Declining Investments in Global Renewable Energy Sector: Blocking the Path of Paris Agreement’s Goals

Posted by Anjali 19/12/2018 0 Comment(s) White Papers,

Governments and organizations across the globe have continuously focused on “clean energy” expansion to reduce the carbon footprint by way of setting up several climate and clean air goals. In the past recent years, spending on the power sector globally has risen primarily due to the increasing electrification of national grids and need to rebuild power networks in order to meet ever-increasing global energy demand. According to the International Renewable Energy Agency (IRENA) Statistics 2017, the world’s total renewable energy production has surged from 3,530,640 GWh in 2007 to 5,537,179 GWh in 2015. 

 

However, despite this general increase along with supportive governmental efforts regarding sustainable environmental policies and regulations, investments in the global renewable energy sector have started witnessing a steep decline. According to the World Energy Investment report 2017 from the International Energy Agency (IEA), global investment in renewables and energy efficiency dropped by 3% in 2017 after several years of growth whereas global investment in the sector fell 7% in 2017 to US$318 billion. Moreover, IEA has projected that this decline will continue this year which can be a threat to the expansion of green energy sector. The major reason behind this slowdown in investment is linked to recent policy changes in China linked to the deployment of solar panels since the country accounts for around 40% of total renewable energy capacity growth. Rising oil and gas prices has also played a significant role in pulling out investments from renewable energy sector such that the investment in the global oil and gas production increased by 4% in 2017, majorly driven by the U.S.’ shale boom, while the IEA predicts that the share of national oil companies in total oil and gas upstream investment will remain high in 2018.

 

Policies and regulations around the globe regarding the renewable energy sector are of critical importance in determining investments in renewable energy solutions. The recent hike in the import tariffs from 25% to 30% on solar panels and equipment by the U.S. government has also hit the investors’ confidence in the country’s renewable energy industry since it relies on imported parts for 80% of its supply. Trump administration is seeking to cut the budget for research in solar energy technology by 78% and fuel-efficient vehicles by 82% in FY2019. In anticipation of higher costs, solar developers are either stalling the existing projects or hoarding panels. On June 1, 2018, China’s government also ordered a halt on the construction of new solar projects by slashing down the subsidy for new solar plants in a bid to stop overcapacity. After the drastic cut in solar subsidies in 2016 which already led to the decline in the solar power installations in the UK, the government has also announced the closure of the feed-in-tariff (FIT) scheme to new applicants from April 2018 without any replacement.

 

In order to fulfill the promises of achieving Paris Agreement’s environmental sustainability goals, environmental activists are urging governments to create less investment uncertainty for green energy. This is because even after decades of heavy investments in subsidies to support renewable energy production, the wind energy provides only 0.6% and solar 0.2% of global energy needs, according to the IEA. Governments are now finding it difficult as well as inefficient to invest in subsidies and incentives to promote renewable energy sector since the sector is almost entirely reliant on subsidies, making energy generation from fossil fuels cheaper. All these factors will continue to swipe down investments in renewables and energy efficiency solutions in the coming years.

 

Refer to the related reports for further information on the global renewable energy industry: