Clean energy investment drops 40% in 2019 as price outlook casts a shadow

Around the world, investment in renewable energy capacity grew marginally last year, to $US282 billion compared with $US280 billion in 2018 – a modest 1% gain.

China was the biggest investor in renewables at $US83.4 billion in 2019, according to data from BloombergNEF, an 8% drop from 2018. The US came in second at $US55 billion, up 28% on 2018. Europe was down 7% to $US54 billion, and the UK was down 40% to $US5.3 billion.

Australia, the world champion of solar and lauded for its can-do attitude towards rooftop solar PV, committed $US5.6 billion – a drop of 40% over 2018.

That’s a sharp fall, but Green Energy Markets director analysis and advisory Tristan Edis says the result should not be seen as an excuse to feel despondent. “In historical terms, 2019 was still a very strong year,” he tells EcoGeneration.

A slowing in investment from 2018 should not come as too much of a surprise, regardless of a Coalition victory in the May federal election.

“Even under a Labor policy [investment] probably would have slowed,” he says, “but you would have at least had a pathway of ongoing investment. The financials behind any further ongoing investment are pretty grim without some sort of policy change. Next year will be horrific.”

Clouds gather

Edis expects investment in NSW and Victoria to “hold up a little bit” as funds are commitment on the back of contracted power purchase agreements, but a sharp slowdown seen in Queensland last year is a sign of what’s to come for every other state as wholesale electricity prices and LGC prices fall.

A predicted drop off in electricity prices will compound the viability of projects that may be contemplating further capex to handle grid constraints in parts of the NEM, such as the inclusion of synchronous condensers or batteries.

If it costs more to provide a service into a market where prices are falling, why bother?

“Even if grid constraints weren’t as bad as they have been you would still see a significant drop off in investment,” he says.

Even projects in parts of southeast Queensland that are close to high-voltage transmission and high load, where losses might be expected to be a minor consideration, have not gone ahead as developers weigh the odds of a power market that will be oversupplied in the middle of the day.

“You’re going to get very low prices, or even negative prices, in the middle of the day,” Edis says.

Clean energy technology, solar especially, becomes a victim of its own success.

The afternoon peak and high gas prices persist as the price-pushing bullies of the energy market. In the short term, the solution would be storage. Investors and owners of generation assets have another monster to watch in that area, however, with the monolithic shadow of Snowy 2.0 approaching over the horizon.

“It’s such a huge amount of capacity that’s coming onto the market that it kind of destroys the economics for anyone else.”

Strong wind

The BloombergNEF report showed commitments in the second half of 2019 helped make up for a paucity in the first half of the year, to edge ahead of 2018. Highlights included US onshore wind and, in particular, offshore wind in China and Europe.

Wind, onshore and offshore, led the way with $US138 billion globally, up 6%. Solar was close behind, at $US131 billion, down 3%.

Falling capital costs in the two technologies meant they are likely to have seen around 180GW added last year, up some 20GW on 2018, BNEF said.