Renewables ride wave of success as prices fall and spending jumps

The past five months have been full of heartening news for the renewable energy industry, which has grown used to the opposite.

Instead of the subsidy cuts, bankruptcies, trade rows and investment dips that dominated the sector three or four years ago, there have been record levels of installations, surprising price falls and a welcome surge in spending.

Global investment in renewable energy bounced up for the first time in three years last year to $270bn, a 17 per cent rise from 2013, the UN Environment Programme reported last month.

A $75bn boom in solar power installed in China and Japan drove part of the surge, along with a record amount of offshore wind farm investment in Europe.

But the more interesting aspect of the $270bn spent last year, that does not include investment in large hydropower plants, is the record amount of so-called modern renewables it helped fund.

At least 95 gigawatts of wind and solar generating capacity was installed last year, far more than the 70GW built in 2011, the only year when the dollar amount invested was higher - at $279bn.

That also illustrates the rate at which costs are falling, especially for solar panel technology, a shift some green power companies claim will cause a profoundly disruptive shift.

"Solar and wind are about to gobble up market share around the world," says Thierry Lepercq, chairman of Solairedirect, a fast-growing French company that has 57 solar parks built or under construction around the world. "We're generating power at lower prices than other energy sources in Chile, India and South Africa," he says.

Among the industry milestones of the past five months was a contract that Dubai's state utility awarded for a solar power plant to the ACWA group from oil-rich Saudi Arabia that will sell electricity for less than 6 US cents per kilowatt hour. That is at least 2 to 3 cents cheaper than generation from gas in Dubai, according to Adnan Amin, head of the International Renewable Energy Agency. Solar panel prices have dropped 75 per cent since 2009 and the total installed costs of big, utility-scale solar plants fell by as much as 65 per cent between 2010 and 2014, according to the agency.

Those lower prices are one reason the city of Georgetown in Texas, also famed for its oil wealth, declared in March it was going to become the first city in the state to get all its electricity from solar and wind farms by 2017.

Jim Briggs, interim city manager, says: "Georgetown Utility Services isn't required to buy solar or other renewables. We did it because it will save on electricity costs and decrease water usage [used in conventional power generation]."

When the industry's history is written, today's chapter will be called "renewable energy reaches adulthood", says Neil Auerbach, chief executive of the US private equity group Hudson Clean Energy Partners. "It's a young adult, but it is still an adult," he adds, explaining the sector is now less reliant on the government subsidies that propelled its early growth.

"Also, the size and quality of the biggest players is more meaningful," he says, pointing to the larger companies emerging in the sector. They include the US groups SunEdison, a solar and wind park developer, and First Solar, a solar-panel maker, both of which have a market value of more than $6bn.

Still, the recent fall in oil prices has dented some forms of renewable energy. One of the UK's biggest biofuel plants, the Ensus factory on Teesside, was temporarily closed in February amid a sharp fall in biofuel prices, which mirror the oil price.

But oil accounts for a small percentage of electricity generation in most countries, and is only about 1 per cent in nations such as the US, so it is not clear that lower crude prices will have a big impact on renewable power generation.

Even so, the sector's recent growth has to be seen in context.

In the past seven years, renewable power (not including large hydroelectric plants) as a percentage of global electricity generation has only grown from 5 to 9 per cent, according to the Bloomberg New Energy Finance research group.

At current rates of growth, it will take until 2030 for renewables to reach 20 per cent of global power generation.

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