A sharp fall in global investment in new renewables was recorded in  2012 and 2013.


That information was interpreted by some as a clear indication that renewable energy was 'running out of puff' after having exhausted the massive, global, post recessionary, economic stimulus packages of 2008/2009.

However we believe that the fall in investment was a good thing and in this post we explain why...

The following graphic shows both the global installed capacity of new renewables - which has grown steadily from 2005 to 2013 - and the unit cost of that capacity - which rose from 2005 to 2011 before falling steeply.


So what's going on? In 2005 global renewable energy additions were dominated by low-cost hydro and wind. However as new renewables expanded rapidly, capacity constraints in the wind sector in addition to significantly higher prices for solar (relative to wind and hydro), forced up the unit costs of new renewables. Those costs peaked at $3.36-million per megawatt in 2008.

Since 2008 the wind sector has addressed its supply chain issues in addition to which solar has substantially benefited from major advances in solar panel  and installation, technology. The result has been continued massive falls in wind and solar costs and a steady fall in the average cost of new renewables to $1.77-million per megawatt in 2013.   

In other words: global investment in new renewables, measured in dollars, fell in 2012 and 2013 because new forms of renewables, most notably wind energy and solar power, have been getting much cheaper. 

All of this indicates that the post-recessionary economic stimulus packages achieved exactly what they were supposed to.  By artificially stimulating demand for new renewables, they helped those new industries to scale up and, in so doing, to sharply reduce unit costs to levels which are now directly competitive with 'traditional' generators i.e. coal, gas and nuclear. ('Solar and Wind Energy Start to Win on Price vs. Conventional Fuels'. New York Times. 23-Nov-2014) 

Initial estimates indicate that 2014 will prove to be another record year for new additions of wind and solar capacity. Those estimates indicate a sharp rise in installed generation capacity AND a steep increase in the total $ investment AND a sharp fall in the unit cost of that new generation. 

Hold on to your hats - 2015 is going to be interesting!

AuthorJames Glennie