Solar generation surged past wind power to become the renewable energy technology of choice for global investors in 2011.
Solar attracted nearly twice as much investment as wind, driving the
renewable energy sector to yet another record-breaking year, albeit one
beset with challenges for the industry, according to two new reports on
renewable energy trends issued June 11 by the United Nations Environment
Programme (UNEP) and the Renewable Energy Policy Network for the 21st
Century (REN21).
Global Trends in Renewable Energy Investment 2012 is the fifth
edition of the UNEP report, based on data from Bloomberg New Energy
Finance, and has become the standard reference for global clean energy
investment figures.
This year it shows that despite an increasingly tough competitive
landscape for manufacturers, total investment in renewable power and
fuels last year increased by 17% to a record $257 billion, a six-fold
increase on the 2004 figure and 94% higher than the total in 2007, the
year before the world financial crisis.
Although last year's 17% increase was significantly smaller than the
37% growth recorded in 2010, it was achieved at a time of rapidly
falling prices for renewable energy equipment and severe pressure on
fiscal budgets in the developed world.
The REN21 Renewables 2012 Global Status Report, which has become the
most frequently referenced report on renewable energy market, industry
and policy developments, notes that during 2011 renewables continued to
grow strongly in all end-use sectors -- power, heating and cooling and
transport. Renewable sources have grown to supply 16.7 % of global
energy consumption. Of that, the share provided by traditional biomass
has declined slightly while the share sourced from modern renewable
technologies has risen.
In 2011, renewable energy technologies continued to expand into new
markets: around 50 countries installed wind power capacity, and solar PV
capacity moved rapidly into new regions and countries. Solar hot water
collectors are used by more than 200 million households as well as in
many public and commercial buildings worldwide.
The two publications were launched jointly by Achim Steiner, UNEP
Executive Director, Mohamed El-Ashry, Chairman of REN21, Michael
Liebreich, Chief Executive of Bloomberg New Energy Finance, and
Professor Dr. Udo Steffens, President and CEO of the Frankfurt School of
Finance & Management, host of the Frankfurt School -- UNEP
Collaborating Centre for Climate & Sustainable Energy Finance.
Highlights 2011
- Total investment in solar power jumped 52% to $147 billion and
featured booming rooftop photovoltaic (PV) installations in Italy and
Germany, the rapid spread of small-scale PV to other countries from
China to the UK and big investments in large-scale concentrating solar
thermal (CSP) power projects in Spain and the US.
- The United States surged back to within an inch of the top of the
renewables investment rankings, with a 57% leap to $51 billion, as
developers rushed to cash in on three significant incentive programs
before they expired during 2011 and 2012. After leading the world for
two years, China saw its lead over the US shrink to just $1 billion in
2011, as it recorded renewable energy investment of $52 billion, up 17%.
- India's National Solar Mission helped to spur an impressive 62%
increase to $12 billion, the fastest investment expansion of any large
renewables market in the world. In Brazil, there was an 8% increase to
$7 billion.
- Competitive challenges intensified sharply, leading to sharp drops
in prices, especially in the solar market -- a boon to buyers but not to
manufacturers, a number of whom went out of business or were forced to
restructure.
- Renewable power, excluding large hydro-electric, accounted for 44%
of all new generating capacity added worldwide in 2011 (up from 34% in
2010). This accounted for 31% of actual new power generated, due to
lower capacity factors for solar and wind capacity.
- Gross investment in fossil-fuel capacity in 2011 was $302 billion,
compared to $237 billion for that in renewable energy capacity excluding
large hydro.
- The top seven countries for renewable electricity capacity
excluding large hydro -- China, the United States, Germany, Spain,
Italy, India and Japan -- accounted for about 70% of total non-hydro
renewable capacity worldwide. The ranking among these countries was
quite different for non-hydro capacity on a per person basis: Germany,
Spain, Italy, the US, Japan, China and India. By region, the EU was home
to nearly 37% of global non-hydro renewable capacity at the end of
2011, China, India and Brazil accounted for roughly one quarter.
- Renewable technologies are expanding into new markets. In 2011,
around 50 countries installed wind capacity; solar PV capacity is
rapidly moving into new regions and countries; interest in geothermal
power has taken hold in East Africa's Rift Valley and elsewhere;
interest in solar heating and cooling is on the rise in countries around
the world; and the use of modern biomass for energy purposes is
expanding in all regions of the globe.
