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Global energy transition investment hit US$500 billion in 2020 – BloombergNEF

A new, broad measure of ‘energy transition investment’, compiled by BloombergNEF (BNEF), shows that the world committed a record US$501.3 billion to decarbonization in 2020, beating the previous year by 9 percent despite the economic disruption caused by the ongoing coronavirus (COVID-19) pandemic.

According to BloombergNEF (BNEF), global energy transition investment in carbon capture and storage (CCS) tripled to US$3 billion, and that in hydrogen was US$1.5 billion, down 20 percent but the second-highest annual number to date (graphic courtesy BNEF).

BNEF’s analysis shows that companies, governments, and households invested US$303.5 billion in new renewable energy capacity in 2020, up 2 percent on the year, helped by the biggest-ever build-out of solar projects and a US$50 billion surge for offshore wind. They also spent US$139 billion on electric vehicles (EVs) and associated charging infrastructure, up 28 percent and a new record.

Other areas of energy transition investment also showed strength. Domestic installation of energy-efficient heat pumps came to US$50.8 billion, up 12 percent, while investment in stationary energy storage technologies such as batteries but excluding pumped storage was US$3.6 billion, level with 2019 despite falling unit prices.

Our figures show that the world has reached half a trillion dollars a year in its investment to decarbonize the energy system. Clean power generation and electric transport are seeing heavy inflows, but need to see further increases in spending as costs fall. Technologies such as electric heat, CCS, and hydrogen are only attracting a fraction of the investment they will need in the 2020s to help bring emissions under control. We need to be talking about trillions per year if we are to meet climate goals, said Albert Cheung, Head of Analysis at BNEF.

Europe the largest investor

A geographical split of BNEF’s energy transition investment data shows that Europe accounted for the biggest slice of global investment, at US$166.2 billion (up 67 percent), with China at US$134.8 billion (down 12 percent) and the United States (US) at US$85.3 billion (down 11 percent).

Europe’s impressive performance was driven by a record year for electric vehicle (EV) sales, and the best year in renewable energy investment since 2012.

The coronavirus pandemic has held back progress on some projects, but overall investment in wind and solar has been robust and electric vehicle sales jumped more than expected. Policy ambition is clearly rising as more countries and businesses commit to net-zero targets, and green stimulus programs are starting to make their presence felt. Some 54 percent of 2016 emissions are now under some form of net-zero commitment, up from 34 percent at the start of last year. This should drive increasing investment in the coming years, said Jon Moore, Chief Executive of BNEF.

Renewable energy investment

Global investment in renewable energy capacity, excluding large hydroelectric projects of more than 50MW and pumped storage, moved up 2 percent to US$303.5 billion in 2020. This was the second-highest annual figure ever (after 2017’s US$313.3 billion), and the seventh consecutive total of more than US$250 billion.

Falling capital costs enabled record volumes of both solar (132GW) and wind (73GW) to be installed on the basis of the modest increase in dollar investment.

Highlights of the renewables investment total included a leap of 56 percent in financings of offshore wind projects to US$50 billion, including the largest deal ever in that sub-sector – US$8.3 billion for the 2.5GW Dogger Bank project in the UK North Sea.

The year also saw the largest single solar park ever funded, the 2GW Al Dhafrah in the United Arab Emirates (UAE), at a cost of US$1.1 billion. Overall, solar capacity investment was up 12 percent at US$148.6 billion, and wind (onshore and offshore) down 6 percent at US$142.7 billion. Biomass and waste-to-energy financings were down 3 percent at US$10 billion.

In terms of regions, renewable energy capacity investment in Europe, at US$81.8 billion, up 52 percent, was its highest since 2012 and almost caught up with China, at US$83.6 billion, down 12 percent. The US fell 20 percent to US$49.3 billion, as wind investment almost halved, and India slipped 36 percent to US$6.2 billion.

Renewables capacity investment rose 10 percent in Japan to US$19.3 billion, 177 percent in the UK to US$16.2 billion, and 221 percent in the Netherlands to US$14.3 billion. Spain was up 16 percent at US$10 billion, Brazil up 23 percent at US$8.7 billion, Vietnam 89 percent higher at US$7.4 billion, France 38 percent up at US$7.3 billion, and Germany 14 percent up at US$7.1 billion.

Other markets seeing US$3 billion-plus totals included Taiwan, Australia, South Korea, Poland, Chile, Turkey, and Sweden.

Public markets and VC/PE

BloombergNEF also continues to track investment by the public markets and venture capital and private equity players in renewable energy and the closely related area of energy storage. In 2020, specialist companies in these areas raised a runaway record figure of US$20 billion via share issues on public markets, up 249 percent on the previous year.

The biggest deals included US$2.8 billion raised by Chinese battery maker Contemporary Amperex Technology, or CATL, US$846 million from the American fuel cell company Plug Power, and US$777 million from Chinese PV manufacturer JA Solar Technology.

Venture capital and private equity investment in renewables and storage increased 51 percent to US$5.9 billion last year. Both this, and investment via the public markets, took place against the backdrop of buoyant share prices: the WilderHill New Energy Global Innovation Index, or NEX, which tracks about 100 clean energy stocks worldwide, rose 142 percent in 2020 to record levels.

This positive investor mood helped electric vehicle companies raised some US$28 billion from stock market investors in 2020, up from just US$1.6 billion in 2019, according to BNEF estimates. Last year’s total was seven times the previous record, in 2016.

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