THE green-energy industry is starting to feel the impact of an efficiency drive sweeping Asia, where governments from China to Japan are scaling back subsidies to constrain a boom in installations.
Investment in clean-power technologies in Asia slumped 41 percent to $70.1 billion in the first nine months of the year, according to Bloomberg New Energy Finance (BNEF), which hosts a conference on the issue in Shanghai starting on Tuesday. It’s the first decline in the modern history of an industry that’s barely a decade old. The ability of those plants to produce electricity is on track to surge 13 percent, the research group said.
The findings underscore the concern of authorities about their ability to integrate a burgeoning number of wind and solar farms, which have strained the capacity of electricity grids. Officials are getting smarter about how they stimulate the industry, threatening to slow growth in what has been some of the biggest markets for manufacturers from Trina Solar Ltd. to Xinjiang Goldwind Science & Technology Co.
A drop in investment “doesn’t mean that the industry is declining,” said Justin Wu, head of Asia and Pacific for BNEF in Hong Kong. “It is self-correcting. Renewables have to be built efficiently and used more efficiently. Solar is becoming cheaper, and there is more efficient build.”
In China the world’s biggest market for the technology, subsidies were recalibrated at the end of last year because electricity demand stagnated and grid authorities struggled to keep up with the number of new wind and solar farms seeking connections. Those factors reduced the need for new renewable-energy
capacity, giving the government the upper hand in negotiations over the price it will allow for power purchase agreements.
Japan had a similar experience. The second-biggest market for solar in recent years has cut support for renewables to give utilities more time to integrate the variable flows of electricity from photovoltaics—and to take advantage of lower costs. The result was that worldwide, clean energy investment fell to its lowest in three years in the third quarter, according to BNEF data.
Those trends help explain why clean energy shares have under-performed the broader stock market so far this year even as companies reported record sales. The WilderHill New Energy Global Innovation Index has fallen 5.7 percent this year while the MSCI World Index has advanced 2.7 percent.