Total energy investment worldwide in 2016 was just over $1.7 trillion, accounting for 2.2% of global GDP. Investment was down by 12% compared to IEA’s revised 2015 energy investment estimate of $1.9 trillion.
Spending in energy efficiency rose by 9% while spending in electricity networks rose by 6%, yet these increases were more than offset by a continuing drop in investment in upstream oil and gas, which fell by over a quarter, and power generation, down 5%. Falling unit capital costs, especially in upstream oil and gas, and solar photovoltaics (PV), was a key reason for lower investment, though reduced drilling and less fossil fuel-based power capacity also contributed.
For the first time ever, the electricity sector edged ahead of the oil and gas sector in 2016 to become the largest recipient of energy investment. However oil and gas still represent two-fifths of global energy supply investment, despite a fall of 38% in capital spending in that sector between 2014 and 2016. As a result, the share of low-carbon supply-side energy investments, including electricity networks, grew by six percentage points to 43% over the same period.
World clean energy investment totalled $333.5 billion last year, up 3% from 2016 and the second highest annual figure ever, taking cumulative investment since 2010 to $2.5 trillion.
London and New York, January 16, 2018 – An extraordinary boom in photovoltaic installations made 2017 a record year for China’s investment in clean energy. This over-shadowed changes elsewhere, including jumps in investment in Australia and Mexico, and declines in Japan, the U.K. and Germany.
Annual figures from Bloomberg New Energy Finance (BNEF), based on its world-leading database of projects and deals, show that global investment in renewable energy and energy-smart technologies reached $333.5 billion last year, up 3% from a revised $324.6 billion in 2016, and only 7% short of the record figure of $360.3 billion, reached in 2015.
Jon Moore, chief executive of BNEF, commented: “The 2017 total is all the more remarkable when you consider that capital costs for the leading technology – solar – continue to fall sharply. Typical utility-scale PV systems were about 25% cheaper per megawatt last year than they were two years earlier.”
Solar investment globally amounted to $160.8 billion in 2017, up 18% on the previous year despite these cost reductions. Just over half of that world total, or $86.5 billion, was spent in China. This was 58% higher than in 2016, with an estimated 53GW of PV capacity installed – up from 30GW in 2016.
Justin Wu, head of Asia-Pacific for BNEF, said: “China installed about 20GW more solar capacity in 2017 than we forecast. This happened for two main reasons: first, despite a growing subsidy burden and worsening power curtailment, China’s regulators, under pressure from the industry, were slow to curb build of utility-scale projects outside allocated government quotas. Developers of these projects are assuming they will be allocated subsidy in future years.
“Second, the cost of solar continues to fall in China, and more projects are being deployed on rooftops, in industrial parks or at other distributed locales. These systems are not limited by the government quota. Large energy consumers in China are now installing solar panels to meet their own demand, with a minimal premium subsidy.”
Investment by country
Overall, Chinese investment in all the clean energy technologies was $132.6 billion, up 24% setting a new record. The next biggest investing country was the U.S., at $56.9 billion, up 1% on 2016 despite the less friendly tone towards renewables adopted by the Trump administration.
Large wind and solar project financings pushed Australia up 150% to a record $9 billion, and Mexico up 516% to $6.2 billion. On the downside, Japan saw investment decline by 16% in 2017, to $23.4 billion, while Germany slipped 26% to $14.6 billion and the U.K. 56% to $10.3 billion in the face of changes in policy support. Europe as a whole invested $57.4 billion, down 26% year-on-year.
Below are the 2017 totals for other countries investing $1 billion-plus in clean energy:
India $11 billion, down 20% compared to 2016
Brazil $6.2 billion, up 10%
France $5 billion, up 15%
Sweden $4 billion, up 109%
Netherlands $3.5 billion, up 30%
Canada $3.3 billion, up 45%
South Korea $2.9 billion, up 14%
Egypt $2.6 billion, up 495%
Italy $2.5 billion, up 15%
Turkey $2.3 billion, down 8%
United Arab Emirates $2.2 billion, up 23-fold
Norway $2 billion, down 12%
Argentina $1.8 billion, up 777%
Switzerland $1.7 billion, down 10%
Chile $1.5 billion, up 55%
Austria $1.2 billion, up 4%
Spain $1.1 billion, up 36%
Taiwan $1 billion, down 6%
Indonesia $1 billion, up 71%
Investment by sector
Solar led the way, as mentioned above, attracting $160.8 billion – equivalent to 48% of the global total for all of clean energy investment. The two biggest solar projects of all to get the go-ahead last year were both in the United Arab Emirates: the 1.2GW Marubeni JinkoSolar and Adwea Sweihan plant, at $899 million, and the 800MW Sheikh Mohammed Bin Rashid Al Maktoum III installation, at an estimated $968 million.
