Energy transition investmen hit $500 billion in 2020 for first time

A new, broad measure of ‘energy transition investment’, compiled by BloombergNEF (BNEF), shows that the world committed a record $501.3 billion to decarbonization in 2020, beating the previous year by 9% despite the economic disruption caused by the COVID-19 pandemic.

BNEF’s analysis shows that companies, governments and households invested $303.5 billion in new renewable energy capacity in 2020, up 2% on the year, helped by the biggest-ever build-out of solar projects and a $50 billion surge for offshore wind. They also spent $139 billion on electric vehicles and associated charging infrastructure, up 28% and a new record.

Other areas of energy transition investment also showed strength. Domestic installation of energy-efficient heat pumps came to $50.8 billion, up 12%, while investment in stationary energy storage technologies such as batteries and excluding pumped hydro systems, was $3.6 billion, level with 2019 despite falling unit prices. Global investment in carbon capture and storage tripled to $3 billion, and that in hydrogen was $1.5 billion, down 20% but the second-highest annual number to date.

Europe accounted for the biggest slice of global investment, at $166.2 billion (up 67%), with China at $134.8 billion (down 12%) and the U.S. at $85.3 billion (down 11%). Europe’s impressive performance was driven by a record year for electric vehicle sales, and the best year in renewable energy investment since 2012.

Renewable energy investment

Global investment in renewable energy capacity (excluding large hydro-electric projects of more than 50 MW) moved up 2% to $303.5 billion in 2020. Falling capital costs enabled record volumes of both solar (132 GW) and wind (73 GW) to be installed on the basis of the modest increase in dollar investment.

Highlights of the renewables investment total included a leap of 56% in financings of offshore wind projects to $50 billion, including the largest deal ever in that sub-sector – $8.3 billion for the 2.5GW Dogger Bank project in the U.K. North Sea. The year also saw the largest single solar park ever funded, the 2 GW Al Dhafrah in the United Arab Emirates, at a cost of $1.1 billion.

Overall, solar capacity investment was up 12% at $148.6 billion, and wind (onshore and offshore) down 6% at $142.7 billion. Biomass and waste-to-energy financings were down 3% at $10 billion.

Renewable energy capacity investment in Europe, at $81.8 billion, up 52%, was its highest since 2012 and almost caught up with China, at $83.6 billion, down 12%. The U.S. fell 20% to $49.3 billion, as wind investment almost halved, and India slipped 36% to $6.2 billion.

Renewables capacity investment rose 10% in Japan to $19.3 billion, 177% in the U.K. to $16.2 billion and 221% in the Netherlands to $14.3 billion. Spain was up 16% at $10 billion, Brazil up 23% at $8.7 billion, Vietnam 89% higher at $7.4 billion, France 38% up at $7.3 billion, and Germany 14% up at $7.1 billion. Other markets seeing $3 billion-plus totals included Taiwan, Australia, South Korea, Poland, Chile, Turkey and Sweden.

Public markets and VC/PE

BloombergNEF also continues to track investment by the public markets and venture capital and private equity players in renewable energy and energy storage. In 2020, specialist companies in these areas raised a runaway record figure of $20 billion via share issues on public markets, up 249% on the previous year.

The biggest deals included $2.8 billion raised by Chinese battery maker Contemporary Amperex Technology, or CATL, $846 million from U.S. fuel cell company Plug Power, and $777 million from Chinese PV manufacturer JA Solar Technology.

Venture capital and private equity investment in renewables and storage increased 51% to $5.9 billion last year. Both this, and investment via the public markets, took place against the backdrop of buoyant share prices: the WilderHill New Energy Global Innovation Index, or NEX, which tracks about 100 clean energy stocks worldwide, rose 142% in 2020 to record levels.

This positive investor mood helped electric vehicle companies raised some $28 billion from stock market investors in 2020, up from just $1.6 billion in 2019, according to BNEF estimates. Last year’s total was seven times the previous record, in 2016.