Perspectives on Geopolitics, History, and Political Economy

Renewable Energy Investments Rising but ‘Not Quickly Enough’

Photo: Village shop at dusk in Sri Lanka lit by solar panels. Credit: World Bank/Dominic Sansoni

Photo: Village shop at dusk in Sri Lanka lit by solar panels. Credit: World Bank/Dominic Sansoni

IDN-InDepthNews | Analysis That Matters

By Jaya Ramachandran

FRANKFURT | NAIROBI (IDN) – Impressive strides were made on renewable energy investments amounting to $266 billion in 2015 – more than double the estimated $130 billion invested in coal and gas power stations, according to a new United Nations backed report. But UN Secretary-General Ban Ki-moon has issued a cautious note.

In his foreword to the report titled Global Trends in Renewable Energy Investment 2016, Ban said: “In spite of these positive findings, to keep global temperature rise well below 2 degrees and aim for 1.5 degrees, we must immediately shift away from fossil fuels. Sustainable, renewable energy is growing, but not quickly enough to meet expected energy demand.”

Ban added: “For power sector development to be consistent with the goal of zero net greenhouse gas emissions in the second half of the century, it will be necessary to reduce or leave idle fossil-fuel power plant capacity, unless carbon capture technologies become widely available and are rapidly and fully utilised.”

UNFor the low-carbon transformation of the global economy to succeed, governments will need to create a level playing field for clean energy investment through carbon pricing, removing fossil fuel subsidies and strengthening stable and predictable regulatory and investment environments, Ban added.

The UN Environment Programme (UNEP) report, launched on March 24 by the Frankfurt School-UNEP Collaborating Centre for Climate & Sustainable Energy Finance and Bloomberg New Energy Finance (BNEF) in Frankfurt finds that 2015 was the first year in which investment in renewables excluding large hydro was higher in developing economies than in developed countries.

The developing world invested $156 billion in 2015, some 19% up on 2014 and a remarkable 17 times the equivalent figure for 2004, of $9 billion. Developed countries invested $130 billion in 2015, down 8% and their lowest tally since 2009, states Global Trends in Renewable Energy Investment 2016, the 10th edition of the annual publication issued by the UN Environment Programme (UNEP).

The report highlights that a large part of the record-breaking investment in developing countries took place in China. The country, it says, has indeed been the single biggest reason for the near-unbroken uptrend for the developing world as a whole since 2004. However, it was not just China – India also raised its commitment to renewables in 2015, and developing countries excluding China, India and Brazil lifted their investment by 30% last year to an all-time high of $36 billion, some 12 times their figure for 2004.

Among those “other developing” economies, those putting the largest sums into clean power were South Africa, up 329% at $4.5 billion as a wave of projects winning contracts in its auction programme reached financial close; Mexico, 105% higher at $4 billion, helped by funding from development bank Nafin for nine wind projects; and Chile, 151% higher at $3.4 billion, on the back of a jump in solar project financings. Morocco, Turkey and Uruguay also saw investment beat the $1 billion barrier in 2015.

According to the report, investment in the developed world has been on a downward trend, more or less consistently, since 2011, when it peaked at $191 billion, some 47% higher than the 2015 outturn. “This decline has been a little to do with the U.S., where there was a rush of investment in 2011 as projects and companies tried to catch the Treasury grant and Federal Loan Guarantee programmes before they expired; but much more to do with Europe, where allocations fell by 60% between 2011 and 2015,” notes the report.

The study points out that a big drop reflected a mix of factors including retroactive cuts in support for existing projects in Spain, Romania and several other countries, an economic downturn in southern Europe that made electricity bills more of a political issue, the fading of solar booms in Germany and Italy, and the big fall in the cost of PV panels over recent years. “The two factors pushing in the opposite (positive) direction in Europe in recent years have been strong investment in the UK, and the growth of the offshore wind sector in the North Sea.”

UNEP Executive Director Achim Steiner said: “Access to clean, modern energy is of enormous value for all societies, but especially so in regions where reliable energy can offer profound improvements in quality of life, economic development and environmental sustainability. Continued and increased investment in renewables is not only good for people and planet, but will be a key element in achieving international targets on climate change and sustainable development.”

“By adopting the Sustainable Development Goals last year, the world pledged to end poverty, promote sustainable development, and to ensure healthier lives and access to affordable, sustainable, clean energy for all. Continued and increased investment in renewables will be a significant part of delivering on that promise,” he added.

Meanwhile, the Chairman of the Advisory Board at BNEF, Michael Liebreich, said global investment in renewables capacity hit a new record in 2015, far outpacing that in fossil fuel generating capacity despite falling oil, gas and coal prices.

“It has broadened out to a wider and wider array of developing countries, helped by sharply reduced costs and by the benefits of local power production over reliance on imported commodities,” he noted.

As in previous years, the report shows the 2015 renewable energy market was dominated by solar photovoltaics and wind, which together added 118GW in generating capacity, far above the previous record of 94GW set in 2014. Wind added 62GW and photovoltaics 56GW. More modest amounts were provided by biomass and waste-to-power, geothermal, solar thermal and small hydro.

In 2015, more attention was drawn to battery storage as an adjunct to solar and wind projects and to small-scale PV systems. UNEP highlighted that energy storage is of significant importance as it is one way of providing fast-responding balancing to the grid, whether to deal with demand spikes or variable renewable power generation from wind and solar. Last year, some 250MW of utility-scale electricity storage (excluding pumped hydro and lead-acid batteries) was installed worldwide, up from 160MW in 2014. [IDN-InDepthNews – 27 March 2016]

IDN is the flagship of International Press Syndicate.

Photo: Village shop at dusk in Sri Lanka lit by solar panels. Credit: World Bank/Dominic Sansoni

Source: IDN inDepthNews, 2016. All rights reserved.

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