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Declining Clean Energy Investments

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Cattle graze near wind turbines that are part of Babcock & Brown Infrastructure Group's Gulf Wind Project on Kenedy Ranch south of Kingsville, Texas, U.S., on Monday, Feb. 23, 2009. The $787 billion stimulus legislation signed by President Barack Obama includes at least $14 billion in tax breaks for wind and solar electricity and establishes a grant program to help finance projects. When completed, this wind farm will have 118 turbines with a total output of 283 megawatts (MW). Photographer: Eddie Seal/Bloomberg News

Climate change, only the greatest problem facing the world, has received nearly zero attention in the presidential campaign. So it’s easy to forget about it! But the fact that investment in renewables is seriously down worldwide is a very bad thing.

Investment in renewable energy and smart energy technologies totaled $42.2 billion in the third quarter, down 31 percent from the previous quarter and down 43 percent from the third quarter of 2015, a report by Bloomberg New Energy Finance said.

Asset finance of utility-scale renewable energy projects fell 49 percent year-on-year to $28.8 billion in the third quarter.

“These numbers are worryingly low even compared to the subdued trend we saw in Q1 and Q2,” Michael Liebreich, chairman of the advisory board of Bloomberg New Energy Finance, said in a statement.

Chinese investment fell by 51 percent compared with the third quarter last year to $14.4 billion and Japan’s investment was 56 percent lower at $3.5 billion.

In many countries, electricity demand growth is also lower than government forecasts.

“My view is that the Q3 figures are somewhere between a ‘flash crash’ blip and a ‘new normal’,” Liebreich said.

If more transactions emerge, Q3 figures could be revised upwards, but with Q1 and Q2 data down an average 23 percent from the equivalent quarters last year, clean energy investment this year could end up well below last year’s record of $348.5 billion.

Of course, markets change and you can’t take a quarter or two and assume this is a permanent change. But we need not just growing electricity demand to come through renewables, but also the replacement of fossil fuel energy structures with new investments in wind and solar. If that’s not happening and declined investment is something like a new normal as the analyst states, that’s a very bad thing for the planet and all the species who live on it. Including us.

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  • cleek

    Climate change, only the greatest problem facing the world, has received nearly zero attention in the presidential campaign.

    but not because Clinton isn’t talking about it.

    https://thinkprogress.org/clinton-gore-florida-climate-speech-db6170a2cb70#.31yoe4vai

    • twbb

      Yep, I was at that event and it was solely about climate change.

  • Well it’s pretty easy to explain: cheap oil. Renewable energy investment is less attractive than it was when petroleum was over $100/barrel. Unless government puts its thumb on the scale with a carbon tax, we need the price of sustainable energy to come down continually to outcompete fossil fuels. It’s doing that but not fast enough so far.

    Declining demand for electricity is good, however, if it means more energy efficiency. (Is to be expected as the stock of old light bulbs and appliances is slowly replaced, new construction is more energy efficient, and commerce and industry make technological improvements.) But renewables can’t compete very easily as long as the grid stays dumb.

    • RobertL

      Well, we’re “rejoicing” here in Australia because the price of coal has doubled* in the last few months. We’re reopening mothballed coal mines. What could go wrong!

      It will be interesting to see if this has an affect on investment in renewables.

      * Roughly, and it’s different for thermal vs coking coal.

  • njorl

    Reduced growth rates in the demand for new energy are a good thing from an ecological standpoint, but reduced growth rates will have a disproportionate impact on clean energy investment.
    Nobody is going to take profitable dirty energy sources off line just to replace them with clean energy. Clean energy is only created for new demand and to replace attrition in old sources which have become unprofitable. If you want to skew investment into clean energy sources and away from maintenance of old dirty sources, you need something like a carbon tax to increase the cost of dirty energy.

    • That is, fortunately, wrong. There are credible reports on both Texas and Colorado showing that *existing* coal generating plants have become uneconomic in the face of a combination of cheap renewables and cheap gas. Only the latest coal plants are designed to ramp up and down so a low capacity factor – and one Texas plant is under 30%- spells unsustainable losses and early closure. Till very recently, “cheap renewables” meant wind, but the cost of solar is dropping faster, with greater future potential. I would not like to be an investor in a coal generator anywhere in the world.

      • njorl

        None of that makes what I wrote “wrong”, fortunately so or otherwise.