Wind was the second-biggest sector for investment in 2017, at $107.2 billion. This was down 12% on 2016 levels, but there were record-breaking projects financed both onshore and offshore. Onshore, American Electric Power said it would back the 2GW Oklahoma Wind Catcher project in the U.S., at $2.9 billion excluding transmission. Offshore, Ørsted said it had reached ‘final investment decision’ on the 1.4GW Hornsea 2 project in the U.K. North Sea, at an estimated $4.8 billion. There were also 13 Chinese offshore wind projects financed last year, with total capacity of 3.7GW, and estimated investment of $10.8 billion.
The third-biggest sector was energy-smart technologies, where asset finance of smart meters and battery storage, and equity-raising by specialist companies in smart grid, efficiency, storage and electric vehicles, reached $48.8 billion in 2017, up 7% on the previous year and the highest ever.
The remaining sectors lagged far behind, with biomass and waste-to-energy down 36% at $4.7 billion, biofuels down 3% at $2 billion, small hydro 14% lower at $3.4 billion, low-carbon services 4% down at $4.8 billion, geothermal down 34% at $1.6 billion, and marine energy down 14% at just $156 million.
The clean energy investment total excludes hydro-electric projects of more than 50MW. However, for comparison, final investment decisions in large hydro are likely to have been worth $40-50 billion in 2017.
BNEF’s preliminary estimates are that a record 160GW of clean energy generating capacity (excluding large hydro) were commissioned in 2017, with solar providing 98GW of that, wind 56GW, biomass and waste-to-energy 3GW, small hydro 2.7GW, geothermal 700MW and marine less than 10MW.
Investment by category
Breaking the investment total down by type of deal, the dominant category – as always – was asset finance of utility-scale renewable energy projects of more than 1MW. This was $216.1 billion in 2017, up fractionally on the previous year. Small-scale projects of less than 1MW (effectively small solar systems) attracted $49.4 billion, up 15% – thanks in large part to the installation rush in China.
Equity-raising by specialist clean energy companies on public markets totaled $8.7 billion in 2017, down 26%. The biggest transactions in this category were a $978 million convertible issue by electric car maker Tesla, and a $545 million placement by Guodian Nanjing Automation, a Chinese technology supplier to generating and transmission plants.
Venture capital and private equity investment in clean energy came to $4.1 billion in 2017, down 38% on the previous year and the lowest figure since 2005. The biggest deals were a $400 million Series A round for Microvast Power System, a Chinese maker of electric vehicle technology, and a $155 million expansion capital round for Greenko Energy Holdings, an Indian wind project developer.
Asset finance of energy-smart technologies was $21.6 billion, up 36% thanks to increased installation of smart meters and lithium-ion batteries for energy storage. Corporate research and development into clean energy rose 11% to $22.1 billion, and government R&D was almost level at $14.5 billion.
Global new investment in clean energy by sector, $ billion
Source: Bloomberg New Energy Finance. Note: Clean energy covers renewable energy excluding large hydro, plus energy smarttechnologies such as efficiency, demad response, storage and electric vehicles. BNEF’s annual figures for past years, revised in this round, are $61.7 billion in 2004, $88 billion in 2005, $129.8 billion in 2006, $182.2 billion in 2007, $205.2 billion in 2008, $206.8 billion in 2009, $276.1 billion in 2010, $324 billion in 2011, $290.7 billion in 2012, $268.6 billion in 2013, $321.3 billion in 2014, $360.3 billion in 2015, $324.6 billion in 2016 and $333.5 billion in 2017.
The 2016 figures reflect a significant revision, due to the arrival of new data on Chinese solar and wind and on global corporate R&D.
Acquisition spending
The above figures all concern new investment coming into the clean energy sector. BNEF also measures money changing hands, as organizations purchase and sell clean energy projects and companies, and refinance existing project debt.
This acquisition activity totaled $127.9 billion in 2017, up 4% on the previous year and the highest ever. Acquisitions and refinancing of renewable energy projects rose 14% to a record $87.2 billion, while corporate M&A involving specialist clean energy companies fell 51% to $17.5 billion. Public market investor exits came to $7.4 billion, down 8%, and private equity buy-outs reached an all-time high of $15.8 billion, up sixfold on the previous year. The largest acquisition transaction of the year was the purchase of a 51% stake in U.S. ‘yieldco’ TerraForm Power by Brookfield Asset Management for $4.7 billion.
