TODAY’S STUDY: THE WORLD’S RACE FOR NEW ENERGY

Who’s Winning the Clean Energy Race?

April 2012 (Pew Charitable Trusts)

Overview

The clean energy sector continues to advance. Beyond its resilience, the clean energy sector also continues to demonstrate dynamism as the cost of wind, solar, and other sources declined in the global marketplace. Individuals, businesses, and countries seeking clean, secure, and affordable sources of power and fuel are finding clean energy an increasingly attractive alternative to conventional sources, which are unpredictable in price and generate local, regional, and global air pollutants. As a result, economic, environmental, and security imperatives are driving clean energy deployment forward.

Who’s Winning the Clean Energy Race? 2012 Edition documents how the old order is changing technologically and geographically. Clean energy is gaining ground in the global energy mix. Even as several pioneering countries have stumbled, new markets have opened, and the center for clean energy investment has shifted from West to East.

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Notable in 2012 was the growth of clean energy markets in smaller countries outside the Group of 20, or G-20. Investment there increased by 52 percent, to more than $20 billion, while G-20 nations—the world’s leading rich and developing countries—experienced a collective decline in private investment of 16 percent, attracting $218 billion, exclusive of research and development spending. Non-G-20 countries’ share of total global investment reached 8.5 percent, its highest since reliable data collection began in 2004. This trend is likely to continue: Bloomberg New Energy Finance projects continued annual growth for clean energy of 10 to 18 percent in parts of Asia, Africa, the Middle East, and Latin America through 2020

Asia-Oceania experienced uninterrupted growth in clean energy investment in each of the past nine years. In 2012, Asia became the leading regional destination for clean energy investment for the first time. Investment in the region grew 16 percent, to $101 billion, accounting for 42 percent of the global total. The region that encompasses Europe, the Middle East, and Africa recorded an investment decline of 22 percent, to $87.6 billion. Investment fell in such leading markets as Germany, Italy, the United Kingdom, and Spain as governments curtailed incentive programs.

Investment fell most precipitously in the Americas, with clean energy financing down 31 percent in 2012, to $50.3 billion. The sharp decline followed growth of more than 30 percent in 2011, reinforcing a pattern of investment volatility in the Americas and driving financing in the region to the lowest level since 2009…

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Clean energy capacity grows

Even though worldwide investment fell by 11 percent in 2012, significant and sustained price declines for leading technologies helped fuel a record 88 gigawatts, or GW, of new capacity around the world. By the end of 2012, 648 GW of clean energy generating capacity was in place globally. With a record 48.6 GW of new generating capacity installed in 2012, the wind sector led all others with 280 GW deployed worldwide.

Although solar investment fell 13 percent in 2012, lower prices made it possible for overall deployment to increase 6 percent, to 31 GW. With these additions, cumulative installed solar capacity eclipsed 100 GW, four times its level in 2009. As of the end of 2012, 104 GW of solar generating capacity was installed globally. Significant amounts of additional solar capacity were deployed in Germany, Italy, China, the United States, and Japan.

Clean energy continues to account for a significant share of new generating capacity in key regions and around the world. In the United States, wind, solar, and other renewable energy sources accounted for 49 percent of the generating capacity added in 2012. In the European Union, 70 percent of new capacity was renewable for the second consecutive year…

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The race clarifies with China in the lead

The competition among countries for clean energy leadership is resulting in a reshuffling of the old order. In 2012, China advanced its position as the epicenter of clean energy finance, attracting $65.1 billion in investment, 20 percent more than in 2011 and an unsurpassed 30 percent of the G-20 total. It garnered 25 percent of all solar energy investment, setting a one-year record with $31.2 billion invested. China also accounted for 37 percent of all wind energy investment ($27.2 billion) and 47 percent of the investment in the “other renewable energy” category ($6.3 billion) that includes small hydro, geothermal, marine, and biomass. All told, 23 GW of clean energy generating capacity was installed in China in 2012.

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Although the United States invented many of the leading clean energy technologies, it continues to underperform in investment and deployment relative to the size of its economy and its history in the field. In 2012, clean energy investment in the United States was down 37 percent, to $35.6 billion, second-highest among G-20 nations. Record amounts of wind-generating capacity (13.6 GW) were installed, spurred in large part by the possibility that the production tax credit might expire at the end of 2012. Although the credit was extended for one year, ongoing uncertainty surrounding this and other policies is emblematic of the lack of a consensus among American policymakers, and it contributes to the halting, disappointing U.S. performance in the worldwide race for clean energy jobs, manufacturing, and market share.

The solar sector was something of a bright spot for the United States, with financial innovations such as private third-party financing leading to a 42 percent increase in investment for residential photovoltaic installations. A record 3.2 GW of solar was installed in the United States last year. The United States took the No. 2 spot in clean energy investing in 2012.