      • Bill Murray

        Nobody is going to take profitable dirty energy sources off line just to replace them with clean energy

        is not actually in conflict with

        *existing* coal generating plants have become uneconomic

  • Steve LaBonne

    The mirage of “peak oil” has vanished because of shale and tar sands. This is a disaster for the climate. Only a carbon tax can undo the damage, and I can’t see that happening in the US soon enough to do much good. We’re fucked, a bit of knowledge that I deal with by pure denial.

    • Ithaqua

      No. http://oilprice.com/Energy/Crude-Oil/Peak-Oil-Myth-Or-Coming-Reality.html TL;DR – “peak oil” is a demand issue as well as a supply issue, and demand is already shifting away from oil.

      • Steve LaBonne

        But shifting to what, is the question. Declining investment in renewables suggests a not very hopeful answer. But of course I’d love to be wrong. Anyway, for fossil fuel demand merely to plateau for an extended period instead of growing will still lead to disaster,

        • Ithaqua

          Good points both. No disagreement there!

    • njorl

      “Peak oil” was averted because the rate of increase of demand prematurely cratered.
      Oil consumption had doubled every 10 years from 1900 to 1970. If trends had continued, we’d be using a billion barrels a day now instead of 80 million.
      It hasn’t even doubled once since the 1973 oil embargo. Without OPEC, we’d have hit peak oil in the 1990s.

    • Oil is not used for electricity generation but for transport. Have you looked at the learning curve for batteries recently?

      • Brett

        That gives me a lot of hope. Mass decarbonization of automobiles seems like it would be easier than many of the other uses of fossil fuels, although not as easy as replacing power plants.

        Batteries, though . . . the batteries we know of are limited by physics in what they can store per kilogram. Virtually all of them aside from Aluminum-Air batteries can’t match liquid fossil fuels on energy density, and Aluminum-Air batteries are non-rechargeable.

  • Ithaqua

    To add to the excellent comments above – China, which is over a third of the world market, had very heavily overinvested in renewables for a number of years, with the result that they have far, far more production capacity than they can actually use. Cutting their investment by 50% will have at worst a small impact on their implementation of new renewable power sources.

    • The Pale Scot

      The “over investing” resulted in solar cells being dumped on the USA market, leading to the Solandra loss. AFTER Solandra went down, THEN the government slapped a 240% tariff.

      Horses and gates and all that.

      The “over investing” was premeditated attempt to knock USA solar cell production out, there are a shitload of places in China that can use solar, but the Chinese plan to dominate the solar market worldwide.

      I spent time trying to find out what the Chinese advantage was, it was attributed “efficiencies of production”. BS, without massive subsidies the Chinese were no cheaper than Solandra.

      • Ithaqua

        I was in the industry at the time; Solyndra was pricing well below cost, and we knew they would likely go out of business well before they actually did. But the Chinese were far worse; our analysis indicated that even if most of their workforce in solar was paid for by the government, their firms still would not be profitable. There was a big shakeout in the Chinese solar industry over the last few years as a result. And yes, the Taklimakan desert is one of the very best places for solar generation in the world, with Antarctica being the best, but you do lose a lot of power transmitting that electricity all the way to where the people are…

        • How is Antarctica the best place for solar energy? For six months of the year there isn’t any sun.

  • Nobdy

    Is part of this just related to the plummeting price of solar? My understanding is that it has fallen very significantly just this year, so it’s possible that at least part of the lower investment in dollars is offset by the amount of capacity each dollar brings online.

    I haven’t drilled down into the data though.

    • CrunchyFrog

      That was my thought, too. I’ve seen numbers showing a dramatic decrease, which means building the same amount of electric capability would cost about that much less. But a) I don’t know the numbers well enough to be sure, and b) even so, I would hope that there would be a major increase in such investment, not staying flat.

    • MacK

      The problem though is that quite literally, a lot of companies in the supply chain are losing their shirts and looking at bankruptcy. The price of 9-nines solar grade silicon has fallen 90%, you can’t give away 7-nines, and this goes the whole way through the channel – companies with billion dollar plants getting hammered. The difficulty with that is that the supply chain is not that big – and it is not clear how to get companies to invest again.

      • The Pale Scot

        The tech is moving so fast that equipment design is obsolete by the time it rolls of the production line.

