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London - The slump in oil prices that’s brought upheaval and cost-cutting to the traditional energy industry spared renewables such as solar and wind, which raked in a record $329.3bn of investment last year.
The 4% increase in clean energy technology spending from 2014 reflected tumbling prices for photovoltaics and wind turbines as well as a few big financings for offshore wind farms on the drawing board for years, according to research from Bloomberg New Energy Finance released on Thursday.
“These figures are a stunning riposte to all those who expected clean energy investment to stall on falling oil and gas prices,” said Michael Liebreich, founder of the London-based research arm of Bloomberg. “They highlight the improving cost-competitiveness of solar and wind power.”
While oil companies such as Exxon Mobil and Royal Dutch Shell eliminate jobs and curb capital spending to cope with prices that have fallen two-thirds in 18 months, renewables are enjoying a renaissance underpinned by rules designed to curb fossil-fuel emissions damaging the atmosphere.
Fears that low oil prices will continue into 2016 have knocked confidence among oil companies, delaying $380bn worth of investment in upstream projects, according to analysis by industry consultant Wood Mackenzie on January 12. Companies are "going into survival mode" this year with more projects delayed and budgets cut, said Angus Rodger, one of the report’s authors.
Brent crude oil has traded near $30 a barrel this month, down from more than $110 in 2014 as exporters led by Saudi Arabia battled for market share. Coal and natural gas prices have followed, already pushing a handful of producers into bankruptcy. While BNEF has said lower prices may hurt funding for efficiency projects and the spread of electric cars, the main clean energy technologies enjoyed record installations in 2015.
Another “strong year” is in store for renewables in 2016, said Angus McCrone, chief editor at BNEF, stopping short of saying another record will be reached. Balancing that is a potential slip in funding for yieldcos, which drew higher investment in 2015, and a clouded outlook for offshore wind in its biggest market.
“There is a lot of uncertainty on how strong U.K. support for offshore wind is going to be,” McCrone said. “It is conditional on costs coming down, and I think that will happen, but it’s hard to say how many will be supported."
China remained the biggest market for renewables, increasing investment 17% to $110.5bn. That’s almost double the $56bn invested in the US, which was second in the BNEF rankings. The strength of the dollar helped boost the value of investment.
In India, funding for clean energy rose 23% to $10.9bn, and new markets including Mexico, Chile and South Africa attracted tens of billions of dollars. Brazil bucked the trend with a 10 percent drop to $7.5bn.
“Wind and solar power are now being adopted in many developing countries as a natural and substantial part of the generation mix,” Liebreich said. “They can be produced more cheaply than often high wholesale power prices. They reduce a country’s exposure to expected fossil fuel prices. And above all, they can be built very quickly to meet unfulfilled demand for electricity.”
New wind and solar power accounted for about half of all new generation last year. Around 64 gigawatts of new wind power and 57 gigawatts of new photovoltaics was added, representing an increase of 30% from to 2014.
Investment was driven mainly by large-scale projects, including a number of major offshore wind farms. The UK’s 580 megawatt Race Bank offshore wind farm was the largest project financed last year, attracting $2.9bn, followed closely by the $2.3bn Galloper offshore wind farm, also in the UK.
UK record
As a result, the UK was by far Europe’s strongest market, despite Prime Minister David Cameron’s effort to roll back incentives for the industry. Renewables investment in the UK rose 24% to a record $23.4 billion from 2014, according to BNEF.
The UK’s rooftop solar power market grew to $1.8bn, putting the UK in fourth place for investment in solar installations smaller than one megawatt, behind Japan, the US and China.
Globally, rooftop solar installations like the ones championed by SolarCity Corp. were another big winner, reaping a 12% increase to $67.4bn.
Europe recorded its weakest year since 2006, in part because of slower activity in Germany after the government cut subsidies and revealed plans for a new auctioning system in 2017. Investment in the continent’s biggest economy fell by 42% to $10.6bn. The continent as a whole suffered an 18% drop to $58.50bn.