Abraham Louw, analyst, clean energy economics at BNEF, said: “It is notable that acquisition activity in clean energy has been in excess of $100 billion in each of the last three years. The fact that generating assets, in particular, are in growing demand from buyers is a sign of a maturing sector.”
Today’s press release is being published in tandem with a comment article setting out BNEF’s 10 Predictions for Energy in 2018, based on the views of its analyst teams on everything from wind and solar, to storage and electric vehicles, from U.S. policy to advanced mobility. See this link.
UK-based green power developer RES Group has been awarded the contract for a battery storage project by North German local utility VB Bordesholm to come online next spring, it said in a statement.
Bordesholm project to offer secure island solution
Balancing market income seen at Eur1 million/year
The project primarily intended for the German balancing market will have a capacity of 10 MW with an annual planned income of around Eur1 million ($1.19 million), it said.
In addition, the battery with a storage capacity of 15 MWh is also intended to secure local power supply in case of a grid failure for which the project received funding by the regional government to develop an "island solution" to improve security of supply in one of the world's densest wind clusters.
The local community of Bordesholm near Kiel supplies itself already 75% with renewable energy, it said.
Germany with its massive portfolio of wind and solar set to reach the 100 GW mark this spring is seen as key in developing battery storage systems with especially Northern Germany facing grid stability issues amid large fluctuations in wind power output.
Last year, Germany's largest single battery storage project -- a 48 MW li-ion battery system -- was announced at Jardelund also in the state of Schleswig-Holstein at the border with Denmark with a number of increasingly larger projects to be realized in the future grabbing the headlines.
European Power Daily's uniquely comprehensive package of news and pricing information, provides you with daily updates on new policies, projects, power deals, acquisitions, alliances, regulatory decisions and evolving trading markets in Europe. It also produces market assessments for the UK, Germany, France, The Netherlands, Belgium, Spain and Italy.
Solar leads the charge in another record year for renewables
Boosted by a strong solar PV market, renewables accounted for almost two-thirds of net new power capacity around the world in 2016, with almost 165 gigawatts (GW) coming online. This was another record year, largely as a result of booming solar PV deployment in China and around the world, driven by sharp cost reductions and policy support.
Last year, new solar PV capacity around the world grew by 50%, reaching over 74 GW, with China accounting for almost half of this expansion. For the first time, solar PV additions rose faster than any other fuel, surpassing the net growth in coal.
This deployment was accompanied by the announcement of record-low auction prices as low as 3 cents per kilowatt hour. Low announced prices for solar and wind were recorded in a variety of places, including India, the United Arab Emirates, Mexico and Chile.
These announced contract prices for solar PV and wind power purchase agreements are increasingly comparable or lower than generation cost of newly built gas and coal power plants.
A bright future for renewables to 2022, solar PV entering a new era
This record performance in 2016 forms the bedrock of the IEA’s electricity forecast, which sees continued strong growth through 2022, with renewable electricity capacity forecast to expand by over 920 GW, an increase of 43%. This year’s renewable forecast is 12% higher than last year, thanks mostly to solar PV upward revisions in China and India.
Solar PV is entering a new era. For the next five years, solar PV represents the largest annual capacity additions for renewables, well above wind and hydro. This marks a turning point and underpins our more optimistic solar PV forecast which is revised up by over one-third compared to last year’s report. This revision is driven by continuous technology cost reductions and unprecedented market dynamics in China as a consequence of policy changes.
Under an accelerated case – where government policy lifts barriers to growth – IEA analysis finds that renewable capacity growth could be boosted by another 30%, totalling an extra 1,150 GW by 2022 led by China.
Solar PV and wind capacity in China could by then reach twice the total power capacity of Japan today.
China is the undisputed renewable growth leader
China alone is responsible for over 40% of global renewable capacity growth, which is largely driven by concerns about air pollution and capacity targets that were outlined in the country’s 13th five-year plan to 2020. In fact, China already surpassed its 2020 solar PV target, and the IEA expects it to exceed its wind target in 2019. China is also the world market leader in hydropower, bioenergy for electricity and heat, and electric vehicles.
Today, China represents half of global solar PV demand, while Chinese companies account for around 60% of total annual solar cell manufacturing capacity globally. As such, market and policy developments in China will have global implications for solar PV demand, supply, and prices. In the Renewables 2017 main case forecast, total solar PV capacity around the world reaches 740 GW by 2022 – more than the combined total power capacities of India and Japan today.
