How can shifting public behavior accelerate the energy transition?
While trends in total investment in clean energy have been strong over the last few years, 2016 clean energy investment worldwide looks likely to fall short of 2015’s record $348.5 billion by between 15 and 20 percent (estimated by BNEF – final numbers out end-April). Preliminary statistics by BNEF for the first three quarters of the year show a drop of some 30 percent in large-scale asset finance .
BNEF provided numerous statistics and data to explain why 2015 was a record year, including: (i) falling oil prices, (ii) falling technology/component prices, (iii) cost competition through reverse auctions, (iv) renewable generation reaching price parity faster than expected, and thus becoming more attractive alternatives, (v) acceleration in the adoption of electric vehicles and (vi) the phasing out of subsidies, driven in part by the fact that they had achieved their goals and many of these types of investments were viable without them.
But one of the key drivers of the banner year in sustainable energy investment in 2015, as underscored by BNEF, was that policy and price signals matter. In 2015, in countries with feed in tariffs and market mechanisms and in places where auctions are introduced into fix priced markets, consumer prices for renewable energy fell between 15 percent – 50 percent (avg. 35%). And where these policies had been sustained for several years, energy prices for consumers fell on average 50 percent. M.Leibrich in 2016: “Price signal are absolutely at the heart of the success in the clean energy sector and the [renewable] revolution.”. BNEF emphasized that policy is not only important at the country/state level, but also internationally – Paris being the single biggest [international] policy signal at the time.
In April 2017, the entire political and policy landscape has shifted in many parts of the world – including the US, Europe and Britain – and has shifted in ways hard to predict a year ago. The result is a level of uncertainty across all areas of sustainable energy investment in many parts of the world, although in some countries (with strong, explicit commitments to low-carbon transition) that uncertainty may be potentially limited to questions about the Paris Agreement, versus internal policy efforts already underway. While confidence among some is high that the Paris Agreement may be unscathed, these shifts are bound to have consequences for the sustainable energy investment landscape, including in emerging markets.