Investments In Renewable Energies

Today the world faces two main energy challenges: to fulfill rising energy demand and at the same time to use more and more clean energy sources which are sustainable, equitable and efficient and can protect our fragile environment. Renewable energy not only has the answer to these global challenges, but also significantly contributes to energy diversification. Asian countries are hugely dependent on fossil fuels to meet their drastically rising energy demand. Using renewables will not only reduce fuel imports and insulate the economy, but will also help countries in the Asian region to take advantage of their ample supplies of solar, hydro, wind, biomass, geothermal and ocean energies which are mostly pollution free and are available in abundance. The UNEP, Bloomberg New Energy Finance, states in its report ‘Global Trends in Renewable Energy Investment’ that investment in renewable power and fuels (including small hydro-electric projects) was $244 billion in 2012 which is 8% up from 2010 investments. Out of $244 billion, $102.1 billion invested comes from Asia only. In finding solutions to the energy security and climate change, Asia has emerged as the leading destination for renewable energy investment.

Among all Asian countries, China was the dominant performer, raising its investment by 22% and has shown the most consistent growth in investment, from just $2.6 billion in 2004 to $66.6 billion in 2012. Since the Fukushima nuclear crisis in 2011, Japan has made a decisive shift in favour of renewable power. Japanese investment in renewable energy reached $16 billion in 2012. India launched a National Solar Mission to attract renewable power investment at the lowest possible cost. India’s investment in the renewable energy sector reached $6 billion in 2012. Though China and India remain major investors in Asia for renewable energy, there are smaller Asian countries as well which are reflecting signs of emerging investment. The table highlights investments of other countries in Asia from Thailand to Pakistan and Malaysia to Vietnam. Thailand and South Korea in particular have made impressive investment with $1.3 billion and $ 1.1 billion respectively in clean energy.

From Developed To Developing Countries

The balance of renewable energy investment has witnessed a dramatic shift in the world. According to the UNEP and Bloomberg’s ‘New Energy Finance report on Global Trends in Renewable Energy Investment’, the total investment in developed economies was $132 billion in 2012 which is down by 29%, whereas in developing economies the investment is up by 19% and has reached the highest ever, a $112 billion investment. The table indicates that solar was by far the leading sector in terms of investment. In 2012, money committed to solar was $140.4 billion out of which China accounted for the largest of all, at $31.3 billion.

In developing countries, costs of wind and solar generation have come down making them more affordable than ever before. Although investments in solar energy were dominated by developed economies such as Germany, US, Japan and Italy, the table clearly indicates developing economies are much ahead of developed economies in terms of investments in wind, small hydro and biomass. The data demonstrates that the developing countries generated $7.5 billion of investment in small hydro which is way ahead of the investment of developed nations which merely stands at $254 million. Developed countries invested $35 billion in wind whereas the developing group invested $45.3 billion. The instability in policy regime in developed-economy markets is seen as the main issue for holding back investments in renewable energy. Squeeze on subsidies in Europe and the US triggered sharp falls in investment in countries such as the US, Italy and Spain in 2012. Developing economies are able to offer policies that command investor confidence, the need for extra generating capacity and strong renewable power resources

Top Investors In Renewable Energy

The ‘Global Trends in Renewable Energy Investment report’, by the UN Environment Program has tracked the investment flowing into renewable energy across the world. In 2012, investment in renewable power and fuels (including small hydro-electric projects) was $244 billion of which $132 billion came from developed economies and $112 billion from developing nations. Most of this money originates from the private sector. The table ranks the world’s top 10 investors in renewable energy which is led by China as its investments stand at $67 billion rising 22%. Through a mixture of policies and extensive government support, China surged ahead of the US to become the world’s biggest investor in clean energy.

Policy uncertainty of the U.S. was very much visible in its investments in renewable energy which showed a 34% decline and commitments of only $36 billion. Due to reductions in subsidies from Germany to Spain, Europe’s clean-energy industry is retrenching and as a result Germany attracted only $19 billion. Post 2011 Fukushima nuclear disaster Japan is focusing more on renewable energy and has attracted $16 billion of investment. The African region is represented by South Africa whose investment has jumped from few millions to $5 billion in 2012. To attract renewable power investment at the lowest possible cost, the emerging economies such as India, Brazil and South Africa are making the best use of competitive reverse auctions. The data suggests that investment patterns are going global with higher capital commitments by India, Brazil and South Africa.