WHEN	
  244	
  BILLION	
  IS	
  NOT	
  ENOUGH…	
  
Be#er	
  Energy	
  Monitor	
  	
  
October	
  2013	
  
Propelled	
  by	
  reduced	
  technology	
  costs,	
  new	
  capacity	
  grows	
  by	
  record	
  numbers	
  

Key	
  findi...
UMlity-­‐scale	
  and	
  small	
  distributed	
  capacity	
  dominate	
  investment	
  flows	
  in	
  2012	
  
Renewable	
 ...
Renewable	
  energy	
  ready	
  to	
  overtake	
  fossil	
  fuel	
  investment	
  by	
  end	
  of	
  this	
  decade	
  
In...
Solar	
  PV	
  and	
  onshore	
  wind	
  lead	
  investment	
  while	
  investment	
  in	
  developing	
  countries	
  pic...
Improved	
  electricity	
  grid	
  and	
  economically	
  sustainable	
  support	
  systems	
  are	
  key	
  to	
  cost-­‐...
More	
  investment	
  into	
  renewable	
  energy	
  is	
  urgently	
  required	
  

10,000	
  

CumulaMve	
  installed	
 ...
Our	
  views	
  on	
  the	
  future	
  of	
  renewable	
  energy	
  investment	
  
We	
  expect	
  the	
  imperaMve	
  to	...
About	
  Be#er	
  Energy	
  
"  Who	
  we	
  are	
  	
  
Beker	
   Energy	
   is	
   a	
   	
   plaworm	
   for	
   fundin...
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When $244Bn is not enough

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New Investment in Renewables is just $2Bn short of overtaking Investments in Fossil Energy Sources. Read about trends in Renewable Energy Investments in First Issue of Better Energy Market Monitor

