Investments in renewable energy grew 32% in 2010, reaching a record $211 billion. Notably, investment in faster-growing developing economies, at $72 billion, surpassed that in developed economies, at $70 billion, for the first time, a dramatic shift from the 3/4-1/4 developed-developing economy split that existed in 2004, according to the United Nations Environment Program’s “Global Trends in Renewable Energy Investment 2011,” which was prepared by Bloomberg New Energy Finance.
Auguring well for continued increases over the longer term, government R&D surged more than 120%, easily exceeding $5 billion. “The continuing growth in this core segment of the Green Economy is not happening by chance,” commented UNEP Secretary General and executive director Achim Steiner. “The combination of government target-setting, policy support and stimulus funds is underpinning the renewable industry’s rise and bringing the much needed transformation of our global energy system within reach.”
Emerging Economies Fuel Growth
Growth in renewable energy investments was particularly strong in emerging market economies. China topped the table among countries in 2010, with investments totaling $48.9 billion, while India’s renewable energy investments rose 25% to $3.8 billion. Excluding these two Asian BRICs, renewable energy investment rose 31%, to $4 billion, in Asia’s developing economies.
Renewable energy investment also rose in Central and South America, up 39% to $13.1 billion. In percentage terms, investment growth was greatest in Africa and the Middle East, where renewable energy investment rose 104% to $5 billion.
“The investment activity in the developing world is not only leading to innovations in renewable energy technologies. Further more, it will open up new markets as first mover investors are facilitating a range of new business models and support entrepreneurship in the developing world”, Udo Steffens, president of the Frankfurt School of Finance and Management, commented.
The UNEP report highlights other notable shifts in the pattern of renewable energy investment. While large-scale investments were the main driver in China, for example, it was growth in small-scale, distributed solar power on rooftops that drove growth in Germany. Rising a sharp 132% to $34 billion, the latter more than compensated for a 22% fall in large-scale investment in Europe to $35.2 billion.
Government funded R&D and small-scale, distributed renewable energy investment grew fastest in percentage terms, rising 121%, to $5.3 billion, and 91%, to $60 billion, respectively. Outside of Germany, European investment in “small distributed capacity” renewable energy rose 163% to $2.3 billion in the Czech Republic, 150% in France to $2.7 billion, and 59% to $5.5 billion in Italy.
Corporate R&D and deployment and private equity fund investment dropped off in 2010, the report notes. The former dropped 12% to $3.3 billion, while the latter fell off 1% to $3.1 billion.
Falling natural gas prices, ranging from $3 to $5 per million BTU for nearly half of 2010 as compared to $13 per million BTU in 2008, made construction of gas-fired power stations more attractive while driving down the terms of renewable power purchasing agreements.
Fierce competition across the supply chain and falling per megawatt costs were more than enough to offset these factors, however. Declines in the cost of solar PV modules bolstered investment in small-scale, distributed solar power in Europe as governments scaled back feed-in tariffs, a change in market economics also seen in the wind power sector.
The per megawatt price of PV modules has dropped 60% since mid-2008, making it much more competitive. The same is true for wind power, where per megawatt cost has fallen 18% in the past two years.
Wind power continued to attract the most renewable energy investment in 2010, increasing 30% year-over-year to $94.7 billion. Solar power is gaining ground, however; investment totaled $86 billion in 2010, a 52% increase, when investments in small-scale projects are included. Biomass and waste-to-energy investment totaled $11 billion, while investment in biofuels fell to $5.5 billion in 2010, down significantly from $20.4 billion in 2006.
Steiner and UNEP are looking forward to keeping the momentum going at this year’s big meets on climate change. “The UN climate convention meeting in Durban later in the year, followed by the Rio+20 summit in Brazil in 2012, offer key opportunities to accelerate and scale-up this positive transition to a low carbon, resource efficient Green Economy in the context of sustainable development and poverty eradication,” he said.