- In the power sector, renewables accounted for almost half of the
estimated 208 gigawatts (GW) of electric capacity added globally during
the year. Wind and solar photovoltaic (PV) accounted for almost 40% and
30% of new renewable capacity, respectively, followed by hydropower
(nearly 25%). By the end of 2011, total renewable power capacity
worldwide exceeded 1,360 GW, up 8% over 2010; renewables comprised more
than 25% of total global power-generating capacity (estimated at 5,360
GW in 2011) and supplied an estimated 20.3% of global electricity.
- At least 118 countries, more than half of which are developing
countries, had renewable energy targets in place by early 2012, up from
96 one year before, although some slackening of policy support was seen
in developed countries. This weakening reflected austerity pressures,
particularly in Europe, and legislative deadlock in the US Congress.
- Despite all the additional investments, share prices in the
renewable energy sector had a dismal 2011 in the face of overcapacity in
the solar and wind manufacturing chains and investor unease about the
direction of support policies in both Europe and North America.
"There may be multiple reasons driving investments in renewables,
from climate, energy security and the urgency to electrify rural and
urban areas in the developing world as one pathway towards eradicating
poverty-whatever the drivers the strong and sustained growth of the
renewable energy sector is a major factor that is assisting many
economies towards a transition to a low carbon, resource efficient Green
Economy" says Mr. Steiner.
"This sends yet another strong signal of opportunity to world leaders
and delegates meeting later this month at the Rio+20 Summit: namely
that transforming sustainable development from patchy progress to a
reality for seven billion people is achievable when existing
technologies are combined with inspiring policies and decisive
leadership," he said.
"It is essential to continue government policies that support and
nurture the sector's growth, and to de-escalate damaging trade disputes.
Otherwise," he warned, "the low-carbon transition could weaken just at
the point when exciting cost reductions are starting to transform the
economics."
Says Dr. El-Ashry: "Despite the continuing economic crisis in some
key traditional markets, and continuing political uncertainties, more
renewable energy was installed last year than ever before. Policies
helped to drive renewable energy forward. Policy development and
implementation were stimulated by the Fukushima nuclear catastrophe in
Japan, along with improvements in renewable energy costs and
technologies. As a result, renewable energy is spreading to more
countries and regions of the globe. Globally there are more than 5
million jobs in renewable energy industries, and the potential for job
creation continues to be a main driver for renewable energy policies."
Bumps in the road
Faced with plunging green energy technology prices and economic
austerity measures, many governments slashed their renewable subsidies
and allowed other support schemes to expire. The result was a succession
of company failures and factory closures in 2011-2012, including five
significant solar manufacturers in the US and Germany.
According to Mr. Steiner, "Today's over-capacity situation in some
renewables sectors, particularly solar, provides the opportunity to
upscale deployment in new markets at costs few thought possible only a
few years ago. This is particularly attractive to the many developing
countries where much of the population has little or no access to modern
energy services."
Says Prof. Dr. Steffens: "Renewables are starting to have a very
consequential impact on energy supply, but we're also witnessing many
classic symptoms of rapid sectoral growth -- big successes, painful
bankruptcies, international trade disputes and more. This is an
important moment for strategic policymaking as winners in the new
economy form and solidify."
Adds Mr. Liebreich: "We are entering a fascinating period, with clean
energy's costs starting to be competitive with fossil fuels. The
challenge for policy-makers is to reduce support mechanisms at just the
right pace -- too fast and the long-term future of the industry will be
harmed. Too slow and you do the world's taxpayers and energy consumers a
great disservice."
"Right now we are seeing a lot of pain on the supply-side as prices
are being compressed, but it is important to remember than installers,
generators and consumers are benefiting. It is all part of the maturing
of the sector," he says.
"In 1903, the United States had over 500 car companies, most of which
quickly fell by the wayside even as the automobile sector grew into an
industrial juggernaut. A century ago, writing off the auto industry
based on the failures of weaker firms would have been foolish. Today,
the renewable energy sector is experiencing similar growing pains as the
sector consolidates."
The industry's image in the investor community has been harmed by a
number of high-profile supply-chain company failures, he says. At the
same time, he points out, Germany's solar installations hit a new record
peak output of 22GW at the end of May -- equivalent to around one
quarter of the country's total power demand.