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When $244Bn is not enough

  1. 1. WHEN  244  BILLION  IS  NOT  ENOUGH…   Be#er  Energy  Monitor     October  2013  
  2. 2. Propelled  by  reduced  technology  costs,  new  capacity  grows  by  record  numbers   Key  findings   §  Total   investment   in   renewable   power   and   fuels   amounted   to   €244bn,   down   by   12%   from   2011   record   figure  of  €279bn   §  Despite   this   drop,   2012   saw   second-­‐highest   total   investment  in  renewables   §  §  A   notable   shiE   in   momentum   between   developed   and   developing  countries  led  to  a  rise  of  19%  in  renewables   investment   to   $112bn   in   developing   countries,   while   funds   channelled   into   clean   energy   in   developed   countries  dropped  by  29%  to  132bn   AEer  closely  compeHng  with  the  US  in  2011,  China  was   the   dominant   country   for   investment   in   renewable   energy,   with   a   rise   of   22%   to   a   total   of   $67bn,   mostly   due  to  a  jump  in  solar  investment   §  Further   significant   reducHon   in   costs   of   solar   PV   technology   brought   increased   compeHHveness   of   solar   energy   across   all   segments,   parHcularly   in   small-­‐scale   residenHal  sector   §  New   solar   PV   capacity   installed   in   2012   was   a   record   30.5GW,   up   from   the   previous   year’s   28.8GW.     However,   the   total   amount   invested   in   solar   fell   by   11%   to  a  total  of  $140bn   §  New   installed   wind   capacity   reached   a   record   48.4GW   in  2012,  up  from  42.1GW  in  2011   §  Japan   became   an   unexpected   success   story,   as   it   saw   investment   in   renewable   energy,   excluding   R&D,   surge   73%  to  $16bn   §  Small-­‐scale   capacity   (of   less   than   1MW)   was   the   strongest  area,  rising  3%  to  $80bn  in  2012  
  3. 3. UMlity-­‐scale  and  small  distributed  capacity  dominate  investment  flows  in  2012   Renewable  energy  investment  by  type  of  finance  in  2012,  $bn   400   52.2   300   80   297   244   148.5   200   100   0   2.3   4.8   4.8   Venture  capital  Corporate  R&D   Gov't  R&D   1.4   4.1   Private  equity   Public  markets   Asset  finance   -­‐  new  equity   Small   distributed   capacity   Total  new   M&A/buy-­‐out   Total   investment   transacHons   Source:  Global  Trends  in  Renewable  Energy  Investment,  Bloomberg  New  Energy  Finance,  2013   Maturing  sector  conMnues  to  add  installed  capacity…   …  but  some  concerns  remain   §  Asset   finance   of   uHlity-­‐scale   mature   technologies   (onshore   wind,  solar  PV)  is  the  major  driver  of  capacity  addiHons   §  Reduced   financing   of   early-­‐stage   technologies   via   venture   capital,   corporate   and   government   R&D   in   2012  leads  to  concerns  about  the  ability  of  supply  chain   to   respond   to   future   demand   with   new   improved   technologies   §  Public   markets   (new   share   lisHngs)   experienced   the   largest  drop  in  funding,  falling  by  61%  from  2011  level   to  $4.1bn  in  2012   §  At   the   same   Hme,   financing   of   small   distributed   capacity   has   increased  each  year  from  2004  to  2012,  and  at  $80bn  closely   follows  uHlity-­‐scale  asset  finance     §  Small   distributed   capacity   represents   residenHal   and   commercial   market   segments   where   high   retail   electricity   prices  make  distributed  renewables  cost-­‐compeHHve  
  4. 4. Renewable  energy  ready  to  overtake  fossil  fuel  investment  by  end  of  this  decade   Investment  in  renewable  energy  generaMng  capacity*  and  fossil  fuel   capacity,  $bn     400   300   262   227   200   100   0   2008   2009   2010   Renewable  energy     2011   2012   Fossil  fuels   Source:  Global  Trends  in  Renewable  Energy  Investment,  Bloomberg  New  Energy  Finance,  2013   §  Narrow   difference   between   investment   in   renewable   energy   generaHng   assets   and   fossil   fuel   capacity   puts   renewables  on  track  to  overtake  fossil  fuels  by  the  end  of  this  decade   §  Due   to   capacity   reHrement   and   growing   replacement   needs   for   fossil   fuels   plants,   only   $147bn   out   of   total   $262bn  is  esHmated  to  be  invested  into  new  fossil  fuel  capacity  in  2012   §  In  contrast,  almost  all  of  $227bn  channelled  into  renewables  is  esHmated  to  be  for  new  build-­‐out   §  When  $33bn  of  large  hydro  is  taken  into  account,  total  investment  in  RE  generaHng  capacity  reaches  $260bn     *  Renewable  energy  generaHng  assets  include  asset  finance  of  and  exclude  biofuels  and  large  hydro    
