The latest annual update from BloombergNEF (BNEF) has provided a dose of good and bad news for the global green economy, as investment levels remained close to historic highs and renewables deployment continued to rise last year, but overall clean energy investment dipped eight per cent.
The influential analyst firm today published its annual clean energy investment update, confirming global investment hit $332.1bn last year marking the fifth year in a row when investment has topped $300bn.
However, total clean energy investment was down eight per cent on 2017 levels as a combination of plummeting wind and solar costs, policy changes in key markets, and a sharp reduction in Chinese subsidies led to a fall in overall investment.
The slowdown in investment will concern green business groups, which have consistently warned investment levels need to keep rising if the world is to have a chance of delivering on the goals of the Paris Agreement.
But the latest report also provided encouraging news, confirming that clean energy deployment rose with solar capacity setting a new record and breaking the 100GW barrier for the first time. Solar investment may have fallen 24 per cent year-on-year to $130.8bn during 2018, but a glut in solar modules sparked by China’s decision to restrict its feed-in tariff incentive scheme led to a sharp reduction in technology costs that served to drive investment in new projects around the world.
BNEF said its global benchmark for the cost of installing a megawatt of photovoltaic capacity fell 12 per cent in 2018, leading to lower investment levels at the same time as driving increased development.
“2018 was certainly a difficult year for many solar manufacturers, and for developers in China,” explained Jenny Chase, head of solar analysis at BNEF. “However, we estimate that global PV installations increased from 99GW in 2017 to approximately 109GW in 2018, as other countries took advantage of the technology’s fiercely improved competitiveness.”
Solar cost reductions were further fuelled by increased economies of scale as a number of mega-projects moved forward. For example, the 800MW NOORm Midelt PV and solar thermal portfolio in Morocco attracted an estimated $2.4bn in investment, while the 709MW NLC Tangedco PV plant in India secured around $500m of finance.
The global wind energy industry also enjoyed a solid year, with BNEF reporting that investment in the sector rose three per cent to $128.6bn on the back of the second strongest year on record for the offshore wind industry.
Investment in offshore wind projects rose 14 per cent year-on-year to $25.7bn, as the centre of gravity for the industry started to shift from Europe to China, where construction started on 13 new projects backed by $11.4bn of investment. Onshore wind investment also rose, climbing two per cent to just over $100bn.
“The balance of activity in offshore is tilting,” said David Hostert, head of wind analysis at BNEF. “Countries such as the U.K. and Germany pioneered this industry and will remain important, but China is taking over as the biggest market and new locations such as Taiwan and the US East Coast are seeing strong interest from developers.”
The picture for the wider global clean energy market was broadly positive. Total investment in utility-scale renewable energy projects and small-scale solar systems worldwide may have fallen 13 per cent year-on-year to $256.5bn, but the gigawatt capacity added increased. Meanwhile, investment in smart meter rollouts, electric vehicle firms, biomass and waste-to-energy, biofuels, geothermal, and marine energy all increased.
Government clean tech R&D also climbed four per cent to $15bn, the value of clean energy IPOs rose 20 per cent, and global venture capital and private equity investment more than doubled to $9.2bn, its strongest performance since 2010. However, corporate R&D spending slipped six per cent to $20.9bn.
The geographical reach of the clean energy sector also continued to grow, with 23 different countries mobilising more than $2bn of clean energy investment last year.
However, China, the US, and the EU continued to dominate the market, with China retaining the top spot despite investment levels falling by a third last year to just over $100bn.
“Once again, the actions of China are playing a major role in the dynamics of the energy transition, helping to drive down solar costs, grow the offshore wind and EV markets and lift venture capital and private equity investment,” said Jon Moore, chief executive of BNEF.
The update comes just days after the Chinese government announced plans for a number of wind and solar pilot projects that could be built without subsidies, as the country seeks to take advantage of the plummeting technology costs it has helped to engineer.
BNEF also confirmed that the US market continued to defy the Trump administration’s hostility towards clean energy with investment rising 12 per cent year-on-year to $64.2bn, as developers rushed to take advantage of existing tax credits and major corporates continued to sign power purchase agreements with renewables projects.
In addition, Europe’s clean energy sector enjoyed a solid year, investment rising 27 per cent to almost $75bn on the back of a number of major new offshore wind deals and a “sharp” recovery in the Spanish solar market.