Policy uncertainty spurred 2012 plunge in U.S. investments — report

Source: Nick Juliano, E&E reporter • Posted: Tuesday, January 15, 2013

Clean energy investment in the United States fell nearly a third last year compared with 2011, largely driven by uncertainty around the fate of a key tax break, slackening demand from state renewable energy mandates, falling costs for renewable technology and competition from natural gas, according to research released today.

Investment in U.S. wind, solar, biomass, hydropower and other clean energy projects fell to $44.2 billion in 2012, down 32 percent from the previous year, according to figures released by Bloomberg New Energy Finance, a research firm. Investments in 2011 were still benefiting from infusions of federal money from the Obama administration’s economic stimulus program, which largely disappeared last year, said Ethan Zindler, an analyst with the firm.

The wind sector in particular was buffeted by uncertainty over whether its production tax credit would be extended into this year. The wind industry and its allies mounted an aggressive lobbying campaign throughout the year and ultimately won an extension to the credit earlier this month. But firms were wary to invest before the extension was in place, contributing to the downfall.

“The fact that the PTC extension came so late … it does help, but it meant that nobody could plan for 2013 until 2013, so that’s definitely problematic,” Zindler said.

Although 2012 is expected to have been a record year for wind installations — with the Energy Information Administration projecting more than 12,000 megawatts of capacity additions — most investments in those projects came in the previous year. Uncertainty over the PTC’s fate means developers could not adequately plan projects for this year, reflected in the investment drop and in expectations that installations will fall in 2013, Zindler said.

Furthermore, targets established in state-level renewable portfolio standards have largely been met and are not spurring as much demand, and low-cost natural gas continues to make it difficult for renewable projects to compete, Zindler said.

But the report should not be seen as all bad news, he added. The price of wind turbines, solar cells and other clean energy components also has been falling, a scenario that is reflected in the firm’s findings.

“When you bring costs down, you need less money, and that’s part of what’s gone on here,” he said.

Worldwide, investment in clean energy fell 11 percent last year, according to the BNEF findings, to $268.7 billion from $302.3 billion a year earlier.

Many countries saw their investment level fall, but China surged 20 percent to $67.7 billion, overtaking the United States to lead the globe in clean energy investment.