World’s Electricity Generated By Renewables Rises To 12.1%

The proportion of world electricity generated by wind, solar, biomass and waste-to-energy, geothermal, marine and small hydro rose from 11% in 2016 to 12.1% in 2017. This corresponds to approximately 1.8 gigatonnes of carbon dioxide emissions avoided.

A record 157 gigawatts of renewable power were commissioned in 2017, up from 143GW in 2016 and far out-stripping the 70GW of net fossil fuel generating capacity added last year.

The Global Trends in Renewable Energy Investment 2018 report, released by UN Environment, Frankfurt School – UNEP Collaborating Centre, and Bloomberg New Energy Finance, finds that falling costs for solar electricity, and to some extent wind power, is continuing to drive deployment.

Last year was the eighth in a row in which global investment in renewables exceeded $200bn – and since 2004, the world has invested $2.9trin these green energy sources.

“The extraordinary surge in solar investment shows how the global energy map is changing and, more importantly, what the economic benefits are of such a shift,” said UN Environment head Erik Solheim.

“Investments in renewables bring more people into the economy, they deliver more jobs, better quality jobs and better paid jobs. Clean energy also means less pollution, which means healthier, happier development.”

Renewable Investment

Global investment in renewable energy edged up 2% in 2017 to $279.8bn, taking cumulative investment since 2010 to $2.2tr, and since 2004 to $2.9tr. The latest rise in capital outlays took place in a context of further falls in the costs of wind and solar that made it possible to buy megawatts of equipment more cheaply than ever before.

The leading location by far for renewable energy investment in 2017 was China, which accounted for $126.6bn, its highest figure ever and no less than 45% of the global total. There was an extraordinary solar boom in that country in 2017, with some 53GW installed (more than the whole world market as recently as 2014), and solar investment of $86.5bn, up 58%.

“Investments in renewables bring more people into the economy, they deliver more jobs, better quality jobs and better paid jobs. Clean energy also means less pollution, which means healthier, happier development.”

Renewable energy investment in the US was far below China, at $40.5bn, down 6%. It was relatively resilient in the face of policy uncertainties, although changing business strategies affected small-scale solar.

Europe suffered a bigger decline, of 36% to $40.9bn. The biggest reason was a fall of 65% in UK Investment to $7.6bn, reflecting an end to subsidies for onshore wind and utility-scale solar, and a big gap between auctions for offshore wind projects.

Germany also saw a drop in investment, of 35% to $10.4bn, on lower costs per MW for offshore wind, and uncertainty over a shift to auctions for onshore wind. The latter change was also one reason, along with grid connection issues, for a fall in Japanese outlays of 28% to $13.4bn.

There were sharp increases in renewable energy investment in Australia, of 147% to $8.5bn, in Mexico, of 810% to $6bn, and in Sweden, of 127% to $3.7bn. Just outside the world top 10, investment in Egypt leapt nearly sixfold to $2.6bn, and that in the United Arab Emirates 29-fold to $2.2bn.

Developing economies (including China, Brazil and India) committed $177bn to renewables last year, up 20%, compared to $103bn for developed countries, down 19%. This was the largest tilt in favour of developing countries yet seen. It was only in 2015 that the developing world first invested more in green energy than developed economies.

Long Way To Go

In 2017, costs continued to fall for solar, in particular. The benchmark levelized cost of electricity for a utility-scale photovoltaic project2 dropped to $86 per megawatt-hour, down 15% on a year earlier and 72% since 2009. Some of this was due to a fall in capital costs, some to improvements in efficiency.

Renewable energy auctions around the world once again produced record-low figures for the resulting tariffs. In Mexico in November, solar contracts were agreed at an average of $20.80 per MWh, and onshore wind at an average of $18.60. A U.K. auction in September saw offshore wind projects for commissioning in 2022-23 win through with bids 50% below the 2015 auction.

Nils Stieglitz, President of Frankfurt School of Finance & Management – “This shows where we are heading, although the fact that renewables altogether are still far from providing the majority of electricity means that we still have a long way to go.”

Clean energy share prices rose in 2017, by about 28% on the WilderHill New Energy Global Innovation Index, or NEX. However, this has so far not produced a jump in equity issues by specialist companies. Instead, public markets investment in renewable energy dipped 6% to $5.7bn, a five-year low. Venture capital and private equity (VC/PE) investment was also weak, fading 33% to $1.8bn, the lowest figure since 2005.

One way of interpreting the modest public markets and VC/PE activity, and also a record high of $87.2bn for asset acquisitions and refinancings in 2017, up 14%, is that renewable energy has become a mature sector increasingly dominated by big industrial players, utilities and institutional investors.

One uncertainty ahead for renewable energy is how investors will take to the coming period in which project revenues have no government price support, and instead depend on private sector power purchase agreements or even just merchant power prices.

Another potential issue for the sector in the years ahead could be rising interest rates. The record-low rates of recent years have helped to reduce overall costs per MW, and also attracted new capital from institutional investors into the financing of projects.

“The world added more solar capacity than coal, gas, and nuclear plants combined”, said Nils Stieglitz, President of Frankfurt School of Finance & Management. “This shows where we are heading, although the fact that renewables altogether are still far from providing the majority of electricity means that we still have a long way to go.”


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