If uncertainties and barriers are addressed, solar PV growth could accelerate even more. Two important challenges in China – the growing cost of renewable subsidies and grid integration – limit growth in the main case forecast.
China’s renewable energy policies are being modified quite substantially in order to address these challenges. China is moving away from its feed-in-tariff (FIT) programme to a quota system with green certificates. Together with ambitious power market reform, new transmission lines, and the expansion of distributed generation, these new policies are expected to speed up deployment of solar (and wind). However, the timing and implementation of this policy transition remains uncertain.
Renewable markets around the world
The United States
Despite policy uncertainty, the United States remains the second-largest growth market for renewables. The main drivers remain strong for new onshore wind and solar capacities, such as multi-year federal tax incentives combined with renewable portfolio standards as well as state-level policies for distributed solar PV.
Still, the current uncertainty over proposed federal tax reforms, international trade, and energy policies could have implications for the relative economics of renewables and alter their expansion over the forecast period.
India
India’s moves to address the financial health of its utilities and tackle grid-integration issues drive a more optimistic forecast. By 2022, India is expected to more than double its current renewable electricity capacity. For the first time, this growth over the forecast period is higher compared with the European Union.
Solar PV and wind together represent 90% of India’s capacity growth as auctions yielded some of the world’s lowest prices for both technologies. In some Indian states, recent contract prices are comparable to coal tariffs. India’s accelerated case indicates that renewable capacity expansion could be boosted by almost a third, providing that existing grid integration and infrastructure challenges are addressed, policy and regulatory uncertainties are reduced, and costs continue to fall. With this growth India would equal the United States, becoming the joint second-largest growth market after China.
The European Union
In the European Union, renewable growth over the forecast period is 40% lower compared with the previous five-year period. Overall, weaker electricity demand, overcapacity, and limited visibility on forthcoming auction capacity volumes in some markets remain challenges to renewable growth. Policy uncertainty beyond 2020 remains high.
If adopted, the new EU Renewable Energy Directive covering the post-2020 period would address this challenge by requiring a three-year visibility over support policies, thereby improving the market’s predictability.
Developing Asia and Sub-Saharan Africa
For the first time, Renewables 2017 tracks off-grid solar PV applications more closely in developing Asia and sub Saharan Africa. Over the forecast period, off-grid capacity in these regions will almost triple – reaching over 3 000 MW in 2022 – from industrial applications, solar home systems (SHSs), and mini-grids driven by government electrification programmes, and private sector investments.
Although this growth represents a small share of total PV capacity installed in both regions, its socio-economic impact is nonetheless significant. Over the next five years, SHSs – the most dynamic sector in the off-grid segment – are forecast to bring basic electricity services to almost 70 million more people in Asia and sub Saharan Africa. It will also lead to new business players bringing innovative payment solutions that allow low-income populations initial access to electricity services.
System integration becomes increasingly important
Wind and solar together will represent more than 80% of global renewable capacity growth in the next five years. By 2022, Denmark is expected to be the world leader, with 70% of its electricity generation coming from variable renewables.
In some European countries (Ireland, Germany and the United Kingdom), the share of wind and solar in total generation will exceed 25%. In China, India and Brazil, the share of variable generation is expected to double to over 10% in just five years. These trends have important implications going forward. Without a simultaneous increase in system flexibility (grid reinforcement and interconnections, storage, demand-side response and other flexible supply), variable renewables are more exposed to the risk of losing system value at increasing shares of market penetration since wholesale prices are depressed precisely when wind and solar production exceeds demand.
Market and policy frameworks need to evolve in order to cope simultaneously with multiple objectives, including providing long-term price signals to attract investment, ensuring efficient short-term electricity dispatching, pricing negative externalities and unlocking sufficient levels of flexibility as well as fostering a portfolio of dispatchable renewable technologies, including hydropower, bioenergy, geothermal and CSP.
Renewable generation closes the gap with coal
By 2022, global renewables electricity generation is expected to grow by over one-third to over 8 000 terrawatts per hour, equal to the total power consumption of China, India and Germany combined. As a result, the share of renewables in power generation will reach 30% in 2022, up from 24% in 2016.
In the next five years, growth in renewable generation will be twice as large as that of gas and coal combined. While coal remains the largest source of electricity generation in 2022, renewables halve their gap with coal, down to 17% in 2022. Despite slower capacity growth, hydropower will remain the largest source of renewable electricity generation in our forecast, followed by wind, solar PV and bioenergy.
