Offshore Wind Still Shines In Slumping Year For Clean Energy Investment

Posted by Betsy Lillian on January 12, 2017 No Comments
Categories : Featured, New & Noteworthy

Despite a record year for offshore wind financings, new investment in clean energy worldwide fell 18% last year to $287.5 billion, according to the latest authoritative figures from Bloomberg New Energy Finance (BNEF).

The 2016 setback in global investment, signaled in advance by weak quarterly figures during the course of last year, partly reflected further sharp falls in equipment prices, particularly in solar photovoltaics, says BNEF.

However, there was also a marked cooling in two key markets, China and Japan. Clean energy investment in China in 2016 was $87.8 billion, down 26% from the all-time high of $119.1 billion reached in 2015, while the equivalent figure for Japan was $22.8 billion, down 43%.

“After years of record-breaking investment driven by some of the world’s most generous feed-in tariffs, China and Japan are cutting back on building new large-scale projects and shifting towards digesting the capacity they have already put in place,” explains Justin Wu, head of Asia for BNEF.

Notably, says the research company, offshore wind was the brightest spot in the global clean energy investment picture in 2016: Capital spending commitments hit $29.9 billion in 2016 – up 40% on the previous year – as developers took advantage of improved economics, bigger turbines and better construction know-how.

Last year’s record offshore wind tally included the go-ahead for DONG Energy’s 1.2 GW Hornsea array off the U.K. coast at a cost of $5.7 billion – plus 14 other offshore wind farms worth anywhere between $391 million and $3.9 billion in British, German, Belgian, Danish and Chinese waters.

“The offshore wind record last year shows that this technology has made huge strides in terms of cost-effectiveness and in proving its reliability and performance,” states Jon Moore, CEO of BNEF. “Europe saw $25.8 billion of offshore wind investment, but there was also $4.1 billion in China, and new markets are set to open up in North America and Taiwan.”

According to BNEF, even though overall investment in clean energy was down in 2016, the total capacity installed was not. The company estimates that a record 70 GW of solar was added last year (up from 56 GW in 2015), plus 56.5 GW of wind, which is down from 63 GW but represents BNEF’s second-highest figure ever.

Geographical split

Clean energy investment in the U.S. slipped 7% to $58.6 billion as developers took time to progress wind and solar projects eligible for the tax credits that were extended by Congress in December 2015.

Investment in the whole Asia-Pacific region, including India and China, fell 26% to $135 billion – representing some 47% of the world total. However, India was almost level with 2015 at $9.6 billion due to the establishment of several giant solar projects.

Europe was up 3% at $70.9 billion, helped by offshore wind and also by the biggest onshore wind project ever financed: the 1 GW, $1.3 billion Fosen complex in Norway.

The U.K. led the European field for the third successive year with an investment of $25.9 billion, up 2%, while Germany was second at $15.2 billion, down 16%.

Among developing nations, many saw investment slip as projects that won capacity in renewable energy auctions during 2016 did not secure finance before year-end, explains BNEF. Specifically, investment in South Africa fell 76% to $914 million, while that in Chile dropped 80% to $821 million. Mexico fell 59% to $1 billion, Uruguay fell 74% to $429 million and Brazil edged down 5% to $6.8 billion.

BNEF says one of the emerging markets to go the other way was Jordan, which broke the $1 billion barrier for the first time: Its clean energy investment increased 147% to $1.2 billion in 2016.

Categories and sectors

The biggest category of investment in clean energy in 2016 was, as usual, asset finance of utility-scale renewable energy projects. This totaled $187.1 billion last year – down 21% from 2015. Notably, the biggest seven financings were all in offshore wind in Europe.

Among other categories of investment, small-scale projects of less than 1 MW – including rooftop PV – attracted 28% less investment than the previous year. The 2016 total finished at $39.8 billion. Most of this year-on-year drop reflected the falling costs of solar systems, rather than a decline in interest from buyers, notes BNEF.

Public markets’ investment in quoted clean energy companies was $12.1 billion in 2016, down 21%. Most cash was raised by Innogy, the renewable power offshoot of German utility RWE; it secured just over $2.2 billion of new money in an initial public offering.

Venture capital and private equity investment in clean energy firms rose 19% to $7.5 billion. The largest rounds came from two Chinese electric vehicle businesses, Le Holdings and WM Motor Technology. U.S. solar developer Sunnova took the third most at $300 million.

In addition, corporate research and development (R&D) spending on clean energy fell 21% to $13.4 billion, while government R&D moved up 8% to $14.4 billion.

Last but not least, asset finance of energy smart technologies surged 68% last year to $16 billion, which was helped by a jump in global smart meter spending.

Taking all categories of investment into account, solar was the leading sector once again at $116 billion. However, this number was down 32% from 2015 levels, due in large part to lower costs per megawatt, according to BNEF.

On the other hand, wind saw $110.3 billion invested, down 11%, while energy smart technologies attracted $41.6 billion, up 29%; biomass was more or less level on 2015 at $6.7 billion; and biofuels secured just $2.2 billion, down 37%. Small hydro showed a 1% dip in investment to $3.4 billion, while low-carbon services attracted $4.3 billion, up 5%; geothermal at $2.7 billion, up 17%; and marine energy at $194 million, down 7%.

Also measured by BNEF but not included in the figures for new investment is acquisition activity in clean energy. This totaled $117.5 billion in 2016, up from $97 billion in 2015. This represents the first time this number has broken the $100 billion level.

Behind the surge was a rise in renewable energy project acquisitions to $72.7 billion and, in particular, a leap in corporate mergers and acquisitions to a record $33 billion. The top takeovers included Tesla’s acquisition of SolarCity for $4.9 billion and Enel’s buyback of the minority holders in Enel Green Power for $3.5 billion.

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