New investment in wind, hydro and solar power hit their highest levels ever last year, as emerging markets in particular threw money at renewables to meet their growing energy needs.
An annual review of the world market for renewables by the UN-sponsored REN21 organization showed that overall investment in green power rose to $286 billion last year, a 4.8% rise on 2014 and nearly four times what the world spent on renewables a decade ago.
Over 40% of the total was spent in China, where pollution from an energy sector that runs mainly on coal is an acute and widespread problem in major cities. Although much of China’s $103 billion spend was on traditional large-scale hydropower projects, it also installed over 30 gigawatts of wind capacity last year–almost four times as much as the U.S., the second-biggest builder of wind projects. China was also the leader in solar photo-voltaic power, adding another 15 gigawatts of capacity. That means it’s adding wind and solar at a rate comparable to its breakneck expansion of coal-fired power in the pre-crisis boom years.
Investments in renewables in the U.S. rose to $44.1 billion from $37 billion a year earlier, but were still short of the $49 billion record set in 2011. The U.S. installed around 7.3 GW of new solar capacity, putting it third behind China and Japan. REN21 estimated around 769,000 jobs in the U.S. are generated directly or indirectly by renewable energy.
The surge is all the more remarkable for coming in a year when prices for fossil fuels collapsed, thanks to Saudi Arabia’s decision to reclaim lost market share in the global market for crude oil and, to a lesser extent, the surge in shale gas production in the U.S. which brought down wholesale power prices.
Solar and thermal power have become much cheaper over recent years, thanks to technological advancements and more market-oriented policy-making. REN21 estimates that onshore wind and solar PV are now competitive with new fossil fuel plants, given a level regulatory playing field.
The organization also noted that prices have come down as governments have switched from offering flat-rate subsidies–known as ‘feed-in tariffs’– to competitive tendering for new projects. By the end of 2015, according to REN21, at least 64 countries had held renewable energy tenders, with record bids in terms of both low price and high volume seen across the world’s developing and emerging countries.
As the sector starts to stand more on its own two feet, private investors are more willing to finance renewable projects, REN21 said. The number of large banks active in the sector increased last year, as did the average loan size. Innovations such as yieldcos, crowd funding and green bonds also contributed.
Europe, a relatively early adopter of renewable energy, has scaled back spending in recent years after high feed-in tariffs led to steep and unpopular rises in household bills. The U.K., Spain and, as of Wednesday, Germany have all moved to cut direct subsidies to appease consumers. Overall investment in Europe was down by more than half from its 2011 peak last year at $48.8 billion.