        It’s Beta vs VHS on meth

        • MacK

          Nope – not this stuff – this is the silicon substrate, the wafer.

  • Rob in CT

    Regarding lower emissions…

    Anybody here have a heat pump instead of furnace/boiler + AC? Better yet, anyone here in a climate similar to mine have that setup? I’ve toyed with the idea of going that route before, but didn’t pull the trigger, in part b/c I’ve heard they work better in milder climates.

    Side note: I was disappointed to see that the federal tax credit for geothermal heat pumps expires at the end of the year (and the system has to be installed by 12/31/16 to qualify – you can’t start the process before the date, you have to finish it). Congress did that deal to extent solar & wind credits, but apparently heat pumps got axed.

    • Steve LaBonne

      The condo I used to own in the Cleveland-area snow belt- not a mild climate!- has geothermal. It works great and clearly saves energy.

      • catclub

        geothermal.

        Much different from heat pump that exchanges heat with outside air – the usual cheaper setup.

        Heatpump heating efficiency goes to heck when air temps get cold. The ground (10 feet or so down) probably never drops much below 40F, if even that cold, in most continental US locations.

        • Rob in CT

          Yes, if I did it I’d go geothermal, not air.

          So basically what you’re saying is that when I read that heat pumps are better in milder climates, that’s really only true for air heat pumps? That would make sense… I just wasn’t sure if it also had to do with how much heating (or cooling) it needed to produce. Heating a house to ~65 degrees when it’s 10 outside is harder than if it’s 40 out.

          I know geothermal is more expensive, which is why I was sad to realize I’d blown the opportunity for the 30% tax credit. Hopefully it comes back.

          It’s not like my boiler & AC setup is really old – 15 years. So I don’t *need* to replace them. But I’d like to, as long as I can make the math work if I squint (which was the basic test I had for the solar panel installation).

          • GFW

            Yeah, your understanding of the temperature-dependent issue is about correct.

            I (in Seattle, WA) had an air-source heat-pump installed (in a house where ground-source simply isn’t an option). I did so in 2008, before the fracking revolution. I recently did some estimating based on the current prices of electricity and gas, and what rough information I could glean from the internet about the temperature-dependent efficiency of a 13 SEER/HSPF heat pump … and I changed the controls to switch to the gas backup at 40F outside temp. Luckily, around here that’s really not all that much of the time. We need a carbon tax.

    • Matt McIrvin

      I used an electric heat pump as my sole heater when I lived in a connected townhouse in Malden, Massachusetts. It worked all right, though the fact that it was an interior unit with only two exposed walls probably helped.

      It had an auxiliary coil heater that would kick in in the very coldest weather. As direct resistive heating is a lot less efficient than pumping heat, this could be expensive. But it was only a big problem during the time when the fuse protecting the heat pump proper blew (the idiot maintenance guy had installed the wrong capacity fuse), so the coil heater was doing all the work, and I didn’t realize it for weeks.

      • Brett

        It’s comforting to know it worked in Massachusetts to keep your house adequately warmed. Vox had a good piece on electric heat pumps for Heating-and-A/C purposes, but the author lived in northern California – I was a bit skeptical of what they considered “adequate” for heating-and-cooling purposes. I’d need something that could keep the house at 60-70 degree Fahrenheit when the outside temperature is as low as 10 degrees F or as high as 107 degrees F.

        Fortunately, I live in a dry climate with dry, hot summers. We can get away with using a single evaporative cooler instead of full house A/C.

  • The Pale Scot

    Besides the stranded costs of existing infrastructure, the financial people prefer to get involved in BIG HONKING DEALS.

    Can’t remember which deal it was, I think it’s Duke energy down here in Fl. Goldman Sacks got involved in setting up a bond issue for a new nuclear plant. The plan was to float a 3 billion $ issue that was to backed by immediate rate increases for existing customers with GS skimming a quick 300 million off the top. The deal I believe fell thru when activists (both environmental and consumer) contested the rate increases in court.

    Duke had the state energy board in their back pocket, GS has the regulators in their pocket. It would have been the perfect I Won’t Be Here, You Won’t Be Here (IWBH-YWBH) deal. a decade from now when the deal is shelved there still be all those bonds to payoff, fortunately it’s already built into people’s energy bills.

