Bad news dominated energy headlines in 2015: Plunging oil prices. Oil and gas companies scaling back investment. Coal companies going bankrupt. Layoffs.
If it bleeds, it leads.
Turmoil in fossil fuel markets led many analysts to suggest that clean energy investment would similarly stall out. How could renewable energy possibly compete with cheap oil, gas and coal?
But clean energy did compete, and it won.
Clean Energy Canada’s latest global analysis found that a record $325-billion (U.S.) was invested in renewable power in 2015 – nearly a third of a trillion dollars. That’s serious money, nearly 50 per cent more than was invested in power from fossil fuels.
What’s driving this trend? There’s money to be made and money to be saved. For commercial electricity consumers, sourcing renewable power can lock in future savings from technologies whose fuel – wind, sun, water, biomass and the earth’s heat – is free. For renewable power developers, declining technology and financing costs mean the profits are getting fatter.
Meanwhile, the costs are dropping. In the United States, the cost of clean energy technology has been falling steadily since 2009 thanks to improved efficiency and lower-cost components. Today, wind energy costs 61 per cent less than it did in 2009, and costs for utility-scale solar PV systems are down 82 per cent.
The growing cost-competitiveness of clean energy makes it an increasingly attractive choice. In fact, 2015 marked the first year that developing countries saw more money invested in clean energy than developed countries did.
The biggest players globally continue to be China, the United States and Japan, which collectively account for well over half of global investment. India regained fifth spot for investment in 2015 (behind the U.K.), and appears poised to rise in the ranks as a clean-energy investment destination. (Canada, by comparison, holds eighth place.)
Meantime, the Middle East and Africa are tapping into clean energy’s potential; both regions have growing populations and abundant solar and wind resources. Their combined clean energy investment totalled $13.4-billion (U.S.) in 2015, up 54 per cent over 2014.
The business case for clean energy goes beyond economic competitiveness: In countries such as China and India, delivering more power without adding to the smog that already chokes big cities is paramount. In the United States, climate action is driving a shift from coal-fired power to clean energy. Some African countries are delivering power to communities for the first time and want to avoid the expense of building a centralized grid.
And it’s clear that clean energy is going mainstream. In a move that would have seemed “fringe” a decade ago, cities, states and entire countries are targeting 100-per-cent renewable energy. Some of the world’s largest and most-recognized companies, including Nike, IKEA, Google and Coca-Cola, have also committed to this goal.
These global trends paint a picture of great opportunity for Canadian business and political leaders: New prospects for clean-energy technology developers and service providers are opening up on every continent. Yet clean energy investment within Canada dropped a significant 46 per cent in 2015, from $7.4-billion to $4.0-billion (U.S.). Little wonder that Canadian firms are looking abroad for their next big deal.
Canada’s 2015 performance is unsettling, and markedly out of step with other countries. Why the drop in clean energy investment, particularly when our peers and competitors are scaling up?
For starters, Canada has a provincial patchwork of renewable power policies, which often have not provided the long-term certainty that renewable energy developers need. A lack of overarching federal policy support is another barrier: Until recently, pipelines trumped power lines as a national priority.
But that tide may be turning. Alberta and Saskatchewan announced targets to increase the production of renewable power late in 2015, and the new federal government is working toward getting more clean energy onto Canada’s grid. This week’s first ministers’ meeting, which aims to build agreement on national climate action, offers a prime opportunity to make clean energy a pan-Canadian priority.
Canada has tremendous renewable energy resources, and we have fostered renewable power developers, clean energy technology and service providers to capitalize on those resources. The challenge now is to translate that domestic success into global success, without overlooking the emerging opportunities at home.
And the clock is ticking.
Originally published in the Globe and Mail’s Report on Business.
Merran Smith is executive director and Dan Woynillowicz is policy director at Clean Energy Canada, a program of the Centre for Dialogue at Simon Fraser University. Tracking the Energy Revolution—Global 2016 Edition is available here.
*Editor’s note (April 11, 2016): This op-ed has been updated. An earlier version included an erroneous figure for total renewable energy investment. The correct value is US$325 billion.