INVESTMENT IN RENEWABLE ENERGY CAPACITY
Global investment in new renewable energy capacity (excluding large hydropower)i withstood the economic crisis triggered by the COVID-19 pandemic and totalled USD 303.5 billionii in 2020.1 This 2% increase over 2019 marks a significant rebound, particularly during the second half of the year.2 With lockdowns and mobility restrictions affecting the entire renewables production and construction chain in the first half of 2020, new renewable capacity was expected to fall 10% for the year.3 In the first quarter of 2020, final investment decisionsiii on solar and wind projects dropped to their 2017 levels (USD 10 billion for solar and USD 23 billion for wind).4
However, government recovery packages increased the flow of renewable energy finance.5 (→ See Sidebar 3 in Policy Landscape chapter, and Figure 5 in Global Overview chapter.) Private initiatives also contributed to the resilience of renewables, with continued development aimed at boosting investor interest in renewable energy – including through climate-related financial disclosure, green standards and taxonomies, and (to a certain extent) divestment campaigns. (→ See Feature chapter.)
Investment by Economy
Renewable energy
capacity investments
in developing and emerging countries exceeded those in developed countries.
For the sixth consecutive year, renewable energy capacity investments by developing and emerging countries (excluding hydropower projects larger than 50 megawatts, MW) exceeded those of developed countries, although by a smaller margin than in previous years, accounting for 50.5% of the 2020 total.6 (→ See Figure 46.) Investments for the year rose 13% in developed countries and fell 7% in developing and emerging countries.7
The drop in developing countries was due mainly to declining capacity investment in China (down 12%), India (down 36%) and developing countries in the Americas (down 33%).8 Investment also fell in Sub-Saharan Africa (down 14%), further diminishing the low investment in new renewable capacity in the region (USD 2.8 billion).9 In contrast, investment growth continued for the seventh consecutive year in developing countries outside of those areas, including in Brazil (up 23%), the Middle East and North Africa (up 22%), and Asia and Oceania (up 13%).10 (→ See Figure 47).
Figure 47
Source: BloombergNEF. See endnote 10 for this chapter.
Note: Figures include utility-scale renewable energy and small-scale solar projects and exclude large hydropower projects of more than 50 MW. The regions in this chapter follow those presented in the BNEF Energy Transition Investment 2021 report and differ from the regional definitions included elsewhere in the GSR.
Although capacity investment in China fell 12% compared to 2019, the country continued to lead in overall renewable energy capacity investment, accounting for 27.5% of the global total.11 The European Union (EU) was next, with 22.9%, followed by Asia-Oceania (16.9%, excluding China and India) and the United States (16.2%).12 Africa and the Middle East accounted for 4.5%, non-EU Europe for 4.1%, the Americas (excluding Brazil and the United States) for 3%, Brazil for 2.9% and India for 2%.13
Overall capacity investment in China totalled USD 83.6 billion in 2020.14 Around 65.5% of these investments were in the wind sector (onshore and offshore), followed by solar PV (30%), biomass and waste (4.2%) and small hydropower (0.5%).15 In parallel, China's foreign investments in solar PV, wind power and hydropower represented for the first time more than half of the country's total overseas energy investments under the Belt and Road Initiative – China's main international co-operation and economic strategy – increasing from 38% in 2019 to 57% in 2020.16 This was due mainly to the steady decline in coal investments since 2015 (although they resurged in 2020) and to the sharp decrease in natural gas investment, which represented only 2.4% of the total 2020 investment, compared with 23.7% in 2019.17 The majority of renewable energy investment was in hydropower (35%), while solar and wind represented 23%.18
Qatar and Oman received 100% of the renewable energy investments from China in 2020.19 However, most of the power plants financediv during the year by foreign direct investment from Chinese companies and China’s two global policy banksv were coal-fired plants (around 39% of the capacity), followed by hydropower (27%).20 Wind and solar projects constituted a higher share of total projects than coal, gas and hydropower plants, but due to their smaller capacity they accounted for only 11% of Chinese investment overseas.21
After hitting a record high in 2019, US investment in renewable energy capacity fell 20% in 2020, to USD 49.3 billion.22 Investments were mainly in solar PV (USD 31.3 billion, or 63.5% of the total) and onshore wind (USD 17.7 billion, 36%).23 The EU was the main driver of increased renewable energy capacity investment in 2020, totalling USD 69.4 billion in 2020, led by the United Kingdom and the Netherlands (due to investments in large offshore wind projects), followed by Spain.24
Figure 46
Source: BloombergNEF. See endnote 6 for this chapter.
