Solar Energy continued to dominate clean energy investment in the 3rd quarter of 2012 with more than double the money being invested in solar energy plants compared to wind power farms. The total green investment could fall for the first time in 8 years according to BNEF as investment has declined sharply in major wind energy markets of USA and India. Note USA faces the expiry of the 30% tax credit on wind investment while India has already suspended the accelerated depreciation and GBI for wind energy developers. While both the subsidies are being pushed by the renewable energy lobbies for a reintroduction, it looks unlikely that wind investment can pick up for the rest of 2012. Note China is already saturated with wind capacity and cannot show further growth given the constraints in the power grid.
Solar Energy Investment in 2011 dominates Wind Energy
Investment in Solar Energy sector jumped by more than 50% y/y to around $150 billion in 2011 with solar projects being built frantically in Germany, Italy and China. Massive oversupply in the solar industry meant that thousands of solar panel companies went bankrupt even as demand surged. Note Wind Energy which has the largest installed base in green energy at around 150-200 GW has matured. The big spurt in growth has already occurred in most of the big countries like China, USA and Europe. Also the cost reduction in wind energy has not been as sharp as that by crystalline silicon solar panels. This means the cost curve of solar power is set to beat that of wind energy in the next 2-3 years. Also solar energy unlike wind energy does not have a scale issue as wind energy requires bigger wind turbines of 5 MW or greater size to achieve cost reduction.
The Bloomberg report shows that traditionally strong markets of China, USA, Europe and India are slowing down and some of the slack is being picked up in newer regions like African (Morocco), South America (Brazil) and SE Asia. The prices of solar and wind energy equipment continue to remain at low levels as massive overcapacity created in China keeps the costs for developers at bargain basement levels.
The $56.6 billion injected into clean energy projects in the third quarter was down 5 percent from the second quarter and indicates that investment may fall for the first time in eight years when figures for the whole of 2012 are tallied, the London-based researcher said in a statement today.
The industry is suffering from excess capacity that’s driven down prices for solar panels and wind turbines, meaning developers pay less to install each megawatt of capacity. “The location of some of the biggest projects financed in quarter three this year highlight the geographical shift that is taking place in clean energy, with established markets such as the U.S., Europe and China losing momentum while newer markets in South America, Asia and Africa pick up steam,” said Michael Liebreich, chief executive officer of New Energy Finance.
Spending in the U.S. was $7.3 billion, down 28 percent from the previous quarter and 62 percent on the same period last year. Investment in India also slid 16 percent from the second quarter and 60 percent from a year ago. Brazil showed a 94 percent increase to $1.9 billion from the three months ended in June and a 24 percent boost from the same quarter a year ago.