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energy technologies

Four large-scale shifts in the global energy system set the scene for the World Energy Outlook 2017 (WEO 2017). These are the rapid deployment and falling costs of clean energy technologies; the growing electrification of energy; the shift to a more services-oriented economy and a cleaner energy mix in China; and the resilience of shale gas and tight oil in the United States. These changes come at a time when traditional distinctions between energy producers and consumers are being blurred and a new group of major developing countries, led by India, moves towards centre stage. How these developments play out and interact is the story of this WEO. (The first part of this extensive summary of the WEO 2017 was published in our November issue).

LNG ushers in a new order for global gas markets

Natural gas grows to represent one quarter of global energy demand in the New Policies Scenario by 2040, becoming the second-largest fuel in the global mix after oil. In resource-rich regions, such as the Middle East, the case for expanding gas use is relatively straightforward, especially when it can substitute oil. In the US, plentiful supplies maintain a strong share of gas-fired power in electricity generation through to 2040, even without national policies limiting the use of coal. But 80% of the projected growth in gas demand takes place in developing economies, led by China, India and other Asian countries, where much of the gas needs to be imported and infrastructure is often lacking.

But the landscape is extraordinarily competitive, not just due to coal but also to renewables, which in some countries become a cheaper form of new power generation than gas by the mid-2020s, pushing gas-fired plants towards a balancing rather than a baseload role. Efficiency policies also play a part in constraining gas use. While the electricity generated from gas grows by more than half to 2040, the use of gas for power generation rises by only one-third, due to a higher proportion of highly efficient plants. Read more…

Article published in: FuturENERGY December 2017 – January 2018

An extraordinary boom in PV installations made 2017 a record year for China’s investment in clean energy. This over-shadowed changes elsewhere, including jumps in investment in Australia and Mexico, and declines in Japan, the U.K. and Germany. Annual figures from Bloomberg New Energy Finance (BNEF), based on its world-leading database of projects and deals, show that global investment in renewable energy and energy-smart technologies reached $333.5 billion last year, up 3% from a revised $324.6 billion in 2016, and only 7% short of the record figure of $360.3 billion, reached in 2015. The 2017 total is all the more remarkable when you consider that capital costs for the leading technology – solar – continue to fall sharply. Typical utility-scale PV systems were about 25% cheaper per megawatt last year than they were two years earlier.

Solar investment globally amounted to $160.8 billion in 2017, up 18% on the previous year despite these cost reductions. Just over half of that world total, or $86.5 billion, was spent in China. This was 58% higher than in 2016, with an estimated 53 GW of PV capacity installed – up from 30 GW in 2016.

China installed about 20GW more solar capacity in 2017 than we forecast. This happened for two main reasons: first, despite a growing subsidy burden and worsening power curtailment, China’s regulators, under pressure from the industry, were slow to curb build of utility-scale projects outside allocated government quotas. Developers of these projects are assuming they will be allocated subsidy in future years.

Second, the cost of solar continues to fall in China, and more projects are being deployed on rooftops, in industrial parks or at other distributed locales. These systems are not limited by the government quota. Large energy consumers in China are now installing solar panels to meet their own demand, with a minimal premium subsidy.

Investment by country

Overall, Chinese investment in all the clean energy technologies was $132.6 billion, up 24% setting a new record. The next biggest investing country was the U.S., at $56.9 billion, up 1% on 2016 despite the less friendly tone towards renewables adopted by the Trump administration.

Large wind and solar project financings pushed Australia up 150% to a record $9 billion, and Mexico up 516% to $6.2 billion. On the downside, Japan saw investment decline by 16% in 2017, to $23.4 billion, while Germany slipped 26% to $14.6 billion and the U.K. 56% to $10.3 billion in the face of changes in policy support. Europe as a whole invested $57.4 billion, down 26% year-on-year.

