Clean Energy In 2016: Investments Dropped, Solar Set Install Record
Although global investment in clean energy declined in 2016, a record 70 GW of solar capacity was added worldwide last year, which is up from 56 GW in 2015, according to a new report from Bloomberg New Energy Finance (BNEF).
The report says new clean energy investment fell 18% last year to $287.5 billion, and the 2016 setback in global investment, signaled in advance by weak quarterly figures during the course of last year, partly reflected further sharp falls in equipment prices, particularly in solar photovoltaics. However, the report notes there was also a marked cooling in two key markets: China and Japan. Clean energy investment in China in 2016 was $87.8 billion, down 26% on the all-time high of $119.1 billion reached in 2015, while the equivalent figure for Japan was $22.8 billion, down 43%.
Justin Wu, head of Asia for BNEF, explains, “After years of record-breaking investment driven by some of the world’s most generous feed-in tariffs, China and Japan are cutting back on building new large-scale projects and shifting toward digesting the capacity they have already put in place.
“China is facing slowing power demand and growing wind and solar curtailment,” continues Wu. “The government is now focused on investing in grids and reforming the power market so that the renewables in place can generate to their full potential. In Japan, future growth will come not from utility-scale projects, but from rooftop solar systems installed by consumers attracted by the increasingly favorable economics of self-consumption.”
According to the report, offshore wind was the brightest spot in the global clean energy investment picture in 2016. Capital spending commitments to this technology hit a record $29.9 billion in 2016, up 40% on the previous year, as developers took advantage of improved economics, resulting from bigger turbines and better construction know-how.
Jon Moore, chief executive of BNEF, comments, “The offshore wind record last year shows that this technology has made huge strides in terms of cost-effectiveness and in proving its reliability and performance. Europe saw $25.8 billion of offshore wind investment, but there was also $4.1 billion in China, and new markets are set to open up in North America and Taiwan.”
The report notes that even though global clean energy investment significantly dropped last year, the total capacity installed did not. In addition to the aforementioned 70 GW of solar installed in 2016, the report says 56.5 GW of wind was added worldwide, which is down from 63 GW but the second-highest figure ever.
According to the report, clean energy investment in the U.S. slipped 7% to $58.6 billion, as developers took time to progress wind and solar projects eligible for the tax credits that were extended by Congress in December 2015. Canada was down 46% at $2.4 billion.
Investment in the whole Asia-Pacific region, including India and China, fell 26% to $135 billion, some 47% of the world total. India was almost level with 2015, at $9.6 billion, with several giant solar PV plants going ahead.
The report says Europe was up 3% at $70.9 billion, helped by offshore wind and also by the biggest onshore wind project ever financed – the 1 GW, $1.3 billion Fosen complex in Norway. The U.K. led the European field for the third successive year, with investment of $25.9 billion, up 2%, while Germany was second at $15.2 billion, down 16%. France got $3.6 billion, down 5%, and Belgium $3 billion, up 179%, while Denmark was 102% higher at $2.7 billion, Sweden up 85% at $2 billion and Italy up 11% at $2.3 billion.
Among developing nations, the report continues, many saw investment slip, as projects that won capacity in renewable energy auctions during 2016 did not secure financing before the year-end. Investment in South Africa fell 76% to $914 million, while that in Chile dropped 80% to $821 million, Mexico fell 59% to $1 billion and Uruguay 74% to $429 million. Brazil edged down 5% to $6.8 billion.
The report says one of the emerging markets to go the other way was Jordan, which broke the $1 billion barrier for the first time, with its clean energy investment increasing 147% to $1.2 billion in 2016.
Categories and sectors
The report says the biggest category of investment in clean energy in 2016 was, as usual, asset finance of utility-scale renewable energy projects. This totaled $187.1 billion last year, down 21% on 2015. The biggest seven financings were all in offshore wind in Europe, but there were also large deals in solar thermal and PV, biomass, and geothermal.
Among other categories of investment, small-scale projects of less than 1 MW – including rooftop PV – attracted 28% less investment than the previous year, with the 2016 total finishing at $39.8 billion. The report says most of this year-on-year drop reflected falling costs of solar systems rather than a decline in interest from buyers.
Public markets investment in quoted clean energy companies was $12.1 billion in 2016, down 21%. The report says the most cash was raised by Innogy, the renewable power offshoot of German utility RWE, which secured just over $2.2 billion of new money in an initial public offering, and BYD, a Chinese electric vehicle maker, which took just under $2.2 billion via a secondary share issue.
