A new report issued by the United Nations Environment Programme (UNEP) and Bloomberg New Energy Finance on April 7, 2014, shows that international investment in solar energy has dropped by $35.1 billion over the last year–a decrease of roughly 20% from the previous year. At first glance, this might seem like a bad sign for renewable energy.
On closer inspection, this is actually a good sign. The decrease in investments is not because of a lack of interest. Rather, it’s because of a reduction in prices for solar energy hardware. The average price of a solar panel in the United States has declined by nearly 60% in the past year, which makes solar energy a much more appealing choice for many homes and businesses.
As a result of this market shift, renewable energy sources now account for 8.5% of the world’s energy production capacity, up from 7.8% last year. 39 gigawatts of solar energy were added to the world’s production capacity in 2013, up from 31 gigawatts the previous year. Additionally, stocks listed in the WilderHill New Energy Global Innovation Index (NEX), which tracks clean energy companies, grew in value by 54% in 2013.
Unfortunately, the news isn’t all good. The economic uncertainty looming over Europe may have hindered investment in renewable energy. With solar energy state-subsidized in so much of the world, uncertainty about state economic reserves can serve as a disincentive for investment. European investment in renewable energy was down 44% in 2013, and while a portion of that can be explained by greater efficiency the uncertainty of the market has also contributed to that decline.
It’s also important to remember that renewable sources such as solar and wind power are less predictable than fossil fuels. While renewable energy capacity is up, exploiting that capacity is more of a challenge. Renewable sources tend to deliver on only 34% of their capacity, as compared to 64% for coal and 90% for nuclear sources. Increasing the efficiency of solar and wind production to match that of fossil fuels will be one of the great economic challenges of the 21st century.
While challenges remain, it’s clear that solar and other renewable energy resources are on the rise. Their development will shape world energy politics in the coming decades.