Investment is down, but the world still installed record overall solar power capacity last year.
Image: Rob Goodler/Flickr
Last year, global investment in renewable energy hit lows that haven’t been seen since 2009, but it’s not because countries are giving up on the promise of clean energy: It’s because, in the last few years, renewable energy has become so cheap and efficient that we don’t have to spend a fortune to install it anymore.
That’s the takeaway from a new report sponsored by the United Nations Environment Programme, which found that solar energy capacity increased to a new record high while costing less than ever before: “a record amount of [solar energy] capacity (some 39 gigawatts) was constructed in 2013, and for less money than the smaller 2012 total of 31GW,” the report notes.
Over the last two years, investment in renewables has fallen a quarter, from $279 billion in 2011 to $214 billion in 2013, but during that time, renewable electricity increased from a 6.9 percent global share to 8.5 percent global share. That fact underscores a growing trend worldwide: Companies are spending less on new energy infrastructure worldwide, regardless of whether that energy comes from fossil fuels or renewables.
“Although photovoltaic module prices bottomed out in early 2013 as the industry’s severe over-capacity eased, balance-of-plant costs for PV systems continued to fall,” the report noted. “In addition, there was a shift in the global mix of PV installations in 2013, with a lower share of relatively high-cost per megawatt residential systems and a higher share of relatively low-cost per MW utility-scale systems, particularly in China. The result was that although PV capacity installed was up from 31 GW in 2012 to a record 39 GW in 2013, dollar investment in solar capacity was down 23 percent at $104 billion.”
Beyond that, the report attributes much of the declining worldwide investment in renewable energy to the fact that countries no longer have to incentivize companies and consumers to make the switch—it’s now an economically-viable proposition on its own. The report notes that “wind and [solar] may be able to out-compete fossil-fuel options as long as there are plentiful local sunshine or wind resources, low capital costs, and no cheap, indigenous coal or gas feedstocks.”
In many places in Latin America, the Middle East, and Africa, it’s cheaper to simply start smaller solar, wind, or hydroelectric projects rather than find a way to hook up rural and underserved areas with existing fossil fuel infrastructure. In Peru, for instance, the government has decided that, rather than connecting its poorest residents to fossil fuel-generated power, it’s going to spend $200 million to power more than 2 million residents in the Andes mountains with solar power.
All of this is very, very good news, and supports some of what we’ve been seeing in the United States recently: Solar is now becoming cheap enough to be a real, viable alternative to fossil fuels, rather than a novelty project for well-off people who want to have a smaller carbon footprint.
There's a flip side, of course: Regardless of how cheap solar capacity is, investment has declined. Total dollar investment in renewables, on a continent-by-continent basis, only increased in the Americas, minus the United States and Brazil. China outspent all of Europe on new renewable energy sources, but its overall renewable investment fell 6 percent. The US spent 10 percent less in 2013 than it did in 2012, and Europe’s investment fell a whopping 44 percent.
No matter how far the price of solar and wind falls, that trend can’t continue if the world wants renewables to continue to take market share from fossil fuels. But this new report shows that the technology is sound and improving, and that solar and wind are finally completely viable alternatives to oil and coal in many parts of the world.