Below are the 2017 totals for other countries investing $1 billion-plus in clean energy:
• India $11 billion, down 20% compared to 2016
• Brazil $6.2 billion, up 10%
• France $5 billion, up 15%
• Sweden $4 billion, up 109%
• Netherlands $3.5 billion, up 30%
• Canada $3.3 billion, up 45%
• South Korea $2.9 billion, up 14%
• Egypt $2.6 billion, up 495%
• Italy $2.5 billion, up 15%
• Turkey $2.3 billion, down 8%
• United Arab Emirates $2.2 billion, up 23-fold
• Norway $2 billion, down 12%
• Argentina $1.8 billion, up 777%
• Switzerland $1.7 billion, down 10%
• Chile $1.5 billion, up 55%
• Austria $1.2 billion, up 4%
• Spain $1.1 billion, up 36%
• Taiwan $1 billion, down 6%
• Indonesia $1 billion, up 71%

Investment by sector

Solar led the way, as mentioned above, attracting $160.8 billion – equivalent to 48% of the global total for all of clean energy investment. The two biggest solar projects of all to get the go-ahead last year were both in the United Arab Emirates: the 1.2 GW Marubeni JinkoSolar and Adwea Sweihan plant, at $899 million, and the 800 MW Sheikh Mohammed Bin Rashid Al Maktoum III installation, at an estimated $968 million.

Wind was the second-biggest sector for investment in 2017, at $107.2 billion. This was down 12% on 2016 levels, but there were record-breaking projects financed both onshore and offshore. Onshore, American Electric Power said it would back the 2GW Oklahoma Wind Catcher project in the U.S., at $2.9 billion excluding transmission. Offshore, Ørsted said it had reached ‘final investment decision’ on the 1.4 GW Hornsea 2 project in the U.K. North Sea, at an estimated $4.8 billion. There were also 13 Chinese offshore wind projects financed last year, with total capacity of 3.7 GW, and estimated investment of $10.8 billion.

The third-biggest sector was energy-smart technologies, where asset finance of smart meters and battery storage, and equity-raising by specialist companies in smart grid, efficiency, storage and electric vehicles, reached $48.8 billion in 2017, up 7% on the previous year and the highest ever.

The remaining sectors lagged far behind, with biomass and waste-to-energy down 36% at $4.7 billion, biofuels down 3% at $2 billion, small hydro 14% lower at $3.4 billion, low-carbon services 4% down at $4.8 billion, geothermal down 34% at $1.6 billion, and marine energy down 14% at just $156 million.

The clean energy investment total excludes hydro-electric projects of more than 50 MW. However, for comparison, final investment decisions in large hydro are likely to have been worth $40-50 billion in 2017.

BNEF’s preliminary estimates are that a record 160GW of clean energy generating capacity (excluding large hydro) were commissioned in 2017, with solar providing 98 GW of that, wind 56 GW, biomass and waste-to-energy 3 GW, small hydro 2.7 GW, geothermal 700 MW and marine less than 10 MW.

Investment by category

Breaking the investment total down by type of deal, the dominant category – as always – was asset finance of utility-scale renewable energy projects of more than 1MW. This was $216.1 billion in 2017, up fractionally on the previous year. Small-scale projects of less than 1MW (effectively small solar systems) attracted $49.4 billion, up 15% – thanks in large part to the installation rush in China.

Equity-raising by specialist clean energy companies on public markets totaled $8.7 billion in 2017, down 26%. The biggest transactions in this category were a $978 million convertible issue by electric car maker Tesla, and a $545 million placement by Guodian Nanjing Automation, a Chinese technology supplier to generating and transmission plants.

Venture capital and private equity investment in clean energy came to $4.1 billion in 2017, down 38% on the previous year and the lowest figure since 2005. The biggest deals were a $400 million Series A round for Microvast Power System, a Chinese maker of electric vehicle technology, and a $155 million expansion capital round for Greenko Energy Holdings, an Indian wind project developer.

Asset finance of energy-smart technologies was $21.6 billion, up 36% thanks to increased installation of smart meters and lithium-ion batteries for energy storage. Corporate research and development into clean energy rose 11% to $22.1 billion, and government R&D was almost level at $14.5 billion.