  5. 5. Solar  PV  and  onshore  wind  lead  investment  while  investment  in  developing  countries  picks  up   pace     Total  investment  in  2012  by  technology,  $bn   New  solar  PV  capacity  installed  reached  a  record  of  30.5  GW,   up  from  28.8  GW  installed  in  2011   New  wind  capacity  installed  hit  a  record  of  48.4  GW,  up  from   42.1  GW  in  2011   Record   new   installed   capacity   is   due   to   falling   cost   of   renewable  energy  –  in  case  with  uHlity-­‐scale  solar  PV,  nearly   40%  cost  reducHon  between  2011  and  2012   §  Developing  countries  en  route  to  close  the  gap  in  investment   with  developed  countries   §  China   emerged   as   the   dominant   player   with   $67bn   channelled   into  clean  energy,  up  by  22%  from  year  before   §  Sharp   increases   in   investment   in   South   Africa,   Morocco,   Mexico,  Chile  and  Kenya   §  Solar   §  §  5   As   more   mature   technologies,   onshore   wind   and   solar   PV   conHnue   to   outpace   other   technologies   in   terms   of   total   investment  flows     §  Wind     §  Developing   countries   increasingly   akracHve   not   only   for   uHlity-­‐scale  installaHons  but  also  for  small  distributed  capacity   7.8   8.6   80.3   Biofuels   Biomass  and  WtE   Small  hydro   Geothermal   140.4   Marine   Total  investment  by  geography,  $bn   200   186   150   150   132   103   100   50   112   73   48   32   8   17   27   59   43   112   104   64   94   77   0   2004   2005   2006   2007   2008   Developed  countries   2009   2010   2011   Developing  countries   2012  
  6. 6. Improved  electricity  grid  and  economically  sustainable  support  systems  are  key  to  cost-­‐ compeMMveness  of  clean  energy         Current  status     Key  developments    to  watch  for   Germany     Germany   added   a   record   7.6   GW   solar   PV   capacity  in  2012,  with  cumulaHve  34.5  GW  by  July   2013.   While   a   recent   freeze   of   levy   charged   to   consumers  for  support  of  renewable  energy  may   h a v e   r a k l e d   t h e   s e c t o r ,   G e r m a n y ’ s   comprehensive   framework   for   invesHng   in   renewables  remains  a  definite  advantage.   •  ConHnued  grid  expansion  –  three  new  “power  autobahns”   approved   by   the   government   in   Q4   2012   consisHng   of   5,700  km  of  new  and  upgraded  cables;     •  implementaHon   of   “Offshore   Grid   Development   Plan”   meant   to   give   a   Hmetable   for   offshore   grid   build-­‐out   for   the  next  10  years     Japan   As   a   relaHvely   new   market   entrant,   Japan   saw   investment  in  renewables  in  2012  soar  by  73%  to   $16bn,  mostly  due  to  a  boom  in  small-­‐scale  solar   PV  following  new  feed-­‐in  tariff  announcement.   •  Government   announcement   of   plans   to   build   1GW   of   offshore  wind  off  the  coast  of  Fukushima  by  2020;   •  evoluHon   of   the   FIT   regime   which   is   currently   very   akracHve   Poland     Poland   is   an   akracHve   wind   and   solar   market,   despite   a   delay   in   passing   comprehensive   legislaHon   to   support   renewable   energy,   originally  scheduled  for  January  2013.  An  industry   body   esHmates   a   potenHal   to   add   $20bn   to   the   country’s   GDP   through   a   build-­‐out   of   6GW   of   offshore  wind  capacity  .   •  ImplementaHon   of   the   feed-­‐in   tariff   in   2014,   which   will   be   distributed  via  an  aucHon  system   •  development  of  shale  gas  resource  and  its  impact  on  the   European  gas  and  electricity  prices   UK   The   July   2013   release   of   strike   prices   for   CfD   bodes   well   for   onshore   and   offshore   wind   which   will   receive   higher   CfD   payments   compared   to   current   levels,   albeit   for   15   years   instead   of   current   20   years.   Large-­‐scale   solar   PV   is   akracHng   higher   levels   of   both   private   and   public   funding,   however   concerns   grow   about   public   acceptance   of  large-­‐scale  greenfield  solar  plants.   •  Gov’t   shiE   of   offshore   wind   target   of   18GW   by   2020   to   2030   dampens   the   sector   ambiHon   but   pipeline   remains   robust   •  development   of   capacity   market   –   UK   will   experience   dramaHc  fall  in  peak  capacity  margin  by  2022,  hence  the   need  to  guarantee  sufficient  margin  may  increase  the  role   of  renewables  as  baseload  capacity  