Note: Figure includes utility-scale renewable energy and small-scale solar projects and excludes large hydropower projects of more than 50 MW.
Investment by Technology
In 2020, solar power was the only renewable energy technology to experience an
increase in investments.
Solar power represented nearly half of global renewable energy capacity investment in 2020, at USD 148.6 billion.25 It was the only renewable energy technology to increase for the year, up 12% from 2019.26 Although wind power capacity installations grew during the year, investment in wind power fell 6% to USD 142.7 billion, representing 47% of the total.27 (→ See Market and Industry chapter.)
Biomass and waste-to-energyvi investment was down 3% to USD 10 billion.28 The remaining technologies continued their downward trend in 2020, with investment in small hydropower reaching USD 0.9, geothermal USD 0.7 billion and biofuels USD 0.6 billion – each dropping more than 70% since 2010.29 (→ See Figure 48.)
Figure 48
Source: BloombergNEF. See endnote 29 for this chapter.
Note: Figure includes utility-scale renewable energy and small-scale solar projects and excludes large hydropower projects of more than 50 MW.
The factors behind these trends vary by technology. Common barriers to investment in small hydropower projects include the high upfront cost, the lack of a regulatory framework encouraging deployment of the technology, and a high degree of risk and uncertainty in the different development stages.30 For geothermal projects, high risks and expensive early-stage development (test drilling) have impeded further participation from private investors in the last two decades.31
The declining investment in first-generation biofuels started in 2007, amid growing concern about the impacts of the fuels on food security and prices and on land use (also affecting greenhouse gas emissions).32 In contrast, investment in second-generation biofuelsvii grew starting in 2007, but the growth lasted only until 2011.33 The main barriers to further investment in the sector include the regulatory uncertainty regarding sustainability criteria (especially in Europe), low subsidy levels, high financing costs and doubts regarding technological readiness.34
Marine power received no capacity investment in 2020, mainly because of technology challenges and a lack of specific policy support in the key markets.35
Other investments that are relevant (indirectly) to the uptake of renewables include spending on electric vehicles (EVs), heat pumps and energy storage.36 (→ See Systems Integration chapter.) In 2020, investment in EVs and associated charging infrastructure was up 28% to USD 139 billion, and investment in domestic installation of energy-efficient heat pumps was up 12% to USD 50.8 billion; meanwhile, investment in batteries and other energy storage technologies (excluding pumped hydropower, compressed air and hydrogen) was unchanged from 2019, despite lower unit prices, for a total of USD 3.6 billion.37 Hydrogen investment fell 20% in 2020, due to lower investment in fuel cell buses and commercial fuel cell vehicles, while investment in the electrolysis process rose 12.5% to USD 189 million due to the increased attractiveness of renewable hydrogen production.38
COVID-19’s Impact on Investment
Renewable energy investments in COVID-19 recovery packages were nearly
six times less
than those for fossil fuels.
In addition to the resilience of renewable energy investments to the COVID-19 crisis, economic recovery packages in 2020 included significant spending to stimulate further investment in renewables, both to address climate change and to deploy specific renewable energy projects.
