Renewable Energy: Macroeconomic and Regulatory Trends

GlobalData Thematic Research 31 August 2020 (Last Updated August 31st, 2020 12:04)

Renewable Energy: Macroeconomic and Regulatory Trends

With a focus on decarbonising electricity supply, several governments and utilities are focusing on increasing the share of renewable energy sources in the overall energy mix. They have provided support measures that include incentives for renewable power development and to offer a level playing field against conventional sources.

Listed below are the key macroeconomic and regulatory trends in the renewable energy theme, as identified by GlobalData.

Gradual shift to auctions

A number of federal and provincial governments have moved away from generation based incentives such as Feed-in Tariffs (FiT) and have been adopting the auction mechanism to allocate capacities and sign power purchase agreements (PPAs). Auctions are becoming the new normal. Auction-based bidding will drive solar and wind power in most of the key markets.

Increasing role of distributed sources

Consumers have been engaging more and more with the utilities and – by selling self-generated power back to the grid – are also contributing to supply. Consumers from all segments – residential, commercial, and industrial – are interested in reducing consumption to reduce their emissions and cut costs, and help balance the grid during peak times.

Policy toward renewable energy scaling dependent on political environment

In every conference of parties of the United Nations Framework Convention on Climate Change (UNFCCC), each ratifying government makes commitments which are in line with the incumbent political party in power in the country. Currently a number of countries are trying to reach their commitments made in the Paris Climate Talks during the 21st Conference of Parties – COP21. A few countries have been lagging in their efforts as well.

The commitments made by a country, the efforts put in to withhold these commitments, and the extent to which these governments plan to use renewable energy to achieve these emission reduction commitments depends on the political environment at any point of time.

Capital costs stabilising after falling for years

Capital costs of solar photovoltaic (PV) and wind power have plummeted over the past several years, but in 2020 will not fall as much as they did between 2015 and 2019. Average costs of wind turbines (of capacity 3MW and over) fell by around 25% between 2012 and 2019. Average solar PV module prices fell by around 70% during the same period. Currently, the costs have stabilised and may only see slight reductions. However, in a few years with the use of advanced materials and technological advancements, new products may command slightly higher prices, while also increasing generation efficiencies.

This is an edited extract from the Renewable Energy – Thematic Research report produced by GlobalData Thematic Research.