Renewable energy investment across the European Union almost ground to a standstill last year, with less than 1% growth, despite a strong global rebound in financing led by China and the United States, according to figures published on Tuesday (31 March).
Global investment in renewable energies jumped by 17% to €290 billion, the first funding increase for three years, according to the United Nations Environment Programme’s (UNEP) annual Global Trends in Renewable Energy Investment report.
The hike reflected a €80.5 billion boom in solar installations in China and Japan and a record €20 billion of final investment decisions on offshore wind projects in Europe.
The total figure, which excludes large hydro, is just 3% below the all-time record of €299.6 billion set in 2011, according to research published today (31 March).
China was by far the biggest investor. It pumped a record €89.5 billion into projects, up 39% from last year.
The US was second at €41.2 billion, up 7%, but well below its all-time high reached in 2011. Japan was third, at €38.4 billion, 10% higher than in 2013 and its biggest total ever, according to the influential report, by Frankfurt School-UNEP Collaborating Centre for Climate & Sustainable Energy Finance and an Bloomberg New Energy Finance.
Solar and wind accounted for 92% of all investment in renewable and fuels worldwide. Biomass and waste-to-energy made up 3% of total. Solar jumped 25% to €161 billion, its second highest total ever. Wind rose 11% to a record €107 billion.
There were seven billion dollar worth of financing for offshore wind projects in the North Sea, funded from the Netherlands, the UK and Germany.
It included the 600MW Gemini project in Dutch waters, which at €4.1 billion was the largest non-hydro renewable energy plant to get the go-ahead anywhere in the world. Gemini’s financing was agreed by 12 banks, three export credit agencies, the European Investment Bank and a Danish pension fund.
EU policymakers are pushing for better interconnections across the North Sea as part of the Energy Union project, which aims to strengthen the bloc’s resilience to shortages.
Even accounting for a booming offshore sector, investments in Europe had hardly changed from 2013, growing by less than 1%, the report said.
Total renewables investment in developed economies rose by only 3% to €149 billion. Renewable investments in developing countries jumped by more than a third (36%) to €141 billion.
Europe’s share of global renewables had shrunk, the report said. The country contributing the most to the European total for renewable investment was the United Kingdom. Its investment increased by just 1%.
Investors losing confidence in Europe
Experts said that investors did not have confidence in European policymakers’ support systems for renewables. Spain and Italy changed public support schemes for wind and solar after the financial crisis, sparking legal battles.
“Southern Europe is still almost a no-go area for investors because of retroactive policy changes, most recently those affecting solar farms in Italy,” said Michael Liebreich, chairman of the advisory board for Bloomberg New Energy Finance.
“Europe was the first mover in clean energy, but it is still in a process of restructuring those early support mechanisms,” said Liebreich.
“In the UK and Germany we are seeing a move away from feed-in tariffs and green certificates, towards reverse auctions and subsidy caps, aimed at capping the cost of the transition to consumers.”
The collapse in the oil price, of more than 50%, in the second half of last year, should not hit renewables investment in the future. Udo Steffens, president of the Frankfurt School of Finance and Management, said the loss of investor confidence due to inconsistent policy was of greater concern.
“Oil and renewables do not directly compete for power investment dollars,” said Steffens. “Wind and solar sectors should be able to carry on flourishing, particularly if they continue to cut costs per MWh. Their long-term story is just more convincing.”
Declining technology costs in both wind and dollar meant the money invested was buying significantly more capacity.The 103Gw of generating capacity added around the world made 2014 the best year ever for newly installed capacity, the report said. In 2013 the capacity was 86Gw.
“Once again in 2014, renewables made up nearly half of the net power capacity added worldwide” said Achim Steiner, UN under-secretary-general and executive director of UNEP.
“These climate-friendly energy technologies are now an indispensable component of the global energy mix and their importance will only increase as markets mature, technology prices continue to fall and the need to rein in carbon emissions becomes ever more urgent.”
World leaders will meet in Paris in November to try and agree a legally binding target to keep global warming below two degrees.
The Commission will likely legislate after Paris to translate that agreement into EU law. EU leaders agreed to an EU-wide 27% renewables target by 2030, but it is not binding at national level.
Governments have often struggled to produce policy measures that keep up with the advance of renewable power and its knock-on effect on the rest of the electricity system, the report authors said. Grids and utilities in many countries struggle to cope with the increasing penetration of wind and solar in the generation mix.
Major electricity market reforms such as Germany’s Energiewende energy transition was needed, according to the report authors.
The European Commission has said it wants to overhaul the EU electricity market, to ensure better interconnection between member states and integration of renewables, as part of Energy Union.
EU leaders recently backed the executive’s blueprint at their summit in Brussels.
As most renewable energies are still more expensive than fossil fuels, a variety of support schemes have been put in place to accelerate their uptake and meet the EU's goal of sourcing 20% of its energy from renewables by 2020.
The European Commission warned last year that EU energy prices will continue to rise unless governments take steps to reduce green subsidies.
>> Read our LinksDossier: Supporting renewable energies: The 'transition' schemes
- Press release and report: Global Trends in Renewable Energy Investment 2015