The 12th of December, 2015 is an historic day for the entire humankind, following the universal agreement found in Paris at the climate conference (COP21). Among the main measures setting up, countries will have to limit their emissions to maintain global warming below 2 °C, with an aspiration of 1,5°C. This advance in the struggle against climate change is added to the current 2020 road map, set up by European Union leaders in 2007 and enacted in its legislation in 2009.

On this date the commission is expecting, for each member state, at least a 20% greenhouse gases reduction compared to 1990 levels, but also, and this is the most important, 20% of energy from renewable sources in its final production. To reach this goal, renewable energies such as wind, solar, geothermal, hydropower or biomass will play an important part in the world and particularly in Europe, which is in the vanguard in this sector. A right time for Premier Publishing to show you the trend for private and public investments in sustainable energy over the next 5 years.

Upward trend
“Renewables are expected to be the largest source of net additions to power capacity over the medium term.” This is what is written in the last Medium-Term Renewable Energy Market Report, published by the IEA (International Energy Agency) last year. But if we focus more on Europe, the report is even more detailed, explaining that “OECD Europe renewable capacity is expected to grow by over 109 GW from 2014-20”. In concrete terms, it means almost a 25% rising during this period.

Here are the main forecast figures for OECD Europe, showing public and private investments taken together in renewable, over 2020, in billion dollars*:

– 2013: 27
– 2014: 20
– 2015: 19
– 2016: 15-16
– 2017: 17-18
– 2018: 21-22
– 2019: 22-23
– 2020: 23-24

*Figures published by the International Energy Agency (IEA) in 2015

By looking closely to these figures, we see that in 2016, compared to 2015, investments are falling from 3 to 4 billion euros. However, as the IAE explains it in his report, “investment should pick up during the second half of the outlook with increasing offshore wind deployment in OECD Europe due to expected cost reduction and improvements in the competitiveness of solar PV and onshore wind”.

Some major players in the energy sector already planned, or are going to focus more on renewable. For example, Dong Energy, the biggest operator of offshore wind farms in Britain with 6 billion pounds spent so far, said in January that it would double its investments in this field in the next four years. By the way, the company has just started construction of what will be the world ‘biggest offshore wind farm off the Yorkshire coast, featuring 1.2GW of power. We could also talk about Vattenfall, the Swedish power company, whose CEO Magnus Hall declared, in December of last year in several newspapers, that he would like to move away from fossil production:

“Our aim is to be one of the largest producers of renewable energy in Europe and to triple our installed wind power capacity within ten years. In the period 2016-2020, we intend to be a driving force in investment projects in renewable production in the Nordic region, Germany, the Netherlands and Great Britain.”

In Central Europe, Austria’s leading electricity company Verbund already announced that it is “shifting investment to focus on renewables and other energy services”, while on the other side of the border, the German energy giant E.ON officially separated its fossil fuel assets at the beginning of the year. A decision which will “liberate us from continually having to make compromises”, declared Johannes Teyssen, chief executive of E.ON in a statement. Its German rival RWE also announced a similar plan in December, pooling its renewable energy, grids and retail business areas in a new subsidiary. Peter Terium, CEO of RWE AG, acknowledged the restructuring plan was a “response to the transformation of the European energy landscape”.

Last but not least, German financial giant Allianz, one of the world’s largest financial asset managers, unveiled its new strategic plan last November, which consists in decreasing investments in “companies using coal and boost funding in those focused on wind power over the next six months”. According to specialists, this decision could affect investments worth €4bn. Allianz investment chief Andreas Gruber added this choice was based on “concern” over global warming, and that the company would double wind energy investments to €4bn.

Good period to invest in renewables?
Giles Dickson, EWEA chief executive officer (European Wind Energy Association), recently declared in an interview that Europe could expect to have “over 20GW offshore wind by 2020”, and that “the industry is making real progress in reducing costs”. Very well. However, Mister Dickson also warned that governments have “to give us a clear vision of the volumes they envisage long term and the regulatory framework they’ll apply to drive the necessary investments”. Once again, all is about politics. And is there in Europe, despite the global Paris climate agreement, a real political will to create a good environment for investments in renewables?

In United Kingdom, Cameron’s government blows hot and cold. In November, it decided to phase out all remaining coal-fired power stations by 2025, which seems to be good news for renewable. But on the other side, it also announced, to reduce public spending, a new decreasing gradually mechanism to lower the subsidies given to renewable projects through its Fit system (Feed-In Tariffs), that it had set up in 2010. If the modifications don’t seem really important, this measure, which will come into effect in March 2016, is not a really good signal for investors.

Also in Poland, renewable doesn’t to be the main priority. The recently elected new President, Andrzej Duda, approved anti-smog legislation allowing municipalities to ban coal-fired home furnaces, but on the other side, also refused to endorse an amendment to the UN’s Kyoto carbon-cutting pact, requiring Poland to curb greenhouse gas emissions that equal around one percent of the global total. Difficult choices have to be made by Poland, with 90% of its energy generated from coal, and tens of thousands minors who could lose their job.

In spite of a general trend currently unfolding, opening doors for private investments in renewable energies, a state of uncertainty still remains. The drop of crude oil prices, if holding, could be a huge handicap for renewable, making it uncompetitive. At the same time, the fall of coal exchange rate may also be the coup de grâce for countries relying on coal, and a good reason to invest in renewable energies.

Antoine de Longevialle