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In Germany, investments fell, but world leading amounts of new solar generating capacity were still added. Clean energy investment in Germany was down 27 percent in 2012 from the year before. With Germany significantly curtailing incentives for clean energy, it was feared that the German market might collapse. But the country remained the G-20’s third-leading destination for clean energy investment, with $22.8 billion. This level of investment was sufficient to spur a record 7.5 GW of new solar photovoltaic capacity, as well as 2.4 GW of new wind capacity.

Japan reemerged as a top destination for clean energy investment as national efforts to develop alternatives to nuclear energy gained momentum after the Fukushima Dai-ichi nuclear disaster in 2011. In response, clean energy investment increased 75 percent in 2012, to $16.3 billion. Almost all (97 percent, or $15.7 billion) of clean energy financing in Japan was in the solar sector, which added more than 2 GW of generating capacity. These investments propelled Japan into the No. 5 spot in investment in 2012, with the 27 countries of the European Union that are not separate members of the G-20 at No. 4.

After lengthy delays in the initiation of national programs, South Africa finally emerged in 2012 as an important destination for clean energy investment, attracting $5.5 billion and becoming the fastest-growing market in the G-20. The South African solar sector attracted $4.3 billion in 2012, or 80 percent of the total. Another $1.1 billion was invested in the nation’s wind sector. All of the money invested in South Africa was in the form of asset financing for larger commercial and utility-scale projects, catapulting the country into the ninth-leading destination of clean energy investment behind Italy, the United Kingdom, and India. Brazil rounds out the top 10 countries.

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Key Findings

Worldwide clean energy investment falls to $269 billion

Public and private investment in solar, wind, and other technologies retreated from an adjusted 2011 record of $302 billion to $269 billion, an 11 percent drop. Still, 2012 was the third year in a row that worldwide clean energy investment eclipsed $200 billion. Investment fell in many traditional markets but grew in emerging markets. Investment in countries outside the G-20 increased in 2012 by 52 percent, to more than $20 billion, while G-20 members experienced a decline in private investment of 16 percent, attracting a total of $218 billion, exclusive of research and development spending…

The non-G-20 countries’ share of global investment reached 8.5 percent of the global total, its highest level since reliable data collection began in 2004. This trend is likely to continue: Bloomberg New Energy Finance projects continued annual growth for clean energy of 10 to 18 percent in parts of Asia, Africa, the Middle East, and Latin America through 2020. In 2012, significant gains in clean energy investment were recorded in countries such as Chile, Romania, Morocco, Bulgaria, and Ukraine.

Although 2012 investment in the G-20 declined amid the withdrawal or expiration of key financial incentives and persistent policy uncertainty in long-standing clean energy markets, the sector has been remarkably resilient over the past decade. Reliable investment data have been collected for nine years. Broken down in three-year increments, average investment increased by $90 billion in each triennial, from $64 billion in 2004-06 to $156 billion in 2007-09 to $245 billion in 2010-12.

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Asia takes the lead for regional investment

Clean energy investment flows continued to shift in 2012 from established markets in the West to the emerging markets of the East. The Asia and Oceania region has experienced uninterrupted growth in investment annually for nine years and in 2012 became the leading regional destination for investment for the first time. Clean energy investment in the region grew by 16 percent, to $101 billion, accounting for 42 percent of the global total. In fact, this was the only region to experience investment growth in 2012, largely due to gains recorded in China and Japan.

The region that encompasses Europe, the Middle East, and Africa has traditionally led all others in attracting clean energy investment. In 2012, however, investment fell 22 percent, to $87.6 billion. This was the first drop since reliable data have been collected.

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Investment declined in the region overall as various long-standing and substantial markets—Germany, Italy, the United Kingdom, and Spain—shrank in the face of curtailed government incentives. Dramatic investment growth in South Africa helped stanch losses elsewhere in the region.

Investment fell most precipitously in the Americas, where clean energy financing in 2012 was down 31 percent, to $50.3 billion. The sharp decline came on the heels of more than 30 percent growth in 2011, reinforcing a pattern of investment volatility in the Americas. Reduced financing in 2012 pushed investment in the region to the lowest level since 2009. The region’s largest markets—the United States, Brazil, and Canada—fell by 37, 32, and 23 percent, respectively. Mexico, however, experienced investment gains of 548 percent, to $2 billion. (See Figure 3 for a regional breakdown of clean energy investment.)

