After less than a year and a half in which so much energy news seemed troubling — nuclear meltdowns, oil spills, rising gas prices — it might be startling to find out that worldwide installed capacity of renewable energy has now surpassed that of nuclear power. In fact, global investment in clean energy, driven by enlightened, forward-looking national policies, grew to a record US$243 billion last year, up 30 percent from the previous year.
Indeed, in less than a decade, clean energy has grown from a niche industry to a significant source of trade, investment, manufacturing and job creation. Since 2004, annual investment in the sector has increased by an impressive 630 percent. We need to ensure that this encouraging trend continues.
The emergence of the clean-energy sector reflects rational policies — from research to financing to tariff incentives — in the world’s largest economies. These measures, which still pale in comparison to what is granted to conventional fossil fuels, will be reduced over time as economies of scale are realized and costs fall. We are not far from the day when clean energy can compete head to head with coal, oil and gas.
In many places, wind energy is already competitively priced, and it has attracted almost half (48 percent) of all G20 clean-energy investments in recent years, fueling the addition of some 40 gigawatts of generating capacity — enough to power 30 million homes.
However, the solar sector is the fastest-growing clean-energy industry, in large part because prices of solar panels have declined by more than 60 percent in the last 30 months. By the end of this year, solar modules are expected to cost half as much as they did four years ago. The 17 gigawatts of solar-generation capacity that was added last year from investments totaling US$79 billion could power more than 12.5 million homes. Geographically, recent research by The Pew Charitable Trusts and -Bloomberg New Energy Finance reveals that Europe continues to lead the world in such investment, attracting US$94.4 billion last year, a 25 percent gain over 2009. Investment in Germany more than doubled to US$41.2 billion, surpassing the US to take second place globally. Italy was in fourth place — up from eighth in 2009 — attracting almost US$14 billion in investment. France entered the world’s top 10, after annual investment grew 25 percent to US$4 billion. Investment in Spain, meanwhile, was down by more than half, but remains in the top 10 worldwide at US$4.8 billion.
The research also demonstrates that Europe’s consistent policies leave it well positioned to compete in the clean-energy sector. Investors want to be sure that there will be ongoing demand for renewable energy. The EU is providing that certainty through its clean-energy targets, carbon markets and feed-in tariffs — under which utilities guarantee to pay a fixed rate for clean energy.
For example, European policies are driving an explosion in small-scale, distributed solar-power generation. Investment in these projects doubled last year to US$59.6 billion globally, with most poured into the EU and more than half into Germany alone.
Germany also is demonstrating that sound clean-energy policies can drive not only domestic investment and installations, but also manufacturing and export opportunities. Last fall, Germany’s environment ministry reported that renewable-energy jobs had doubled since 2004 to 340,000 thanks to the country’s investments in education, training, research and innovation.
Owing to high prices for conventional energy and abundant sunshine, Italy is the first country to achieve grid parity, or cost-competitiveness, for solar energy. Sixty-two percent of its private clean-energy investment was directed toward small-scale solar projects last year. Yet what is striking is that Italian manufacturers have almost entirely failed to carve out a position in this booming sector.
Moreover, Europe’s global clean-energy leadership is being challenged by Asia, where private investment, powered largely by China’s surge, is growing faster. Indeed, among individual countries, China is the world leader, attracting US$54.4 billion in investment last year. In the space of just a few years, China has become entrenched as the leading destination for private investment and manufacturing of related equipment.
Last year, China added a staggering 17 gigawatts of wind-power capacity and now produces half of the world’s wind and solar equipment, in part to meet its own highly ambitious clean-energy targets, which include deployment of 150 gigawatts of wind power and 20 gigawatts of solar power by 2020. China has already surpassed the US to lead the world in installed clean-energy capacity.
However, China is not alone in pushing Asia to the global forefront. India, too, entered the ranks of the top-10 countries for clean-energy investment last year. Moreover, its five-year growth rate for renewable-energy capacity also ranked 10th worldwide, and the country was seventh in terms of installed capacity. With a target of 20 gigawatts of solar-generating capacity by 2020, investment in India could grow rapidly.
The events of the past 15 months — starting with the Deepwater Horizon oil spill in the Gulf of Mexico, followed by the violence in North Africa and the tragedy in Japan — confront the world with a stark choice between the costs and risks of traditional energy sources and the promise and progress of clean energy.
In recent decades, Europe has been a driving force for energy modernization. In the years ahead, such leadership will be needed to help capture the economic, environmental and security benefits of renewable energy. Reaffirming its commitment to rapid decarbonization of its energy system and to creative policies in support of that goal will help Europe continue to reap the rewards of one of the most remarkable new market opportunities in living memory.
Phyllis Cuttino is director of the Clean Energy Program at The Pew Charitable Trusts and Michael Liebreich is chief executive of Bloomberg New Energy Finance.
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