Trends in Global Energy Investments

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Trends in Global Energy Investments

Trends in Global Energy Investments

A Fossil Fuel Free Future?

Fossil fuels are the source for 85 percent of the world’s energy consumption1, so transitioning to a carbon-free future will not happen quickly. But make no mistake, the shift away from carbon-based energy is firmly underway. Our energy future is being written now, reflected in investments that are being made today.

Trends in Global Energy Investments

According to recent research commissioned by the U.N.2, renewable energy set new records in 2015 for dollars invested, new capacity added and the contribution of developing countries to that growth. Global investments in renewable energy were $285.9 billion, the sixth year in a row that investments have exceeded $200 billion.

Here are some highlights of the investments made.

  • The new gigawatt capacity added in 2015 by renewable sources for the first time represented the majority (53.6 percent) of the total amount of new gigawatt capacity added.
    • 3 percent was from wind
    • 8 percent was from solar
  • The biggest source of investments came from asset-based financing ($199 billion), targeting utility-scale projects such as wind farms and solar parks.
  • China invested $102.9 billion in renewable energy, while European investments totaled $48.8 billion. The U.S. accounted for $44.1 billion of investment.

Despite the fall in oil prices, investment in renewable energy has remained strong.  One reason is the speed with which new capacity can be built—a wind farm may take nine months to build and solar parks three to six months, while coal and gas plants can take years.  For many countries with more immediate needs for new energy, renewables are an attractive option.

Additionally, renewable energy is becoming more cost competitive.  Onshore wind costs have declined 14 percent in the last six years, while the cost of solar photovoltaics has plummeted 61 percent.

Because electricity needs to be available at all times, including cloudy and windless days, energy storage remains key to a carbon-free future. The cost of batteries has fallen 65 percent since 2010, while storage capacity commissioned in 2015 reached a record high. However, much more technological progress still needs to be made.

Geopolitical Impacts

The geopolitical impacts of reduced dependency on oil will be profound. Can Middle East countries make the economic transition away from oil, and what will failure mean to the stability of the region? Will U.S. foreign policy grow less interested in a Middle East that is no longer an important energy source? Will Europe adopt a firmer hand with Russia as its dependency on Russian energy diminishes? Will a “Saudi Arabia” of renewable energy emerge and what role will it play on the world stage?

Many questions still remain.  One that does not, however, is the important role that investments in energy play on a global scale.

Sources:

  1. http://large.stanford.edu/courses/2014/ph240/aljama2/
  2. http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2016

See referenced disclosure (2) at http://blog.americanportfolios.com/disclosures/ 

 

About The Author

Lon T. Dolber

 

CEO, CIO & President of American Portfolios Financial Services, Inc. (APFS) 
631.439.4600, ext. 106 

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