Renewables: an increasingly important contributor to world energy supply
In more and more countries, renewable energy represents a significant and rapidly growing share of total energy supply.
In the United States, renewable energy (including large hydro)
provided 12.7% of total domestic electricity in 2011, up from 10.2% in
2010, and 9.3% in 2009. An estimated 39% of electric capacity added in
2011 was from renewable sources, mostly wind power.
Renewable energy
sources accounted for about 11.8% of U.S. domestic primary energy
production, for the first time surpassing the 11.3% from nuclear power).
China again led the world in the installation of wind turbines and
was the top hydropower producer and leading manufacturer of PV modules
in 2011. Wind power generation increased by more than 48.2% during the
year.
In the European Union, renewable energy accounted for more than 71%
of total electricity generating capacity additions in 2011, with solar
PV alone representing nearly half (46.7%) of new capacity coming on
stream.
Germany remained the third biggest market for renewable energy
investment. Renewable sources met 12.2% of total final energy
consumption and accounted for 20% of electricity consumption (up from
17.2% in 2010 and 16.4% in 2009).
As the world marks the UN "International Year of Sustainable Energy
for All," the REN21 Renewables 2012 Global Status Report includes a
special focus on rural renewable energy, based on input from local
experts working from around the world. Renewable energy is seen
increasingly as a means for providing millions of people with a better
quality of life through access to modern cooking, heating/cooling and
electricity.
The impressive deployment of all renewable energy technologies
combined with dramatic cost reductions and significant technology
advances in recent years create an important opportunity for rural
renewable energy development that points to a brighter future.
However,
further efforts will be necessary to reach the UN's outlined objectives:
annual investment in the rural energy sector needs to increase more
than fivefold to provide universal access to modern energy by 2030.
Closing the gap with fossil fuels
The price of all major renewable energy technologies continued to
fall in 2011 -- to the point where they are challenging fossil-fuel
sources, even before climate, health and other benefits are factored in.
The dominant reason for the price declines was that manufacturer
margins were compressed as the industry continued the shift from a
period of under-capacity a few years ago, to overcapacity now as growing
demand failed to keep up with a surge in supply.
The most spectacular price plunge was in PV cells, whose average
price fell from $1.50 per Watt in September 2010, to $1.30 per Watt by
January 2011 and $0.60 per Watt by the end of the year, according to the
Bloomberg New Energy Finance Solar Price Index. This fed into a fall in
PV module prices of nearly 50% between the start of 2011 and the
beginning of this year.
Onshore wind turbines showed a similar, although less dramatic,
trend. In 2011, prices for turbines to be delivered in the second half
of 2013 were 25% lower than for devices delivered in the first half of
2009, according to the Bloomberg New Energy Finance Wind Turbine Price
Index.
While 2011 saw significant falls in the costs of generating a MWh of
power from onshore wind (down 9%), and from PV technologies (down more
than 30%), the cost of electricity generated by fossil-fuel sources
changed less in most parts of the world -- despite the sharp falls in US
natural gas prices due to the increased use of "fracking," a hotly
contested form of resource extraction.
Based on current trends, it is predicted that the average onshore
wind project worldwide will be fully competitive with combined-cycle gas
turbine generation by 2016 even in the US, as gas prices are expected
to rebound to a point where they cover the cost of extraction. At
present, this is true only of a minority of wind projects, those that
use the most efficient turbines in locations with superior wind
resources.
In solar, analysis suggests that the cost of producing power from
rooftop PV panels for domestic use is already competitive with the
retail (but not the wholesale) daytime electricity price in several
countries including Germany, Denmark, Italy and Spain, as well as the
state of Hawaii.
Policy environment drives development
REN21's analysis found that stable renewable energy policies continue
to be a driving force behind the development of green power capacity.
At least 118 countries -- more than half of them in the developing
world -- have now established renewable energy targets. These include
shares of total primary energy, total end-use energy, electricity
generation (typically 10-30%), heat supply, biofuels as shares of road
transport fuels, and total installed capacities for specific
technologies.
Support for renewable power generation remains the most popular
policy option with at least 65 countries and 27 states now having
feed-in-tariffs (FITs).
Most policy activities in 2011 involved revisions to existing FITs, at times under controversy and involving legal disputes.
FIT payments vary widely among technologies and countries but are
generally trending downwards, mostly due to lower technology costs than
expected.
The reports in full are available at:
