Ultimate guide to Attracting Renewable Energy Projects
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Ultimate guide to Attracting Renewable Energy Projects
From the jaw-dropping rise of wind and solar power to the increased importance of environmental, social, and governmental (ESG) investing, the renewable energy market has experienced significant growth in the past few years. While we still live in a carbon-first world, the renewable energy market is becoming increasingly important. The future is always exciting. It offers endless possibilities to make life easier and better. Yet by looking at the renewable energy market in 2021, we can see that there are already some fascinating developments that will affect all of our lives. Whether you are looking to attract investment into your region by identifying fast-growing renewable energy companies or simply want to learn more about this accelerating market, it is worth your time to understand the state of this market in 2021. 2 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTS
A Fast-Growing Market That Is Entering a New Chapter
To understand the state of the renewable energy market we Electricity consumption will likely fall
must settle on a proper definition of “renewable energy.”
3.9% year over year in 2020 and increase
According to the U.S. Energy 1.3% in 2021. The share of renewables in
2020 eclipsed that of coal generation for
Information Administration, renewable
153 days in 2020 (compared to only 39
energy is defined as “energy from days in 2019).
sources that are naturally replenishing
Lockdown measures significantly reduced electricity demand
but flow-limited.” last year. Therefore, it is important to keep in mind that this was
an aberrational year when comparing the 2020 data to the 2021
In other words, these are resources that are essentially projections.
inexhaustible in duration, but they offer reduced energy per
unit of time. Biomass, hydropower, wind, solar, and geothermal
power are considered sources of renewable energy.
2020 has been an interesting year for renewables—especially
because of Covid-19. Looking at the data, we can see that the
share of renewables exceeded other electricity generation
sources this year—even as electric demand actually fell this year.
3 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTSRenewable Energy Market Size
With this background in mind, let’s look at the projected size of renewable energy market is expected to increase about 23%
the renewable energy market in 2021. (from $184.3 billion in 2020 to $226.1 billion in 2021). The U.S.
Energy Information Administration (EIA) also projects a rise of
Simply put, we can expect renewables to show their resilience. around 21% of electricity generation from renewable energy
According to one report by Research and Markets, the global sources.
u.s.u.s.
electricity
u.s.
electricitygeneration
electricity by fuel,
generation
generation byall
by fuel, sections
fuel,
all all
sections
sections
BILLION KILOWATTHOURS
BILLION
BILLION
KILOWATTHOURS
KILOWATTHOURS PERCENT SHARE
PERCENT
PERCENT
SHARE
SHARE
forecast
forecast
forecast forecast
forecast
forecast
4,0004,0004,000 50%50%50% NATURAL GASGASGAS
NATURAL
NATURAL
45%45%45% COALCOALCOAL
40%40%40%
3,0003,0003,000
35%35%35% NUCLEAR
NUCLEAR
NUCLEAR
30%30%30% RENEWABLES (NON-HYDRO)
RENEWABLES
RENEWABLES (NON-HYDRO)
(NON-HYDRO)
2,0002,0002,000 25%25%25%
20%20%20% HYDROPOWER
HYDROPOWER
HYDROPOWER
15%15%15% OTHER SOURCES
OTHER SOURCES
OTHER SOURCES
1,0001,0001,000
10%10%10%
5% 5% 5%
0 0 0 0% 0% 0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2010
2011
2012
2012
2013
2013
2014
2014
2015
2015
2016
2017
2016
2017
2018
2018
2019
2019
2020
2021
2020
2021
2010
2011
2010
2011
2012
2012
2013
2013
2014
2014
2015
2015
2016
2017
2016
2017
2018
2018
2019
2019
2020
2021
2020
2021
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, December 2020
4 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTSAccording to Goldman Sachs, spending for renewable energy One of the more exciting subsectors of renewable energy is
projects is expected to become the largest area of energy green hydrogen. While green hydrogen has historically been
spending. This would be the first time in history that spending on expensive, it is getting significantly cheaper and it no longer
renewable energy eclipses spending on upstream oil and gas. relies on government support in many regions. As Deloitte
argues, green hydrogen production and storage are going to
As referenced above, the renewable energy market includes cause more projects to transform surplus wind and solar power
many different types of renewable energy—each with its own into carbon-neutral chemicals and fuels. Fitch Solutions, as you
growth rates. can see below, projects a substantial number of green hydrogen
projects in 2021.
