|Photo credit: Sten Dueland via Flickr.|
By Anders Lorenzen
I recently wrote how renewables have had a record year in 2014. Investments in renewable energy sources have increased by an impressive 16% compared to 2013, though they still fall 2% short of the all-time record which was set in 2011.
Despite a low oil price which some claim hurts growth in the clean energy sector, there are reasons to be optimistic that in 2015 investment in renewable energy will at least match 2014, and could even set a new all-time record.
But how can you possibly be optimistic about this, you might ask? At a time of uncertain renewable energy policies in Europe and the US, as well as with a low oil price?
These are all valid questions. It is true that subsidy schemes for some renewable energy sources are being threatened in the west. The current UK government wants to see an end to onshore wind power. Germany has slashed subsidy schemes for solar. The US Congress has so far failed to renew the Production Tax Credit (PTC) that benefits wind power. The US has now been a year without the subsidy and, as a result, wind power investment has declined in the world`s largest economy . And it is not yet known when or if an extension of the PTC can be agreed. In Australia clean energy investments fell by a staggering 35%, due to Prime Minister Tony Abbott’s repeal of the carbon tax.
The important role of the developing world
But here is the good news. Even if the west were to report a disappointing clean energy investment year (which I don’t think would happen) I would still say there is a high chance 2015 could see an all- time clean energy investment record. The key is developing countries and the sheer scale of the clean energy market from Latin America, to Africa and China. In 2014 clean energy investment exploded in Latin America, led by Brazil who witnessed nearly a 90% growth. That growth also impacted on neighboring countries, such as Chile, which also had an impressive year with new wind and solar farms being constructed.
Expect to see continued strong growth in China too, although it might not increase much more than the 32% reported in 2013. But 2014 saw important climate targets set by China following the announcement that they would ban coal in Beijing by 2020, and then the welcome news that they would set an emission cap in 2030. On top of that, new carbon tax schemes will continue to be rolled out across China’s regions, eventually covering the entire country by 2016-2017. All these factors combined will spur increased investor confidence in the clean energy sector.
India could be one of the rising stars of 2015. While Prime Minister Narendra Modi might not be too keen on environmental NGO’s or setting legal requirements to limit the country’s CO2 emissions, he is keen on solar power. Modi announced in 2014 that he wanted to create a solar revolution. He wants to nearly double India’s solar energy output to a total of 34 Gigawatts (GW) installed capacity by 2022. In November last year India passed the milestone 3 GW of installed solar capacity. If India is to meet the 34 GW goal, large investments in solar will need to be made in the coming years.
Then there is Africa. While the continent is unlikely to witness the same pace of growth as Asia and Latin America, there is a steady increase of clean energy investment year on year. Wind farms have been constructed in South Africa and Morocco, while Kenya intends to build Africa’s largest installation. On top of that, the huge potential of geothermal in the Rift Valley region is coming on line as well as other promising projects in both Kenya and Ethiopia. Meanwhile, the quiet revolution of rooftop solar is continuing to grow in rural Africa. The key issue is to get enough capital investment flowing into Africa, as capital not potential is the only thing that holds the continent back from being a global leader on renewables.
The maturing of renewable energy technologies
But a fundamental reason why I’m optimistic for continued growth in renewables in 2015 is due to the maturing process of clean energy technologies. The cost of solar panels continues to drop, and in many countries they are edging closer to grid parity (the point at which one unit of electricity produced by solar costs the same as a unit of electricity from power plants). So, for example, now in the US one solar system is installed every four minutes, making up for the drop in wind energy investment. More people and businesses invest in solar, even in countries that have no subsidy schemes. Much the same arguments can be made for onshore wind which in many countries is the cheapest form of low carbon electricity.
Offshore wind market to expand
Offshore wind was one of the main contributors to renewable energy investment in 2014, despite the fact that only very few countries have so far installed the system. But as more countries enter the sector, expect costs to start coming down. Expect also the leading players, UK, Denmark, Germany, France and Belgium to be leading on offshore wind again in 2015, being joined by Norway and Sweden. But also expect US, South Korea and China to announce their first offshore projects.
The countries I have mentioned are just some of the leading players, which I expect will play a leading role in clean energy investments this year. But there is a host of countries who have not as yet made any big noise in the clean energy sector, that would also be worth watching in 2015. And they could provide a real boost to clean energy investments. One such country is Ukraine. That country, which wants to become more energy independent from Russia, has so far invested very little in renewables but has enormous potential. Will they finally embrace renewables in 2015? And what about Russia ? As the Russian economy struggles with the low oil price, will they finally start to diversify their energy policy by implementing more clean energy investments?
Questions are many, and many remain unanswered, but one thing is certain, the current trend towards investment in renewable energy will continue to flourish, of that I’m convinced.