China’s solar boom powers global clean energy push

World clean energy investment totalled $333.5 billion in 2017, up 3% from 2016 and the second highest annual figure ever, taking cumulative investment since 2010 to $2.5 trillion. China invested just over half of the world total in solar at $86.5 bn. This was 58% higher than in 2016, with an estimated 53 GW of PV capacity installed – up from 30 GW in 2016.

The US was the second biggest investor in clean energy after China at $56.9 bn, up 1% from 2016 despite the less friendly tone towards renewables adopted by the Trump administration. Markets such as Australia, Brazil, Mexico and the UAE also saw increased investment in clean energy.

Record solar

An extraordinary boom in photovoltaic installations made 2017 a record year for China’s investment in clean energy. This overshadowed changes elsewhere, including jumps in investment in Australia and Mexico, and declines in Japan, the UK and Germany.

Jon Moore, chief executive of BNEF, commented: “The 2017 total is all the more remarkable when you consider that capital costs for the leading technology – solar – continue to fall sharply. Typical utility-scale PV systems were about 25% cheaper per MW last year than they were in 2015.”

Solar investment globally amounted to $160.8 bn in 2017, up 18% on the previous year despite these cost reductions. Just over half of that world total, or $86.5 bn, was spent in China. This was 58% higher than in 2016, with an estimated 53 GW of PV capacity installed – up from 30 GW in 2016. Justin Wu, head of Asia-Pacific for BNEF, said: “China installed about 20 GW more solar capacity in 2017 than we forecast. This happened for two main reasons: first, despite a growing subsidy burden and worsening power curtailment, China’s regulators, under pressure from the industry, were slow to curb build of utility-scale projects outside allocated government quotas. Developers of these projects are assuming they will be allocated subsidy in future years.

“Second, the cost of solar continues to fall in China, and more projects are being deployed on rooftops, in industrial parks or at other distributed locales. These systems are not limited by the government quota. Large energy consumers in China are now installing solar panels to meet their own demand, with a minimal premium subsidy.”

Investment by country

Overall, Chinese investment in all the clean energy technologies was $132.6 bn, up 24% setting a new record. The next biggest investing country was the USA, at $56.9 bn, up 1% on 2016 despite the less friendly tone towards renewables adopted by the Trump administration.

Large wind and solar project financings pushed Australia up 150% to a record $9 bn, and Mexico up 516% to $6.2 bn. On the downside, Japan saw investment decline by 16% in 2017, to $23.4 bn, while Germany slipped 26% to $14.6 bn and the UK 56% to $10.3 bn in the face of changes in policy support. Europe as a whole invested $57.4 bn, down 26% year-on-year.

Investment by sector

Solar led the way, its $160.8 bn equivalent to 48% of the global total for all of clean energy investment. The two biggest solar projects of all to get the go-ahead last year were both in the United Arab Emirates: the 1.2 GW Marubeni JinkoSolar and Adwea Sweihan plant, at $899 m, and the 800 MW Sheikh Mohammed Bin Rashid Al Maktoum III installation, at an estimated $968 m.

Wind was the second-biggest sector for investment in 2017, at $107.2 bn. This was down 12% on 2016 levels, but there were record-breaking projects financed both onshore and offshore. Onshore, American Electric Power said it would back the 2 GW Oklahoma Wind Catcher project in the USA, at $2.9 bn excluding transmission. Offshore, Ørsted said it had reached ‘final investment decision’ on the 1.4 GW Hornsea 2 project in the UK North Sea, at an estimated $4.8 bn. There were also 13 Chinese offshore wind projects financed last year, with total capacity of 3.7 GW, and estimated investment of $10.8 bn.

The third-biggest sector was energy- smart technologies, where asset finance of smart meters and battery storage, and equity-raising by specialist companies in smart grid, efficiency, storage and electric vehicles, reached $48.8 bn in 2017, up 7% on the previous year and the highest ever.

The remaining sectors lagged far behind, with biomass and waste-to-energy down 36% at $4.7 bn, biofuels down 3% at $2 bn, small hydro 14% lower at $3.4 bn, low-carbon services 4% down at $4.8 bn, geothermal down 34% at $1.6 bn, and marine energy down 14% at just $156 m. The clean energy investment total excludes hydro-electric projects of more than 50 MW. However, for comparison, final investment decisions in large hydro are likely to have been worth $40-50 bn in 2017.

BNEF’s preliminary estimates are that a record 160 GW of clean energy generating capacity (excluding large hydro) was commissioned in 2017, with solar providing 98 GW, wind 56 GW, biomass and waste- to-energy 3 GW, small hydro 2.7 GW, geothermal 700 MW and marine <10 MW.

Investment by category

Breaking the investment total down by type of deal, the dominant category – as always – was asset finance of utility-scale renewable energy projects of more than 1MW. This was $216.1 billion in 2017, up fractionally on the previous year. Small-scale projects of less than 1MW (effectively small solar systems) attracted $49.4 bn, up 15% – thanks in large part to the installation rush in China.

Equity-raising by specialist clean energy companies on public markets totalled $8.7 billion in 2017, down 26%. The biggest transactions in this category were a $978 m convertible issue by electric car maker Tesla, and a $545 m placement by Guodian Nanjing Automation, a Chinese technology supplier to generating and transmission plants.

Venture capital and private equity investment in clean energy came to $4.1 bn in 2017, down 38% on the previous year and the lowest figure since 2005. The biggest deals were a $400 m Series A round for Microvast Power System, a Chinese maker of electric vehicle technology, and a $155 m expansion capital round for Greenko Energy Holdings, an Indian wind project developer.

Asset finance of energy-smart technologies was $21.6 bn, up 36% thanks to increased installation of smart meters and lithium-ion batteries for energy storage. Corporate research and development into clean energy rose 11% to $22.1 bn, and government R&D was almost level at $14.5 bn. The 2016 figures reflect a significant revision, due to the arrival of new data on Chinese solar and wind and on global corporate R&D.

Acquisition spending

The above figures concern, above all, new investment coming into the clean energy sector. BNEF also measures money changing hands, as organisations purchase and sell clean energy projects and companies, and refinance existing project debt.

This acquisition activity totalled $127.9 bn in 2017, up 4% on the previous year and the highest ever. Acquisitions and refinancing of renewable energy projects rose 14% to a record $87.2 bn, while corporate M&A involving specialist clean energy companies fell 51% to $17.5 bn. Public market investor exits came to $7.4 bn, down 8%, and private equity buy-outs reached an all-time high of $15.8 bn, up sixfold on the previous year. The largest acquisition transaction of the year was the purchase of a 51% stake in US ‘yieldco’ TerraForm Power by Brookfield Asset Management for $4.7 bn.

Abraham Louw, analyst, clean energy economics at BNEF, said: “It is notable that acquisition activity in clean energy has been in excess of $100 billion in each of the last three years. The fact that generating assets, in particular, are in growing demand from buyers is a sign of a maturing sector.”