By September 2020, governments had announced USD 11.8 trillion in fiscal assistance in response to the pandemic-induced economic crisis, more than three times the amount spent to respond to the financial crisis of 2008.39 While most of the funding prioritised supporting health and reducing unemployment, around 30% was allocated to sectors with an impact on the energy transition, with the aim of creating jobs and boosting economies.40 Globally, investment in the solar PV sector in 2020 created an estimated 13 jobs per USD 1 million invested, or twice as many jobs as in the coal or gas industry.41 Wind and hydropower projects generated as many jobs as nuclear power projects.42
As of April 2021, 31 governments had announced a combined USD 732.5 billion in spending to support all types of energy through new or amended policies.43 Of this total, 42% (USD 309.9 billion) was allocated to fossil fuel-intensive sectors, 37% (USD 264.2 billion) to “clean energy”viii and 21% (USD 152.9 billion) to other energy sources (including nuclear, first-generation biofuels, biomass and biogas, and hydrogen from unspecified sources).44 (→ See Figure 49.)
Figure 49
Source: EnergyPolicyTracker.org. See endnote 44 for this chapter.
Note: Although the energy produced from solid waste combustion is efficient, it cannot be considered entirely renewable as solid waste also contains inorganic material. Generally, about 50% of energy from municipal solid waste is classified as renewable. (→ See Municipal solid waste in Glossary.). Multiple renewables include geothermal and ocean power. Enabling technologies include e-mobility and renewable hydrogen. The “Other” category refers to other types of energy-related policies including, among others, nuclear energy, incineration, hydrogen from unspecified sources, and multiple energy types (for example intertwined fossil fuels and clean energy). Where totals do not add up, the difference is due to rounding.
Of the clean energy spending, around 20.1% (USD 53.1 billion) was allocated directly to policies to support the production or consumption of renewables (including solar and wind power, small and large hydropower, rain and tidal energy, geothermal heat, and biofuels and waste energy).45 The amount for biofuels and waste energy covers mainly investments in India, where nearly USD 27 billion was allocated to set up 5,000 compressed biogas plants.46 However, 67 of the 199 policies related to clean energy sources did not specify an amount, making the actual total allocation much higher.47
Investment in enabling technologies associated with renewable energy use (such as e-mobility and renewable hydrogen) and energy efficiency comprised an additional USD 204 billion in renewable energy-related stimulus.48
Regionally, the EU led in environmental investments as of April 2021, allocating 30% (around EUR 550 billion, or USD 660 billion) of its overall recovery package and its long-term 2021-2027 budget solely to climate-related projects.49 These projects included scaling up renewable energy (mainly wind and solar), launching a European “clean hydrogen economy”ix and developing clean mobility (including EVs).50 However, many of the clean energy policies that could strengthen the deployment of renewables had not yet been translated into legislation, and allocation amounts had not been determined as of April 2021.51 Within the EU, the leaders in renewable energy measures and allocations were Germany (at least USD 12.6 billion) and France (at least USD 3.9 billion).52
By early 2021, the United States had pledged only around USD 459.5 million to support renewable energy and USD 26.8 billion to support mobility, including EVs; this was less than 40% of the amount that was allocated to fossil fuel energy, without establishing climate targets or additional pollution reduction requirements (at least USD 72 billion).53 The administration’s proposed clean energy and sustainable infrastructure plan released in early 2021 favoured investment in renewable energy, although the US Congress still needed to pass legislation and allocate proper funding.54
Other economies that announced investments in renewables (as well as fossil fuels) included the Republic of Korea, which allocated USD 984 million for solar and offshore wind generation; China (at least USD 217 million in biofuels and waste and multiple renewables) and India (at least USD 30 billion, including USD 27 billion to biofuels and waste projects).55 However, these economic recovery plans also include coal (USD 2.5 billion in the Republic of Korea, USD 1.07 billion in China and USD 15.5 billion in India).56
