Investment on The Rise
Reflecting these developments, global investment in renewable power capacity and fuels increased more than fivefold over the period 2004-2013.20 In terms of net additions to electric generating capacity, global annual investments in renewable energy have exceeded those for fossil fuels since 2009.21 Total global investment (both public and private) in R&D for renewable energy technologies has nearly doubled over the past decade.22
Investment in utility-scale electricity projects (asset finance) has played the largest role in the growth of the renewable energy sector, with a 33% compound annual growth rate from 2004 to 2011, although investment in this area has fallen slightly in recent years. Investment in small-scale distributed generating capacity has seen significant growth since 2004, decreasing only slightly since record levels were reached in 2011.24 Declines have resulted from policy uncertainty in several countries, but have also reflected a steep decline in system prices forsolar PV.25 While public market investment in renewables has fluctuated over the past decade, it has maintained multibillion-dollar levels since taking off in 2005.26
Commercial banks were just starting to enter the renewable energy sector in 2004, at a time when the majority of financiers and other investors considered most renewable technologies to be unproven and too risky. Today commercial banks are joined by pension funds, insurance companies, major corporations (including several outside of the energy industry), and others ooking for stable, long-term returns.
Now that renewables are becoming economically competitive and investors are increasingly recognising their value, a key to further development will be the design of effective financing tools to overcome initial investment costs. Several financial nnovations have been developed since 2004. Recently, nvestment firms introduced tools such as Sustainable Yield Bonds in the United States, Green Bonds in France and the United States, and the Renewable Financing Company Bonds in the United Kingdom.27 Further innovations, ranging from crowd funding to new ownership models (such as leasing), are making it possible for individuals and communities to invest in renewable energy.
20 FS-UNEP Centre and BNEF, op. cit. note 16.
24 BNEF, "Global Trends in Clean Energy Investment," 15 January 2014, http://about.bnef.com/files/2014/01/BNEF_PR_FactPack_Q4_CleanEnergylnvestment_2014-01-15.pdf.
25 FS-UNEP Centre and BNEF, op. cit. note 16.
27 "Financial Innovations Spur Renewable Energy Investment in Global Markets," PV Magazine, 15 January 2014, http://www.pv-magazine.com/news/details/beitrag/financial-nnovations-spur-renewable-energy-investment-in-global-markets_100013942/#axzz2sHJ3IFNV.