Viewpoints on Energy, Geopolitics, and Civilization
Nathaniel Bullard/ Bloomberg:
Want More Bang for Your Buck? Go Solar
Daniel Rodrigues /Bloomberg
Solar and wind power
Wind power's return on investment might not be as thrilling,
but investors in clean energy should be very excited about the two technologies.
For the fifth year in a row, global investment in clean energy topped $300 billion, according to Bloomberg NEF. 2018's financing for new power-generation projects, research and development, and public-markets activity was up fivefold from 15 years ago, when Germany introduced its first major subsidy and policy supports for clean energy.
Rising, Then Steady
Global new financial investment in clean energy per year
That's still progress, but if such investment over the past five years was essentially unchanged, is it good news for efforts to decarbonize the electricity sector?
Wind and solar make up the vast majority of all new clean-energy power generation now being built. The asset financing to construct those wind and solar plants makes up the vast majority of all investment in clean energy – far more than R&D or public-markets activity. Examining that investment and the assets being built with it reveals what's actually going on in the world's changing power sectors.
When we rebase asset financing, and assets built each year, to the year 2004, we can define three eras in clean energy. Bloomberg NEF founder Michael Liebreich once described these eras as such: “Spend more, get more,” from 2004 to 2011; “Spend less, get the same,” from 2012 to 2013; and “spend the same, get more,” since 2014. That last era, based on the past two years of investment, could be refined to “spend the same, get a lot more.” Nominal dollars invested in wind and solar are up by a factor of six since 2004; new installed capacity per year is up by a factor of 15.
Annual clean-energy asset financing and new installed capacity per year (rebased 2004=100)
With total investment dollars flat, that means technology costs have clearly come down as companies are building more capacity for the same money invested.
There are also three eras in wind and solar installations: “more wind than solar,” from 2004 to 2012; “about the same amount of wind and solar,” 2013 and 2014; and “more solar than wind,” since 2015.
A Tale of Two Technologies
New installed generation capacity
What happened? Two very different things.
Wind has been mostly a “spend the same, get the same” paradigm since 2004:
Tracking Quite Closely
Annual wind energy asset finance and generation capacity additions (rebased 2004=100)
This doesn't mean wind hasn't come down in cost, in terms of energy delivered. Much of this spending-installation correlation comes from investment in more expensive offshore wind, which generates more power per megawatt than onshore turbines. Also, onshore turbines are more efficient and produce much more power now, on average, than they did 15 years ago. In terms of investment and capacity, it's “spend the same, get the same,” but in terms of the cost of power generated, it's “spend the same, get more generated power at a lower cost.”
Solar's paradigm is different: “Spend more, get more,” then “spend the same, get much, much more.”
Spend Less, Get Much More
Annual solar energy asset finance and generation capacity additions (rebased 2004=100)
Solar investment has increased by a factor of 11 since 2004. Solar installations have increased by a factor of 110. Today's solar asset builders invest an order of magnitude more money than they did 15 years ago, and they build far more generation capacity. And, like wind projects, today's solar projects generate significantly more energy than those built 15 years ago.
My colleagues expect trillions of dollars' more investment in wind and solar technologies in the coming years, a volume of zero-carbon, zero-marginal-cost electricity that will significantly challenge the world's traditional utilities. Investing even the same amount of money every year but getting far more out of it is hard to ignore.
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Nathaniel Bullard is a BloombergNEF energy analyst, covering technology and business model innovation and system-wide resource transitions. Petroleumworld reprint this article in the interest of our readers.
Editor's Note: This article was originally published by Bloomberg, on Jan. 18, 2019. All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld.
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