Wind Rises, Carbon Falls – 6/8/16

Investors are beginning to talk with their feet as they shift money from fossil fuels to renewables. As wind rises on a tide of money from European investors looking to take advantage of the change, carbon falls under the weight of increased competition and regulatory risks.

The GWEC recently launched its Global Wind Report: Annual Market Update. The report shows the wind power industry set new records across the world last year in capacity installation as wind power installations broke through the 50 GW barrier for the first time in a single year in 2014 and annual installations topped 63 GW in 2015.

At the start of 2016, there was near 433 GW of wind power installations around the globe, a 17% increase over last year, according to the International Energy Agency. China alone added 30 GW in 2015 and now has more than 146 GW installed. China’s new Five Year Plan covering the period from 2016-2020 has increased the 2020 target for wind to 250 GW likely due to air pollution and energy security concerns.

European installations were led by Germany’s 6 GW of installations, more than 2 GW of which came from offshore wind. In non-China Asia, India became the nation with the fourth highest amount of cumulative installations as it surpassed Spain in global rankings.

U.S. states in the Plains region have had lower prices for wind power than most for a while now, but an uncertain regulatory environment has hampered the development of the U.S. market. The catalyst for the rise in U.S. investment in wind came from the unexpected extension of tax credits for wind and solar projects in late 2015.

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In contrast to the boom wind is experiencing, fossil fuel assets are being eyed with suspicion by U.S. insurers who see many energy-related investments at risk of becoming stranded assets due to climate change concerns.

European fossil-fuel companies in particular are seeing their value decline as countries shift their focus to renewable energy. Sovereign wealth funds and European insurers including France’s Axa SA and Germany’s Allianz SE committed to exiting some coal-related holdings as global leaders commit to fighting climate change.

In the U.S., California Insurance Commissioner Dave Jones urged insurers to voluntarily divest from thermal coal, and is requiring annual disclosure of carbon-based investments.

“If the international community, nations, states and local governments adopt the policies necessary to limit global warming to 2 degrees Celsius, then the value of holdings in the carbon economy will diminish dramatically if not drop to zero,” Jones said in an interview.

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