A continuing sharp decline in technology costs—particularly in solar but also in wind—meant that every dollar invested in renewable energy bought significantly more generating capacity in 2014. The 103GW of capacity added by new renewable energy sources last year compares to 86GW in 2013, 89GW in 2012 and 81GW in 2011 and made 2014 the best year ever for newly installed capacity.

Additional highlights of the 9^th annual Global Trends in Renewable Energy Investment 2015 report include:

• China saw by far the biggest renewable energy investments in 2014—a record $83.3 billion, up 39% from 2013. The US was second at $38.3 billion, up 7% on the year but well below its all-time high reached in 2011. Third came Japan, at $35.7 billion, 10% higher than in 2013 and its biggest total ever.

• A key feature of the 2014 result was the rapid expansion of renewables into new markets in developing countries. Investment in developing countries, at $131.3 billion, was up 36% on the previous year and came the closest ever to overhauling the total for developed economies, at $138.9 billion, up just 3% on the year.

  Additional to China, Brazil ($7.6 billion), India ($7.4 billion) and South Africa ($5.5 billion) were all in the top 10 of investing countries while more than $1 billion was invested in Indonesia, Chile, Mexico, Kenya and Turkey.

• Wind, solar, biomass and waste-to-power, geothermal, small hydro and marine power contributed an estimated 9.1% of world electricity generation in 2014, compared to 8.5% in 2013. This would be equivalent to a saving of 1.3 gigatonnes of CO₂ taking place as a result of the installed capacity of those renewable sources.

• Other renewable energy sources mostly did less well, biofuels seeing an 8% fall in investment to $5.1 billion, a 10-year low; biomass and waste-to-energy dropping 10% to $8.4 billion; small hydro slipping 17% to $4.5 billion; and geothermal managing to rise 23% to $2.7 billion.

• As in previous years, the market in 2014 was dominated by record investments in solar and wind, which accounted for 92% of overall investment in renewable power and fuels. Investment in solar jumped 29% to $149.6 billion, the second highest figure ever, while wind investment increased 11% to a record $99.5 billion. These expenditures added 49GW of wind capacity and 46GW of solar PV, both records.

• Investment in Europe advanced less than 1% to $57.5 billion. There were seven billion-dollar-plus financings of offshore wind projects, boosting the investment totals for the Netherlands, the UK and Germany. These included, at the euro equivalent of $3.8 billion, the largest single renewable energy asset finance deal ever, outside large hydro—that of the 600MW Gemini project in Dutch waters.

• Equity raising by renewable energy companies on public markets jumped 54% in 2014 to $15.1 billion, helped by the recovery in sector share prices between mid-2012 and March 2014, and by the popularity with investors of US “yieldcos” and their European equivalents, quoted project funds. These vehicles, owning operating-stage wind, solar and other projects, raised a total of $5 billion from stock market investors on both sides of the Atlantic in 2014.

Challenges. Although 2014 was a turnaround year for renewables after two years of shrinkage, multiple challenges remain in the form of policy uncertainty, structural issues in the electricity system— even in the very nature of wind and solar generation, with their dependence on breeze and sunlight.

Another challenge was, at first sight, the impact of the 50%-plus collapse in the oil price in the second half of last year. According to Udo Steffens, President of the Frankfurt School of Finance & Management, however, the oil price is only likely to dampen investor confidence in parts of the sector, such as solar in oil-exporting countries, and biofuels in most parts of the world.

Oil and renewables do not directly compete for power investment dollars. Wind and solar sectors should be able to carry on flourishing, particularly if they continue to cut costs per MWh. Their long-term story is just more convincing.

—Udo Steffens

Of greater concern, according to the report, is the erosion of investor confidence caused by increasing uncertainty surrounding government support policies for renewables.

Europe was the first mover in clean energy, but it is still in a process of restructuring those early support mechanisms. In the UK and Germany we are seeing a move away from feed-in tariffs and green certificates, towards reverse auctions and subsidy caps, aimed at capping the cost of the transition to consumers.

Southern Europe is still almost a no-go area for investors because of retroactive policy changes, most recently those affecting solar farms in Italy. In the US there is uncertainty over the future of the US Production Tax Credit for wind, but costs are now so low that the sector is more insulated than in the past. Meanwhile the rooftop solar sector is becoming unstoppable.

—Michael Liebreich, Chairman of the Advisory Board for Bloomberg New Energy Finance

There are also structural challenges in the electricity system as grids and utilities in many countries struggle to cope with the increasing penetration of wind and solar in the generation mix. Coping with 25% or more variable generation is more difficult for grids and utilities than managing a 5% proportion.

Governments have often struggled to produce policy measures that keep up with the advance of renewable power and its knock-on effect on the rest of the electricity system.

If the positive investment trends seen in 2014 are to continue, the report suggests, major electricity market reforms will be needed of the sort that Germany is now attempting with its Energiewende energy transition. The structural challenges needing to be overcome are not simple ones, but are of the sort that have only arisen because of the very success of renewables and their more than two trillion dollars of investment mobilized since 2004.

Figures in this report are predominantly based on the output of the Desktop of Bloomberg New Energy Finance—an online portal to a comprehensive database of investors, projects and transactions in clean energy.

The report includes all biomass and waste-to-energy, geothermal, and wind generation projects of more than 1MW; all hydropower projects of between 1MW and 50MW; all wave and tidal energy projects; all biofuel projects with a capacity of one million liters or more per year; and all solar projects, with those less than 1MW estimated separately and referred to as small-scale projects, or small distributed capacity.

The report concentrates on renewable power and fuels and does not substantively address technologies such as smart grid, electric vehicles and power storage.