Why investors bet $310 billion on green energy in 2014

Why investors bet $310 billion on green energy in 2014

A boat of money rides a wave
Courtesy ofNomad_Soul
Clean energy investments rode a wave in 2014, with solar as the biggest cause for the swells.

This article originally appeared at BusinessGreen.

The global clean tech market enjoyed its strongest investment performance in years during 2014, according to new figures showing total clean-energy investment jumped 16 percent to $310 billion.

Leading analyst Bloomberg New Energy Finance  published its latest report last week, detailing how increased investment in solar PV and offshore wind projects pushed total funding back towards record levels.

The company said total investment of $310 billion represented a more than fivefold increase on the $60.2 billion achieved a decade earlier. The strong performance left investment levels just 2 percent short of the record annual investment of $317.5 billion achieved in 2011 as government stimulus programs mobilized a wave of new projects in the U.S. and Asia.

Michael Liebreich, chairman of the advisory board for BNEF, said the strong performance throughout 2014 had beaten previous projections.

"Throughout last year, we were predicting that global investment would bounce back at least 10 percent in 2014, but these figures have exceeded our expectations," he said in a statement. "Solar was the biggest single contributor, thanks to the huge improvements in its cost-competitiveness over the last five years."

He also downplayed concerns that the collapse in the price of oil during the second half of 2014 would hamper clean-energy investment.

"Healthy investment in clean energy may surprise some commentators, who have been predicting trouble for renewables as a result of the oil price collapse since last summer," Liebreich said. "Our answer is that 2014 was too early to see any noticeable effect on investment, and anyway the impact of cheaper crude will be felt much more in road transport than in electricity generation."

Strong global performance

Encouraging data shows that most of the leading clean-energy markets and technologies enjoyed a strong performance during 2014.

Clean energy investment in China jumped 32 percent to a record $89.5 billion, while the U.S. market grew 8 percent to $51.8 billion, Japan saw investment climb 12 percent to $41.3 billion and Canadian investment soared 26 percent to $9 billion.

Similarly, leading emerging economy markets continued their recent strong run of form. Investment in Brazil jumped 88 percent to $7.9 billion, while Indian investment climbed 14 percent to $7.9 billion and South Africa saw its clean-energy investment jump 5 percent to $5.5 billion.

Europe was the only major clean-energy market to post a more mixed performance, with total clean-energy investment inching up 1 percent to $66 billion, primarily as a result of significant new investment in offshore wind projects.

U.K. investment climbed just 3 percent to $15.2 billion, a performance almost exactly matched by Germany where investment also rose 3 percent to $15.3 billion. Investment in France jumped 26 percent to $7 billion, in large part thanks to the confirmation of the 300MW Cestas solar project. In contrast, investment in Italy dropped 60 percent to $2 billion, with BNEF attributing the fall to retroactive cuts in incentives for solar PV plants.

Australia also provided a bleak picture for clean-energy investors, as total investment fell 35 percent to $3.7 billion in the wake of the policy uncertainty that has resulted from the government's controversial review of its Renewable Energy Target.

Globally, the market was dominated by solar projects, as falling technology costs helped drive a 25 percent year-on-year increase in investment to just short of $150 billion. Wind energy investment rose 11 percent to nearly $100 billion, while investment in so-called "energy smart technologies" climbed 10 percent to just over $37 billion. The picture was less encouraging for biofuels, biomass and waste-to-energy and small hydroelectric projects, which saw investment levels fall 7 percent, 10 percent and 17 percent respectively.

Breakdown by investment categories

BNEF also confirmed a strong performance across investment categories.

For example, new figures published separately to the investment report detailed how green bond issuance soared from $15 billion in 2013 to $38 billion last year. The data will provide further ammunition for green bond campaigners, who have tipped the market to expand rapidly to about $100 billion this year as growing numbers of banks issue dedicated clean-energy and climate bonds.

Meanwhile, asset finance for renewable energy projects dominated the market, climbing 10 percent to more than $170 billion, driven by a surge in investment in $1 billion-plus European offshore wind projects. A further $73.5 billion of investment was mobilized through small distributed capacity projects of less than 1MW, such as rooftop solar installations, while R&D spending from governments and corporations inched up 2 percent to $29 billion.

There was also a strong performance in the equity markets, as clean-tech firms raised $18.7 billion through 2014, achieving a seven-year high. Similarly, venture capital and private equity investment rose 16 percent to $4.8 billion, although it remains a long way below the $12.3 billion record set in 2008.

The latest figures are likely to be seized upon by green business campaigners as further evidence that the falling cost and growing maturity of clean-energy technologies mean the sector is continuing to prosper, despite falling subsidy levels in many markets and political and policy uncertainty.