For the past five years, Pew Charitable Trusts has tracked investment and finance trends in the world’s leading economies. Over that period, the clean energy industry has been buffeted by a global recession, broad changes in energy markets, and uncertainty surrounding international policies on clean energy and climate change. Despite these challenges, the clean energy sector is now an annual $250 billion component of the world economy.
In a press release dated 1 April, Pew summarizes the results of its latest annual clean enegy report:
“Although global clean energy investment in renewable sources, biofuels, smart energy, and energy storage fell 11 percent in 2013, to $254 billion, a number of developments indicate a promising future for clean energy. First, the prices of leading technologies such as wind and solar have dropped steadily for decades; they are increasingly competitive with century-old and more financially volatile conventional power sources. Second, clean energy manufacturers are moving forward and have effectively weathered withering competitive pressures, consolidations, and policy changes. Investor confidence about the long-term future of renewable energy was reinforced in clean energy stock indexes in 2013, which rose sharply over the year. Third, markets in fast-growing, developing countries are prospering; these economies see distributed generation as an opportunity to avoid investments in costly transmission systems, comparable to the deployment of cellphones instead of costly landline infrastructure. Even in the contracting markets of Europe and the Americas, which have affected the overall industry, policymakers are recalibrating rather than abandoning clean energy policies.
Worldwide investment dips for 2nd straight year
Over the past two years, clean energy investment has declined 20 percent from a 2011 record of $318 billion. Although investment in non-G-20 markets grew by 15 percent, with promising sectors emerging in such places as Chile and Uruguay, investment in the larger and more established markets of G-20 countries2 declined by 16 percent. Only three G-20 countries—Japan, Canada, and the United Kingdom—had increased levels in clean energy investment in 2013.
Asian investment grows steadily, Europe slides sharply
Clean energy investment in the European region, which is comprised of Europe, the Middle East, and Africa, slid sharply for the second year in a row. It fell 42 percent, to $55 billion, less than half the region’s 2011 record of $115 billion. Investment levels declined sharply in once-vibrant markets, with levels in Germany down 55 percent and Italy 75 percent. In contrast, the Asia and Oceania region continued to grow steadily in 2013, with levels increasing 10 percent, to $102 billion. China continued to be the leading regional and global market, attracting $54.2 billion in 2013. Japan experienced the fastest investment growth in the world, increasing 80 percent, to almost $29 billion.
Investment levels decreased in the Americas for the second year in a row to $52 billion, 8 percent lower than in 2012. Most notably, the largest markets in North and South America—the United States and Brazil—were down by 9 and 55 percent, respectively. For the first time, clean energy investment in Brazil was less than the combined total for the rest of Latin America. Canada was the second-fastest growing market in the G-20, increasing 45 percent, to $6.5 billion.
Wind investment holds steady as solar slips
Wind sector investments held relatively steady in 2013, falling 1 percent, to $73.5 billion, and accounted for 39 percent of the G-20 total. Financing dropped significantly in Turkey and Brazil, but those losses were offset by gains in Canada and the United Kingdom. China continued to attract the largest share of wind energy investment, accounting for 38 percent of the global total.
For the fourth year in a row, solar energy technologies garnered the largest share of G-20 clean energy investment—52 percent of the total. Nonetheless, investment in solar technologies fell by 23 percent in 2013, to $97.6 billion. Steep drops in Germany and Italy were among the reasons that collective investment in the solar sector fell below the $100 billion mark for the first time in seven years.
Energy efficient/low-carbon technologies, which include smart meters and energy storage devices, constituted the only clean energy sector with rising investment levels, growing 15 percent to $3.9 billion. G-20 investment in biofuels sank by 41 percent, to just under $3 billion. Other renewable energy technologies, including geothermal, biomass, and waste-to-energy, dropped by 31 percent, to $10.7 billion.
