Renewables are set to account for 70% of global investment in new power generation capacity this year with solar PV leading the growth, but spending on clean energy must accelerate much more rapidly if the world is to meet its climate goals.
That is according to a new report from the International Energy Agency (IEA), which found that while renewables dominate investment in new power generation and are expected to account for 70% of 2021’s total of US$530 billion spent on all new generation capacity, stimulus spending on clean energy technologies is “falling well short” of what is needed to ensure a sustainable recovery from the COVID-19 crisis.
The IEA said clean energy investment will need to double in the 2020s to maintain temperatures to within a 2°C increase, and more than triple to keep the door open for a 1.5°C stabilisation.
Despite the disruptions caused by the pandemic, investment in renewables was “remarkably robust” last year, the report noted, and given solar PV’s competitiveness and the existing pipeline of projects committed through tenders, auctions and power purchase agreements, the technology is forecasted to drive spending this year.
Investments in PV are anticipated to grow by more than 10% in China, India, the US and Europe in 2021.
Thanks to improved technology and falling costs, the IEA said a dollar spent on solar PV deployment today results in four times more electricity than ten years ago.
In total, global investment in energy is set to reverse last year’s drop and increase by nearly 10% in 2021 to US$1.9 trillion – a rebound that IEA executive director Fatih Birol said is “a welcome sign”. He added: “But much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050.”
While markets such as Europe and the US are forecasted to see a rise in renewables spending this year, the IEA said the gap between today’s investment trends and the needs of climate-driven scenarios is particularly large in emerging markets and developing economies. Market uncertainty, lockdowns and reduced revenues fed into lower spending outlays last year on new power projects, especially in India, the Middle East and North Africa, and Southeast Asia. Vietnam was an exception, thanks to an installation deadline for feed-in tariffs that helped the country install around 9GW of solar in 2020.
Meanwhile, the rising share of renewables in new power generation investment has been accompanied by a steep drop in approvals for new coal-fired plants, which are 80% below where they were five years ago. However, lower restrictions on building new coal plants in China meant that there was an uptick in go-aheads for new coal projects last year, according to the IEA. Cambodia, Indonesia and Pakistan were other countries where coal-fired final investment decisions picked up in 2020.
With oil and gas companies coming under increasing pressure to adapt their investment strategies, the report said clean energy investments by the sector could rise from 1% of its total capital expenditure last year to 4% in 2021. A deal of note was announced yesterday by BP, which is acquiring 9GW of US solar projects from developer 7X Energy.