Several countries focused on electricity decarbonisation, with the Republic of Korea, France and Italy increasing their subsidies for rooftop solar PV.57 Nigeria, Africa’s largest oil and gas producer, aimed to use 10% of its stimulus funds (USD 620 million) to install solar systems for up to 5 million households.58 Colombia allocated USD 4 billion to renewable energy and transmission projects, including wind (nine projects), solar (five), geothermal (three) and hydropower (one).59
With calls for a “green recovery” following the COVID recession, combined with the expectation that the new US administration would implement low-carbon measures, renewables became more attractive to investors, who increased investments in wind and solar power, batteries and EVs.60 The decreasing cost of these technologies compared to fossil fuels also was key to their greater appeal.61
Several indices that track the performance of renewable energy companies surged in 2020. For example, the WilderHill New Energy Global Innovation Index (NEX)x gained 142% and the S&P Global Clean Energy Indexxi gained 138%.62 By contrast, the NYSE Arca Oil Index and the S&P 500 Energy Index – both of which follow the performance of fossil fuel-linked companies – fell 38% and 37%, respectively.63 The solar equipment manufacturer Enphase Energy was among the three best performers on the NEX.64
Overall, the stock prices of solar power manufacturers and distributors rose sharply in 2020. For example, the company SunPower tripled its value, and the Invesco solar index increased 66% between January and September.65 However, growth in these indices must be viewed with caution as market prices fluctuate widely: the S&P Global Clean Energy Index fell 30% between early January and mid-March 2021.66
iRenewable energy includes onshore and offshore wind, large- and small-scale solar, biofuels, biomass and waste, marine, geothermal and small hydropower.i
iiThese estimates are for capacity investment and exclude capital invested in companies and money spent on research, development and manufacturing.i
iiiThe final investment decision marks the point in the capital project planning process when the decision to make major financial commitments is taken. At that point, major equipment orders are placed and engineering, procurement and construction contracts are signed.i
ivChinese participation in these power plants includes foreign direct investment, mergers and acquisitions, greenfield investments and debt finance. See Global Development Policy Center, Boston University, “China’s Global Power Database”, http://www.bu.edu/cgp.i
vThe China Development Bank and the Export-Import Bank of China.i
viAlthough the energy produced from solid waste combustion is efficient, it cannot be considered entirely renewable as solid waste also contains inorganic material. Generally, around 50% of energy from municipal solid waste is classified as renewable. (→ See Glossary.)i
viiAdvanced biofuels, or second-generation biofuels, are made of “lignocellulosic feedstock such as corn stover, straw, wood waste, rapidly growing grasses and short-rotation trees, municipal waste, and waste oils, fats or algae, all of which have few non-energy uses, and some of which can be grown on less productive and degraded lands or in seawater (algae), thus involving a smaller impact in terms of land-use.” See International Renewable Energy Agency, Advanced Biofuels: What Holds Them Back? (Abu Dhabi: 2019), https://irena.org/publications/2019/Nov/Advanced-biofuels-What-holds-them-back.i
viiiThis refers to policies supporting the production or consumption of low-carbon energy and the energy transition, including: energy efficiency and renewable energy (solar, wind, small hydropower, rain, tides and geothermal heat, large hydropower); renewable hydrogen; active transport (cycling and walking), rail, public transport and EVs (electric cars, bicycles, scooters and boats) using multiple types of energy; smart grids and technologies that better integrate renewables; hydrogen in the case of mixed, but predominantly clean, sources (e.g., as under Germany’s hydrogen strategy); and biofuels, biomass and biogas with a proven minimum negative impact on the environment. For details, see EnergyPolicyTracker.org, “Methodology”, https://www.energypolicytracker.org/methodology.i
ixThe term “clean hydrogen” refers to renewable and low-carbon hydrogen in the Hydrogen Strategy for a Climate-neutral Europe elaborated by the European Commission. See https://ec.europa.eu/energy/sites/ener/files/hydrogen_strategy.pdf.i
xThe WilderHill New Energy Global Innovation Index tracks the performance of around 100 companies focusing on clean energy, renewables, decarbonisation and efficiency worldwide.i
xiThe S&P Global Clean Energy Index is designed to measure the performance of 30 companies from around the world that are involved in clean energy-related businesses, comprising a diversified mix of clean energy production and clean energy equipment and technology companies.i