Global new investment in clean energy by sector, $ billion

Source: Bloomberg New Energy Finance. Note: Clean energy covers renewable energy excluding large hydro, plus energy smart technologies such as efficiency, demand response, storage and electric vehicles. 
BNEF’s annual figures for past years, revised in this round, are $61.7 billion in 2004, $88 billion in 2005, $129.8 billion in 2006, $182.2 billion in 2007, $205.2 billion in 2008, $206.8 billion in 2009, $276.1 billion in 2010, $324 billion in 2011, $290.7 billion in 2012, $268.6 billion in 2013, $321.3 billion in 2014, $360.3 billion in 2015, $324.6 billion in 2016 and $333.5 billion in 2017. 
The 2016 figures reflect a significant revision, due to the arrival of new data on Chinese solar and wind and on global corporate R&D.
<br /><p><strong>Acquisition spending</strong></p><p>The above figures above all concern new investment coming into the clean energy sector. BNEF also measures money changing hands, as organizations purchase and sell clean energy projects and companies, and refinance existing project debt.</p><p>This acquisition activity totaled $127.9 billion in 2017, up 4% on the previous year and the highest ever. Acquisitions and refinancing of renewable energy projects rose 14% to a record $87.2 billion, while corporate M&A involving specialist clean energy companies fell 51% to $17.5 billion. Public market investor exits came to $7.4 billion, down 8%, and private equity buy-outs reached an all-time high of $15.8 billion, up sixfold on the previous year. The largest acquisition transaction of the year was the purchase of a 51% stake in U.S. ‘yieldco’ TerraForm Power by Brookfield Asset Management for $4.7 billion.</p><p><em>Source: BNEF</em></p></div><div class=

Nueva inversión mundial en energía limpia por región, por trimestre en miles de M$. Fuente: Bloomberg New Energy Finance / Global new investment in clean energy by region, by quarter, US$bn. Source: Bloomberg New Energy Finance.

Seven giant wind projects, each costing between US$600m and US$4.5bn, and spread between the US, Mexico, the UK, Germany, China and Australia, helped global clean energy investment jump 40% YoY in the third quarter of 2017. The latest authoritative figures from the Bloomberg New Energy Finance database of deals and projects show that the world invested US$66.9bn in clean energy (renewable energy excluding large hydro-electric projects of more than 50 MW; plus energy smart technologies such as smart grid, battery storage and electric vehicles) in Q3 2017, up from US$64.9bn the second quarter of this year and US$47.8bn in Q3 2016.

The numbers for Q3 mean that investment in 2017 to date is running 2% above that in the same period of last year, suggesting that the annual total is likely to finish up close to, or just ahead of, 2016’s figure of US$287.5bn. However 2017 looks highly unlikely to beat the record US$348.5bn reached in 2015.

 

The stand-out move of Q3 2017 was American Electric Power investing US$4.5bn in Invenergy’s 2 GW Wind Catcher project in the Oklahoma Panhandle. Due to be completed by 2020, the project will have 800 wind turbines, connected to population centres via a 350-mile high-voltage power line. AEP still needs to secure some regulatory approvals, but construction has started and BNEF is treating the project as financed.

The other top asset finance transactions of the quarter were Dong Energy’s (that is changing its name to Ørsted) decision to proceed with the 1.4 GW Hornsea 2 offshore wind farm in the UK North Sea, at an estimated US$3.7bn by the time it is completed in 2022-2023; and Northland Power’s financing of the 252 MW Deutsche Bucht array in German waters, at US$1.6bn.

After those came two Chinese offshore wind farms (Guohua Dongtai and Zhoushan Putuo) totalling 552 MW and an estimated US$2.1bn; the Zuma Reynosa III onshore wind farm in Mexico, at 424 MW and an estimated US$657m; and the 450 MW Coopers Gap onshore wind project in Queensland, Australia at US$631m. The biggest solar project financing was an estimated US$460m for First Solar’s 381 MW California Flats PV park in the US.

Breaking the Q3 2017 figures down by type of investment, asset finance of utility-scale renewable energy projects, such as those above, jumped 72% globally compared to the same quarter of last year, reaching US$54.3bn. Small-scale project investment (solar systems of less than 1 MW) amounted to US$10.8bn in the latest quarter, up 9%.

The two other areas of investment that BNEF tracks quarterly are venture capital and private equity investment in specialist clean energy companies, as well as equity-raising on public markets by quoted companies in the sector. Both these areas saw subdued activity in Q3.

VC/PE funding was only US$662m in Q3, down 79% from a very strong equivalent period a year earlier. Q3 2017 was the weakest quarter for this type of investment since 2005. The only deal to break three-figure millions was a US$109m private equity expansion capital round for Indian solar project developer Clean Max Enviro Energy Solutions.

