Clean energy investment swings to developing economies

Clean energy investment swings to developing economies


As investment in Europe slumped to its lowest level for a decade developing world investments in renewable energy has over taken developed nations for the first time.

Europe was once the world’s leading light in the clean energy revolution, and in 2010 clean energy investment in Europe peaked at US$131.7 billion, far and away the highest of any other region in the world.

china-wind-powerHowever, just five years on and there are a few new kids on the block who have unceremoniously grabbed Europe’s title as the world’s dominant clean energy market.

New analysis released by Bloomberg New Energy Finance (BNEF) and the United Nations Environment Program (UNEP) reveal last year clean energy investment in Europe crumbled 21 per cent to US$48.8bn, as clean tech investors set their sights on developing economies such as China, India, and even South Africa.

Investments in renewable energy in developing markets rose dramatically in 2015, up 19 per cent compared to 2014 reaching an investment total of $156bn.

Angus-McCrone-senior-analyst-BNEFAccording to the BNEF and UNEP researchers, this is the first time emerging economies have overtaken developed nations in terms of clean energy investment.

Angus McCrone, chief editor at BNEF, told the British environmental news website BusinessGreen lower investment in Europe is likely to become a new normal for the green energy sector.

“The investment level in Europe is probably moving down to a lower plane than it was a few years ago,” he said.

Offshore-Windpark Lillgrund - Serviceschiff auf dem Weg zum Windpark / Lillgrund Offshore Wind Farm - Service ship en route to the wind farmMr McCrone pointed out that despite record levels of investment in offshore wind, led by United Kingdom projects, continuing policy uncertainty across the continent is likely to deter investors who will look abroad for a safer haven for their cash.

“I think 2016 will probably be another good year for offshore wind in Europe but overall investment in Europe will still be well down on where it was, and it may be further down this year than it was last year given the policy uncertainties that there are now in the UK,” he explained.

“And the UK was the biggest country in terms of investment in Europe last year.”

Over recent years, Europe has endured something of a boom and bust cycle for renewable energy.

solar-panel-installation-GermanyThe BNEF report refers to the fading of the “solar boom” enjoyed by rooftop developers in Italy and Germany in 2011 and the uncertainty caused by retroactive subsidy changes in Spain, Romania, and several other countries. Even strong investment in the UK offshore wind industry, which had a “bumper year” with US$10.5bn of capital spending commitments in 2015, according to the report, was not enough to offset the investment slump in other clean energy sectors and European countries.

california-cars-wind-turbinesThe United States was not caught by the same downturn, delivering a 19 per cent uplift in investment compared to 2014 as developers raced to install new capacity before the main federal tax credits for clean energy were slated to expire at the end of the year.

The multi-year extension to the tax breaks, agreed in December, is now expected to drive continued high levels of investment over the next few years, according to Mr McCrone.

“The US investment got a lot of encouragement at the end of last year with the extension for the main tax credits for wind and solar, so we may see some reasonably strong figures from the US in the next few years,” he said.

morocco-wind-farm-africa-biggestHowever, he stressed it is developing economies which are really set to take the lead in clean energy investment.

China saw investment climb 17 per cent last year to US$102.9bn, while in South Africa investment jumped a staggering 329 per cent to US$4.5bn.

In India, meanwhile, renewable energy investment rose 22 per cent to $10.2bn, an impressive sum, but it will need to do more in the coming years to meet its ambitious clean energy targets, Mr McCrone said.

India-Solar-Pumps-farming“2016 could be a bigger year for India, certainly they have very ambitious targets and in order to hit those targets they are going to have to raise investment significantly above where it was in 2015,” he said.