Global clean energy investment in the first quarter of this year (Q1’16) was $53.1 billion, down 22% from $68.1 billion in Q4’15 and 12% below the $60.5 billion recorded in the equivalent quarter a year ago, according to a new report from Bloomberg New Energy Finance (BNEF).
BNEF says the main factor behind the relatively weak quarter was a change in the pace of activity in China. Clean energy investment in that country in Q1’16 was $11.8 billion, down 50% from Q4’15 and 37% lower than in Q1’15, as wind and solar developers paused after a rush last year to qualify for soon-to-expire electricity tariffs.
Meanwhile, the report shows investment in the U.S. was somewhat steady at $9.7 billion in Q1’16, down 7% on the quarter but up 9% compared to Q1’15. The strongest-performing region of the quarter, bucking the trend of recent years, was Europe, where three different billion-dollar wind project financings boosted investment to $17 billion, up 22% quarter-on-year and no less than 70% year-on-year.
BNEF notes the first quarter is often the weakest of the year for global investment, and totals can be revised up if more deals come to light. However, Michael Liebreich, chairman of BNEF’s advisory board, says, “Based on Q1 figures, 2016 is going to be hard-pressed to beat last year’s record investment total.” According to BNEF, overall clean energy investment in 2015 was a record $328.9 billion, up 4% from 2014.
“The fundamentals behind global clean energy investment remain strong, with our latest research showing solar PV and wind again reducing their costs and competing strongly despite lower coal, oil and gas prices,” explains Liebreich. “But China accounted for more than one-third of all new financings last year, so what happens there in 2016 will be crucial to the world outturn.”
Justin Wu, head of Asia-Pacific at BNEF, comments: “A strong pipeline of projects remains in China, and the government is providing a torrent of cheap debt to support the economy. But slowing power markets and uncertainty over changes to its feed-in tariff regime mean the country looks unlikely to match the $110.5 billion investment it saw in clean energy in 2015.”
BNEF says China was not the only reason for the downbeat first-quarter investment total. Brazil saw commitments there fall 27% year-on-year to $1 billion, while South Africa recorded almost no deals in Q1’16 compared to $3.7 billion in the same quarter of 2015, due to the timing of its auction rounds. Japan notched up investment of $6.8 billion, down 19% on the year, while Chile, Mexico and Uruguay, all significant centers for investment in 2015, had quiet starts to 2016.
According to the report, investment held up better in India, reaching $1.9 billion, up 6% from Q1’15, and big projects were financed in two African countries: the 300 MW Grand Para solar PV installation in Djibouti and the 140 MW Olkaria V geothermal plant in Kenya.
Looking at the different categories of investment globally, BNEF says asset finance of utility-scale renewable energy projects amounted to $34.3 billion worldwide in Q1’16, down 16% compared to the same quarter a year earlier. Small-scale solar projects of less than 1 MW represent the second-biggest category of spending, and these were worth an estimated $17.4 billion in Q1’16, up 3% year-on-year.
Venture capital and private equity investment in specialist clean energy companies was $1.4 billion in Q1’16, up 16% from the Q1’15. BNEF says the biggest such investments of the quarter were a $300 million private equity round for U.S. solar installer Sunnova and a $142 million private equity deal for U.S. project developer United Wind.
BNEF also measures quarterly equity raising by clean energy firms on public markets. BNEF says this was notably weak in Q1’16, reaching just $552 million, down 76% compared to the first three months of last year. This setback was out of proportion to the slippage in clean energy shares in Q1’16. The WilderHill New Energy Global Innovation Index, or NEX, which tracks the performance of more than 100 clean energy stocks, edged down 5% in the first quarter.
“A few individual stocks – including U.S. solar players SunEdison, Vivint Solar and SolarCity – suffered much sharper falls, and this may well have dampened investor confidence,” says Luke Mills, energy economics associate at BNEF.