Venture capital and private equity investment in clean energy firms rose 19% to $7.5 billion, with the largest rounds coming from two Chinese electric vehicle businesses, Le Holdings and WM Motor Technology, raising $1.1 billion and $1 billion, respectively. The report says U.S. solar developer Sunnova took the third most, at $300 million.
Corporate research and development (R&D) spending on clean energy fell 21% to $13.4 billion, while government R&D moved up 8% to $14.4 billion. Last but not least, the report adds, asset finance of energy smart technologies surged 68% last year to $16 billion, helped by a jump in global smart meter spending, from $8.8 billion in 2015 to $14.4 billion.
Taking all categories of investment into account, the report says solar was the leading sector once again, at $116 billion; however, this was 32% down on 2015 levels due, in large part, to lower costs per megawatt. Wind saw $110.3 billion invested, which is down 11%, while energy smart technologies attracted $41.6 billion, up 29%; biomass was more or less level on 2015 at $6.7 billion; and biofuels secured just $2.2 billion, down 37%. Small hydro showed a 1% dip in investment to $3.4 billion, while low-carbon services attracted $4.3 billion, up 5%; geothermal $2.7 billion, up 17%; and marine energy $194 million, down 7%.
Record acquisition activity
Also measured by BNEF, but not included in the figures for new investment, is acquisition activity in clean energy. This totaled $117.5 billion in 2016, which is up from $97 billion in 2015, and it represented the first time this has broken the $100 billion level. BNEF says behind the surge were a rise in renewable energy project acquisitions to $72.7 billion and, in particular, a leap in corporate mergers and acquisitions to a record $33 billion. The top takeovers included Tesla’s acquisition of SolarCity and Enel’s buyback of the minority holders in Enel Green Power, according to BNEF.
Sungevity’s Deal To Go Public Falls Through
A blank-check company has terminated an agreement with Sungevity Inc. that would have paved the way for the rooftop solar solutions provider to become a public company.
In June 2016, California-based Sungevity announced a reverse merger deal with Easterly Acquisition Corp., a shell company created by asset management firm Easterly Capital. Once the reverse merger closed, Easterly Acquisition Corp. was slated to become Sungevity Holdings Inc. and trade on the NASDAQ stock exchange under a new ticker symbol. The agreement was expected to provide the struggling solar company with around $200 million in cash for its business operations.
The parties anticipated the reverse merger agreement to close by the end of 2016, subject to various approvals. However, in a U.S. Securities and Exchange Commission (SEC) filing, Easterly Acquisition Corp. states it has terminated the transaction.
When first announcing the reverse merger plan in June, Sungevity CEO and Co-founder Andrew Birch said the company expected the agreement to “enhance our ability to innovate and grow as we strive to provide the highest customer experience to our expanding customer base.”
Darrell Crate, chairman of Easterly Acquisition Corp., added, “Sungevity makes solar simple and now will provide public investors the opportunity to gain exposure to the accelerating growth of the solar adoption curve. We believe that our merger with Sungevity will accelerate the pace of its growth and create superior value for our shareholders.”
Although the SEC document does not offer many details about the terminated agreement, Crate explains in an emailed statement to Solar Industry, “We concluded it was not the right time to pursue a merger with Sungevity for a host of reasons, including changes in the marketplace regarding the valuations of renewable energy companies.”
Indeed, several market factors, such as the bankruptcy of renewables giant SunEdison, module oversupply and regulatory uncertainty, caused investors to be wary of solar providers in 2016.
Raj Prabhu, CEO and co-founder of clean energy communications and research firm Mercom Capital Group, says, “Out of a peer group of 31 solar public companies around the world, 27 of them were in negative territory in 2016. That gives you a picture of how tough the stock market was on solar companies last year.”
Prabhu adds, “The rooftop solar market has slowed, and installers, especially large installation companies, have struggled to make a profit. Installers that went public like SolarCity, Sunrun and Vivint Solar have all struggled.”
As of press time, Sungevity has not responded to requests for comment, but in a Reuters report, Birch suggests renewable energy investors also became more cautious following the presidential election of Donald Trump, a climate change doubter who has questioned the costs and viability of solar and wind power.
According to Birch, “We lost the attention of investors. There is a good amount of uncertainty until Trump gets into office and his team starts describing what their policy plans are.”
Now that the agreement has been terminated, what lies ahead for Sungevity?
