Global renewables investments fell to slightly above $250 billion in 2013 and are set to continue slowing in coming years, a report has warned.
Investments peaked at nearly $280 billion in 2011 but declined over the following two years, according to the International Energy Agency's (IEA) third annual Medium-Term Renewable Energy Market Report, which for the first time includes an investment outlook.
It forecast that investments will slow to slightly less than $250 billion in 2014, as they fall to an average of $230 billion over the remainder of the decade.
This trend will be driven by reduction in the cost of technologies such as photovoltaic solar and onshore wind, and as net generation capacity additions plateau from highs of 125GW in 2014.
The decreasing costs are creating opportunities in some markets. The report points out that in Brazil onshore wind has continued to outbid new-build natural gas plants in auctions, while in northern Chile, "high wholesale electricity prices and high irradiation levels have opened a new unsubsidised solar market".
The report finds that power generation from renewables reached almost 22% of global generation in 2013, putting it on a par with electricity from gas.
Global renewable generation is seen rising by 45% and making up nearly 26% of global electricity generation by 2020 – the equivalent to China's anticipated power demand.
2013 was noteworthy because it was the first year when investment in non-OECD countries nearly matched those of OECD countries, said Paolo Frankl head of the IEA's renewable energy division, adding that non-OECD countries would be leading the charge by 2020.
Some 70% of the growth of renewables over the remainder of the decade will come from rapidly growing non-OECD countries, such as China and the rest of Asia, where they will be the largest source of generation. This will be spurred by diversification needs in many countries and increasing air quality concerns in China.
Renewables will account for 80% of new power generation in the OECD, but with more limited upside due to sluggish demand and growing policy risks in key markets such as the US and Japan.
"The rapid growth of renewables has been a success story … but will I be able to repeat that message next year?" said IEA executive director Maria van der Hoeven. "Renewables are a necessary part of energy security. However, just when they are becoming a cost-competitive option in an increasing number of cases, policy and regulatory uncertainty is rising in some key markets."
She called on governments to "distinguish more clearly between the past, present and future, as costs are falling over time".
She added. "Many renewables no longer need high incentive levels. Rather, given their capital-intensive nature, renewables require a market context that assures a reasonable and predictable return for investors."
Peter Cripps
