Global investment in renewables is one of the essential elements of any plan to tackle greenhouse gas emissions. Since the Stern Report in 2006, which recommended significant increases in R&D and capital investment in renewables, a number of organizations, including Bloomberg and the International Energy Association have been tracking the growth of the sector. China, in particular, has had a dramatic impact on the cost of wind and solar and has driven down the cost of manufacturing to a level where energy production is at “grid parity,” meaning that is it competitive with conventional generation. In light of this evidence, there are some good reasons to be optimistic.
The International Energy Agency (IEA) and the United Nations Environment Programme (UNEP) both track investment progress annually and in 2015 developing and emerging economies invested $156 billion in renewables, overtaking the developed world in total renewable investment. In 2015, China also took the number one spot from the U.S., increasing investment in renewables by 17% to $102.9 billion. While the total $287bn invested in renewables was almost double the amount invested in oil and gas, renewables tend to have a higher up front cost, while gas fired power generation costs are driven by the cost of the fuel rather than the generation. As a result, the amount invested may not accurately reflect the new installed capacity.
Fossil fuels remain cheap and plentiful, resulting in a low-cost energy environment where the competition with renewables is still active. There are signs of tightening in the oil and gas market, with prices beginning to rebound in 2016 for oil and 2017 for natural gas although the long term outlook for gas prices is that where shale gas is available, we can expect prices to remain low for the next 15 to 25 years.
The cost of natural gas production has declined significantly due to the growth of shale gas supply in North America in particular and that has made coal less attractive in some jurisdictions. Japan has increased by 30% in response to new regulations following the Fukushima incident. Unfortunately, coal, which results in much higher levels of emissions from electricity generation is easier and cheaper to transport than natural gas. So although natural gas production is cheaper, the full cost when transportation is also included is still higher in many parts of the world.
Much will depend now on the future paths that China and India take and also on what the Trump administration choses to do about coal generation in the U.S. Rolling back the regulation of mercury emissions from coal will be challenging and the low cost of natural gas, which also has emissions around 50% lower than coal, means that the utilities may still choose to use gas.
By Dr. Thor Jenson and Dr. James Tansey, 26 January 2017
 Investment by developed countries declined 8% from 2014 to $130 billion.