9bn, Brazil up 88% at $7.9bn, India up 14% to $7.9bn, and South Africa up 5% at $5.5bn. Europe, despite the flurry in offshore wind, was a relative dull spot overall, investment there edging 1% higher to $66bn.
Michael Liebreich, chairman of the advisory board for Bloomberg New Energy Finance, said: “Throughout last year, we were predicting that global investment would bounce back at least 10% in 2014, but these figures have exceeded our expectations. Solar was the biggest single contributor, thanks to the huge improvements in its cost-competitiveness over the last five years.
“Healthy investment in clean energy may surprise some commentators, who have been predicting trouble for renewables as a result of the oil price collapse since last summer. Our answer is that 2014 was too early to see any noticeable effect on investment, and anyway the impact of cheaper crude will be felt much more in road transport than in electricity generation.”
Looking at the different categories of investment last year, asset finance of renewable energy projects was by far the largest, at $170.7bn, some 10% higher than in 2013. There were no fewer than seven European billion-dollar offshore wind projects reaching the “final investment decision” stage, including the $3.8bn, 600MW Gemini array off the Netherlands (the largest non-hydro renewable energy project on record in terms of dollars committed), the $2.6bn, 402MW Dudgeon project in UK waters, and the $1.7bn, 350MW Wikinger undertaking in the German area of the Baltic Sea.
Many big solar and onshore wind projects around the world were also financed in 2014. They included the Setouchi Mega PV project in Japan, at an estimated $1.1bn for 250MW, the Xina Solar One solar thermal plant in South Africa, at $1bn for 100MW, the $859m, 310.5MW Lake Turkana wind project in Kenya and the K2 wind complex in Ontario, Canada, at $728m and 270MW.
The second-largest category of investment was small distributed capacity – projects of less than 1MW, predominantly rooftop solar. This saw $73.5bn committed in 2014, up 34%. Research and development by governments and corporations totalled $29bn, some 2% more than in 2013, while asset finance of energy smart technologies such as smart meters came in at $16.8bn, up 8% on 2013.
New equity raised for clean energy companies on public markets hit a seven-year high in 2014, at $18.7bn, up 52% on the year. US electric car maker Tesla Motors raised $2.3bn via convertible issues, and a succession of US- and UK-listed “yieldcos” and project funds tapped investors for $3.9bn in total.
Venture capital and private equity investment in clean energy was $4.8bn in 2014, up 16% on the year but still far below the $12.3bn record set in 2008. The largest VC/PE deals last year were a $250m expansion round for US lithium-ion battery firm Boston-Power, a $250m expansion round for US solar installer Sunnova Energy, and a $150m late-stage VC round for US residential solar financier Sunrun.
The increased total for public market and VC/PE investment came despite a 3% slippage in clean energy share prices over the year. The WilderHill New Energy Global Innovation Index, or NEX, which tracks the just over 100 stocks worldwide, peaked at 220.58 in March 2014 and slid to 178.66 by year-end.
Solar made up almost half of total clean energy investment in 2014, its highest share ever. Last year, solar saw $149.6bn committed, up 25% on 2013. Investment in wind rose 11% to a record $99.5bn. The third largest sector was energy smart technologies, including smart grid, power storage, efficiency and electrified transport, with $37.1bn of investment, up 10%. Investment in biofuels was just $5.1bn in 2014, down 7%, and in biomass and waste-to-energy $8.4bn, down 10%. Geothermal attracted $2.7bn, up 23% on 2013, while small hydro-electric (projects of less than 50MW) got $4.5bn, down 17%.
The US investment total of $51.8bn in 2014 included $15.5bn of utility-scale asset finance, with wind down more than half at $5.9bn, hit by uncertainty over the future of its key incentive, the Production Tax Credit, and solar up 39% at $8.9bn. There was also $12.9bn of investment in small-scale projects. The Chinese total of $89.5bn included $73bn of asset finance, with both wind ($38.3bn) and solar ($30.4bn) up by more than 20%. China saw $7.6bn of spending on small distributed capacity.
Among European countries, overall investment rose 3% in the UK to $15.2bn and 3% in Germany to $15.3bn, while France jumped 26% to $7bn thanks partly to the financing of Europe’s biggest ever PV plant, the 300MW Cestas project. Big offshore wind deals drove the figure for the Netherlands up 232% to $6.7bn, but investment in Italy fell 60% to $2bn, hit by retroactive cuts in tariff support for PV plants.
In Australia, clean energy investment tumbled 35% to $3.7bn, the lowest since 2009, as wind and solar project developers delayed decisions while they awaited the government’s response to its Renewable Energy Target review.
Separate from the clean energy investment figures, Bloomberg New Energy Finance also released annual data today on “green bonds” – fixed-interest securities linked to clean energy and energy efficiency, and also other sustainability goals. Green bond issuance enjoyed another record year in 2014, with $38bn sold, two and a half times the 2013 total of $15bn. Volume was driven by a doubling in issuance from institutions like the World Bank and a five-fold increase in issuance from corporations.