Public markets investment was also subdued, down 63% year-on-year at US$1.4bn, its lowest quarter since Q1 2016. The biggest equity raisings were by Chinese company Beijing Shouhang Resources Saving, to fund activity in solar thermal generation (a US$675m private placement), and a US$314m initial public offering by Greencoat Renewables, a Dublin-based investment company targeting operating-stage wind projects in Ireland and the rest of the euro area.

Taking every investment category together (asset finance, small-scale projects, VC/PE, public markets, and an adjustment for re-invested equity), country-level results for Q3 included:

• China: $23.8bn, up 35% compared to Q2 2016, down 8% on Q2 2017.
• US: $14.8bn, up 45% YoY, up 8% QoQ.
• Europe: $11.6bn, up 43% YoY, up 45% QoQ.
• Germany: $2.4bn, down 5% YoY, down 26% QoQ.
• Japan: $2.2bn, down 32% YoY, down 17% QoQ.
• India: $1.1bn, down 49% YoY, down 60% QoQ.
• Brazil: $1.7bn, up 32% YoY, down 4% QoQ.
• Mexico: $2.8bn, from almost nothing a year earlier, up 84% QoQ.
• Australia: $1.8bn, up 388% YoY, down 10% QoQ.
• Turkey: $796m, from almost nothing a year earlier, up 312% on Q2 2017.
• France: $631m, up 109% YoY, down 21% QoQ.
• South Korea: $593m, up 143% YoY and up 85% on Q2 2017.
• Argentina: $1.2bn, from almost nothing in Q3 2016 and up 151% on Q2 2017.
• UK: $4.6bn, up 57% YoY, up tenfold QoQ.
• Chile: $1bn, up 134% YoY, up 306% QoQ.

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Dubbed Breakthrough Energy Ventures, the 20-year fund is backed by a mix of technology luminaries and heavyweights from the energy industry. The goal is to pump money into long-term energy technology that could dramatically reduce greenhouse gas emissions. The investments will likely go into areas such as electricity generation and storage, agriculture and transportation.

Investors include Jeff Bezos, founder and chief executive officer of Amazon.com Inc., Richard Branson, the founder of Virgin Group Ltd., Jack Ma, the executive chairman of Alibaba Group Holding Ltd., John Arnold, a billionaire natural gas trader, and Prince Alwaleed Bin Talal, the founder of Kingdom Holding.

 

Last year, a number of these investors joined Gates in announcing the Breakthrough Energy Coalition — a group of wealthy investors who pledged to aim a large portion of their fortunes toward energy technology. The arrival of the fund marks a more concrete step by this group toward their stated goals.

“I am honored to work along with these investors to build on the powerful foundation of public investment in basic research,” Gates said in a statement. “Our goal is to build companies that will help deliver the next generation of reliable, affordable, and emissions-free energy to the world.”

Gates, co-founder of Microsoft Corp., spent much of the last year stumping for advances in energy production. He maintains that things like solar plants, nuclear power and electric cars will do little to solve global warming in the relatively near-term. The only way to halt global warming is to find an energy source that produces no greenhouse gases, Gates has said.

He has personally backed a number of energy startups and has encouraged other wealthy individuals to follow suit. Clean energy was a hot niche of venture capital investing several years ago, but many of those investments didn’t pan out and some VC firms pulled back.

Source: Bloomberg

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stanford-renovables

A comprehensive energy study of 139 countries undertaken by Stanford University in California, concludes that by 2050 it is perfectly feasible to have a world that obtains 100% of its energy needs from renewables. The study details a vast plan to transform current energy infrastructures (electricity, transport, heating, temperature control, industry, agriculture, forestry and fishing) in 139 countries into systems solely powered by the wind, water and sun. The road map forecasts an 80% conversion of these infrastructures by 2030 and 100% by 2050.

The study compares the energy consumption of the entire supply system required by fossil fuels and renewables. For fossil fuels, extraction, transport and the transformation of coal, gas, oil and uranium into heat, electricity and fuel involve a huge amount of energy consumption, from the supply source to reach the final consumer.

Renewables also have transport costs however they need no extraction or transformation to make them usable, thereby bringing down their costs. Researchers have converted these costs into GW and have concluded that the current global energy mix, predominantly fossil fuel-based, would require 20,600 GW in 2050 to cover supply, compared with 12,100 GW in 2012. The study concludes however that the 100% renewable scenario would require 11,800 GW in 2050, a 42% saving on the world’s energy consumption.

