Energy Investors Are an Uncertain Kitten

Photographer: Simon Murrell/Corbis

Global investment in renewable energy last year declined for the second year in a row . Even worse: For the first time since renewables became plausible, growth in new capacity slowed.

"Is this the clean-tech crash?" asked Michael Liebreich, chairman of Bloomberg New Energy Finance, to start his keynote at the group's annual summit in New York.

In a word: No.

The chart below shows BNEF's outlook for renewable energy worldwide. The forecast, based on projects already in the pipeline, shows a 37 percent increase in annual installations in the next two years. Installation will almost triple to 290 gigawatts in 2030. The switch to renewables is speeding up, not slowing down.

Source: Michael Liebreich/BNEFSummit 2014

Think of the energy investor as an uncertain kitten facing its first mouse and wondering what to do with it. (Oh, play along.) We're at a global turning point, where for the first time renewables are becoming the cheapest form of energy available in many regions, even without fickle government subsidies, according to BNEF data. Last year the kitten hesitated. Soon it will pounce.

Just look at China, the world leader in renewable energy investment:

Source: Michael Liebreich/BNEFSummit 2014

Sixty-eight percent of China's energy capacity added last year was renewable. China, the world's biggest coal consumer, will be dismantling more coal plants than it is adding within 15 years, maybe sooner, Liebreich said.

Both wind and solar are "within striking distance" of being competitive worldwide, he said, without the training wheels of subsidies. Onshore wind energy is already there. Here's what comes next:

Source: Michael Liebreich/BNEFSummit 2014

Renewables were responsible for about 20 percent of global electricity generation in 2010, a share that will rise to 31 percent by 2035, according to the International Energy Agency. Projecting that far ahead is difficult, though, because it's impossible to predict breakthroughs in technology that may speed things up.

The world is already adding more renewable-energy capacity each year than fossil fuel capacity. "Capacity" can be a misleading milestone, though, because in practice the wind doesn't always blow and the sun doesn't always shine. The capacity factor for U.S. renewables is about 34 percent, compared with a capacity factor of 64 percent for coal, according to the U.S. Energy Information Administration.

In coming years that distinction will matter less, as new renewable generation outpaces new fossil-fuel generation by a wide margin.

Power grids will need to adjust. Utilities will no longer be mere peddlers of power. The grid of the future will be more like a public battery, Liebreich said, where a house or business with renewables can send excess energy and draw back from it as needed. This will also lead to stronger ties between nations, because you never know when you're going to need your neighbor to act as your battery.

"This is no longer about adding a bit of wind," Liebreich said. "It's about a fundamental change in the structure of the energy sector."

And it's happening meow.

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