Signs of a rebound: Renewables' strong first quarter

An increasing share of small-scale solar in overall investment and the expansion of clean energy capital flows to more emerging economies has delivered a 10 per cent first quarter lift for global renewables.

Investment in clean energy worldwide rallied nearly 10 per cent in the first quarter of 2014 compared to the same period a year earlier, reaching $50.8 billion.

The first-quarter figure owed much to a 42 per cent jump in investment in small-scale solar, as households and businesses in countries such as Japan and the US took advantage of the big falls that have taken place in the cost of photovoltaic systems over recent years.

The first quarter is often the weakest of the year for investment in clean energy, reflecting the fact that developers tend to rush to finance projects in the closing months of each year to take advantage of expiring subsidies, and also the effect of colder weather in the Northern Hemisphere on project progress. So, although global investment in the first quarter of 2014, at $50.8 billion, was down on the fourth quarter's $61.9 billion, the more useful comparison is with the first quarter of 2013's $46.5 billion.

"It is too early to say definitively that 2013 was the low point for clean energy investment worldwide and that 2014 will show a rebound, but the first-quarter numbers are encouraging," Michael Liebreich, chairman of the advisory board for Bloomberg New Energy Finance, said.

"Two trends, in particular, are worth picking out ‒ the increasing share of small-scale solar in overall investment, following a 50 per cent-plus improvement in PV's levelised cost of electricity per MW over the last four years; and the geographical expansion of investment to more and more emerging economies. In Q1, we saw two of the top four asset finance deals happening in Indonesia and Kenya."

Breaking the figures down by region, Asia and Oceania excluding China and India saw $12.9 billion of investment in Q1 2014, up 26 per cent compared to the same quarter of 2013, helped by the solar boom in Japan. The US enjoyed a 95 per cent gain in Q1 compared to a year earlier, although investment – at $8.4 billion – was only half the bumper figure for Q4 last year, when a number of large wind projects were financed.

Europe's investment was down 30 per cent compared to Q1 2013, at $11.8 billion, while China's was up 18 per cent at $10.6 billion. The biggest percentage gain on the year came in Brazil, where investment rebounded to $1.4 billion in Q1 this year, up 211 per cent. The Americas excluding the US and Brazil saw an 11 per cent drop in investment compared to the same quarter last year, with the latest figure at $2.2 billion. The Middle East and Africa managed an 82 per cent increase to $2.6 billion.

Looking at the different types of investment, the dominant driver of the rise in investment was spending on small-scale projects of less than 1MW, including rooftop solar. This increased 42 per cent compared to the first quarter of 2013, reaching $22.6 billion.

Also rising strongly year-on-year was public markets investment in specialist clean energy companies, with a 195 per cent gain to $3.8 billion. The biggest capital raisings of the quarter were a $2.1 billion convertible issue by US electric vehicle maker Tesla Motors, followed by a $643 million secondary share issue by Danish turbine manufacturer Vestas Wind Systems.

Helping to spur public market investment was another bright performance from clean energy shares. The WilderHill New Energy Global Innovation Index, or NEX, which tracks around 100 clean energy stocks worldwide, appreciated 11 per cent in the first quarter, to roughly double its low of July 2012.

Venture capital and private equity investment fell 26 per cent from Q1 2013, to hit $1.3 billion in the first quarter of this year. Among the largest deals were a $133 million round for US financing platform Renewable Energy Trust Capital, and a $107 million fundraising by View, a US energy-saving smart window developer.

The largest type of investment, asset finance of utility-scale projects of more than 1MW slipped 13 per cent to $24.3 billion. The biggest asset finance deals of the quarter included the investment decision on the West of Dudden offshore wind farm in UK waters, at $2.2 billion for 389MW; the Sarulla geothermal project in Indonesia, at $1.7 billion for 330MW; the Lake Turkana wind project in Kenya, at $917 million for 310.5MW; and the 270MW K2 wind project in Canada.

Overall investment in solar was up 23 per cent at $29.3 billion, while that in wind fell 16 per cent to $14.8 billion. Investment in energy-smart technologies such as smart grid, efficiency, power storage and electric vehicles, powered up 243 per cent year-on-year to $3.3 billion in Q1, while investment in biofuels fell 28 per cent to $708 million. Investment in geothermal heated up from virtually nothing in Q1 2013 to $1.9 billion in the first quarter of this year.

Corporate merger and acquisition activity, which is not included in the new investment figures above, leapt 57 per cent to $7.6 billion in the first quarter of 2014 compared to the same period a year earlier, helped by Google's $3.4 billion takeover of energy-efficient thermostat company Nest Labs.

Note: Bloomberg New Energy Finance reported on January 15 that global investment in clean energy in 2013 as a whole fell 11 per cent to $271 billion, the lowest annual figure since 2009. As well as the ingredients that make up the quarterly statistics, the annual figures include research and development spending and certain types of asset finance that cannot be broken out by quarter.

Originally published by Bloomberg New Energy Finance. Reproduced with permission.

*All amounts are in $A