Renewables investment to breach $200bn in 2010?

www.environmental-finance.com
19 March 2010

New investment in clean energy is set to recover to at least $175 billion-200 billion this year, according to projections from Bloomberg New Energy Finance (BNEF). But while the analysis firm is forecasting that current policies will drive $200 billion of investments in physical clean energy generating assets by 2030 (not including initial public offerings, mergers and acquisitions, etc), this is far below the $500 billion/year it says will be needed by that date to avoid dangerous climate change.

Yesterday, BNEF published revised historical figures to reflect revisions to its methodology. It found that $162 billion was invested in 2009 across the financing spectrum, from corporate R&D and venture capital through to asset financing. This figure was down 6.4% from the revised 2008 figure of $173 billion. Speaking to reporters before the start of a BNEF conference in London yesterday, CEO Michael Liebreich said that investment this year "could be as high as 2008 … given that [government] stimulus money is now coming through at the project level". While he gave a range of $175 billion-200 billion, he added that "if our past record is anything to go by, I'm more likely to be surprised on the upside."

However, a long-term projection from a new economic model built by BNEF forecasts that investments in renewable energy generating assets will only reach $150 billion by 2020 and $200 billion by 2030, based on existing policies and measures, up from $90 billion in 2009. This would mean that renewables account for 22% of the world's installed power generation base by 2020, up from 13% today, and 31% by 2030.

"These figures must increase significantly in order to avert the worst effects of climate change and achieve an average of 2 t CO2 [tonnes of CO2] per head by 2050," the company says – namely to $230 billion by 2020 and $500 billion by 2030. Guy Turner, director of carbon markets at BNEF, said that a global carbon price of $65/tCO2 by 2013, rising to $100/t by 2030, would be sufficient to drive this increased level of investment. "We would get there – we've got the technology, all we need is the willpower," he said.

However, current carbon prices in Europe are at around $15/t, and the US and China – the world's two largest emitters – appear extremely reluctant to begin putting a price on carbon. Nonetheless, Turner insisted that the price on carbon is "affordable – $100/t won't destroy our way of life".

Liebreich said he was unfazed by the failure of the Copenhagen conference to make much progress on securing a post-2012 international climate change deal. "The focus on Copenhagen and Mexico [where UN climate talks will continue, in December], is a distraction, compared with what's actually happening on the ground," with national and regional legislation and policies to support low-carbon investment.

"We'll be negotiating on climate for the next 50 years," he said, noting that "whole other areas of global policy-making", around tariffs and trade, and national and international product standards, are likely to become more important in promoting low-carbon technologies and emission reductions.