December 21, 2017 Read More →

BNEF: Eight Consecutive Year of $250-$350 Billion in Global Green Energy Investments

Bloomberg New Energy Finance:

2017 looks certain to be the eighth successive year in which global clean energy investment has been in the range of $250 billion to $350 billion; there is a good chance that it will end up a touch higher than last year’s figure of $287.5 billion. Once again, we have seen substantial reductions in the cost of renewable energy, so that 2017 will certainly see another record for new capacity installations.

Prices agreed for renewable electricity at auctions around the world have continued to plummet, with the latest records held in photovoltaics by Mexico in November at an average of $20.77 per MWh, and in onshore wind also by Mexico, at an average of $18.60 – or, in you prefer, by India in October at $40.52 with no inflation indexing. In offshore wind, the U.K. auction in September saw projects for commissioning in 2022-23 win through with bids fully 50% below the 2015 auction.

2017 also saw relatively new markets break into the big league as destinations for clean energy investment, including Mexico ($5.6 billion in the first three quarters of 2017), United Arab Emirates ($2.4 billion in the same period), Argentina ($1.7 billion) and Egypt ($1.3 billion).

Another notable 2017 milestone was the record for the biggest renewable energy corporate power purchasing agreement ever – see number 8 in the break-out below – plus arguably the biggest wind farm repowering ever (the 350MW Wieringermeer project in the Netherlands) and, most importantly, the most solar capacity ever installed in one country in a year, namely an incredible 50GW-plus in China.

Electric vehicles made great progress in 2017, with this year likely to have seen EV sales globally surpass 1 million for the first time, a big leap from just under 700,000 previously (see box on our “10 Predictions”). More significant than the current numbers, however, were the announcements during the course of the year of planned bans on pure internal combustion engines – the Netherlands by 2030, India “within 13 years”, China by a so-far-undefined date in the future, the U.K. and France by 2040. EVs still make up less than 2% of global vehicle sales, but they are certainly starting to loom in the rear-view mirror of the internal combustion sector.

At the start of the year we predicted a deepening debate about the implications of what we called “base-cost renewables” – renewables with levelized costs that are not just grid-competitive, but that significantly undercut the costs of all other sources of power. That debate has indeed intensified, fueled by the record-low costs of wind and solar that we saw during 2017.

The question is no longer about how to promote wind and solar to enable them to grab a small share of each electricity market, but how to reform the rules of the power system so that as much super-cheap but variable renewable electricity as possible can be integrated into it. “Market design” is the hot topic.

All in all, therefore, 2017 was a good year. We started by predicting that “our little flotilla will sail on – perhaps not serenely, but more or less as it did in 2016,” and so it turned out.

What about 2018? Maybe it is the short days and fading light of mid-December in the Northern Hemisphere, but it is hard right now to feel 100% relaxed about the next few years – even if the eventual direction for the world’s energy and transport systems seems more apparent than ever.

One reason is that progress towards renewables and low-emission transport can be accelerated, or just as often, held back by political forces. Promising new markets can go in, and then out, of the fast lane. South Africa, for instance, was a star of renewable power deployment via auctions, investing $15.4 billion in clean energy between 2012 and 2015. And yet, in 2017, investment is likely to end up at little more than $100 million, the victim of Eskom’s refusal to sign power purchase agreements with developers of new projects.

More seriously for the global picture, the Trump administration in the U.S. has not only set back international climate efforts by committing to quit the Paris agreement, but has been nibbling at the foundations of that country’s renewable energy boom. First, it proposed subsidies for generation sources that could keep 90 days of feedstock onsite (coal and nuclear), then the President got the chance to impose tariffs on imported solar cells, and finally the tax reform bill being discussed in Congress at one point threatened to undercut severely the all-important Production Tax Credit for wind and the Investment Tax Credit for solar. It appears – cross fingers – that the final version this week may more or less spare the PTC and ITC.

So far, those developments have not changed hard reality for renewables, but they have affected confidence. Whether by cunning coordination or not, the Trump administration’s broad program, from removing regulations on power station emissions, to tax and trade measures, and international diplomacy, all point in one direction – and that is to preserve the country’s ancient fleet of coal-fired power stations rather than decarbonize.

It is not just politics that provides inertia. The fact that vast amounts of coal-fired capacity are already installed around the world means that it is a struggle to change the mix in more than an incremental way, especially when that coal is plentiful. This year has seen the seaborne coal price extend its recovery from lows reached in 2016, and it has also seen the Global Carbon Project estimate that world CO2 emissions are likely to have increased by 2% in 2017, the first rise for four years.

There are also risks in the markets at the end of 2017 that, if they came to pass, could wash over the economy generally, and therefore indirectly over investment in clean energy and transport too. One is that the financial markets look more exposed than for many years, with interest rates rising or soon to start rising almost everywhere, and share prices sitting on top of a 19% gain on the S&P 500 Index in 2017 alone. In more idiosyncratic markets, bubbles seem to be the air, whether in art with a Leonardo da Vinci sold for $450 million, or in crypto-currencies with bitcoin up from $952 to almost $18,000 this year alone.

But let’s not be too cautious. It is the festive season after all. Clean energy and transport continue to enjoy powerful long-term trends in their favor. The pace of technological change is picking up, in particular in the areas of power storage and machine learning, after a decade in which change seemed to be mainly about scale, not about kind.

More: Long-Term Clean Energy Optimism, Short-Term Caution

Comments are closed.