Global investment in the renewable energy sector climbed 11 per cent to $226 billion in the first half of 2022 amid higher energy prices, according to a report by research company BloombergNEF (Bnef).
Investment in new large- and small-scale solar projects rose 33 per cent to a record-breaking $120bn, while wind project financing grew 16 per cent to $84bn, the report said.
“Policymakers are increasingly recognising that renewable energy is the key to unlocking energy security goals and reducing dependence on volatile energy commodities,” said Albert Cheung, head of analysis at Bnef.
“Despite the headwinds presented by ongoing cost inflation and supply chain challenges, demand for clean energy sources has never been higher, and we expect that the global energy crisis will continue to act as an accelerant for the clean energy transition.”
Oil prices, which rose 68 per cent last year during a faster-than-expected economic rebound, have been extremely volatile this year, rocked by the Russia-Ukraine conflict.
Brent is up more than 28 per cent since the start of the year after falling from a 14-year high in April when the benchmark touched nearly $140 per barrel after sanctions by the US and the UK on the import of Russian crude.
Brent, the global benchmark for two thirds of the world's oil, was trading at $100.10 per barrel at 7.54pm UAE time on Tuesday, while West Texas Intermediate, the gauge that tracks US crude, was at $93.86 a barrel.
Renewables are expected to drive 8 per cent rise in global energy investment in 2022, to this year to $2.4 trillion, a report has shown, the International Energy Agency said in a June report. The energy body expect more investors to lean towards clean energy amid the universal drive to seek alternatives to fossil fuels.
The fastest growth in energy investment is coming from the power sector — mainly in renewables and grids — and from energy efficiency, the IEA's World Energy Investment 2022 report showed.
Venture capital and private equity investments into renewables and energy storage climbed 63 per cent to reach a record $9.6bn in the first half of 2022, according to the BNEF report, while public market issuances for renewable energy companies dropped 65 per cent to $10.5bn.
China, the world’s second-largest economy, posted higher investment growth in wind and solar project finance. The country’s large-scale solar investments totalled $41bn in the first half of 2022, up 173 per cent from the year before. It also invested $58bn in new wind projects, up 107 per cent year on year, according to the report.
“Green infrastructure is the most important investment area that China is relying on to boost its weak economy in the second half of 2022,” said Nannan Kou, Bnef’s head of China analysis.
“The investment growth trend follows China’s strategy to build new renewable generation capacity so that it can replace its existing coal fleet. China is well on track to hit its 1,200 gigawatt wind and solar capacity target by 2030.”
Offshore wind was another sector that recorded a steep increase, with investment up 52 per cent from the previous year, to $32bn, the report said.
“Investments in 2022 will flow into projects coming online in the next few years as the offshore wind installed base is set to grow tenfold from 53 gigawatts in 2021 to 504 gigawatts in 2035," said Chelsea Jean-Michel, offshore wind analyst at BNEF.
"Offshore wind projects enable companies and governments to make progress towards their decarbonisation goals at scale. The UK, France and Germany are just a few of the countries that have increased their offshore wind targets in the first half of 2022, signalling further support for investment in the technology.”
Meanwhile, renewables remain extremely cost-competitive with prices in the industry dropping last year, even as the energy market tackles a global fossil fuel crisis, a recent report by the International Renewable Energy Agency showed.
Given the current high prices of fossil fuel generation, the renewable power added in 2021 saved about $55bn from global energy generation costs in 2022, according to Irena's estimates.
“Renewables are by far the cheapest form of power today,” Irena's director general Francesco La Camera, said last month.