  7. 7. More  investment  into  renewable  energy  is  urgently  required   10,000   CumulaMve  installed  capacity  of  renewable  and  convenMonal*  energy  under  2  Degree   Scenario**  to  2050,  GW   8,134   CAGR  renewable  energy   2009-­‐2030:  6%   8,000   7,159   6,255   5,293   6,000   4,292   4,000   2,000   3,235   1,253   1,957   2,453   0   2009   2015   2020   2025   2030   Non-­‐renewables   2035   2040   2045   2050   Renewables   Source:  Tracking  Clean  Energy  Progress,  OECD/IEA  2013   Drivers  of  renewable  energy  investment     §  §  §  §  Further  reducHons  in  installaHon  costs  across  all  technologies   Growing  demand  for  electricity  and  heat  from  developing  and  developed  economies   Carbon   constraints   and   depleHon   of   cheap,   easily   accessible   deposits   lead   to   increasing   fossil  fuel  prices     Fossil   fuel   prices,   rather   than   subsidies,   become   a   defining   factor   for   renewable   energy   prices,  making  renewables  increasingly  compeHHve  with  convenHonal  power   *  ConvenHonal  energy  includes  coal  w/o  CCS,  coal  with  CCS,  natural  gas,  natural  gas  with  CCS,  oil,  nuclear   Renewables   include   biomass   and   waste,   hydro   (inc.   pumped   storage),   solar   PV,   solar   CSP,   wind   onshore,   wind  offshore,  geothermal  and  ocean  power   **  2  Degree  Scenario  foresees  limiHng  the  global  temperature  rise  to  2  degrees  this  century   •  CAGR  2009-­‐2030  for   renewables:  6%   •  Installed  renewable   energy  capacity  is   expected  to  overtake   convenHonal  capacity  in   2030-­‐31   •  Solar  PV  is  projected  to   grow  from  2%  of  total   world  power  generaHng   capacity  in  2012,  to  16%   by  2030   •   Wind  energy  is  forecast   to  expand  from  5%  of   world’s  installed  power   generaHng  capacity  in   2012  to  15%  by  2030  
  8. 8. Our  views  on  the  future  of  renewable  energy  investment   We  expect  the  imperaMve  to  invest  into  clean  energy  to  become  even  stronger,  boosted  by  improving   cost-­‐compeMMveness  of  renewables   UHliHes   focus   away   from   ownership   and   towards   development   and   operaHon   of   clean   energy   infrastructure,  in  2012  €9.6bn  of  renewable  energy  assets   were   sold   by   major   uHliHes,   with   87%   of   that   amount   divested  by  European  uHliHes   §  This   move   by   uHliHes   away   from   ownership   allows   dedicated   investors   (infrastructure   funds,   insHtuHonal   investors)   to   acquire   ownership   stakes   in   operaHng   projects  in  larger  numbers   §  §  Debt   finance   is   sHll   difficult   to   obtain   as   banks   look   to   match   their   long-­‐term   liabiliHes,   making   debt   from   development   banks   and   green   bonds   ever   more   important  for  asset  finance     §  §  Green   bonds   conHnue   their   ascent   in   the   hierarchy   of   clean   energy   finance   –   in   2012,   renewable   energy   projects   issued   $2bn   in   green   bonds,   while   total   green   bond  issues  neared  $5bn,  up  by  44%  from  2011   §  Emerging  markets  are  going  to  conHnue  to  add  capacity   While   insHtuHonal   investors   dominate   the   uHlity-­‐scale   asset   market,   a   lively   small   distributed   capacity   market   and  mid-­‐sized  assets  <1MW  represent  a  playing  field  for   smaller  retail  investors     “Sustaining   the   uptake   of   renewable   energies   will   be   crucial   to   the   success   of   both   Sustainable   Development   Goals   and   the   need   to   limit   the  global  average  temperature  rise  to  less  than  two  degrees  Celsius  this  century.       Renewable  energy  has  been  thriving  despite  an  unequal  landscape  with  respect  to  fossil  fuels  and  the  $600  to  $800  billion  of  subsidies   they  conHnue  to  akract.  The  costs  of  fossil-­‐fuel  based  generaHon,  ranging  from  impacts  on  human  health  to  damage  to  ecosystems  such   as  forests,  water  demand  and  yes,  climate  change,  are  also  currently  leE  outside  the  ledgers  of  profit  and  loss.  If  renewable  and  clean   energy   systems   are   to   reach   their   full   potenHal   over   the   medium   to   long   term,   these   imbalances   need   to   be   addressed   and   these   externaliHes  recognised.”     Achim  Steiner,  UN  Under-­‐Secretary  General  and  UNEP  ExecuHve  Director   ChrisHana  Figueres,  ExecuHve  Secretary  of  the  UN  Framework  ConvenHon  on  Climate  Change   Udo  Steffens,  President  and  CEO,  Frankfurt  School  of  Finance  and  Management  
  9. 9. About  Be#er  Energy   "  Who  we  are     Beker   Energy   is   a     plaworm   for   funding   renewable   energy   enabling   investors   to   invest   directly   in   renewable   energy   projects  such  as  solar,  wind  and  bioenergy   to   achieve   stable   returns   based   on   the   sale  of  the  energy  produced   Mark  Augustenborg  Ødum,  CEO     mao@be#erenergy.dk   "  What  we  do   We   make   renewable   energy   investments   available   to   everyone   by   offering   a   price-­‐ effecHve   structure   where   the   investor   gets  the  full  benefit  of  their  investments         www.bekerenergy.dk   Follow  us  on  linked-­‐in:  Beker  Energy  Invest  A/S   Katya  Peremanova,  OriginaMon  and   Research     kp@be#erenergy.dk  

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