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At the breakpoint

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That stands behind dry figures?

2015-2016 statistics data reflected common falling of global investments in renewable energy sources (RES) monetary. "Global Trends in Renewable Energy Investment 2017" research of world tendencies on investing in RES, conducted under the aegis of Frankfurt center of  United Nations Environment Programme (UNEP) and Bloomberg New Energy Finance (BNEF), reports financial data with at least deceleration, if not falling, of RES investments, including solar electro-generation.


Pic. 1. New global investments in RES for 2004-2016 period (exclusing large hydroelectric power stations with more than 50 MW of total power).Financing of assets and leasing reflect also capital reinvestment level. Final values include estimation of unpublic transactions. Source: UN Environment, Bloomberg New Energy Finance.


Diagram of new global investments in RES is presented on pic. 1 with data for 2004-2016 period (exclusing large hydroelectric power stations with more than 50 MW of total power) with laying out on financing sources. Really, with just a glance on the chart it is possible to see the decline of investments in RES, general volume of new investments in 2016 went down on 23% to $241,6 billions, compared to 2015 record-breaking value.

On a background of world prices decline on mineral energy resources voices are being raised about decreasing of interest in RES in the whole world. But is it actually so? Is there some return to traditional energy?

Bad habit to compare everything only in money equivalents sometimes can play a wicked joke. In 2016 development of RES was slowed in one dimension and accelerated in other. According to BNEF evaluations, the amount of new launched RES capacities increased from 127,5 GW in 2015 to record-breaking level of 138,5 GW in 2016. According to International Renewable Energy Agency (IRENA) sources, by the end of 2016 about 161 GW of new RES-station capacities were built all over the world. New stations, put into operation on RES  (solar stations of all types (+75 GW), wind electric power stations (+51 GW), biomass and waste (+9 GW), geothermal energy (<+1 GW), small hydro-electric power stations and marine surf generation (+30 GW)), made more than half (55,3%) of all new power-stations, built in 2016 in the whole world.

According to IRENA data, at the beginning of 2017 the world installed power of power-stations on RES attained 2006 GW totally. For the first time ever photovoltaic generation increased more than any other technology (+71 GW).

Why did investments in RES fall down in 2016 in monetary terms? There are some reasons for that. The major one  was greater cost of investments decrease per unit of installed power facilities, than years before. Average capital costs on PV-generation objects building, intended to be built in 2016, were on 13% below, than in 2015 (for comparison, prices reduction per 1 kW of coastal wind electric stations is 11,5%, for sea-based capacities is 10%).

Solar technologies become cheaper in more rapid way than any other. And more wider they spread, less money are needed for their implementation. British Financial Times published very indicative confession of a senior partner of Greentech Capital Advisors, world-famous consulting firm on RES implementation: "In 2010 we financed a solar park in South California with a capacity of 15 MW. We spent near $55 million in 2010, herein 2016 we built another park, with the same size and in the same district. It costed $15 million now but it will produce at least 40% more energy".

An important factor is recurrence of investments. It can be seen on graphics on a fig. 1. Average "wave-length" of global investment cycle in RES now makes 3,5 - 4,2 years. In addition, cycle of investing does not coincide with a calendar period. Many projects in wind and solar electro-generation were financed at the end of 2015, and put into an operation in 2016. So facilities were actually launched, but not registered in a corresponding period (2015), and added to it later. Really, global investment index in 2015, noted in Global Trends in Renewable Energy Investment 2017 report (see fig. 1), shows a value shift on 9% upwards as compared to the corresponding figure of last year's report. As fast as new information arrives, data are corrected, and there is very high probability, that data for 2016 annual period are substantially understated in the report, published at the beginning of 2017.

Current data for 2016 are shown on picture 2 with laying out on sums of investments (in $ billions) on RES sectors. Most world investments in RES are solar and wind energy. These two industries actually do not compete, rather mutually complement each other, because very often their generation is reverse-phased. Unprecedented splash of projects financing happened in wind electric stations sector last year. Wind arrays at seaside usually have much higher capital costs per 1 MW, what coastal wind electric stations, that was reflected in increase of investments share for the annual period. In 2016 investments in offshore wind electric stations were made  in the amount of $30 billions, that is 41% more than in previous year. No less than 14 wind electric station projects in Great Britain, Germany, Belgium, Denmark and China, with project costs $500 million to $5,7 billion each, were approved for construction.


Pic. 2. New global investments in RES on sectors, 2016, $ bln. New investments amount is corrected by reinvested capital value. Source: UN Environment, Bloomberg New Energy Finance.


Some changes happened in RES industry investment sources in 2016 (see pic. 3). In the left part of the diagram investments are shown on initial stage and at corporate level, including venture capital, stock investments in open and closed RES-oriented stock companies, financing of corporate and governmental research-and-developments. Small power plants (SPP), private facilities on house roofs and other small solar projects in households and in small businesses with power less than 1 MW each brought in $39,8 billions, that resulted in $241,6 billions of annual investments final amount.



Pic. 3. Sources of RES financing in 2016, $ billions. SPP are RES small private power plants with distributed power, working in households and small businesses. Values include the estimation of unpublic transactions. Figures may not coincide with final results because of roundoff. Source: UN Environment, Bloomberg New Energy Finance.


SPP share continues to grow with much stronger influence on the investments structure. The role of autonomous (standalone) SPPs, which are not connected to national energy grid, grows most of all. According to IRENA agency data,  total global power of standalone SPPs attained 2,8 GW in 2016. Standalone "off-grid" and local "mini-grid" PV – stations take approximately 40% in this distributed power capacity.

Other financial transactions, which also can be attributed to RES investments, were detected in 2016. Their volume is estimated at $110,3 billions, increasing total sum of operations with RES in 2016 up to $351,9 billions. This figure includes record-breaking transactions on long-term RES energy acquisition from large operators, transactions on refunding, businesses’ confluences and absorptions. For example, today there are new proprietors of simultaneously wind and solar assets, some producers of wind turbines were consolidated, et cetera. The important conclusion, which can be made out of pic. 3, is thay general investments in research and perspective developments of RES are about 5%, so now market requires solutions, prepared to commercial use.

Together with the process of RES financing investments also grow in energy-savings sector.

There is a huge splash of individual and private investments in energy-saving technologies. Exceptional growth is noted for combined energy-saving technologies, with $16 billions being invested in energy-effective usage of solar/wind energy and traditional fuel.


Pic. 4. Investing in new developments of "clever" energy technologies, 2004-2016. Source: UN Environment, Bloomberg New Energy Finance (BNEF).


Pic. 4 shows that investments in "clever" energy-effective technologies,  related to efficiency and savings from RES energy storage systems, in 2016 demonstrated 29% plus to the new record-breaking of $41,6 billions. Private and venture investments into "smart" energy-effective technologies increased on 150%. At the same time governmental research-and-developments in this sector even decreased on 2%, and corporate R&Ds got a financial cut on 15%.


Fight between "new" and "old"

There are less positive statistics too, because obvious signs appeared that in 2016 activity continued to be slower on two key RES markets, namely China and Japan. In particular, Chinese solar market reduced indexes sharply. After solid numbers of growth in first semester of 2016 (+ 22 GW), the second half-year period resulted in 8 GW only. Japanese solar energy slowed its growth from +11,5 GW in 2015 to +9,2 GW in 2016. Asian market is very important. Based on IRENA data, 58% of growth among all RES capacities, installed all over the world in 2016, are exactly from Asia. Whole Asian region increased RES capacities installed in 2016 by 13,1%. World 70 % PV-generation growth in 2016 should be also acknowledged on the Asian account.

Growth of RES generation in Asian region substantially diminishes demand on traditional types of fossil organic fuel: oil, coal, gas. Meeting trends and contradirectional tendencies can be traced here, starting the spiral with positive feed-back: further growth of RES market share diminishes demand for "organics", and traditional fuel prices continue their way down. Thus world price-cutting on fossil fuel, caused by different factors, including geopolitical, obviously reduces current activity of RES investments.

In such situation producers of organic types of fuel aim to quicker sell as many energy resources as possible, realizing that oil and gas era is finished. According to BNEF calculations, in 2026 RES will be ahead of hydrocarbon energy. It is expected, that in 2040 RES will become the basis of world energy grid. Nowadays the "new" is still figthing with the "old", but the “old” has an almost triple margin of price safety. Price-cutting trend on mineral fuel can proceed up to the standard prices of oil, gas and coal at the beginning of 2000s. For example, oil marks it down to $15 - $20 for a barrel.


The extremely new future

Exactly under such title Bloomberg analytic published data about research of International Energy Agency (IEA) in the closing date of spring 2017.


Pic. 5. Global oil demand 2000-2040, million barrels per day. Source: International Energy Agency, IEA.


IEA experts compared prognoses of oil demand from analysts of two largest petroleum giants, Exxon and BP, together with expectations of oil producers from OPEC. In IEA expert opinion, their expectations are initially overpriced. IEA offered the estimation (base scenario, see pic. 5) and  presented the prognosis of global oil demand up to 2040 (see pic. 5), taking into account influence of new technologies. Oil traders do not take into account explosive development of energy-effective technologies, electric cars usage (that is very related to development and reduction of electric accumulators production prices), and global transition to RES, especially in favor of solar electro-generation. Fossil hydrocarbons also will be far less used as raw material for chemical industry, gradually giving up their positions to bioplastics.

The Financial Times financial experts already talk about "Big Green Bang" as the accomplished fact. Illustrating and confirming this point, the IEA analysis shows that the critical point is literally nearby. The global energy system, based on a fossil hydrocarbon fuel, which demanded about $25 trillion on its creation during XX century, will start to decline already in 2020. The age of renewable energy sources domination begins.

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