Hydro Gains on Investment Slide

David Appleyard, Chief Editor

Bloomberg New Energy Finance reports that 2012 investment in renewable and clean energy is expected to fall considerably short of the record $280 billion spent last year. In its third quarter analysis, the company reveals that investment during the period came to $56.6 billion, down about 5% on the second quarter and some 20% below the equivalent period for 2011.

According to BNEF, policy uncertainty in regions such as the USA and parts of Europe continues to challenge the sector. But, perhaps more significantly, falling wind and solar PV prices have dampened the overall dollar value of new projects.

Splitting the total shows that solar is still the leading sector for investment, although this is down by about 22% on the equivalent quarter of 2011, while second place wind is down 23% on the year. However, small hydro — projects of 50 MW or less — is in third place with $3.5 billion invested over the course of the quarter.

This suggests that while there is a general downturn in investment — a reasonable response to these troubled economic times — there are significant differences between the fortunes of various renewable energy technologies and across various regions. Established markets in Europe, the USA and China are making way for emerging markets in Latin America, Asia and Africa.

With the long-established hydro technologies widely acknowledged as the most cost effective, it seems that the outlook for this sector is rather more robust that its younger siblings. For instance, another recent BNEF analysis, its CREX (Corporate Renewable Energy Index) report, reveals hydro is still a strong performer. Overall, BNEF finds, consumer-facing industries tend to be the biggest fans of renewable energy, including financials and consumer services and goods companies. Hydroelectric power is the most popular form of renewable energy for these companies, with a 47% share of the total known, followed by wind at 29% and biomass/waste-to-energy at 23%.

These differing fortunes between technologies is reflected elsewhere, too, most recently in the news that German energy engineering giant Siemens has announced that it will focus its renewable energy activities on wind and hydropower, while planning an exit from the solar business.

The company attributes the move to changed framework conditions, lower growth and strong price pressure in the solar markets. Michael Süß, chief executive officer of the company’s Energy Sector, explains: “The importance of renewable energies in the global power mix will continue to grow, and hydropower and wind energy will remain the major renewable contributors.”

Overall, these events appear to confirm that while the drive for clean energy is largely undiminished, the appetite for the associated financial burden is far less palatable. Under this scenario, it is the technologies with the lowest cost of energy that will win out, and that’s a win for hydro.

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