KUALA LUMPUR (Dec 15): Despite a record-breaking year for energy transition investment in 2020, investors poured US$67 billion (about RM283.91 billion) fewer dollars into clean energy in emerging markets than they did into wealthier countries.
In a statement on Tuesday (Dec 14), BloombergNEF (BNEF), a strategic research provider covering global commodity markets and disruptive technologies, said data suggests that investors retreated hastily from less developed markets to refocus on wealthier countries as the Covid-19 pandemic spread.
Energy transition investment in less developed markets fell 10% from 2019 to 2020 as financiers deployed more funds in traditionally lower-risk OECD countries, adding that this marked a major shift from previous years when these rapidly growing economies attracted the majority of new funds deployed.
BNEF said that in 2020, developed nations received US$262 billion, or 57%, of total global energy transition investment, including support for renewable power assets, electric vehicles (EVs) and electrified heating.
It said developing economies received US$195 billion or 43%. In 2019, emerging markets accounted for a slight majority of such funds received and in 2017 some 59% of such investment went to developing economies.
BNEF head of energy transitions research Luiza Demôro said based on total funds deployed in 2020, enthusiasm for clean energy technologies appeared to be at an all-time high.
“But investors’ willingness to invest in poorer parts of the world really seemed to stall in 2020 as the pandemic took hold," she said.
BNEF said the surge in investment in wealthier nations can in part be explained by an explosive growth in EV adoption in western European nations and, to a lesser degree, in the US.
It said in emerging markets other than mainland China, EV purchase rates had remained slow to date and as such, vehicles were typically sold for a premium over conventional internal combustion engine vehicles.
Governments in such nations rarely can afford to offer the types of subsidies consumers in wealthier nations receive, it said.
However, it said the trend away from emerging markets and back to countries regarded as less risky was clearly evident in renewable power asset finance flows alone.
Investment in renewables fell 9% from 2019 to 2020 in emerging markets but spiked 24% year-on-year in developed countries.
Energy transition investment as defined by BNEF encompasses funding for: renewables assets, such as utility-scale wind or solar projects, and distributed solar capacity; clean road vehicles and infrastructure including EVs; and electrified heat technologies.