Net Zero Investor provided a summary of The International Energy Agency’s (IEA) annual report on global renewable energy, which offers a mix of good and bad news. Key themes are operating costs are down (good), government subsidies are increasing and working (good), but systemic risks threaten progress (bad) and growth is behind expectations (bad). A few key points from the article:
“‘The world is on course to add more renewable capacity in the next five years than has been installed since the first commercial renewable energy power plant was built more than 100 years ago’… So much so, that by 2025 renewables could surpass coal as a share of global power generation…
The best incentive to invest in renewables is the relative price difference… ‘In 2023, an estimated 96% of newly installed, utility-scale solar PV and onshore wind capacity had lower generation costs than new coal and natural gas plants’…
Prices, however, might not be conducive for long. The IEA warns that rising interest rates also mean rising project costs for developers. At the same time, inflationary pressure on supply chains in onshore wind and solar PV are significant. Macroeconomic turbulence carriers with it, the risk of financial misfortune for many developers…
‘The renewable energy industry, particularly wind, is grappling with macroeconomic challenges affecting its financial health – despite a history of financial resilience’, the IEA’s report reads..
Prices are also affected by extensive green subsidy programs which target renewable energy projects. Globally, such programs are proliferating… policy signals play a vital role in shaping future demand and convincing markets to deploy capital. The IEA expects the US to add nearly 340 GW of capacity – which hinge on the IRA as a market signal.”
I’ve written recently about cancelled renewables projects (here and here) and the fundamental business challenge (here and here) faced by the industry right now. Until the business environment for renewable energy settles down, it will be difficult for the industry – and all those counting on renewables growth for their own Scope 2 emissions reductions. If that is you, you should be looking into alternatives and contingency plans.
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