Green energy investment takes the lead

Posted: 5 June 2009

For the first time, investment in renewable sources of energy has overtaken investment in power from fossil fuels, the United Nations reports today - World Environment Day.

According to a report on Global Trends in Sustainable Energy Investments, $155 billion was invested in 2008 in clean energy companies and projects worldwide.

Skegness offshore windfarm
Skegness offshore windfarm
Skegness offshore windfarm. Photo © Dave Hughes
Of this $13.5 billion of new private investment went into companies developing and scaling-up new technologies, alongside $117 billion of investment in renewable energy projects from geothermal and wind to solar and biofuels. The 2008 investment is more than a four-fold increase since 2004,

Despite the 'extremely difficult financial market conditions' during 2008, investment in clean energy topped 2007's record investments by 5 per cent, largely as a result of China, Brazil and other emerging economies, the report says.

Of the $155 billion, $105 billion was spent directly developing 40 GW of power generating capacity from wind, solar, small-hydro, biomass and geothermal sources, with a further $35 billion spent on developing 25 GW of large hydropower.

This $140 billion investment in 65 GW of low carbon electricity generation compares with the estimated $250 billion spent globally in 2008 constructing 157GW of new power generating capacity from all sources. It means that renewables currently account for the majority of investment and over 40 per cent of actual power generation capacity additions last year.

Economic crisis

Achim Steiner, UNEP Executive Director, said: "Without doubt the economic crisis has taken its toll on investments in clean energy when set against the record-breaking growth of recent years. Investment in the United States fell by two per cent and in Europe growth was very much muted. However, there were also some bright points in 2008 especially in developing economies - China became the world's second largest wind market in terms of new capacity and the world's biggest photovoltaic manufacturer and a rise in geothermal energy may be getting underway in countries from Australia to Japan and Kenya".

"Meanwhile other developing economies such as Brazil, Chile, Peru and the Philippines have brought in, or are poised to introduce policies and laws fostering clean energy as part of a Green Economy. Mexico for example, the Global host of World Environment Day on 5 June, is expected to double its target for energy from renewables to 16 per cent as part of a new national energy policy," he added.

Wind power leads

Wind attracted the highest new investment ($51.8 billion, 1 per cent growth on 2007), although solar made the largest gains ($33.5 billion, 49 per cent growth) while biofuels dropped somewhat ($16.9 billion, 9 per cent decrease).

Investment fell off in the second half of 2008 as the economic recession took hold, but, according to Achim Steiner, 'green new deals' that have been lined up by some economies, including China, Japan, the Republic of Korea, European countries and the United States, should help support the market.

"However, the biggest renewables stimulus package of them all can come at the UN climate convention meeting in Copenhagen in just over 180 days time. This is where governments need to seal the deal on a new climate agreement - one that can bring certainty to the carbon markets, one that can unleash transformative investments in lean and clean green tech."

Costs coming down

The price of solar and wind power. in particular, is set to fall with increased investment and softer commodity costs, says the report. The price of solar PV modules, for example, is predicted to fall by over 43 per centin 2009.

Solar panel array at US rice mill
Solar panel array at US rice mill
Solar panel array at Far West Rice Mills in Nelson, California.
And despite the turmoil in the world's financial markets, transaction value in the global carbon market grew 87 per cent during 2008, reaching a total of $120 billion.

On a regional basis, China led new investment in Asia, with an 18 per cent increase over 2007 to $15.6 billion, mostly in new wind projects, and some biomass plants. Investment in India grew 12 per cent to $4.1 billion, while Brazil accounted for almost all renewable energy investment in Latin America.

But much more needs to be done to stimulate spending in sustainabel energy says UNEP. Between 2009 and 2011 it estimates that a minimum of $750 billion - or 37 per cent of current economic stimulus packages and 1 per cent of global GDP - is needed to finance a sustainable economic recovery by investing in the greening of five key sectors of the global economy: buildings, energy, transport, agriculture and water.

It says climate change, economic recovery and energy security will spur far greater investments in coming years.

Source: Global Trends in Sustainable Energy Investment 2009, prepared for the UN Environment Programme's (UNEP) Sustainable Energy Finance Initiative.