Clean energy investment declined 11% in 2012, weighed down by regulatory uncertainty and policy changes in big markets such as the U.S., India, Spain and Italy, according to the latest research from Bloomberg New Energy Finance (BNEF).
The sharply lower prices of wind and solar technology also exerted downward pressure on investment volumes, although they allow for higher installation levels per dollar of funding, BNEF says.
The firm's data show that overall global clean energy investment in 2012 was $268.7 billion, down from a revised figure of $302.3 billion in 2011. The 2012 investment total was the second-highest ever, and five times that seen in 2004.
The highlight of the 2012 total for clean energy investment was a record $67.7 billion outlay by China – up 20% over 2011 due to a surge in the country's solar sector. China's total was more than 50% above that of the second-placed country, the U.S., which saw $44.2 billion in clean energy investment in 2012. In 2011, the U.S. beat China as investors rushed to take advantage of stimulus-related programs before they expired.
Other strong performers include South Africa, which saw investment leap to $5.5 billion from just a few tens of millions in 2011, as its tender process for wind and solar led to a string of large project financings; and Japan, where a fresh emphasis on renewable energy after the Fukushima nuclear disaster in 2011 and the start of a new subsidy program helped investment soar 75% in 2012 to $16.3 billion.
Meanwhile, clean energy investment in the U.S. fell 32%, thanks to policy uncertainty throughout most of the year. Italy saw a 51% plunge in clean energy investment to $14.7 billion, as policy changes curbed the country's solar photovoltaics boom; Spain saw a 68% decrease to just $3 billion, as its government announced a moratorium on subsidies for projects not yet approved; and India experienced a 44% setback, reflecting the expiration of incentives for wind and fewer project approvals for solar.
Other countries showed mixed results in terms of total investment in 2012. Germany saw a 27% drop to $22.8 billion, while France suffered a 35% decline to $4.3 billion and the U.K. experienced a 17% fall to $8.3 billion. Australia enjoyed a 40% gain to $6.2 billion, Mexico saw a fivefold increase to $2 billion and Brazil saw a 32% decrease to $5.3 billion.
"We warned at the start of last year that investment in 2012 was likely to fall below 2011 levels, but rumors of the death of clean energy investment have been greatly exaggerated," says Michael Liebreich, CEO of BNEF. "Indeed, the most striking aspect of these figures is that the decline was not bigger – given the fierce headwinds the clean energy sector faced in 2012 as a result of policy uncertainty, the ongoing European fiscal crisis and continuing sharp falls in technology costs."
"Another message from the 2012 data is that investment is broadening rapidly from established markets – such as Europe, the U.S. and China – to new ones in Africa, the Middle East, Latin America and Asia Oceania," he continues. "Australia, South Africa, Morocco, the Ukraine, Mexico, Kenya, Brazil, Ethiopia, Chile and South Korea were among the countries seeing at least one project of more than $250 million financed during the year."
Breaking down the data
The new investment total of $268.7 billion was made up of five main parts. The largest of these was asset finance of utility-scale renewable energy projects, such as wind farms, solar parks and biofuel plants. This segment totaled $148.6 billion, down from $180 billion in 2011.
The next biggest segment was small-scale project investment, primarily rooftop solar, which came in at $80.2 billion, up from $76.5 billion in 2011. Corporate and government research and development totaled $30.2 billion in 2012, up marginally from 2011.
The other elements were venture-capital and private-equity investment in specialist clean energy companies, which fell 34% to $5.8 billion – its lowest figure since 2006 – and public-market investment in quoted companies. The latter fell 57% to $5.1 billion – the lowest since 2004 – and was down 80% from the peak figure of $25.6 billion in 2007.
Merger and acquisition (M&A) activity in clean energy is not counted as new investment but is an important part of the sector's development, BNEF notes. Clean energy M&A activity totaled $50.8 billion in 2012, down 31% from the record figure recorded in 2011. Within this segment, corporate M&A (as distinct from projects changing hands) was $10.4 billion, down 69% from 2011 and the weakest since 2004.
Once again, solar was the dominant sector in terms of overall clean energy investment in 2012, accounting for $142.5 billion – down 9% from its 2011 record. Wind energy saw investment of $78.3 billion, down 13%, while the third-largest sector – energy-smart technologies such as smart grid, energy efficiency and electric vehicles – suffered a 7% drop to $18.8 billion.
Biomass and waste-to-energy was the fourth-largest sector, at $9.7 billion in 2012, but this figure was 27% down over last year. Biofuels, the second-largest sector back in 2006, saw investment fall 38% to $4.5 billion, while geothermal experienced a 39% drop to $1.8 billion.
The only sector to show growth in 2012 was small hydro (projects smaller than 50 MW), which saw an increase of 17% to $7.6 billion. For the first time, BNEF also published a figure for total investment in carbon capture and storage (CCS) projects worldwide, although this is being shown separately rather than being included in the clean energy total. CCS project investment was $2.8 billion in 2012, down from $3 billion in 2011.
Among the largest projects financed in 2012 were four offshore wind sites in the German, U.K. and Belgian sections of the North Sea: Wikinger (400 MW, $2.1 billion); Baltic II (288 MW, $1.6 billion); Lincs (270 MW, $1.6 billion); and Northwind (216 MW, $1.1 billion).
Wind energy developer China Longyuan Power Group achieved the biggest public-market issue of the year, raising $375 million on the Hong Kong Stock Exchange.