03/07/08

Renewables investment ‘needs robust policy frameworks’

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Renewable energy investments in developing countries are growing but this will only continue with coherent policy frameworks, experts warn.

A report, prepared by the UK-based New Energy Finance for the UN Environment Programme, shows that over US$148 billion was pumped into the global sustainable energy sector in 2007 — a 60 per cent increase from 2006.

Sustainable energy accounted for a fifth of all new power generation capacity worldwide in 2007. Wind power was most popular with investors, but solar power was the sector that grew most rapidly.

"This is not just occurring in developed economies, we’ve seen over the last two or three years a significant expansion in developing economies, particularly the larger and faster growing ones," said Achim Steiner, executive director of UNEP, at a teleconference this week (1 July).

Brazil, China and India are drawing growing investor interest, with their share of new investments growing from 12 per cent (US$1.8 billion) in 2004 to 22 per cent in 2007 (US$56.6 billion).

"The report points mainly to the major developing countries but I think those are representative of much larger trends around the world," said Yvo de Boer, executive secretary of the UN Framework Convention on Climate Change. He cited Latin American and Caribbean countries as examples of developing countries that are investing more and more in renewable energy.

But the report found that Sub-Saharan Africa, "arguably the region that has the most to gain from renewable energy", continues to lag behind.

The overall figures indicate the ability of investors to respond to growing international climate concerns, said Steiner, and that the markets for clean energy are viable.

"What we need now is a strong political signal to drive this trend forward," said de Boer.

Michael Liebreich, chief executive officer of New Energy Finance, said national policies are just as important as international ones. "Any country that doesn’t have a coherent policy to support the development of sustainable energy will simply fall behind, because there are other countries that are more attractive for investors."

Liebreich also wants to see more research and development (R&D) funding in the energy sector. The report found that R&D spending on clean energy and energy efficiency was US$16.9 billion.

"The energy industry is the largest in the world — it counts for about ten per cent of gross domestic product. The idea that it only spends US$16.9 billion on R&D is frankly absurd."

Link to full report

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