Joe Crehan, Investment Director at Greenbank highlights the growing awareness of the inevitability of renewables and a political shift toward clean energy.
Renewable energy has moved to the centre of political and social policy, driving net-zero commitments across many countries. In recent years, there has been a significant acceleration in building the infrastructure needed to support renewable energy sources.
Clean energy deployment is advancing at record speed. In 2023, nearly 560 gigawatts of new renewable capacity was added globally, representing a 64% year-on-year increase and marked the 22nd consecutive year of record additions. By 2024, this renewables growth took clean power to over 40% of the world’s electricity generation, with renewables making up just over 30% in 2023.
In the UK, coal is no longer part of the power system, and more than half of its power comes from renewable energy. In the EU, renewables made up around 45.3% of gross electricity consumption in 2023, most notable from wind power and solar power*1. This shift has been consistent, with fossil fuel generation falling steadily for five consecutive years.
On the cost front, the International Energy Agency (IEA) estimates that 96% of new utility-scale solar and onshore wind projects in 2023 had lower generation costs than new coal and natural gas plants.
It is clear that the momentum behind renewables continues to build, and is driven by both falling costs and the rapid expansion of supporting infrastructure.
United States
When it comes to renewable energy, it is important to understand the role the US has to play in the development of this sector and its recent policy shift.
Before the re-election of President Trump, the US was a key player in the global renewable energy landscape. The Inflation Reduction Act of 2022 introduced strong incentives for domestic clean energy production and manufacturing. However, when President Trump was re-elected this brought a sense of uncertainty to clean energy. From a market point of view this level of uncertainty around renewables has taken a toll on clean energy stock indices, which have been underperforming.
The Inflation Reduction Act is not needed to build new clean energy projects, however it did provide generous tax incentives for building the large-scale infrastructure needed to support renewable energy sources. This piece of legislation had accelerated renewable infrastructure development through tax credits, but many of these are being phased out under the current administration and it has become clear that this is no longer a policy priority in the US.
President Trump’s “drill baby drill” rhetoric has renewed the emphasis on oil and gas, and there have been policy shifts that favour fossil fuels. Notably, a new executive order has halted offshore wind licensing, something he has displayed a particular dislike for, which also reflects a broader pullback in this sector due to complex state-by-state regulatory hurdles.
The US has implemented a complex set of tariffs on imported solar panels and components from Southeast Asian countries, such as China, Vietnam, Cambodia and Thailand. These tariffs are layered on top with anti-clean energy sentiments which does provide a challenge when it comes to investing in renewable energy in the US.
This is not to say there are no renewable energy opportunities in the US, far from it. There are still projects in the country that are well worth looking into and solar in particular is likely to continue to play a very important role. It should also be noted that the US does maintain a well-established domestic manufacturing capacity, which, while it cannot outright meet the level of demand from solar projects, provides a solid foundation to build from that could benefit the renewable energy sector.
Energy Security
Renewables not only offer decarbonisation and cost advantages but also enhance national energy security. This issue has been trending since Russia’s invasion of Ukraine, which triggered a sharp spike in energy prices. This is best demonstrated in the UK, when the household energy price cap surged by 27% in 2022 and could have risen to 80% if it were not for the government’s intervention*2.
Renewable energy is inherently domestic, once the infrastructure is in place, as countries are no longer dependent on foreign fuel imports. Renewable sources provide a solution for both political and social challenges, creating affordable energy while reducing vulnerability to geopolitical developments.
It should be noted that during the energy crisis of 2022, the German Finance Minister Christian Lindner referred to renewable energy as “Freedom Energy,” highlighting that wind and solar sources do not require a geographical lottery of natural resources.
Once the required infrastructure is built, renewable energy is a domestic resource, and eliminates a country’s reliance on imports. This not only keeps generation costs low and stable for consumers but also reduces risk from geopolitics.
Despite uncertainty in the US, the global shift toward clean energy is unmistakable. Political focus, technological improvements, cost declines, and the lessons learned from recent geopolitical crises highlight the necessity for secure, domestic, and affordable energy. Both policymakers and the public recognise these benefits, making the transition to renewable energy inevitable.
It is clear that there is a growing awareness of the inevitability of renewables. Not just because we need them, but because we want them for their price and security. Over the last few years, we have seen the momentum to support renewable energy endeavours both on a political and social level. With these aspects aligned, it demonstrates that there is some real progress being made in this area and provides us with many opportunities to further the renewable agenda. It is hard to not see clean energy as inevitable.
*1 – https://ec.europa.eu/eurostat/statistics-explained/index.php/Renewable_energy_statistics
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