Figures released today show that last year the total investment was $254bn, down from $288.9bn in 2012 and significantly less than the record sum of $317.9bn seen in 2011.
According to research from Bloomberg New Energy Finance (BNEF), the drop was caused by two main factors – the continued sharp fall in the cost of photovoltaic systems, and the impact on investor confidence of shifts in policy towards renewable power in Europe and the US.
There were reductions in investment from both China and the US in 2013. China invested $61.3bn, down 3.8 per cent from $63.8bn in 2012, marking the first falls in Chinese clean energy investment for over a decade. Meanwhile the US saw investment slip 8.4 per cent from $53bn to $48.4bn.
The biggest slump came in Europe, where investment plunged 41 per cent to $57.8bn last year from $97.8bn as Germany, Italy and France either restricted subsidy payments for new projects or failed to quell uncertainty over future support.
Germany investment fell from $26.2bn in 2012 to $14.1bn last year, the lowest since 2006. In France it dropped to $4.1bn from $6.2bn, in Italy to $4.1bn from $15.2bn, and in Spain to just $1.1bn from $3.1bn.
The UK was the most resilient of the big European markets, seeing a relatively modest decline to $13.1bn in 2013, from a record figure of $14.3bn in 2012.
However, there was one country that firmly bucked the downward trend – Japan. Investment surged 55 per cent to $35.4bn from the 2012 figure of $22.7bn. BNEF said this was “spurred on by a boom in small-scale solar installation as the country struggles to fill the gap left by its shuttered nuclear plants”.
BNEF founder Michael Liebreich said: “A second successive year of decline in investment will come as unwelcome news to the clean energy sector, but the top-line figures don’t tell the whole story.
“Investment in Europe crashed, in large part because of the falling cost of solar installations, whose volume worldwide actually grew by around 20 per cent to a new record.
“Outside Europe, the picture was mixed, with some countries increasing and others reducing investment, and Japan the clear leader in terms of growth.”
Liebreich said that public markets “clearly believe that the sector’s consolidation is behind it, as the NEX index soared by over 50 per cent and equity raisings by quoted clean energy companies more than doubled”.
On a sector by sector basis, wind saw a small decline to $80.3bn from $80.9bn while solar dropped to $114.7bn from $142.9bn.
Smart grid, storage, electric vehicles and efficiency technologies saw an increase to $34.6bn from $32.7bn, while the fourth largest area, biomass and waste-to-energy, suffered a drop to $8bn from $13.8bn.
BNEF found that venture capital and private equity investment in clean energy had “a notably weak year”, falling to $4.3bn last year – the lowest since 2005 – from $6.4bn in 2012.
A geographic shift was highlighted in Latin America, where Chile, Mexico and Uruguay all committed more than $1bn to clean energy while Brazil saw its contribution slip to $3.4bn from $7.1bn.
Other significant investors in renewable power and energy smart technologies were India ($7.8bn), Canada ($5.7bn), Australia ($5.6bn) and South Africa ($4.9bn).