Towards a green economy 3 Investing in renewable energy
Both the challenges and opportunities facing the energy sector call for scaling up investment in renewable energy. This section summarizes recent investment trends in renewable energy and the associated evolution of the competitiveness of renewable energy technologies. This is followed by an analysis of how this competiveness is distorted by the lack of mechanisms to account for the larger negative externalities associated with the use of fossil fuels, reviewed in Section 2. The section then discusses the potential employment potential offered by renewable energy. The section closes with a review of estimates of the future investment required to meet the challenges of growing energy demand and climate change mitigation, complementing needed investments to improve energy efficiency across sectors.
3.1 Recent trends in renewable energy investment
During the past 10 years the growth of investment in renewable energy has been rapid, albeit from a low base. From 2004 to 2010, total investments into renewable energy exhibited a compound annual growth rate of 36 per cent9 performance:
. There were a number of reasons for this
■ The relatively easy access to capital for project developers and technology manufacturers in the developed world and major emerging economies and low interest rates supported the growth of renewable energy technologies;
■ For some renewable energy technologies, technological developments have led to a significant decline in costs and increased reliability of the technology, which have made investments more attractive;
■ High oil prices contributed to the interest in renewable energy investments; and
■ Regulatory support for renewable energy technologies increased over the past 10 years. Between 2004 and early 2011, for example, the number of countries that have supportive renewable energy policies in place rose from about 40 to almost 120 (REN21 2011).
For 2010, Bloomberg New Energy Finance estimates that global new investment in renewable energy hit a new record of US$ 211 billion. This is an increase of more than 30 per cent from the US$ 160 billion invested globally in 2009 and the US$ 159 billion in 2008 (UNEP SEFI 2011).
The global financial crisis that began in 2008 appears to have temporarily reduced investment in renewable energy, with growth in new investments slowing in 2008 and 2009 (see Figure 3). Despite more difficult access to capital, especially the availability of debt finance, the sector as a whole has so far proven to be fairly resilient.
This buoyancy may be due partly to the stimulus provided by discretionary fiscal packages in many countries (IEA 2009b) launched in 2008 and 2009, some of which included support for renewable energy (HSBC 2009). In the US, for example, there were two separate packages, with a total of around US$ 32 billion allocated to renewable energy.10
South Korea and China
also included renewable energy investments in their stimulus spending programmes. An estimated US$ 194 billion in green stimulus funding had been allocated to support clean energy globally, including renewable energy technologies, energy-smart technologies, carbon capture and storage, and transport (UNEP SEFI 2011). Less than 10 per cent had actually been spent by the end of 2009, and just under half by the end of 2010. The delay reflects the time it takes for spending to be approved through administrative processes, and the fact that some projects were only formally presented after the programmes were announced.
The investments in renewable energy in emerging
economies have been growing rapidly since 2005 (UNEP SEFI 201111
). In that year OECD countries accounted for
almost 77 per cent of global investment in renewable energy.12
By 2007, however, the share of non-OECD
countries had risen to 29 per cent and further increased to 40 per cent in 2008 (Bloomberg New Energy Finance database). In 2008, for example, China was the second- largest country for renewable energy investments after Spain, with the US ranking third. Brazil was ranked fourth and India seventh. China took the lead though in 2009, maintaining this position in 2010, with US$ 49 billion in new investment in renewable energy. Overall, from 2005 to 2008, investments in renewable energy assets grew by more than 200 per cent in OECD countries, but
9. The Emergency Economic Stabilization Act and the American Recovery and Reinvestment Act; these included the extension of the Production Tax Credits for wind and the Investment Tax Credit for solar.
10. The Emergency Economic Stabilization Act and the American Recovery and Reinvestment Act; these included the extension of the Production Tax Credits for wind and the Investment Tax Credit for solar.
11. See also previous editions of the UNEP SEFI Sustainable Energy Investment Trends Report (UNEP SEFI 2008a, 2009, 2010).
12. New financial investment in renewable energy excludes small scale systems, as well as corporate and government investment in R&D, which are included in Figure 5 and accounted for US$ 68 billion, or almost one-third, of the US$ 211 billion total in 2010 (UNEP SEFI 2011).
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