As the cost of clean technology continues to fall, the world added record levels of renewable energy capacity in 2016, at an investment level 23% lower than the previous year, according to new research published by UN Environment, the Frankfurt School-UNEP Collaborating Centre and Bloomberg New Energy Finance. “Global Trends in Renewable Energy Investment 2017” finds that wind, solar, biomass and waste-to-energy, geothermal, small hydro and marine sources added 138.5 GW to global power capacity in 2016, up 8% from the 127.5 GW added the year before. The added generating capacity roughly equals that of the world’s 16 largest existing power-producing facilities combined.

Investment in renewables capacity was roughly double that in fossil fuel generation; the corresponding new capacity from renewables was equivalent to 55% of all new power, the highest to date. The proportion of electricity coming from renewables, excluding large hydro, rose from 10.3% to 11.3%. This prevented the emission of an estimated 1.7 gigatonnes of carbon dioxide.

The total investment was US$241.6bn (excluding large hydro), the lowest since 2013. This was largely a result of falling costs: the average dollar capital expenditure per megawatt for solar PV, onshore wind and offshore wind dropped by over 10%, improving the competitiveness of those technologies. While much of the drop in financing was due to reduced technology costs, the report documented a slowdown in China, Japan and some emerging markets during the course of the year, for a variety of reasons.

New investment in solar in 2016 totalled US$113.7bn, down 34% from the all-time high in 2015, mainly due to sharp cost reductions – and to real slowdowns in activity in two of the largest markets, China and Japan. India saw the construction of the Ramanathapuram solar complex in Tamil Nadu, billed as the world’s largest ever PV project at some 648 MW.

Wind followed closely behind solar, at US$112.5bn of investment globally, down 9% despite the boom in offshore projects. However, while solar capacity additions rose in the year to a record 75 GW, sharply up from 56 GW, wind capacity additions fell back to 54 GW in 2016 from the previous year’s high of 63 GW.

The smaller sectors of renewable energy had mixed fortunes in terms of investment last year. Biofuels fell 37% to US$2.2bn, the lowest for at least 13 years; biomass and waste-to-energy held steady at US$6.8bn and small hydro at US$3.5bn; while geothermal rallied 17% to US$2.7bn and marine edged down 7% to US$194m.

Investment by type of economy

Renewable energy investment in 2016 showed contrasting trends between regions, as well as between the leading countries. The relative shares of the main regions in global investment in 2016 were as follows: China accounted for 32% of all financing for renewable energy, excluding large hydro, and Europe 25%. The US represented another 19% and Asia-Oceania, excluding China and India, stood at 11%. India. Other Americas made up 4% with Brazil, the Middle East and Africa each at 3%.

Renewable energy investment in developing countries fell 30% to US$117bn, while in developed economies, investment dropped 14% to US$125bn.

The ‘big three’ developing economies of China, India and Brazil saw a combined 28% setback in dollar investment to US$94.7bn, but this disguises different trends in each. China was again the biggest location for dollar commitments, but its total of US$78.3bn was down 32% from 2015 and the lowest since 2013. This broke a 12-year sequence of rising year-on-year investment. China also invested US$4.1bn in offshore wind, its highest figure to date. India recorded US$9.7bn in 2016, equalling 2015 and its average since 2010. Brazil bumps along from year to year without much sign of an upwards trend, and in fact last year’s figure of US$6.8bn was down 4% and the second-lowest since 2006.

Mexico, Chile, Uruguay, South Africa and Morocco all saw falls of 60% or more, due to slower than expected growth in electricity demand and delays to auctions and financing. Jordan was one of the few new markets to buck the trend, with investment there rising 148% to US$1.2bn.

Among developed economies, the US saw commitments slip 10% to US$46.4bn, roughly in line with its average since 2011, although 10% down on the 2015 record, as developers took their time to build out projects to benefit from the five-year extension of the tax credit system.

Investment in Europe has stabilised in recent years after falling from peaks of above US$100bn per year during the German and Italian solar booms of 2010-11. In 2016, it totalled US$59.8bn, up 3% on the previous year, led by the UK (US$24bn) and Germany (US$13.2bn). Two of the main features were the financing of offshore wind projects and the new equity raised by Innogy as it floated on the Frankfurt stock market. Offshore wind (US$25.9bn) dominated Europe’s investment, up 53% thanks to mega-arrays such as the 1.2 GW Hornsea project in the North Sea, estimated to cost US$5.7bn.

The most hopeful sign in 2016 for the future greening of the global electricity system was a succession of winning bids for solar and wind in auctions around the world, at tariffs that would have seemed inconceivably low only a few years ago. The records set last year were US$29.10 per MWh for solar in Chile and US$30 per MWh for onshore wind in Morocco, but there were other eye-catchingly low outcomes to auctions from Dubai to India and from Zambia to Mexico and Peru.

Source: UN Environment, the Frankfurt School-UNEP Collaborating Centre and Bloomberg New Energy Finance