Green hydrogen investments on the rise in 2021
NUMBER OF HYDROGEN POJECTS BY TYPE What is Green and blue hydrogen?
Green hydrogen is produced through the process of
GREEN, 58 electrolysis using renewable power sources such as solar or
wind, with net-zero carbon emissions.
Blue hydrogen is produced from fossil fuels, the
predominant source being natural gas. Blue hydrogen has
two distinct advantages over green hydrogen, those being
lower electricity demand and the inclusion of carbon capture
and storage (CCS).
BLUE, 2
5 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTSAlong with the rise of green hydrogen, wind and solar are Finally, a fascinating area of this market is global hydropower.
mainstays of the renewable energy space. The International While solar and wind get a lot of attention, hydropower is the
Renewable Energy Agency projects substantially falling costs of most used source of renewable energy around the globe.
solar photovoltaics, concentrated solar power, onshore wind, With that being said, China is going to become an even more
and offshore wind power. While more wind and solar capacity is important developer of hydropower. The Wudongde project
hitting the market in 2021, it is less than initially expected before (10 gigawatts) and Bhaetan project (16 gigawatts) are going to
Covid-19. accelerate China’s hydropower capacity in 2021. Ultimately,
GlobalData predicts that this macro trend will continue, with over
165 gigawatts of global capacity by the end of 2030.
PV
0.25
csp
0.20 onshore wind
2019 usd/kwh
0.15 offshore wind
0.10
0.05
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
COMPLETION YEAR FOR COMMITTED PROJECTS PER TECHNOLOGY
6 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTSUpcoming Catalysts
There are a variety of reasons growth is expected in the Storage and Solar: Set to Soar
renewable energy space. Some of these catalysts are expected Driven by government support and massive technological gains,
and some are less certain. That being said, some key factors energy storage and solar power are two of the fastest-growing
will contribute to the growth of the renewable energy market in segments of the energy sector. This is partly due to the synergy
2021. between the two segments; nearly a third of the power storage
projects set to launch in 2021 are solar-plus-storage.
Investment Activity Heats Up
As the end of the pandemic appears on the horizon, investment Offshore Wind on the Rise
activity is heating up, with the renewable energy industry a major Powered by experienced backers and technological
target for mergers and acquisitions. In December of 2020, more breakthroughs, offshore wind is becoming one of the greatest
than 80% of all energy M&A deals were in renewable energy. renewable energy producers in the industry. Private and public
investment indicate that this trend is here to stay.
An FDI Rebound
Across the board, foreign direct investment took a hit in 2020, as Hydrogen Offsets Fossil Fuels
liquidity and risk appetites soured in response to the pandemic. “Green hydrogen” is transforming a number of fossil fuels. The
For renewable energy, we expect this trend to reverse sharply in technology is uniquely poised to supplement and gradually
2021, as investors look for high-yield, innovative companies with phase out fossil fuel consumption, making it easy to adopt for
unique government backing. utility companies.
7 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTSGovernment Support The Rise of ESG Investing
A new White House may spur increased investment in this area. Finally, there is the rise of ESG investing. In 2020 alone, ESG
The Biden team has made it clear that it intends for the United investing has been one of the most discussed areas of capital
States to rejoin the Paris Climate Accord, which will provide some markets. As stated by Chuka Umunna in Forbes, ESG investing
tailwinds in many aspects of the renewable energy market. came of age in 2020.
Financiers are less willing to invest in companies that are bad for
the planet (i.e., oil and gas companies) and more likely to support
renewable energy companies.
There is a high likelihood that this trend will continue in 2021,
as investors are focusing on climate change in their 2021 ESG
President Biden has also announced a strategies.
$1.7 trillion climate plan.
This means that renewable energy
Among other things, the plan would boost investment in companies will be more likely to
technologies like large-scale battery power storage and carbon
capture and minimization. A modernized infrastructure plan is
access funding in the capital markets
also a possibility, with more investment into America’s electricity compared to prior years.
grid and public charging stations for electric vehicles. It goes
without saying, but a significant spending bill in the renewable
energy space will unlock massive opportunities—even in 2021. It
is always difficult to predict the potential progress or success of
any government spending bill, yet the Biden administration may
catalyze a new wave of renewable energy investment.
