Global investment in clean energy fell in 2016 — and that’s largely a good thing.
The world spent less money to build even higher amounts of renewable electricity compared to 2015, according to a new report released Thursday. That means wind, solar, and other technologies are becoming cheaper, and in many places they’re now cost-competitive with coal and natural gas.
Companies and governments added a record 138,500 megawatts of new wind, solar, biomass, waste-to-energy, geothermal, small hydro and marine sources in 2016, the report found. That’s up 8 percent from the 127,500 megawatts added the previous year.
At the same time, investments fell by 23 percent last year to $241.6 billion, which was the lowest level since 2013. However, don’t let that fool you into thinking the world has turned its back on solving climate change (that’s just the Trump administration). Energy experts said the drop was largely due to the falling costs of wind and solar power, though slower economic growth in China and the phasing out of subsidies in Japan and other countries also contributed.
Wind power and solar photovoltaics both saw a 10 percent decline in the average dollar amount of capital expenditure per megawatt.
“Investors got more bang for their buck,” according to the joint report from the United Nations Environment Program (UNEP), the Frankfurt School-UNEP Collaborating Center, and Bloomberg New Energy Finance (BNEF).
According to Erik Solheim, UNEP’s executive director, that’s “exactly the kind of situation — where the needs of profit and people meet — that will drive the shift to a better world for all.”
This dynamic of falling costs and rising renewable installations also sends an important signal that clean energy momentum will continue, despite the waning political support from the United States.
The Trump administration is vowing to scrap many federal programs that encourage renewables in favor of an uncertain effort to revive coal mining and further boost oil and gas drilling. Last month, President Trump signed an executive order to begin unraveling the Obama administration’s key climate change policies, including the Clean Power Plan, which would cut emissions from the power sector and boost demand for clean energy.
Still, states and city governments in the US have made clear that they are plowing ahead with plans to expand the use of renewables. The global share of clean power is expected to rise significantly in coming decades as costs keep dropping, and as countries work to address human-driven climate change through the Paris Climate Agreement.
Under the treaty, which entered into force last fall, world leaders agreed to keep global warming to well below 2 degrees Celsius, or 3.6 degrees Fahrenheit, above preindustrial levels through 2100. The deal also contains a more aggressive aspirational goal of limiting warming to 1.5 degrees Celsius, or 2.6 degrees Fahrenheit.
Renewables still have pretty far to climb in order to hit the 2-degree target. The world will need to invest around $145 trillion in low-carbon technologies by 2050 in order to stay within the Paris limits, two global renewable energy agencies said in March.
In 2016, clean energy sources made up about 11.3 percent of global electricity, not counting large-scale hydropower, according to the new report. That’s up from 10.3 percent in 2015.
Shifting U.S. economic policies, and a potential drop in fossil fuel prices, could slow the pace of renewable energy growth in coming decades, Thursday’s report warns. But investors seem unlikely to turn away from new clean energy projects any time soon.
Investments in renewable capacity were roughly double those in fossil fuels in 2016, BNEF data show. New power capacity from renewables made up about 55 percent of all new power last year — the highest to date.
“The investor hunger for existing wind and solar farms is a strong signal for the world to move to renewables,” Udo Steffens, president of Frankfurt School of Finance & Management, said in a statement.