Worldwide Renewable Energy Investments Rose to Record $260 Billion in 2011

In contrast to what the press led most Americans to believe, 2011 was a strong year for the renewable energy industry. 

Despite a sluggish economy and a painful squeeze on manufacturers, investments in renewable energy rose 5% from 2010 to $260 billion.

That’s a new record and almost five times the $53.6 billion spent in 2004.

Even with all the headwinds the solar industry faced last year, solar led investments (far outstripping wind), and for the first time since 2008, the US took back its leading position over China, according to Bloomberg New Energy Finance.

2011 was also another milestone – it marks the year when the trillionth dollar entered the industry. 

These results are even more impressive when one considers the economic backdrop last year: severe pressure on manufacturer profit margins, a smear campaign in the US against investing in solar, extremely sharp fall-offs in share prices, notable bankruptcies, cuts in European government subsidy support, and a reduced availability of bank finance.

Solar Leads

Still, investments in solar surged 36% to $136.6 billion, nearly double that of wind at $74.9 billion, which dropped 17%. Although solar outpaced wind in 2004 and 2010, this is the first time the gap was so large in investment.

Solar PV prices are now 75% lower than three years ago, in mid-2008, dropping 50% in 2011 alone. The volume of solar PV sold has increased much faster as it approaches competitiveness with other sources of power.

Utility-Scale Projects Lead

The largest single type of investment was asset financing of utility-scale
renewable energy projects, rising from $138.3 billion in 2010 to
$145.6 billion in 2011.

Some of the largest projects in the fourth quarter of 2011 were the $1.3 billion, 288 MW Amrumbank West offshore wind farm in Germany, the $756 million, 272 MW Seigneurie de Beaupre wind farm in Canada, and the $354 million, 92.5 MW Hanas Ningxia Yanchi Gaoshawo solar thermal plant in
China.

Rooftop solar PV was in second place, reaching $73.8 billion, up from $60.4 billion in 2010, dominated by Italy and Germany, as  sharply falling solar panel prices
increased paybacks by feed-in tariffs.

After solar and wind, the next largest sector for investment was
energy-smart technologies, including smart grid, power storage, efficiency and advanced transport. The $19.2 billion invested was mostly in corporate R&D and venture capital and private equity raisings. This was however down 17% on 2010 levels. 

Investment in biofuels edged up from $8.6 billion to $9 billion, but biomass and waste-to-energy suffered an 18% setback to $10.8 billion, geothermal slipped from $3.2 billion to $2.8 billion,  marine marked time at $0.3 billion and small hydro fell 25% to $3 billion.

Corporate R&D dropped to $13.2 billion from $15.3 billion in 2010, and government R&D fell to $12.7 billion from $16.2 billion as various stimulus programs installed during the financial crisis expired.

US Leads

After a couple years of leadership, renewable energy investments in China rose just 1% to $47.4 billion, while the US roared to first place once again, with investments up 33% to $55.9 billion. 

"The news that the US jumped back into the lead in clean
energy investment last year will reassure those who worried that it was falling behind other countries.

However before anyone in Washington celebrates too much, the US figure was achieved thanks in large part to support initiatives such as the federal loan guarantee programme and a Treasury grant programme which have now expired.

The country’s principal remaining support measure for renewable energy, the Production Tax Credit, is currently also scheduled to fall away at the end of 2012 unless it is extended. There may be a rush to get projects completed in 2012, followed by a slump in investment in 2013 if it expires," says Michael Liebreich, CEO of Bloomberg New Energy.

Unfortunately, we saw a preview of that in today’s announcement from Vestas, which could lay off 1600 people in the US.

In Europe, clean energy investment rose 3% to $100.2 billion, led by utility-scale and distributed solar in Germany and Italy, and offshore wind financings in the North Sea.

Investments grew the most in India, jumping 52% to $10.3 billion and Brazil saw a respectable 15% increase to $8.2 bilion.

Dismal Public Investments

Public markets had a horrific year. The WilderHill New Energy
Global Innovation Index (NEX), which tracks the performance of 97 clean
energy shares worldwide, fell 40% in 2011, touching in early October its lowest
level since 2003.

The only sector that successfully raised funds on the public markets consisted of next-generation biofuels companies.

The main reason for this share price retreat was severe
pressure on wind and solar manufacturers, caused by falling prices,
over-capacity, and competition from Asia.

One of the biggest IPOs in the fourth quarter was Chinese solar company Sungrow Power, which raised $215 million. 

Venture Capital

Venture capital and private equity investment increased modestly by 4% to $8.9 billion. 

Two of the largest deals in the fourth quarter were electric car maker Fisker Automotive’s raise of $133 million and thin-film solar maker Stion at $130 million.

2011 was characterized by significant volatility in levels of activity, with
big variations in the amount of investment in each quarter. The most buoyant
period by far was the third quarter, when asset finance alone reached $47.8 billion,
helped by a rush of projects taking advantage of the US federal loan guarantee
program that expired at the end of September. In the following quarter, asset
finance worldwide fell 28% to $34.3 billon. 

This reflected a combination of the end of the US loan guarantee program and the impact of the euro zone sovereign debt crisis on bank lending to renewable energy projects.

"Overall, 2011 was a far better year for the clean energy
industry than the press coverage would lead one to believe. Remember that for
every equipment company operating at thin or negative margins, there is an
installer who is getting a good deal. 2012 looks like being another challenging
year, with the European financial crisis continuing to fester, and the supply
chain working its way out of some fearsome over-capacity," says Liebreich.

"But rumours of the
death of clean energy have been greatly exaggerated. We will be seeing a new
generation of technology starting to hit the market, and we are expecting
important announcements by some of the biggest energy and engineering companies
in the world as they take advantage of current market conditions to establish
themselves in the sector."