8 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTSFDI
Renewable energy has been an attractive target for FDI, enjoying
robust growth since 2007. Activity reached an all-time high in
2019, with overseas projects growing 38% in just one year. 2020
saw a sharp reversal of this trend, as FDI around the world
plunged in response to the pandemic.
The current political environment is very amenable to renewable
energy investment. Both China and the United States under
We expect renewable energy to get the Biden administration have affirmed their commitment to
back on track in 2021 as one of the reaching carbon neutrality, with many major economies such
most attractive industries for foreign as South Korea, Japan and the United Kingdom making similar
pledges. This commitment from governments will trickle down
investment.
into private investment, protecting and subsidizing returns on
renewable energy projects.
2021: More Supply Chain Disruption
The turbulence of the last few years inspired many countries,
most notably but not only the United States, to take a hard look
at their economic partnerships.
The hottest segment is solar power, which comprised 50% of all
renewable FDI in 2019. Solar power has many draws, including Multinational firms are seeking to
rapid technological progress which has led to huge gains in the
diversify their supply chains, often away
cost efficiency of solar panels over the last 20 years. Additionally,
governments are often willing to subsidize the industry in pursuit from China, a country perceived as too
of a greener economy and lower emissions. risky to be so heavily depended on.
9 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTSNearly half of Japanese firms, for example, are taking steps to New York State, for example, will
diversify away from Chinese production in favor of Southeast
Asia and India.
receive 60% of its renewable energy
from offshore wind. The state also
This trend will see a push toward on-shoring and nearshoring committed $400 million to supporting
for the renewable energy industry, as well as a general shake-up
the industry.
of where industry capital is located. Even if China-bound FDI is
adversely affected by these trends, China will continue to be a
Several major energy companies, including Duke, are turning to
leader in renewable energy. The country is currently the largest
offshore wind to reach their renewable energy targets. Duke’s
renewable energy producer, and is now at the forefront of
aggressive goals, which include 2,650 MW from offshore wind
emerging technologies in the industry.
by 2035, depend on a friendlier regulatory environment for the
segment moving forward.
Wind on the Water
The wind industry is increasingly shifting toward an offshore
Fossil fuel companies continue to divest from normal operations
model. Offshore wind is getting more productive, as experienced
toward renewable energy, and offshore wind is a major part
producers bring down costs and scientific progress increases
of their strategy. Wind energy represents a more sustainable,
power generation. Both governments and firms are cashing in,
stable source of revenue for oil and gas companies, and offshore
investing more in the burgeoning segment.
projects allow them to leverage their experience in deep-water
infrastructure.
In the US, coastal states are giving offshore wind a major role
in their renewable energy plans. As these states tend to invest
more heavily in renewables, offshore wind is an outsized
recipient of industry investment.
10 | ULTIMATE GUIDE TO ATTRACTING RENEWABLE ENERGY PROJECTSThe New Hydrogen Economy
Green hydrogen is a major tool in weaning the world off of fossil
fuels. Primarily, green hydrogen power is obtained from using
electricity, produced by some renewable means such as solar
power, to break up water molecules into hydrogen. Hydrogen
can be added to natural gas supplies to lessen the use of fossil
fuels, and perhaps one day become a standard fuel on its own. Electric and gas companies have taken note of green hydrogen’s
The technology holds immense promise for a carbon-neutral potential to improve their bottom line, corporate image and
world that need not sacrifice its energy demands. emissions profile. San Diego Gas and Electric, one of southern
California’s largest utilities, will launch two storage projects
The key theme in the entry of green for green hydrogen in 2022. NextEra, another American utility
company, has launched a $65 million project to produce
hydrogen is its ability to be mixed with hydrogen from solar energy.
natural gas to increase its yield and
reduce consumption. Although this segment of the renewable
Natural gas is used to power electrical grids, fuel industry, and industry is still in its nascence, expect it
heat homes around the world, giving green hydrogen a role in to grow in importance and productivity
much of the power we consume. in the years to come.
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