Greener and greener
The Paris Agreement and a sharp fall in costs cheered investors in renewable energy
Global spending on renewable energy in 2016 eased back from the record high of the previous year but this reflected the depressed state of capital markets, cheaper installation prices and sluggish economic growth, not a loss of appetite for green power. Many markets were also still digesting the huge volumes of capacity added in earlier years.
Taken together, the past two years might be seen as the period when the renewables revolution got moving. Global climate-change talks at the end of 2015 produced a more far-reaching agreement than many expected. And, despite the dip in investment, renewables' share of overall spending grew (while that for oil and gas investment collapsed). Additions to green capacity were an incredible 60% greater than for conventional power stations in 2015, said the World Energy Council (Wec).
The cost of installing green energy fell - ruining theories that cheap oil and gas would kill off the renewables surge. This was especially true for wind and solar, which in recent years have accounted for around three-quarters of new renewables capacity.
In windy places with low costs - the coasts of North Africa, Brazil, Mexico and South Africa - the price of onshore wind power was routinely below $50 per megawatt hour in 2016. Those kinds of prices were also achieved for solar power in places like Mexico. By comparison, generation from coal and gas cost $75-100/MWh. Clouds and poor weather wipe out that differential, so the price wasn't too competitive in northern Europe. Still, the argument against green energy on the basis of cost might have died out for good in 2016. Scale was still the problem. The overall contribution of solar and wind power around the world remained small - just 4% of the total, according to Wec.
The winds also shifted fundamentally in terms of climate policy in 2016, especially in poorer countries. The UN-backed Paris conference, at the end of 2015, agreed tighter measures to control emissions - a moment of joy for any renewable-energy investor (and anyone troubled by climate change).
For all the excitement of Paris, though, investment in new renewables capacity in 2016 simply couldn't keep the pace set in 2015, when the industry splurged almost $350bn. In part, this reflected a slowdown in energy demand, especially in Asia. In China, now the world's largest renewables market, spending was down by a third, according to Bloomberg New Energy Finance, a compiler of such data. The downtrend also showed something else: the falling cost of installation and, especially in solar, a shift from relatively expensive small projects to larger-scale farms.
As for the greening of transport, 2016 brought major growth (from a low base). Global sales of electric vehicles (EVs) grew by nearly 50% in the first half of 2016 alone compared with the same period in 2015. Swedish firm EV Volumes reckoned total sales would reach 0.85m by year's end. China and Europe led the trend.
The petroleum industry snoozed through all that, knowing only about 1% of the world's cars are electric. For all the new models announced by automakers in 2016, and despite much talk during the year of autonomous vehicles, they remain too expensive. Yet the enthusiasm for the technology hasn't abated during a year of cheap gasoline, and some analysts predicted EVs were now just a decade away from price parity with the internal-combustion engine. In 2016, the eternal optimism of fossil-fuel merchants - ever convinced of their product's dominant place in the market - started to look a little more doubtful.
This article is part of Outlook 2017, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here