 

The study considers a host of data, especially the renewables potential of the 139 countries in relation to the surface area of each national territory required to cover its energy needs; the jobs created; benefits in terms of the effects of pollution on the health of residents and even the benefits that could be obtained by developing renewable energy within each of the countries analysed.

The case of Spain

The study calculates that Spain will reduce its energy demand by 45% by 2050 if the use of solar, wind and hydropower becomes widespread for transport, heating, industry and agriculture and if, at the same time, the country develops an energy efficiency plan in different sectors including residential and automotive.

Spain could achieve 100% of renewables use by covering 57% of its needs from solar power, 36% from wind power, 6.3% from hydropower and the rest from other sources such as waves, tidal energy and geothermals. It further indicates that this scenario would create over 300,000 new jobs, significantly bringing down healthcare costs thanks to the improved air quality.

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Worldwide investment in renewable energy and energy-smart technologies totalled $70bn in the third quarter of 2015, just 1% below the equivalent figure a year earlier, according to the latest data from Bloomberg New Energy Finance. A 25% rise in investment in the US, and much larger jumps for Brazil and Chile, were among the highlights as global investment reached $70bn in the third quarter

The largest projects to be financed in Q3 this year included CSP, plants in China, Israel and South Africa, and four offshore wind farms in Chinese waters – the first real wave of sea-based wind projects to get the go-ahead outside that technology’s original market, Europe.

However, the countries enjoying the biggest-percentage gains in investment in the third quarter of 2015 compared to Q3 2014 were mostly in the Americas. Brazil saw investment jump 131% on a year earlier to $2.3bn, thanks to a rush of wind project financings, while Chile leapt from $180m in Q3 2014 to $1.6bn in the latest quarter, and the US enjoyed a 25% surge in investment to $13.4bn.

Part of the explanation is the ongoing improvement in cost-effectiveness of solar and wind relative to fossil fuel generation. That is enabling those renewable energy technologies to attract a big share of power sector investment everywhere from China and Japan to Latin America and South Africa.

The detail of Bloomberg New Energy Finance’s data shows that asset finance of utility-scale renewable energy projects totalled $47.3bn in the third quarter, down 4% on the same quarter of 2014, but spending on small-scale projects, such as rooftop solar, increased 21% to $19bn.

Among the big utility-scale projects funded were the Qinghai solar thermal plant in China, at $866m for 200MW, the Longyuan Haian Jiangjiasha offshore wind farm, also in China, at $856m for 300MW, and the SolarReserve Redstone solar thermal complex in South Africa, at $749m for 100 MW.

Investment in specialist clean energy companies by venture capital and private equity funds shot up 92% in Q3 this year to $2bn, helped by a $500m VC round for Chinese electric vehicle company NextEV and a $150m financing for View, the California-based electronically tinting window technology developer.

Public markets, meanwhile, invested $3.7bn in clean energy companies in Q3, down 38% compared to the same quarter in 2014. The biggest equity-raisings were a $750m issue by Tesla Motors, the electric car maker, and a $675m initial public offering by TerraForm Global, a US-based “yieldco” owning renewable energy assets in emerging markets.

Breaking the figures down by region, China was once again the largest centre for investment, at $26.7bn in Q3, some 5% up on the same period a year earlier. The US was second, at $13.4bn, boosted by financial close for a succession of solar and wind projects worth several hundred million dollars each.

Asia-Pacific outside India and China was the third biggest region, at $11.4bn, down 1% on Q3 2014. However, Europe saw investment of just $5.8bn in the latest three months, down 48% from the third quarter of last year and its weakest performance since Q4 2004.

Angus McCrone, senior analyst at Bloomberg New Energy Finance, said: “The drop in European investment reflects in part a lull in offshore wind financings in Q3, after no fewer than three deals worth more than $2bn off the coasts of the UK and Germany in the second quarter. But it is also the case that support policies have become less friendly to wind and solar investors in several countries, including Italy, Germany, Denmark and, most recently, the UK.”

Looking at the global numbers by sector, investment in solar slipped 1% to $43.9bn in Q3 2015 compared to a year earlier, while that in wind fell 5% to $20.5bn. Among the smaller sectors, biomass and waste-to-energy attracted $1.3bn in Q3, down 26%, while small hydro-electric projects of less than 50 MW harnessed $1.5bn, up 41%, and geothermal $530m, down 16%.

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