Despite a continuing price slide for coal, oil and natural gas — and no decline in subsidies for their use — 2015 saw record global growth in new electric generating capacity powered by the sun, wind and other renewable sources.
And for the first time, the world’s developing economies led the way, investing more as a group than the wealthy industrial states, according to a new analysis from the respected Renewable Energy Policy Network for the 21st Century (REN21).
The world added roughly 147 gigawatts of renewable generating capacity last year, REN21 found. That’s more than in any previous year, and once again the great bulk of new capacity — 77 percent — was driven by solar and wind energy, which had set records in 2014 as well.
Of the remainder, the largest contribution came from hydropower (whose installed capacity grew by 28 gigawatts), with biomass, biofuels, geothermal and miscellaneous other technologies rounding out the picture.
In all, renewably sourced electric generation is now capable of meeting about 24 percent of the world’s demand for electricity, according to REN21, a research and policy collaborative based in the United Nations Environment Programme.
And year after year, capacity expansion in the renewables sector is outpacing new plants powered by coal, oil, natural gas and nuclear fission combined.
There’s jobs growth in renewable power, too — up 5 percent in 2015 to 8.1 million worldwide.
Cost competitive
A main driver of this trend, REN21 says, is that “first and foremost, renewables are now cost competitive with fossil fuels in many markets,” even with the fossils priced at or near historic lows and continuing huge subsidies for their use. (REN21 calculates that fossil fuels receive $490 billion a year in subsidies worldwide, compared to $135 billion for renewables, but most of that is for operating support, not building new capacity.)
[G]overnment leadership continues to play a key role in driving the growth of renewables, particularly wind and solar, in the power sector. As of early 2016, 173 countries had renewable energy targets in place and 146 countries had support policies. Cities, communities and companies are leading the rapidly expanding “100% renewable” movement, playing a vital role in advancing the global energy transition.
Additional growth factors include better access to financing, concerns about energy security and the environment and the growing demand for modern energy services in developing and emerging economies.
REN21 also reports that 2015 was a year of record investment in renewables, reaching $286 billion worldwide in renewable power and fuels; the figure is even higher if large hydropower operations are included. And this is happening despite financial factors that clearly discourage some investors while encouraging others:
Global investment also climbed to a new record level, in spite of the plunge in fossil fuel prices, the strength of the U.S. dollar (which reduced the dollar value of non-dollar investments), the continued weakness of the European economy and further declines in per unit costs of wind and solar PV. For the sixth consecutive year, renewables outpaced fossil fuels for net investment in power capacity additions.
Private investors stepped up their commitments to renewable energy significantly during 2015. The year witnessed both an increase in the number of large banks active in the renewables sector and an increase in loan size, with major new commitments from international investment firms to renewables and energy efficiency.
New investment vehicles — including green bonds, crowdfunding and yieldcos — expanded during the year. Mainstream financing and securitisation structures also continued to move into developing country markets as companies (particularly solar PV) and investors sought higher yield, even at the expense of higher risk.
Some investment slows a bit
The investment trend line is not uniformly upward, however, according to a thoughtful commentary on the REN21 report over at ThinkProgress:
Developed countries’ investment as a group declined by 8 percent in 2015 to $130 billion. Europe invested 21 percent less in 2015 than the year before, according to the report. That’s despite the region’s record year of financing for offshore wind power.
Moreover, investment in renewable energy has been weighted increasingly towards wind and solar power. In fact, all technologies except solar and wind power have seen investment decline since 2014.
In another sense, though, this pattern of investment points to one of the more interesting trends highlighted in the REN21 report: Renewables investment is no longer a luxury affordable only in wealthy industrial economies.
Last year, the analysis found, developed nations as a group invested less in renewables than developing countries, some of them quite poor. That had never happened before.
China accounted for one-third of the global investment total all by itself, even with large hydropower excluded, and now leads all nations in such investment — particularly good news because every megawatt of solar or wind is an avoided megawatt that would likely have been made from coal. The next three rankings are held by the U.S., Germany and Japan, but India comes it at number 5.
If you look at renewables investment as a portion of gross domestic product, it’s the smaller countries that are setting the proudest examples: Mauritania ranks No. 1, followed by Honduras, Uruguay, Morocco and Jamaica.
Turkey, Mexico, Kenya . . .
Turkey led the world in expanding its geothermal power capacity, followed by the U.S. but then Mexico and Kenya. In hydropower capacity, China’s additions were followed by those of Brazil, Turkey, India and Vietnam.
The report also found that smaller nations are adopting new energy systems in ways their larger neighbors could probably learn from:
Globally, renewable electricity production in 2015 continued to be dominated by large (e.g., megawatt-scale and up) generators that are owned by utilities or large investors. At the same time, there are markets where distributed, small-scale generation has taken off or is starting to do so.
Bangladesh is the world’s largest market for solar home systems, and other developing countries (e.g., Kenya, Uganda and Tanzania in Africa; China, India and Nepal in Asia; Brazil and Guyana in Latin America) are seeing rapid expansion of small-scale renewable systems, including renewables-based mini-grids, to provide electricity for people living far from the grid.
Which may explain in part why “developed countries and regions — including Australia, Europe, Japan and North America — have seen significant growth in numbers of residential and industrial electricity customers who produce their own power.”
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The full REN21 report, an executive summary and other materials on the analysis can be found here.
