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Solar drives renewable energy sector to record-breaking year

Munawar Hasan

Amid a spectacular price plunge in the capital cost of renewable energies, solar attracted nearly twice as much investment as wind, driving the renewable energy sector to yet another record-breaking year in 2011, albeit one beset with challenges for the industry, according to two new reports on renewable energy trends released on Monday by the United Nations Environment Programme (UNEP) and the Renewable Energy Policy Network for the 21st Century (REN21).

Global Trends in Renewable Energy Investment 2012 is the fifth edition of the UNEP report, based on data from Bloomberg New Energy Finance, and has become the standard reference for global clean energy investment figures. This year it shows that despite an increasingly tough competitive landscape for manufacturers, total investment in renewable power and fuels last year increased by 17 percent to a record $257 billion, a six-fold increase on the 2004 figure and 94 percent higher than the total in 2007, the year before the world financial crisis.

Although last year’s 17 percent increase was significantly smaller than the 37 percent growth recorded in 2010, it was achieved at a time of rapidly falling prices for renewable energy equipment and severe pressure on fiscal budgets in the developed world.

The REN21 Renewables 2012 Global Status Report, notes that during 2011 renewables continued to grow strongly in all end-use sectors – power, heating and cooling and transport. Renewable sources have grown to supply 16.7 percent of global energy consumption. Of that, the share provided by traditional biomass has declined slightly while the share sourced from modern renewable technologies has risen.

In 2011, renewable energy technologies continued to expand into new markets: around 50 countries installed wind power capacity, and solar photovoltaic (PV) capacity moved rapidly into new regions and countries. Solar hot water collectors are used by more than 200 million households as well as in many public and commercial buildings worldwide.

The two publications were launched jointly by Achim Steiner, UNEP Executive Director, Mohamed El-Ashry, Chairman of REN21, Michael Liebreich, Chief Executive of Bloomberg New Energy Finance, and Professor Dr. Udo Steffens, President and CEO of the Frankfurt School of Finance & Management, host of the Frankfurt School – UNEP Collaborating Centre for Climate & Sustainable Energy Finance.

According to highlights, total investment in solar power jumped 52 percent to $147 billion and featured booming rooftop PV installations in Italy and Germany, the rapid spread of small-scale PV to other countries from China to the UK and big investments in large-scale concentrating solar thermal (CSP) power projects in Spain and the US.

The United States surged back to within an inch of the top of the renewables investment rankings, with a 57 percent leap to $51 billion, as developers rushed to cash in on three significant incentive programs before they expired during 2011 and 2012. After leading the world for two years, China saw its lead over the US shrink to just $1 billion in 2011, as it recorded renewable energy investment of $52 billion, up 17 percent.

India’s National Solar Mission helped to spur an impressive 62 percent increase to $12 billion, the fastest investment expansion of any large renewables market in the world. In Brazil, there was an 8 percent increase to $7 billion.

According to the report, Pakistan adopted a novel two-tier system of Feed-in-tariffs (FITs) for wind projects of 5–250 MW whereby domestically owned companies are paid a higher tariff than foreign developers.23

Elsewhere in the region, countries have made advances, but countries such as Bangladesh, Afghanistan, Myanmar, and Pakistan continue to experience very low rates of rural electrification and to rely largely on traditional biomass.

It is observed that competitive challenges generally intensified sharply, leading to sharp drops in prices, especially in the solar market — a boon to buyers but not to manufacturers, a number of whom went out of business or were forced to restructure. Renewable power, excluding large hydro-electric, accounted for 44 percent of all new generating capacity added worldwide in 2011 (up from 34 percent in 2010). This accounted for 31 percent of actual new power generated, due to lower capacity factors for solar and wind capacity.

The top seven countries for renewable electricity capacity excluding large hydro – China, the United States, Germany, Spain, Italy, India and Japan – accounted for about 70 percent of total non-hydro renewable capacity worldwide. The ranking among these countries was quite different for non-hydro capacity on a per person basis: Germany, Spain, Italy, the US, Japan, China and India. By region, the EU was home to nearly 37 percent of global non-hydro renewable capacity at the end of 2011, China, India and Brazil accounted for roughly one quarter.