China holds a wide lead in the clean energy race
Although overall clean energy investment declined 6 percent in 2013, China solidified its leadership position in the global clean energy race by attracting $54.2 billion. Its clean energy sector is reorienting from an exclusive focus on exports toward greater domestic consumption, as evidenced by China’s dramatic growth in solar power capacity in recent years. Solar deployment increased almost fourfold in 2013, to an unprecedented 12.1 GW, besting its record of 3.2 GW in 2012. In addition, for the fifth year in a row, China deployed more than 10 GW of wind power. In total, China installed more than 35 GW of clean generating capacity in 2013, a record. In terms of investment, China led in the wind category with $28 billion and was second in the solar sector with $22.6 billion. Almost all of China’s investment was in the asset financing category, with $53.3 billion recorded, more than 40 percent of all G-20 asset financing.
The U.S. clean energy sector is in a holding pattern as the second-largest world market. The fulfillment of state-level renewable portfolio standards, the lack of progress on national energy policy, and uncertainty about the direction of policies on global warming pollution has dampened investor interest in the sector. Overall, clean energy investment in the United States declined 9 percent in 2013, to $36.7 billion. The United States remained the second-leading destination for wind energy investments, attracting $14 billion. It was third in solar energy investments, with $17.7 billion. As has been the case for several years, the United States continued to garner world-leading investment levels in the biofuels and energy efficient/ low-carbon technology subsectors. The United States also remains the dominant recipient for public market and venture capital/private equity investments, attracting $6.8 billion and $2.2 billion, respectively, in 2013.
Japan jumped from fifth to third place among G-20 nations for overall clean energy investment, reflecting a priority since the Fukushima nuclear disaster for new energy alternatives. In 2013, Japan became the fastest-growing clean energy market in the world, growing by 80 percent, to $28.6 billion. Most striking was a near doubling of investment in Japan’s solar sector, which received $28 billion in 2013, almost 30 percent of the G-20 total.
The United Kingdom defied the clean energy contraction that gripped the rest of Europe in 2013. Although clean energy investment in Germany, Spain, Italy, and France dropped by 40 percent or more, the United Kingdom experienced 13 percent growth in 2013. The U.K. was one of three G-20 countries to have investment gains last year, and it ranked fourth among G-20 nations. Most of this growth came in the wind sector, where investments increased by nearly 50 percent to $5.9 billion, on the strength of offshore projects and greater activity in public market financing. The world’s largest offshore wind project, the 630-MW London Array, was completed in 2013, and major financing was secured for the 210-MW Westermost Rough Offshore Wind Farm.
Investment levels in Germany were highly sensitive to clean energy feed-in tariff reductions in 2013. Financing fell 55 percent from 2012 levels, to $10 billion, and the country dropped from third to sixth place among G-20 nations. Wind investments were down by 16 percent, to $5.1 billion, and solar financing declined by more than $10 billion, to $4.8 billion. The recalibration of German clean energy policies also affected deployment levels. Wind capacity additions totaled 3.4 GW in 2013. New solar generating capacity additions were down 50 percent, to less than 4 GW, after record additions of almost 8 GW in 2012. Germany has the most installed solar of any country in the world, with 35.5 GW.
Strong clean energy investments in 2013 catapulted Canada up five spots to seventh place in the G-20. Investment grew by 45 percent, to $6.5 billion. The wind sector was especially strong, with financing increasing by more than 40 percent, to $3.6 billion. In Ontario province, a number of backlogged projects were permitted and several others were completed, such as the 270-MW South Kent Wind Farm and the 299-MW Blackspring Ridge project. The solar sector also recorded impressive growth, attracting $2.5 billion.
South Africa’s clean energy sector garnered $4.9 billion in 2013, and it moved up from the 10th–largest to ninthlargest market in the G-20. Although investment levels were down 14 percent last year, South Africa’s market has grown the second fastest in the G-20 over the past five years. Sixty percent of the country’s clean energy investment in 2013, $3 billion, went to the solar sector in conjunction with Phase II of its carefully planned reverse auctions. An additional $1.9 billion was invested in the wind sector.”
(Source: Pew Charitable Trusts. See more here, On China’s lead in renewable energy growth, see also this recent article by John Mathews and Hao-Tan.)