Massive flows of finance are needed to accelerate renewable energy investments. More investment in renewables would reduce energy-related carbon emissions, a key element in efforts to limit global warming.
The International Renewable Energy Agency (IRENA) and Climate Policy Initiative (CPI) have produced a concise, accessible summary of finance flows to renewables around the world. The study examines finance flows worldwide in 2013-2016, broken down by technology, financial instrument and region.
Although investment in renewables dipped in dollar terms in 2016-2017, they have continued to gain ground against conventional energy sources, particularly for new power plants.
The report finds:
Following the format of CPI’s Global landscape of climate finance series, the report highlights correlations between renewable energy finance, cost reductions and megawatts and installed.
- Renewable energy capacity has grown at record-high levels, even as investment has dipped in dollar terms in 2016. Investment levels are highly responsive to policy changes.
- Offshore wind investment has risen steadily – quadrupling in 2013-2016 – and is poised for further growth.
- Private sources provide the bulk of renewable energy investment globally – over 90% in 2016. Conventional debt and equity are the most prominent financing instruments.
- But public finance can play a key enabling role – covering early-stage project risk and getting new markets to maturity. Public spending on policy implementation far outweighs public investments.
- Project developers account for about two-fifths of private investment in the sector. Institutional investors – pension funds, insurance companies, sovereign wealth funds and others – only make up less than 5% of new investments.
- Private investors overwhelmingly favour domestic renewable energy projects (93% of the private portfolio in 2013-2015), whereas public investment is more balanced between in-country and international financing.