Renewable energy's growing pains

Renewable energy received record investment in 2011 and expanded massively, but it also struggled with dwindling political support and plummeting prices. The industry faces several more years of growing pains before it can properly compete with fossil fuels.

By the end of 2011, the global power capacity from renewables was more than 1360 gigawatts, and renewables supplied 20.3 per cent of global electricity, according to the REN21 Renewables 2012 Global Status Report.

Meanwhile, investment in renewables increased by 17 per cent last year to a record $257 billion ? six times what it was in 2004, according to a report by the UN Environment Programme. The UNEP report, Global Trends in Renewable Energy Investment 2012, concludes there were particularly big gains for solar power, which received $147 billion ? 52 per cent more than in 2010.

Yet at the same time, solar power companies suffered massive drops in share prices. Six major companies, including Solyndra and Solar Millennium, have sought bankruptcy protection.

The main reason is the steep drop in the cost of solar panels over the last three years, largely due to a switch to large-scale manufacturing. Solar power is now cheaper than diesel in countries such as India. Many governments, including the UK, also cut their financial support for solar, as tumbling prices meant consumers did not need such large subsidies to buy a panel.

It is normal for weaker firms to fall by the wayside as industries ramp up, says Michael Liebreich, chief executive of Bloomberg New Energy Finance.

"The challenge for policy-makers is to reduce support mechanisms at just the right pace," he says. Cutting subsidies too fast will stop renewables in their tracks, but maintaining them for too long will be a waste of money.

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