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Renewable energy investment hits an all time high

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Global investment in renewable energy totalled $226 billion in the first half of 2022, setting a new record for the first six months of a year and up 11% on the previous year.

Bloomberg NEF’s latest half-year update on renewable energy investment, Renewable Energy Investment Tracker 2H 2022, suggests a rosy future despite concerns about inflation, the energy crisis and the rising cost of renewable energy technologies. While both the wind and solar sector have been troubled by supply chain challenges, wider market trends together to drive appetite for the sector.

Albert Cheung, head of analysis at BloombergNEF, said: “Policy makers are increasingly recognising that renewable energy is the key to unlocking energy security goals and reducing dependence on volatile energy commodities.

“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.”

China continues to dominate renewable energy investment market

Not surprisingly, China dominates as the largest market, followed by the U.S. and Japan. The APAC region led the growth in wind investment but the report noted that there is “less visibility on small-scale solar investment (much of which is in Europe) due to lagging data availability.”

China remained the most dominant market for wind and solar, with a combined $98.8 billion in investments in the first half of 2022. The country’s large-scale solar investments totalled $41 billion in 1H 2022, up 173% from the year before. It also invested $58 billion in new wind projects, up 107% year-on-year.

Nannan Kou, BNEF’s head of China analysis, added: “Green infrastructure is the most important investment area that China is relying on to boost its weak economy in the second half of 2022. 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.”

Overall the US emerged as the second-largest solar market investing $7.5 billion, followed by Japan at $3.9 billion. The US also lead on mergers and acquisitions activity in renewable energy and storage, which was up 25% to a 1H record of $29.3 billion.

While M&A activity does not provide new money for technologies and developers, says Bloomberg NEF, it gives corporate entities the opportunity to secure pipeline projects acquire developers with sought-after development and land rights

Record-levels of investment reached

New investments in the first half of 2022 of $226 billion in renewable energy represents an all-time high. Large- and small-scale solar investment made a strong showing, up 33% to a record-breaking $120 billion.

What’s interesting is that the growth was partly driven by venture capital and private equity investing, which is playing an increasingly large role in the sector. The period saw saw a 63% year-on-year increase in venture capital and private equity funding for renewables, along with a 27% rise in large-scale solar investments, while wind financing was up 16%.

VC, private equity financing steps up to fill public equity issuance gap

The US attracted 50% of the record first half $9.6 billion invested in VC/PE deals on renewable energy and storage companies, followed by Germany and France. Whether this 63% rise in this category of funding leads to an increase in technology based carbon credit issuance remains to be seen.

Not surprisingly, public equity issuances fell 65%, keeping pace with the broader equity markets, following a peak in 1Q 2021. The largest share offerings in the first half came from China-based Tongwei Co. Ltd. (renewable energy generator) with $1.9 billion, Jinko Solar (PV manufacturer) with $1.6 billion, and Sany Heavy Energy (wind equipment) with $837 million.

Renewable power cost competitiveness electrified by large and utility scale projects

Continued investment in utility scale and large scale projects will increase the competitiveness of the price of electricity generated by renewable energy relative to fossil fuels.

Investment in utility-scale solar assets rose 27% year-on-year, and wind asset financing was up 16% year-on-year in the first half, supporting the continued decline in prices of electricity generated from renewable energy sources. In fact, capacity additions for a majority of utility-scale renewable power in Europe can achieve lower electricity costs than the cheapest new coal plant.

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