Will 2014 see a resurgence of clean energy investment?

Creative Commons: Bernd Sieker, 2007
Creative Commons: Bernd Sieker, 2007

2014 could prove to be an important year for clean energy investment.

Following 2013 analysis which showed falling levels of investment last year, 2014 could prove to be a turning point for the downward trends experienced in recent years, with early indications showing investment was back up in the first quarter of the year.

Based on new data complied by Bloomberg New Energy Finance (BNEF), two major reports out last week made for disappointing reading, showing a $35.1 billion drop in investment across 2013.

This represents an 11% drop in global investment in renewable energy sources, biofuels, smart energy, and energy storage – down to $254 billion.

It follows a downward trend, which saw a 20% decline in clean energy investment in the past two years – following a record $318 billion in 2011.

The drop was even larger in bigger and more established G-20 country markets, where investment declined by 16%. Policy uncertainty in these countries has been partly blamed for such a decline.

One report, from PEW Charitable Trusts, showed that only three G-20 countries – Japan, Canada and the UK – had increased levels in clean energy investments in 2013.

However, these topline figures mask other much more promising developments in clean energy.

While global investments fell, a second report from BNEF, the UN Environment Programme and the Frankfurt School showed that renewable energy generated a larger share of the world’s electricity than ever before in 2013.

Globally renewables accounted for 43.6% of newly installed generating capacity last year – displacing an estimated 1.2 gigatonnes of carbon dioxide that would otherwise have been emitted.

Prices of leading technologies, such as wind and solar, have dropped steadily for decades and they are becoming increasingly competitive with century-old and financially volatile conventional power sources, according to the data.

The data also shows that investment in non-G20 markets saw growth last year – by around 15% – with promising sectors emerging in countries such as Chile and Uruguay.

Phyllis Cuttino, director of Pew’s clean energy programme said:

While there was an overall decline in investment, there are signs that the sector is reaping the rewards of becoming a more mature industry. Prices for technologies continue to drop, making them increasingly competitive with conventional power sources.

More positive news can be found looking at the first quarter figures for 2014, which this week have shown a rebounding of clean energy investment.

Earlier this week, analyst firm Clean Energy Pipeline reported that investment had seen a strong start to the year, with the first quarter of 2014 witnessing a 14% increased in global clean energy investment, compared to 2013.

That equates to a total spending of $61 billion.

And optimism that the slowdown in global investment could prove to be a short-lived blip was further strengthen as new figures from BNEF – which uses different criteria for classifying investment – also recorded a strong start to the year.

BNEF’s figures showed global investment rose 10% to $47.7 billion; slightly lower than Clean Energy Pipeline but still a strong recovery for the beginning of the year.

The report placed the increase on a 42% jump in funding for small-scale solar to $21.2 billion, as plummeting costs of solar PV systems continue to make it an attractive option for businesses and households in key markets, such as the US.

So could this be the start renewables resurgence? Michael Liebreich, chairman of the advisory board for BNEF believe the signs are “encouraging”.

It is too early to say definitively that 2013 was the low point for clean energy investment worldwide and that 2014 will show a rebound, but the first-quarter number are encouraging.

Two trends in particular are worth picking out – the increasing share of small-scale solar in overall investment, following a 50% plus improvement in PV’s levelised cost of electricity per MW over the last four years; and the geographical expansion of investment to more and more emerging economies.

Dig a little deeper into the latest figures and a mixed picture emerges. While the US led the recovery – investment in the country was up 95% year-on-year – there was less encouraging performance from Europe and the Americas (excluding the US and Brazil) with investment falling 30% and 11% respectively.

The Asia and Oceania region, the Middle East and Africa also saw climbs in investment.

There was also a mixed picture when it came to technologies, with solar investment rising 23% to $27.5 billion, and smart grid, efficiency, power storage and electric vehicles all also seeing increased spending.

However, biofuel and wind investment both dropped, 28% and 16% respectively.

And finally while there was a soar in increased investment in smaller scale projects, that in utility-scale clean energy projects and venture capital investment also fell globally, according to BNEF.

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