As the cost of renewable energy continues to decrease, the world added record levels of renewable energy capacity in 2016, at an investment level 23 per cent lower than in 2015, according to new research published early April by UN Environment, the Frankfurt School—UNEP Collaborating Centre and Bloomberg New Energy Finance.
In 2016, the advance of renewable energy slowed in one respect, and speeded up in another. Investment in renewables excluding large hydro fell by 23% to $241.6 billion, but the amount of new capacity installed increased from 127.5GW in 2015 to a record 138.5GW in 2016. Together, the new renewable sources of wind, solar, biomass and waste, geothermal, small hydro and marine accounted for 55.3% of all the gigawatts of new power generation added worldwide last year. More solar gigawatts were added (75GW) than of any other technology for the first time. A major reason why installations increased even though dollars invested fell was a sharp reduction in capital costs for solar photovoltaics, onshore and offshore wind. On a less positive note, there were clear signs as 2016 went on of slowing activity in two key markets, China and Japan.
Renewables excluding large hydro have gone from being labelled as ‘alternative energy’ and a niche choice for wealthy countries only 10 years ago, to the majority (55.3% in 2016) of new generating capacity installed worldwide. Wind and solar are undercutting coal or gas – or both – in terms of levelised costs, in an increasing number of countries. That, however, does not mean the future will necessarily be plain sailing for renewables. Wind and solar remain vulnerable to unfriendly twists in policy, or to measures that set out directly to protect coal and gas. Their competitiveness could be eroded, for a time at least, if there was a sharp, upward turn in the international interest rate cycle, perhaps in response to a shift in US economic policy. Demand for all new generating technologies could be dampened if electricity consumption grows much less than expected. Finally, the structure of electricity markets continues to be a challenge not just for renewable energy developers but also for energy ministries around the world. There is the issue of how to reward flexible generation and storage, so that the system is always able to respond when wind and solar generation drops. There is also the issue of how investors in new, unsubsidised wind and solar projects can de-risk future revenues in an unsubsidised era.
You can read the key findings here.