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Green energy investments see 17% surge in 2014

Global investments in renewable energy rebounded strongly last year, registering a solid 17% increase after two years of declines and brushing aside the challenge from sharply lower crude oil prices.

Major expansion of solar installations in China and Japan and record investments in offshore wind projects in Europe helped propel global 2014 investments to USD 270 billion, from USD 232 billion in 2013.

It was the first annual increase in dollars invested in and committed to renewables (excluding large hydro-electric projects) in three years, a total just 3% below the all-time record of USD 279 billion set in 2011.

Lower investment figures for 2012 (to USD 256 billion) and 2013 (to USD 232 billion) were attributed in part to lower prices for renewable energy technologies due to economies of scale.

The 103GW of generating capacity added around the world made 2014 the best year ever for newly installed capacity, according to the UNEP’s 9th annual “Global Trends in Renewable Energy Investments” report, prepared by the Frankfurt School–UNEP Centre, and Bloomberg New Energy Finance. The 103GW of capacity added by renewables last year equals the energy generating capacity of all 158 nuclear power plant reactors in the U.S.A.

A continuing sharp decline in technology costs – particularly in solar but also in wind – means that every dollar invested in renewable energy bought significantly more generating capacity in 2014.

The 103GW of capacity added by new renewable energy sources last year compares to 86GW in 2013, 89GW in 2012 and 81GW in 2011.

Wind, solar, biomass and waste-to-power, geothermal, small hydro and marine power contributed an estimated 9.1% of world electricity generation in 2014, up from 8.5% in 2013.

This meant that last year the world electricity system emitted 1.3 gigatonnes of CO2  — roughly twice the emissions of the world’s airline industry — less than it would have if that 9.1% had been produced by the same fossil-dominated mix generating the other 90.9% of world power.

“Once again in 2014, renewables made up nearly half of the net power capacity added worldwide” says Achim Steiner, Under-Secretary-General and Executive Director of UNEP.

“These climate-friendly energy technologies are now an indispensable component of the global energy mix and their importance will only increase as markets mature, technology prices continue to fall and the need to rein in carbon emissions becomes ever more urgent.”

“The growing penetration of renewable generation in the world’s developing economies is one of the important and encouraging aspects of the 2014 report.”

China saw by far the biggest renewable energy investments last year — a record USD 83.3 billion, up 39% from 2013. The U.S. was second at USD 38.3 billion, up 7% on the year. Japan was third at USD 35.7 billion, 10% higher than in 2013 and its biggest total ever.

As in previous years, the market in 2014 was dominated by record investments in solar and wind, which accounted for 92% of overall investment in renewable power and fuels. Investment in solar jumped 25% to USD 149.6 billion, the second highest figure ever, while wind investment increased 11% to a record USD 99.5 billion.  In 2014, some 49GW of wind capacity and 46GW of solar PV capacity were added worldwide, both records.

Other renewable energy sources did not perform so well by comparison. Biofuels fell 8% to USD 5.1 billion, biomass and waste-to-energy dropped 10% to USD 8.4 billion and small hydro was down 17% to USD 4.5 billion. Only geothermal bucked the trend with a 27% increase to USD 2.7 billion.

A salient feature of the 2014 result was the rapid expansion of renewables into new markets in developing countries, where investments jumped 36% to USD 131.3 billion. China with USD 83.3 billion, Brazil (USD 7.6 billion), India (USD 7.4 billion) and South Africa (USD 5.5 billion) were all in the top 10 investing countries, while more than USD 1 billion was invested in Indonesia, Chile, Mexico, Kenya and Turkey.

In contrast, the total renewables investment in developed economies rose only 3% to USD 138.9 billion.

Despite turnaround, challenges remain

Although 2014 was a turnaround year for renewables after two years of shrinkage, multiple challenges remain in the form of policy uncertainty, structural issues in the electricity system — even in the very nature of wind and solar generation, with their dependence on breeze and sunlight.

Another challenge was, at first sight, the impact of the 50%-plus collapse in the oil price in the second half of last year.  According to Udo Steffens, President of the Frankfurt School of Finance and Management, however, the oil price is only likely to dampen investor confidence in parts of the sector, such as solar in oil-exporting countries, and biofuels in most parts of the world.

“Oil and renewables do not directly compete for power investment dollars,” said Steffens. “Wind and solar sectors should be able to carry on flourishing, particularly if they continue to cut costs per MWh. Their long-term story is just more convincing.”