Worldwide renewable energy investment in the first quarter this year totaled $40.6 billion, down 22% from the prior year, due to a downturn in large wind and solar project financings.
In fact, global investment in clean energy in the first three months of 2013 was lower than in any quarter for the past four years, according to the latest figures from research company Bloomberg New Energy Finance (BNEF).
The first-quarter investment figures for renewable energy, energy efficiency and energy-smart technologies declined 38% from numbers seen in the final quarter of last year. According to BNEF, the decline reflected the effects of policy uncertainty in key clean energy markets, such as the U.S. and Germany, and a lull in financing in some relatively buoyant markets, such as China and Brazil.
The drop also reflected the effect on dollar investment levels of the recent sharp declines in technology costs, particularly those of solar modules.
‘The last 18 months have seen a number of significant support programs launched in the aftermath of the financial crisis come to an end,’ says Michael Liebreich, chief executive of BNEF. ‘The plummeting cost of clean energy technology has kept activity high in terms of megawatts of capacity but not so much in dollar terms.
‘For investment in clean energy to play its role in stemming the growth in world emissions, we would need to see investment levels at least double by 2020, rather than fall,’ he continues. ‘Having said that, as always, there are some regions and technologies doing well. And previous history has shown that the first quarter of the year is generally the weakest, as banks and investors recover their breath from a rush of year-end deal-closing.’
According to the report, the industry saw a 54% year-over-year decline in U.S. clean energy investment to $4.5 billion, a 15% decline in the Chinese total to $8.8 billion, and a 25% drop for Europe to $13.4 billion. The rest of Asia, outside of India and China, bucked the trend with a 47% jump to a record $10.1 billion, led by a surge of investment in Japan to $8.2 billion.
Among different types of investment, the largest decline was seen in the asset finance of utility-scale projects, such as wind farms and solar parks. Total investment in this space fell 34% to $19.3 billion.
Investment in small-scale installations of less than 1 MW, mainly PV units on residential and commercial rooftops, dipped 8% in the first quarter to an estimated $18.5 billion, driven largely by the reduction in solar panel costs over the course of 2012.
The average PV module in March 2013 was selling on world markets for $0.81/W – down 16.5% from a year earlier and an extraordinary 81% below its price in early 2008, according to BNEF.
‘The slump in the price of solar hardware has been remarkable,’ notes Liebreich. ‘It is fundamentally driven by improvements in technology and economies of scale throughout the supply chain. But it also reflects the impact of substantial overcapacity – the industry has moved from supply-constrained to glut – which has had a savage effect on producer margins.
‘We forecast that the number of gigawatts of solar installed in 2013 will grow by about 20 percent compared to last year – but even that is not going to be enough to absorb all of the overcapacity,’ he continues. ‘It is going to be another tough year for manufacturers, and a good year for installers, as long as they have access to finance.’
The brightest signs in the new data point to investment raised in the public markets, or stock exchanges. This sector had been depressed in recent years, in the face of an 80% decline in sector share prices in late July last year. Since then, however, there has been a rally of around 30% in the WilderHill New Energy Global Innovation Index, which tracks the performance of 96 clean energy stocks worldwide.
The slightly improved picture on share valuations helped to stimulate a rebound of 89% in public markets investment in clean energy companies to $1.7 billion in the first quarter. Venture capital and private equity investment in clean energy totaled $1.3 billion in the first quarter, down 29% from the same quarter in 2012. Among the biggest deals between January and March was $125 million of expansion capital for solar installer Sungevity.
The biggest increase in investment in any region was in Asia-Oceania, excluding China and India, which saw a record quarterly figure of $10.1 billion thanks mainly to a jump in small-scale project outlays. Japan saw small-scale solar investment reach $6.7 billion, up more than double from a year earlier.
The report found that Europe saw a decline in small-scale project investment, fueled partly by the sharp decreases in solar technology costs. Nevertheless, Germany and the U.K. experienced modest growth in overall investment of 8% and 1%, respectively, compared to a year earlier.
Clean energy investment in Spain was less than $100 million, down 96% from the first quarter of 2012. Italy and France also dropped off, reaching $1.5 billion (down 61%) and $0.9 billion (down 33%), respectively.