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Renewables Renewed

Written By Brian Hicks

Posted January 13, 2015

The going price for a barrel of oil just dropped below $45 — the cheapest it’s been in over five and a half years — and there isn’t a bottom in sight.

Clean energy investment, on the other hand, is up 16%. It rose for the first time in three years in 2014, making the oil industry look like the weak link.

Investments for solar, wind, biofuels, and other low-carbon energy technologies climbed to $310 billion last year. It was the first net growth the industry claimed since 2011, erasing the damage done by lower solar panel prices and falling subsides in the U.S. and Europe.

Despite concerns that the oil price rout would lead to a sharp reduction in funds for low-carbon energy, which is still more expensive than fossil fuels, the largest parts of the renewable energy industry are expanding. Estimates place installations for solar and wind power at a growth rate of about 10% this year.

Resumed healthy investment in the renewable energy industry demonstrates the resilience of the sector in the wake of plummeting oil prices. The increasing role sustainables play in emerging markets will also ensure their success in the long term.

The boost in solar everywhere had the biggest impact on 2014’s bottom line. Investment in projects that generate electricity from the sun rose 25% to $149.6 billion in 2014.

Photovoltaic technologies are much more cost competitive now, so you won’t see as much pressure from low oil prices, particularly with the recent investment interest.

The United States boosted its investment 8% to $51.8 billion, the biggest jump since 2012. Japan, which has become the second-biggest market for solar power, raised funding for renewables by 12% to $41.3 billion.

In Europe, which formerly led the industry in installations in the 2000s, investment only grew 1% to $66 billion despite increased funding for offshore wind.

Expect these trends to continue as the technology around renewables becomes more accessible and affordable. It’s only a matter of time before this disruptive technology goes mainstream.

China Meets Clean Energy

The clean energy industry benefited from several trends that will be difficult to replicate in 2015.

China expanded its commitment to renewables by 32% and invested a record $19.4 billion in offshore wind projects, giving funding a massive surge.

The primary driving force behind solar this year was China’s support for both photovoltaic installations and solar panel manufacturers.

The rise of rooftop panel installers such as SolarCity (NASDAQ: SCTY) and “yieldcos” — companies that channel dividends to investors from the operation of solar and other clean energy projects — also broadened the avenues for investors to consider the industry more seriously.

China was the largest single contributor in all the world markets for renewable energy, increasing its investment to $89.5 billion. The People’s Republic has become the top market for solar power and one of the largest for wind after distributing investments in the clean energy industries in order to diversify its considerable power sources.

Countries all over the world are reflecting the shift away from large, centralized power stations towards smaller, local facilities. Fossil fuel and nuclear power plants are under pressure to replace their facilities with more intermittent and smaller low-carbon stations.

On the Road

Electric cars also reaped the benefits of the massive renewable expansion — especially Tesla Motors (NASDAQ: TSLA) — shortly before cheaper gasoline prices lowered projections for the market.

Sales of electric vehicles probably will be first to feel the impact of cheaper oil, which has reduced the cost of gasoline and made conventional cars more practical. However, given the current trends, any effect on Tesla will be regarded as a speed bump once the market catches up with itself.

The biofuel sector was one of the few clean energy sectors to report a loss, falling 7% to $5.1 billion.

Strong investment in clean energy might come as a surprise to those who’ve predicted trouble for renewables as a result of the oil price collapse. Many claim the impact of cheaper crude will be felt much more on the road than in electricity generation.

A Rising Wind

Seven offshore wind projects worth more than $1 billion each secured financing in 2014, driving funding for the wind energy industry up 11% to a record $99.5 billion.

In spite of recent developments, the expectation for expansion anytime soon is lessened as the technology remains among the most costly in the industry.

Don’t expect 2015 to be able to match this level of growth, but look for significant additions to wind power in the next year or two as the technology behind it follows the path of solar power.

There’s a joke that makes its way around my office every now and then. It goes like this: “What’s the fastest way to become a millionaire?”

Those not yet in on the joke wait with bated breath….

“Invest a billion dollars in clean energy.”

Of course. But I haven’t heard that joke for a while.