Renewable technologies are expanding into new markets.

In 2011, around 50 countries installed wind capacity; solar PV capacity is rapidly moving into new regions and countries; interest in geothermal power has taken hold in East Africa’s Rift Valley and elsewhere; interest in solar heating and cooling is on the rise in countries around the world; and the use of modern biomass for energy purposes is expanding in all regions of the globe.

In the power sector, renewables accounted for almost half of the estimated 208 gigawatts (GW) of electric capacity added globally during the year. Wind and solar photovoltaic (PV) accounted for almost 40 percent and 30 percent of new renewable capacity, respectively, followed by hydropower (nearly 25 percent). By the end of 2011, total renewable power capacity worldwide exceeded 1,360 GW, up 8 percent over 2010; renewables comprised more than 25 percent of total global power-generating capacity (estimated at 5,360 GW in 2011) and supplied an estimated 20.3 percent of global electricity.

“There may be multiple reasons driving investments in renewables, from climate, energy security and the urgency to electrify rural and urban areas in the developing world as one pathway towards eradicating poverty-whatever the drivers the strong and sustained growth of the renewable energy sector is a major factor that is assisting many economies towards a transition to a low carbon, resource efficient Green Economy” says Mr. Steiner. “It is essential to continue government policies that support and nurture the sector’s growth, and to de-escalate damaging trade disputes. Otherwise,” he warned, “the low-carbon transition could weaken just at the point when exciting cost reductions are starting to transform the economics.”

In the United States, renewable energy (including large hydro) provided 12.7 percent of total domestic electricity in 2011, up from 10.2 percent in 2010, and 9.3 percent in 2009. An estimated 39 percent of electric capacity added in 2011 was from renewable sources, mostly wind power. Renewable energy sources accounted for about 11.8 percent of U.S. domestic primary energy production, for the first time surpassing the 11.3 percent from nuclear power).

China again led the world in the installation of wind turbines and was the top hydropower producer and leading manufacturer of PV modules in 2011. Wind power generation increased by more than 48.2 percent during the year. In the European Union, renewable energy accounted for more than 71 percent of total electricity generating capacity additions in 2011, with solar PV alone representing nearly half (46.7 percent) of new capacity coming on stream.

Most importantly, gap between capital cost of renewable energies and fossil fuels is reducing day by day. The price of all major renewable energy technologies continued to fall in 2011 — to the point where they are challenging fossil-fuel sources, even before climate, health and other benefits are factored in.

The dominant reason for the price declines was that manufacturer margins were compressed as the industry continued the shift from a period of under-capacity a few years ago, to overcapacity now as growing demand failed to keep up with a surge in supply.

The most spectacular price plunge was in PV cells, whose average price fell from $1.50 per Watt in September 2010, to $1.30 per Watt by January 2011 and $0.60 per Watt by the end of the year. This fed into a fall in PV module prices of nearly 50 percent between the start of 2011 and the beginning of this year.

Onshore wind turbines showed a similar, although less dramatic, trend. In 2011, prices for turbines to be delivered in the second half of 2013 were 25 percent lower than for devices delivered in the first half of 2009. While 2011 saw significant falls in the costs of generating a MWh of power from onshore wind (down 9 percent), and from PV technologies (down more than 30 percent), the cost of electricity generated by fossil-fuel sources changed less in most parts of the world – despite the sharp falls in US natural gas prices.

Based on current trends, it is predicted that the average onshore wind project worldwide will be fully competitive with combined-cycle gas turbine generation by 2016 even in the US, as gas prices are expected to rebound to a point where they cover the cost of extraction. At present, this is true only of a minority of wind projects, those that use the most efficient turbines in locations with superior wind resources.

In solar, analysis suggests that the cost of producing power from rooftop PV panels for domestic use is already competitive with the retail (but not the wholesale) daytime electricity price in several countries including Germany, Denmark, Italy and Spain, as well as the state of Hawaii.

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