Renewables added 138.5 GW to global power capacity last year, up 8 per cent from the 127.5 GW added in 2015.
The figures are revealed in a new report published by UN Environment, the Frankfurt School-UNEP Collaborating Centre and Bloomberg New Energy Finance.
Investment in renewable capacity was roughly double that of fossil fuel generation in 2016 and yet the total investment of $241.6bn (excluding large hydropower) was the lowest since 2013. The report explains that this was largely due to falling costs: the average dollar capital expenditure per megawatt for solar photovoltaics and wind dropped by over 10 per cent.
“Ever-cheaper clean tech provides a real opportunity for investors to get more for less,” said Erik Solheim, executive director of UN Environment.
New investment in solar totalled $113.7bn, down 34 per cent from the record high in 2015. Solar capacity additions, however, rose to an all-time high of 75 GW. Wind made up $112.5bn of investment globally, down 9 per cent, and wind capacity additions fell to 54 GW from the previous year’s high of 63 GW.
“The investor hunger for existing wind and solar farms is a strong signal for the world to move to renewables,” said Prof Udo Steffens, president of Frankfurt School of Finance & Management.
While much of the drop in financing was due to reduced technology costs, the report shows a slowdown in China, Japan and some emerging markets, for a variety of reasons.
Renewable energy investment in developing countries fell 30 per cent to $117bn, while that in developed economies dropped 14 per cent to $125bn. China saw investment drop 32 per cent to $78.3bn, breaking an 11-year rising trend.
Mexico, Chile, Uruguay, South Africa and Morocco all saw falls of 60 per cent or more, due to slower than expected growth in electricity demand, and delays to auctions and financings. Jordan was one of the few new markets to buck the trend, investment there rising 148 per cent to $1.2bn.
Meanwhile, the US saw commitments slip 10 per cent to $46.4bn, which the report attributes to developers taking their time to build out projects to benefit from the five-year extension of the tax credit system.
Michael Liebreich, chairman of the advisory board at BNEF, said the oold question of ‘will renewables ever be grid competitive?’ was now invalid: “After the dramatic cost reductions of the past few years, unsubsidised wind and solar can provide the lowest cost new electrical power in an increasing number of countries, even in the developing world – sometimes by a factor of two.”
Liebreich added that “it’s a whole new world: even though investment is down, annual installations are still up. Instead of having to subsidise renewables, now authorities may have to subsidise natural gas plants to help them provide grid reliability.”
Investment in renewables did not drop across the board. Europe enjoyed a 3 per cent increase to $59.8bn, led by the UK ($24bn) and Germany ($13.2bn). At $25.9bn, offshore wind dominated Europe’s investment, up 53 per cent thanks to mega-arrays such as the 1.2 GW Hornsea project in the North Sea, estimated to cost $5.7bn. China also invested $4.1bn in offshore wind, its highest figure to date.