Three things stand out in the 2011 clean energy investment numbers detailed by Bloomberg New Energy Finance last month, showing a record inflow of $260 billion into the sector. This was 5% more than the previous year?despite the economic stresses being faced by some prominent countries in renewable energy.

First, investments during the year were led by solar. An almost 50% slide in the price of photovoltaic modules triggered an all-time-high uptake around the world. Solar investments almost touched $137 billion during the year?36% higher than 2010. This is remarkable, given the backdrop of the enormous slide in the value of solar panels.

Solar investments also trounced wind-energy. At $75 billion, investment in wind energy was a little over half of that invested in solar power. Investment in solar exceeded wind in 2004, and again in 2010, but the gap between the two in 2011 is unprecedented.

The second interesting aspect of the 2011 numbers is the strong comeback from the US. China overtook the US in clean energy investment in 2009 and increased its lead in 2010. Last year, the US bounced back with investments of $55.9 billion?up 33% on year?while China?s investment number was much lower at $47 billion. The US spurt came on the back of the federal loan guarantee programme and the Treasury?s cash grants. A third incentive?the Production Tax Credit (PTC)?is slated to end this year. There could be a rush of investments to take advantage of this credit in 2012, followed by a slump next year, a pattern that has been observed in various markets in Europe with similar incentive deadlines.

Europe managed an investment of about $100 billion, led by solar energy, and offshore wind.

The third headline from the 2011 numbers is India. In terms of growth in investment, India stood out, clocking a 52% jump to touch $10.3 billion from $6.8 billion invested in 2010. This was driven by solar, as was the case globally. Funding for grid-connected solar projects saw a seven-fold jump to $4.2 billion in 2011 and came fairly close to the $4.6 billion invested in the wind sector.

In terms of capacities, a record 2,827 MW was added in the Indian wind power sector in 2011 compared with 2,140 MW in 2010. With this, India continued at the third rank globally in terms of new installations, behind China and the US. Grid-connected solar capacity, which was less than 20 MW in 2010, jumped to almost 280 MW by the end of 2011.

2012 outlook & challenges

In the current year, Bloomberg New Energy Finance estimates that new wind capacity addition in India could cross 3,000 MW, and another 500-750 MW of solar projects could also be added, making the country one of the bright spots in the clean energy firmament.

For global investments, 2012 promises to be another challenging year with the European financial crisis continuing to fester and the supply chain working its way out of some fearful over-capacity, according to Michael Liebreich, the chief executive of Bloomberg New Energy Finance.

Some of those challenges are already visible. Last month, Vestas, the world?s biggest wind turbine maker, announced that it would cut 2,335 jobs?representing 10% of its staff?and halt production at one factory to become more competitive with Chinese suppliers. It also said that another 1,600 jobs in the US are at risk if PTC is not extended beyond 2012.

The last time PTC was allowed to expire?at the end of 2002?annual wind installations fell to 397 MW from 1.67 GW in the previous year, according to data from the American Wind Energy Association.

In Europe, downward revision of incentives is either planned or has been implemented in many countries. Poland is mulling a retroactive cut in support to wind projects, although it is also proposing measures that would reassure investors about the value of green certificates after 2017.

The UK is trying to tame its renewable energy support costs, as is Germany. To top that, financing has become even more challenging. Areva?which is bidding to build five offshore wind farms in France requiring an investment of almost $13 billion?said last month that banks are lending less because of the financial crisis. It is too early to say whether the chill will last through the year.

There are also issues with the power grid cropping up as the renewable energy mix increases. The grid operator of the Czech Republic, for instance, said that network security was frequently compromised in 2011 due to unscheduled inflows of renewable energy from Germany.

Vandana Gombar is the Editor, South Asia for Bloomberg New Energy Finance (www.bnef.com), a leading provider of independent analysis, data and news in the clean energy and carbon markets, headquartered in the UK