    On the other hand, renewable projects are smaller, and a revenue stream for bond payments is harder to create since almost any single energy project’s output is going to be part of a bigger whole.

    Until downstream environmental effects are built into production costs, this isn’t going to change.

    Edited

  • moops

    The investments needed now are not in production capacity but in smart grids. There is enough latent capacity for microgeneration out there. But the business model for a smart grid is not worked out very well.

    • The Pale Scot

      Gotta say, having my usage tracked constantly offsite by a benevolent corporation doesn’t make me happy.

      • postmodulator

        “…and the Right wasn’t happy with their usage being tracked by a government regulatory agency, kids. But luckily civilization pulled through okay. Now, who’s hungry for boiled tumbleweed soup?”

    • catclub

      not in production capacity but in smart grids.

      and/or storage for wind and solar.

      • guthrie

        Storage being one of the huge criminally missed opportunities. Mere experts have been talking about it for decades; here’s one from 2 years ago in the UK: https://www.imeche.org/policy-and-press/reports/detail/energy-storage-the-missing-link-in-the-uk's-energy-commitments

        Meanwhile the politicians fiddle.

        • catclub

          Storage being one of the huge criminally missed opportunities.

          You make it sound like there were some easy storage projects that were missed. But The article says that storage won’t happen without a government push, because there are no economical storage projects.

          • guthrie

            There wasn’t an econmomic case for solar or wind without subsidy in the first place. Same with nuclear. The issue is that the government, e.g. in the UK, hasn’t had a coherent energy policy for over 30 years. Which leaves us in the mess we are in just now.

      • Is anyone talking about flywheels again? They are simple, robust and have dramatic failure modes. Also, they are steampunk as all hell. I don’t see a downside.

        • JustRuss

          Intrigued. Ideas. Newsletter?

      • Ithaqua

        Pumping water from the bottom of a dam to the top is perhaps the best. It’s what the French do in conjunction with the Swiss (where the water is) to store the nuclear energy that’s produced at night. IIRC, pumps are better than 98% efficient, so you lose very little energy. Of course, that assumes you have substantial electric production AND consumption not too far from the mountains, but here in CA we’re lucky that way.

        • FMguru

          Filling/unfilling compressed air bladders anchored to the bottom of reservoirs is the latest cool idea I’ve seen for quick & dirty energy storage.

          Here’s one that uses weighted rail cars being pulled up and down a mountain to store energy.

          • Ithaqua

            That railroad car idea is totally cool. And you can get a lot closer to population centers (LA) and energy generation locations (Mojave Desert) that way too.

  • I saw an article (don’t remember where) that suggested that solar is likely to be the most cost-effective form of energy production by 2020, though I can’t find it again. Other sources have estimated 2025, which still isn’t that far off. Apparently, solar is already cheaper than coal in India, which is a significant milestone.

    Anyway, the declining investment in renewables could be problematic, but their declining cost may be part of the reason, and if the price continues to fall, that could counteract the problem somewhat. We still should be putting way more investment into them, but I’m actually less worried now about whether we’ll transition to them in the future, because at some inevitable point the economics will make it ineffective not to transition to renewables, and only idiots like the “rolling coal” fuckheads will continue using fossil fuels. I’m more worried about the damage we’ve already done to the climate, and will continue doing until such point as renewables achieve saturation. The focus needs to be not on simply transitioning to renewables – that’s definitely going to happen – but on transitioning to them as quickly as possible and trying to mitigate the damage we’ve already done to the climate.

  • Ronan

    Erik, ot, but might be off interest

    http://www.econtalk.org/archives/_featuring/angus_deaton/

    And( I think this sums up our future predicament )

    https://mobile.twitter.com/drbambrick/status/783806663056846848/photo/1

  • West of the Cascades

    Note also that the decline in investment refers only to “utility-scale” projects — the rate of smaller-scale renewable installations, and particularly rooftop solar, has continued to increase significantly (good summary at https://ilsr.org/sharply-higher-rooftop-solar-potential-increases-potential-for-energy-self-reliance/). Ultimately distributed renewable generation — without any associated transmission, or very short transmission from, for example, a “community wind” project with four turbines producing 10 MW for a rural town — is going to be the most sustainable way of transforming away from fossil fuels (and also save some of the sensitive species habitat currently threatened by industrial-scale energy projects).

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