By Nathaniel Bullard / Bloomberg Opinion
More than $2.7 trillion has been invested in building up renewable energy capacity over the past decade. In those same 10 years, renewables more than doubled their share of the global power mix, from 5.9 percent in 2009 to 13.4 percent last year.
Those are two of the key findings of the latest Global Trends in Renewable Energy Investment report, published by the Frankfurt School-United Nations Environment Program Center and BloombergNEF. More investment is needed to meet the goals of the Paris Agreement, and governments and industry groups are touting clean-energy investment as an essential part of recovery from the Covid-19 pandemic. But what this report helps us see — with the clarity only a decade’s worth of data can provide — is just how much the world’s electricity sector has changed. That’s not just in terms of what’s being built, but also where capital is being applied.
An extraordinary amount of capital for clean energy has been deployed to the developing world; the vast majority to China, with a lesser chunk going to India. At the peak year, in 2017, developing economies as a group saw almost $200 billion in new investment in renewable energy capacity. While investment in China and India has tapered off since then, investment in rest of the developing world has been growing, and hit a record of almost $60 billion last year.
It’s not just the size of these investments but the pronounced shift away from the developed world. For the first time in 2015, China, India and other developing countries invested more in clean energy than the developed world did, and there’s been no going back. Developing economies have received more than half of all dollars invested in clean energy for five years in a row.
There was another great shift in electricity last decade: from wind to solar. At the start of the decade there was more than four times as much installed wind generation capacity as installed solar capacity. By the end of last year, solar had exceeded wind; together, they account for nearly 1.3 terawatts of installed generation capacity, up fivefold in 10 years.
Add up the net capacity additions (that is, all new plants built minus old plants taken offline) for all power sectors — coal, gas, nuclear, hydro, wind, and solar — over the past decade and you’ll find that the world’s most common new unit of power generation isn’t coal-fired, despite coal’s abundance. It’s not natural gas, despite natural gas’s relatively low emissions and easy-to-build infrastructure. It’s not zero-emissions nuclear power, certainly, nor is it hydropower, which is limited by geography.
From 2010 to 2019, the world’s electricity system added more solar power generation capacity than anything else. Coal is next, but after that comes wind, which exceeded gas. Hydropower is far behind in net capacity additions, and nuclear hardly increased at all.
Even those figures overstate coal-fired power’s growth in the past decade. That’s because two countries — China and India again — built so much coal that the global fleet expanded even as every other country’s shrank. China’s net coal-fired additions were in excess of 400 gigawatts, while India topped 100 gigawatts. No other market is anywhere close, and plenty of markets decommissioned enough coal-fired power that their total production shrank in the past 10 years. The U.S. leads the world in coal retirements, by far.
Growth markets for coal still exist, but none of them has the heft of India or China, nor will any be big enough to drive the market forward for long. BNEF expects the global coal fleet to peak in 2024, after which the decline will be inexorable.
We can — and should — expect a massive transformation in the energy sector over the years to come. But it’s also important to note how much of that is already underway. That goes for capital allocation, the building of energy assets, and increasingly for the energy mix itself. Last year, the U.K. turned off its coal-fired power fleet for 18 days. This year, the U.K. turned off its coal-fired power fleet as it entered lockdown in April and hasn’t burned a block of the stuff since.
Nathaniel Bullard is a BloombergNEF analyst who writes the Sparklines newsletter about the global transition to renewable energy.
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