UN: Clean energy spending up 5 per cent in 2008

Despite the global economic crisis that began last year, worldwide spending on clean energy rose by 5 per cent in 2008, thanks in large part to China, Brazil and other emerging economices.

That’s according to a report — “Global Trends in Sustainable Energy Investment 2009” — prepared by New Energy Finance for the United Nations Environment Programme (UNEP).

Overall, $155 billion was invested in clean energy companies and projects worldwide last year, not including large hydropower. That’s more than four times as much as was spent in 2004. Of the amount spent in 2008, $13.5 billion of new private investment went into companies developing and scaling-up new technologies, with $117 billion going into geothermal, wind, solar, biofuel and other renewable energy projects.

Some $105 billion was spent directly developing 40 gigawatts of power-generating capacity from wind, solar, small-hydro, biomass and geothermal sources. A further $35 billion was spent on developing 25 gigawatts of large hydropower.

“Without doubt the economic crisis has taken its toll on investments in clean energy when set against the record-breaking growth of recent years,” said Achim Steiner, UN Under-Secretary General and UNEP executive director. “Investment in the United States fell by two per cent and in Europe growth was very much muted. However, there were also some bright points in 2008 especially in developing economies — China became the world’s second largest wind market in terms of new capacity and the world’s biggest photovoltaic manufacturer, and a rise in geothermal energy may be getting underway in countries from Australia to Japan and Kenya.”

Steiner added, “Meanwhile, other developing economies such as Brazil, Chile, Peru and the Philippines have brought in, or are poised to introduce policies and laws fostering clean energy as part of a green economy. Mexico for example, the global host of World Environment Day on 5 June, is expected to double its target for energy from renewables to 16 per cent as part of a new national energy policy.”

Wind attracted the highest new investment ($51.8 billion, 1 per cent growth on 2007) in 2008, although solar made the largest gains ($33.5 billion, 49 per cent growth) while biofuels dropped somewhat ($16.9 billion, 9 per cent decrease).

On a regional basis, investment in Europe in 2008 was $49.7 billion, a rise of 2 per cent, and in North America was $30.1 billion, a fall of 8 per cent. These regions experienced a slow-down in the financing of new renewable energy projects due to the lack of project finance and the fact that tax credit-driven markets are mostly ineffective in a downturn.

While private sector investment was stalling in late 2008, the report finds, government investment looks ready to take up some of the slack in 2009. Sustainable energy investments are a core part of key government fiscal stimulus packages announced in recent months, accounting for an estimated $183 billion of commitments to date.

“There is a strong case for further measures, such as requiring state-supported banks to raise lending to the sector, providing capital gains tax exemptions on investments in clean technology, creating a framework for Green Bonds and so on, all targeted at getting investment flowing,” said Michael Liebreich, chairman & CEO of New Energy Finance. “What’s most important is that stimulus funds start flowing immediately, not in a year or so. Many of the policies to achieve growth over the medium term are already in place, including feed-in tariff regimes, mandatory renewable energy targets and tax incentives. There is too much emphasis amongst some policy-makers on support mechanisms, and not enough on the urgent needs of investors right now.”