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Solar attracts largest share of clean energy investment

Solar energy technologies were the leading recipient of worldwide clean energy investment for the second year in a row. Solar attracted more financing than any other technology by a wide margin. In all, it accounted for $126 billion in investment in 2012, or 58 percent of the G-20 total. China, Europe, and the United States were top markets for solar investment. China’s investment in solar almost doubled from the 2011 level, to $31.2 billion. Germany attracted $17.2 billion and Italy $14.1 billion in the solar sector. While the United States had the thirdhighest level of solar investment, $16.5 billion, financing fell more than 50 percent from the 2011 level.

Solar energy investment among G-20 nations outpaced wind for the second straight year, but wind energy investment was a substantial $72.7 billion, enough to spur record deployment. Across G-20 nations, wind energy investment was down 14 percent, with declines logged in historically large markets including China, Germany, India, Brazil, and the United States, where the potential expiration of the production tax credit loomed throughout 2012. Project developers eager to qualify for the credit helped drive investment totaling $13.9 billion in the U.S. wind sector, a slight decrease from 2011.

The remaining sectors also recorded declining investment in 2012. Investment in geothermal, marine, small hydro, and biomass/waste-to-energy technologies (“other renewables” in Figure 4) fell 29 percent, to $13.5 billion. The biofuels sector showed the steepest investment decline, attracting just $2.6 billion, 47 percent less than in 2011. Investment in energy-efficient/low-carbon technologies and services dropped 27 percent, with invesment shrinking to $3.3 billion, from $4.5 billion the year before. (See Figure 4 for a complete breakdown of investment by technology.)

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Small-distributed capacity remains investment priority

Small-distributed capacity investment declined less than any other financing type, falling 1.6 percent, to $72.8 billion. The ongoing strength of financing for small-distributed capacity reflects the growing attractiveness of residential solar photovoltaic projects. Asset financing remained the leading source of clean energy investment, with $136.5 billion realized in 2012, or 63 percent of all G-20 clean energy investment…

Reflecting the overall downward trend of clean energy, asset financing fell 20 percent from 2011 levels. China attracted almost half of the G-20 asset financing, accounting for $57.6 billion, or 43 percent of the total. Germany was the leading recipient of small-distributed capacity investment with $15.1 billion. This type of investment increased 55 percent in Japan, to $12.9 billion.

Venture capital and private equity investment declined 34 percent in 2012, to $5.6 billion. The United States, with $4.3 billion attracted, continued to dominate this finance class, accounting for 78 percent of all venture capital and private equity. Public and private research and development investment was steady in 2012, at $30 billion. The United States continued to lead the world in total corporate research and development investment, accounting for 24 percent, and 34 percent of government research investment. With leading venture capital and research and development investment, the United States continues to demonstrate leadership in clean energy innovation—even as other data demonstrate ongoing difficulty translating these strengths into momentum for domestic manufacturing and deployment at home and abroad.

Clean energy stock prices remained depressed by product price declines, significant oversupply in the manufacturing sector, and persistent policy uncertainties. As a result, public market financing fell sharply to $4.6 billion, down 55 percent.

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Record solar and wind installations help raise total capacity to 648 GW

Even though worldwide clean energy investment fell by 11 percent in 2012, dramatic and continued price declines for leading technologies helped fuel a record 88 GW of capacity additions around the world. By the end of the year, 648 GW of clean energy generating capacity was in place globally (see Figure 6). With 48.6 GW of new generating capacity installed in 2012, the wind sector led all others with 280 GW deployed worldwide.

The solar sector demonstrates how much declining prices are helping spur large-capacity additions. Although solar investment was down 13 percent in 2012, lower prices made it possible for annual solar deployment to increase by 6 percent to more than 31 GW. With these additions, cumulative installed solar capacity eclipsed 100 GW, four times the 2009 level.

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As they did a year earlier, Germany and Italy deployed more solar energy than any other country, adding 7.6 GW and 3.4 GW, respectively. China and the United States each added 3.2 GW, reflecting priority government incentives for solar in the former and financial innovation (thirdparty financing) in the latter. Japan also showed the impact of government policies aimed at shifting that country’s power generation from nuclear to renewables. Solar investment in Japan rose 84 percent in 2012, to $15.7 billion, helping add more than 2 GW of generating capacity.

As in the solar sector, declining prices for wind technologies helped enable record installation of new wind energy generating capacity. All told, 48.6 GW of wind was added in 2012. Wind installations in the United States more than doubled, to a record 13.6 GW. China continues to deploy more wind energy than any other country, with 16 GW installed, down 20 percent from 2011. Significant gains in capacity were realized in the United Kingdom, Mexico, and Brazil, while deployment fell in Spain, India, and Italy.

Clean energy continues to account for a significant share of additional generating capacity in key regions and worldwide. In the United States, wind, solar, and other renewable sources accounted for 49 percent of the generating capacity added. In the European Union, 70 percent of new capacity was renewable for the second consecutive year…

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