“Sungevity was looking for the $200 million in cash that the deal would have brought in. With the deal canceled, the company needs to raise money elsewhere,” says Prabhu. “The company has raised a billion dollars in equity, debt and project financing, but more recently, we have not seen where they have raised much.”
In the solar space, Prabhu explains, “Financing is the biggest challenge. Considering that most installers, including Sungevity, are not profitable, it is make or break unless you continue to raise capital.”
Birch does not specify the company’s future plans in the Reuters report, but he insists that the transaction did not fall through as a result of Sungevity’s financial situation. In fact, he claims that Sungevity is “very close” to being in the black, according to the report.
As for the future of Easterly Acquisition Corp., Crate says, “We are actively looking for opportunities to deploy our capital in a way that will be advantageous to our public shareholders.” He notes that the public blank-check company was not specifically formed to acquire Sungevity and is not focused solely on the solar industry. – Joseph Bebon
U.S. Solar Employment Jumped 25%
Changes in America’s energy profile are affecting national employment in key sectors of the economy, explains a report from the U.S. Department of Energy (DOE). In particular, wind and solar added 25,000 and 73,000 new jobs in the country, respectively, last year, says the agency.
According to the DOE’s second annual report tracking these employment trends, 6.4 million Americans now work in the “traditional energy and energy efficiency industries,” which added over 300,000 net new jobs in 2016 – representing 14% of the nation’s job growth. The report describes “traditional energy” jobs as those in “electric power generation and fuels” and “transmission, distribution and storage,” both of which include “fossil, nuclear, and renewable energy sources and their value chains,” the report explains. In addition, “energy efficiency” jobs are described as those covering the “production of energy-saving products and the provision of services that reduce end-use energy consumption.” The report notes that energy efficiency employment increased by 133,000 jobs for a total of 2.2 million.
The agency says its “2017 U.S. Energy and Employment Report” (USEER) uses information from surveys to over 30,000 employees in energy sectors and tracks “dramatic growth” in several key sectors of the U.S. economy in 2016. The report also uses secondary data from the U.S. Department of Labor.
For wind power specifically, the industry employs a total of 101,738 workers, which represents a 32% increase since 2015, the report says. The largest share of wind employment lies in construction, which accounts for 37% of the workforce. Manufacturing and wholesale trade follow at 29% and 14%, respectively.
For solar, the report says U.S. Department of Labor data does not adequately capture the true employment numbers: The data “dramatically underestimates” how many workers are employed in the solar sector, which, the DOE report says, includes 373,807 Americans who “spend some portion of their time working to install, distribute or provide professional services to solar technologies.” Like wind, construction/installation represents the biggest employment share, followed by “wholesale trade, manufacturing and professional services.” Overall, the DOE says, the U.S. solar workforce increased 25% in 2016.
“This report verifies the dynamic role that our energy technologies and infrastructure play in a 21st-century economy,” says David Foster, the DOE’s senior advisor on industrial and economic policy. “Whether producing natural gas or solar power at increasingly lower prices or reducing our consumption of energy through smart grids and fuel-efficient vehicles, energy innovation is proving itself as the important driver of economic growth in America, producing 14 percent of the new jobs in 2016.”
USEER examines four sectors of the economy – electric power generation and fuels; transmission, wholesale distribution and storage; energy efficiency; and motor vehicles – which cumulatively account for almost all of the U.S.’ energy production and distribution system and roughly 70% of U.S. energy consumption, according to the DOE.
By looking at such a wide portion of the energy economy, the agency says, USEER can provide the public and policymakers with a clearer picture of how changes in energy technology, systems and usage are affecting the economy and creating or displacing jobs.
Of the 1.9 million workers in electric power generation and fuels, 800,000 employees contribute to the production of low-carbon electricity, including renewable energy, nuclear energy and low-emission natural gas, the report says.
In addition, in an analysis of the 2.4 million employees in the motor vehicles industry, USEER identified 259,000 jobs supported by alternative fuel vehicles – representing an increase of 69,000 during 2016.
Yet, even as the report found the opportunity for job growth in many energy sectors, 73% of all employers surveyed found it “difficult or very difficult” to hire new employees with needed skills. However, this represented a slight increase in hiring difficulty over the previous year, according to the DOE.
USEER also provides individual state energy and employment profiles. The state reports highlight the growth and loss of jobs in particular energy sectors across the country and will provide a tool for state energy offices and economic development agencies, says the DOE, adding that state profiles demonstrate the unevenness of growth in new energy technologies. For instance, 41% of all solar jobs are in California, while 24% of all wind jobs are in Texas.