Renewable policies are spurring more competition
Renewable policies in many countries are moving from government-set tariffs to competitive auctions with long-term power purchase agreements (PPAs) for utility-scale projects. Increased competition has allowed reducing remuneration levels for solar PV and wind projects by 30-40% in just two years in some key countries such as India, Germany and Turkey.
This competitive price discovery mechanism through tenders has squeezed costs along the entire value chain, thus becoming a more cost-effective policy option for governments. Auctions can also allow a better control of deployment, total incentives, and system integration aspects. Almost half of renewable electricity capacity expansion over 2017-22 is expected to be driven by competitive auctions with PPAs, compared to just over 20% in 2016.
Auction prices continue to fall
Announced auction prices for wind and solar have continued to fall although average generation costs of new-built projects remain higher. Over the period 2017-22 global average generation costs are estimated to further decline by a quarter for utility-scale solar PV; by almost 15% for onshore wind; and by a third for offshore wind.
Still, these average costs for solar PV remain relatively high because of high FITs in China and Japan as well as relatively elevated investment costs in the United States. Meanwhile, announced auction prices indicate much steeper possible cost reductions, ranging from $30-45/MWh for solar PV (India, Mexico, United Arab Emirates, Argentina) to $35-50/MWh for onshore wind (India, Morocco, Egypt, Turkey, Chile).
Auctions are also proving effective in rapidly reducing costs of offshore wind and CSP. While auction announcements (in terms of both volumes and prices) need to be verified over time, they suggest that expanding competitive pricing could result in even lower average costs in coming years.
Renewable transport and heat
Surging EVs to complement biofuels in renewable transport
The share of renewables in road transport is expected to increase only marginally, from over 4% in 2016 to 4.5% in 2022. Despite strongly rising sales, the share of EVs remains limited, and biofuels are still expected to represent over 90% of total renewable energy consumption in road transport by 2022. Biofuels production is expected to grow by over 16% during over the forecast period.
Asia leads this growth due to the rising demand for transport fuel, the availability of feedstocks, and supportive government policies. Brazil makes a key contribution as a result of its efforts to increase sustainable biofuels consumption in line with its national target for 2030. In the United States, ethanol and biodiesel production also expands as a result of supportive policy frameworks. Modest growth is expected in the European Union given that the policy landscape after 2020 is not expected to encourage industry investment.
Advanced biofuels (such as cellulosic ethanol) have made important progress in recent years but are not yet competitive with petroleum products. Production is expected to almost quadruple from a low base, which is still just over 1% of total biofuels production.
With a more favourable market and policy landscape, biofuel production could be 13% higher. For the first time, Renewables 2017 looks at an accelerated case forecast for biofuels that assumes additional investment in new production capacity in Brazil; scaling up fuel distribution infrastructure in the United States; and roll-out of a blending programme in India. Still, in this accelerated case, the share of biofuels in road transport fuel demand would only reach 5% by 2022.
The share of EVs in renewable transport remains limited
Renewables account for 30% of electricity consumption of EVs by 2022, up from 26% today. Globally, electricity consumed by EVs – including cars, two- and-three wheelers, and buses – is expected to double by 2022 but will still account for less than 1% of total electricity generation.
This trend is mostly driven by the rapid growth of two- and three-wheelers in China but also results from electric cars in European markets with high shares of renewable generation. The United States represents over one-fifth of global electricity consumption in cars, but the estimated consumption of renewable electricity is expected to be smaller than in China and Europe as a result of the lower share of renewables in the electricity mix.
Renewable heat grows by a quarter
Heat used for water and space heating in buildings and for industrial processes represents almost 40% of global energy-related CO2 emissions; therefore, decarbonising heat remains an important challenge. The share of renewables in heat consumption increases slowly, from 9% in 2015 to almost 11% in 2022.
19%United States: 11%India: 10%China: 3%
The building sector is expected to lead the growth in renewable heat consumption, with the fastest growth in this sector seen in China, the European Union and North America. In industry, China and India see a significant growth in renewable heat consumption.
In terms of sources, bioenergy will lead renewable heat consumption growth over the outlook period, followed by renewable electricity for heat. Global solar thermal energy consumption is also expected to increase by over a third, although growth is forecast to be slower than in previous years.
China alone provides over a third of overall renewable heat growth over the outlook period, driven by strengthened targets for solar thermal, bioenergy and geothermal as well as by increasing concerns over air pollution in cities. The European Union is the second-largest growth market as a result of the binding targets of the Renewable Energy Directive, and it remains the global leader in terms of absolute renewable heat consumption.
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