Renewables Shrug Off Slumping Oil as Investment Remains Steady

Source: By Reed Landberg, Bloomberg News • Posted: Friday, October 9, 2015

Renewable energy investment held firm in the third quarter, indicating the industry is weathering a slump in the cost of oil and coal.

Financing for projects including wind, solar, biofuels and biomass fell 1 percent to $70 billion worldwide, compared with the same period a year ago, according to Bloomberg New Energy Finance. For the first nine months of the year, investment eased 2 percent to $197.9 billion, the London-based researcher estimated.

Surging interest in the U.S., Brazil and China offset a 48 percent plunge in funding for projects in Europe, long the leader in clean-energy technologies. The industry’s capital needs declined because of a drop in the cost of wind power plants, which in the U.K. and Germany are now competitive with fossil fuels even without subsidies. Industry executives will discuss the trends at a conference hosted by New Energy Finance in London next week.

“On a global level, investment has been incredibly resilient,” Michael Liebreich, founder of New Energy Finance, said by phone. “You’ve got very cheap wind and solar power, and in the U.S., there’s an element of people rushing to get things done before the expiry of tax credits.”

Smaller Projects

The figures also confirmed the shift away from larger utility-scale solar plants and toward smaller projects that distribute generation plants closer to consumers, especially rooftop panels for homes and businesses. Solar investment fell 1 percent to $43.9 billion in the third quarter. Wind energy investment dropped 5 percent to $20.5 billion.

Liebreich said government support mechanisms along with the falling cost of renewables and more innovative forms of financing are helping support the industry even as the cost of coal and oil plunges.

The most dramatic changes were in the geographies drawing cash. In the U.S., investment surged 25 percent to $13.4 billion as companies such as SunEdison Inc. sold new types of securities including yieldcos that pay dividends. Developers also want to take advantage of federal subsidies while they last, with concern mounting that the U.S. Congress won’t extend tax credits that are due to expire.

Brazil more than doubled its intake to $2.3 billion, and in Chile it rose to $1.6 billion from $180 million a year ago. In China, investment gained 5 percent to $26.7 billion, supported by costly offshore wind and solar-thermal projects.

In Europe, investment tumbled to $5.8 billion, only the sixth quarter since BNEF began collecting data in 2004 that the region fell short of the Americas. Liebreich said Germany and Italy, which heavily supported renewables in past years, are scaling back to deal with a surge of electricity flows onto the grid. The U.K., meanwhile, is working to control a solar installation boom, and places such as Spain and Portugal are coping with the aftermath of the financial crisis.

“The drop in European investment reflects in part a lull in offshore wind financings in the third quarter after no fewer than three deals worth more than $2 billion off the coasts of the U.K. and Germany in the second quarter,” said Angus McCrone, senior analyst at New Energy Finance. “It is also the case that support policies have become less friendly to wind and solar investors in several countries, including Italy, Germany, Denmark and, most recently, the U.K.”