FRANKFURT and NAIROBI—The annual United Nations Environment Programme (UNEP) report on global investments in renewables shows a 17 per cent increase in 2014.
$270 billion was invested in renewables in 2014, and the majority of funds went to solar and wind projects.
The increase follows two years of decline, and was able to overcome the lower price of crude oil in the second half of the year, which was expected to pose a challenge.
The smaller investment figures in 2012 and 2013 were partly attributed to lower prices for renewables, caused by economies of scale. The price for solar and wind technologies continued to decline in 2014, so the money invested resulted in significantly more capacity. The power generating capacity added by renewables last year amounts to 103 gigawatts—equal to the total capacity of the USA’s 158 nuclear plants.
“Renewables made up nearly half of the net power capacity added worldwide” said Achim Steiner, UN Under-Secretary-General and Executive Director of UNEP. “These climate-friendly energy technologies are now an indispensable component of the global energy mix and their importance will only increase as markets mature, technology prices continue to fall and the need to rein in carbon emissions becomes ever more urgent.”
Despite the increase, the report warns that renewables still face some challenges. Among them are structural issues that stem from the variability of solar and wind power generation. In many countries, electricity grids have trouble coping with the 25% variability caused by dependence on sunlight and breeze.
The report was prepared by the Frankfurt School-UNEP Centre, and Bloomberg New Energy Finance.
Udo Steffens, President of the Frankfurt School of Finance and Management, said another challenge for renewables is investor uncertainty of continued government support.
“Southern Europe is still almost a no-go area for investors because of retroactive policy changes, most recently those affecting solar farms in Italy. In the US there is uncertainty over the future of the Production Tax Credit for wind, but costs are now so low that the sector is more insulated than in the past.”
The report concludes that if current trends continue, the electricity market requires major reforms to keep up with the success of renewables. Since 2004, over $2 trillion has been invested in renewables globally.