Offshore wind was one of the big growth areas for clean energy investment in 2020
There has been a real feeling that investment in the clean energy transition has accelerated over the past year, helped towards the end of the year by the US election and key Net Zero commitments from China, Japan and South Korea.
And so it proved, with energy transition investment hitting half a trillion dollars for the first time. “The world invested unprecedented amounts in low-carbon assets last year, from renewables to cleaner transport, energy storage to electric heat,” according to clean energy analysts BloombergNEF. It reports that “the world committed a record $501.3 billion to decarbonization in 2020, beating the previous year by 9% despite the economic disruption caused by the Covid-19 pandemic.”
This shift was marked by what felt like a changing of the guard as renewable energy, electric vehicle, fuel cell, battery and other related areas saw a dramatic re-rating of their shares. The WilderHill New Energy Global Innovation Index, or NEX, which tracks the performance of about 100 stocks in these sectors, rose 142% over the year – and out-performed the NYSE Arca Oil Index by a thumping 180 percentage points.
BNEF says that companies, governments and households invested $303.5 billion in new renewable energy capacity in 2020, up 2% on the year, helped by the biggest-ever build-out of solar projects and a $50 billion surge for offshore wind. They also spent $139 billion on electric vehicles and associated charging infrastructure, up 28% and a new record. There are now over 10 million electric vehicles on the road globally, and adoption will continue to accelerate in 2021, driven by generous subsidies, tighter fuel economy/CO2 regulations, fleet purchases, and a growing number of competitive models. “We expect around 4.4 million passenger EVs (including battery electrics and plug-in hybrids) to be sold globally this year, up about 60% from 2020,” said Colin McKerracher, head of advanced transport at BNEF.
As the decarbonisation focus switches from power to heat, domestic installation of energy-efficient heat pumps rose 12% to $50.8 billion, up 12%, while investment in stationary energy storage technologies such as batteries was $3.6 billion, the same as the year before but representing much more capacity because of falling unit prices.
As policymakers seek to tackle hard-to-abate sectors, global investment in carbon capture and storage (CCS) tripled to $3 billion, and while funding for hydrogen projects fell by a fifth to $1.5 billion, it was still the second-highest annual number to date (see Figure 1) and growth in the sector is set to surge in 2021. The volume of hydrogen electrolyzers reaching commissioning will set a record in 2021, BNEF says. It has identified 240MW of projects announced for completion in 2021, compared to just 90MW finished in 2020.
“The world has reached half a trillion dollars a year in its investment to decarbonize the energy system. Clean power generation and electric transport are seeing heavy inflows, but need to see further increases in spending as costs fall,” said Albert Cheung, head of analysis at BNEF. “Technologies such as electric heat, CCS and hydrogen are only attracting a fraction of the investment they will need in the 2020s to help bring emissions under control. We need to be talking about trillions per year if we are to meet climate goals.”
Unlike recent years, Europe led the way with $166.2 billion (up 67%), driven by a record year of electric vehicle sales and its strongest year of renewable energy investment since 2012. Both China at $134.8 billion (down 12%) and the US at $85.3 billion (down 11%) were hit by the impacts of the Covid-19 pandemic, although they remained the largest individual national markets.
“The coronavirus pandemic has held back progress on some projects, but overall investment in wind and solar has been robust and electric vehicle sales jumped more than expected,” Jon Moore, chief executive of BNEF, said. “Policy ambition is clearly rising as more countries and businesses commit to net-zero targets, and green stimulus programs are starting to make their presence felt. Some 54% of 2016 emissions are now under some form of net-zero commitment, up from 34% at the start of last year. This should drive increasing investment in the coming years.”
In a sign of how times are changing, the figures include $12.7 billion of low-carbon investment by oil and gas companies, while clean energy ETFs grew 10-fold during the year.
Although total investment in wind and solar increased only slightly, record volumes of both (132GW of solar and 73GW of wind) were installed as costs continued to fall. Offshore wind funding grew by more than half to $50 billion, including the largest deal ever in that sub-sector – $8.3 billion for the 2.5GW Dogger Bank project in the UK North Sea. The year also saw the largest single solar park ever funded, the $1.1 billion 2GW Al Dhafrah in the United Arab Emirates.
Strong growth in Europe, up 52%, offset falls in China down 12%, the US (20% lower) and India (where funding fell by more than a third). Investment in the UK and the Netherlands rose 177% and 221% respectively thanks to offshore wind investment cycles, while the Vietnamese market grew by 87%. Brazil grew by almost a quarter, with Spain, France and Germany also reporting more than $7 billion of funding. Taiwan, Australia, South Korea, Poland, Chile, Turkey and Sweden all saw funding inflows of more than $3 billion.
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