U.N. Report Finds Investment Boom in Renewable Energy, Energy Efficiency Industries

Investment in the renewable energy and energy efficiency industries has been soaring, fueled by factors including climate-change worries coupled with high oil prices and increasing government support, according to a trend analysis from the United Nations Environment Programme (UNEP).

The analysis, released on June 20, finds that investment capital flowing into renewable energy climbed from $80 billion in 2005 to a record $100 billion in 2006. As well, the renewable energy sector's growth "although still volatile . . . is showing no sign of abating."

The report offers a host of reasons behind and insights into the world's newest gold rush, which saw investors pour $71 billion into companies and new-sector opportunities in 2006, a 43 percent jump from 2005 and up 158 percent over the last two years. The trend continues in 2007 with experts predicting investments of $85 billion this year.

In addition to the $71 billion, about $30 billion entered the sector in 2006 via mergers and acquisitions, leveraged buyouts and asset refinancing. This buy-out activity, rewarding the sector's pioneers, implies deeper, more liquid markets and is helping the sector shed its niche image, according to the report.

While renewables today are only 2 percent of the installed power mix, they now account for about 18 percent of world investment in power generation, with wind generation at the investment forefront, according to UNEP. Solar and bio-fuel energy technologies grew even more quickly than wind, but from a smaller base.

Renewables now compete head-on with coal and gas in terms of new installed generating capacity and the portion of world energy produced from renewable sources is sure to rise substantially as the tens of billions of new investment dollars bear fruit.

"One of the new and fundamental messages of this report is that renewable energies are no longer subject to the vagaries of rising and falling oil prices -- they are becoming generating systems of choice for increasing numbers of power companies, communities and countries irrespective of the costs of fossil fuels," said UNEP Executive Director Achim Steiner.

Steiner said that the other key message is that this is no longer an industry solely dominated by developed country industries. "Close to 10 percent of investments are in China with around a fifth in total in the developing world. We will need many sustained steps towards the de-carbonizing of the global economy. It is clear that in respect to renewables those steps are getting underway," Steiner said.

Yvo de Boer, executive secretary of the U.N. Convention on Climate Change, said that as governments prepare to launch a new round of post-2012 climate change-related negotiations later this year, "the report clearly shows that, amid much discussion about the 'technologies of tomorrow,' the finance sector believes the existing technologies of today can and will 'decarbonize' the energy mix provided the right policies and incentives are in place at the international level."

For more information, contact the UNEP Division of Technology Industry and Economics at http://www.unep.fr/en.

This article originally appeared in the 06/01/2007 issue of Environmental Protection.

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