Half-year review: what is happening and how to capitalise on growth moving forward
Published 1st August 2022
By David Stent, Content Editor, Climate Council
A 21st century energy crisis
The world’s uneasy relationship with fossil fuels remains core to society's daily demands, far more so than the push for a renewable-based energy transition might have convinced us otherwise. All it took for the conversation to return to supporting new oil and gas investments, was the world’s third largest oil and gas producer making one unilateral decision to invade a neighbour – adding a range of pressures to an undersupplied market.
Global governments have by and large failed to adequately plan for a diverse energy mix that can withstand market shocks, especially those brought on by pariah states acting to the detriment of all nations. As such, nations have accelerated their renewable ambitions – with the IEA forecasting up to 320GW of new renewable capacity coming online this year.
As oil and gas get the revival and record profits to help their sector ‘survive', where has this precarious position left the renewable roadmaps of the world’s nations and where the clean energy growth exists.
The European Union has arguably ‘suffered’ the most from the restrictions on Russian energy supply, who supplied just over 40% of EU’s gas supply prior to February’s invasion of Ukraine. Yet since, the cost of gas to consumers and utilities alike has risen beyond reasonable levels – the obvious solution is to shift supply away from Russian exports and onto cleaner generation sources.
Initially, the EU’s roadmap laid out a 40% share of renewable capacity by 2030, this has now risen to 45%. Additionally, each member state has agreed to lower its average gas use (calculated between 2017-2021) by 15%.
The EU commission has issued a new roadmap to fast-track solar installations, as part of the REPowerEU plan that sets out how the continental bloc will tackle: energy efficiency, production of clean energy sources and develop more diverse energy sources.
According to the CEO of SolarPower Europe Walburga Hemetsberger, “European solar can install 39 GW this year – replacing 4.57 BCM of Russian gas”. A significant milestone for both reducing fossil fuel use and energy dependency. Naturally, we will see significantly more growth over the short-term, with Europe currently seeking whatever additional solar PV supply there is currently available on the market.
Of course, Europe’s other saving graces are their consistent investments into offshore wind, green hydrogen development and battery storage options. The green hydrogen economy may be hit by lower gas supplies (developing blue hydrogen), however the EU Commission is advancing the timeline for Green Hydrogen projects across the continent and supporting projects in Namibia and South Africa.
United States of America
Quite conversely to the EU, the United States’ have largely benefited from the renewed demand for US LNG and despite the record prices, many state-level spot prices were significantly lower than in Europe.
Biden’s administration has struggled to attain a balance between pursuing a central component of his agenda – to advance the progressive American ambition of becoming the world’s leading clean energy producer and protect consumers from rising oil and gas prices. The geopolitical pressures to supply European partners has ensured natural gas and oil production cannot cease. This is pragmatic, the Supreme Court decision to limit the EPA’s environmental protection regulation, however, has been the more pressing concern and introduced an unnecessary barrier to the energy transition.
Deloitte’s 2022 renewable industry outlook analysed several emerging trends in the US, most notably: the expansion of ‘solar-plus-storage’ build-outs, that include floating solar PV modules and broader access for community solar projects; and expanding access to transmission lines – currently inhibiting 844GW of capacity coming online. With ERCOT’s ongoing inability to keep consumer prices down in Texas, the need for reliable and interconnected transmission is even more pronounced.
China remains the main player developing and installing the lion’s share of global renewable capacity this year, going so far as to surpass the 2021 record-level solar and wind installations by 25%. This increase aligns with the national goal to achieve 33% of renewable-powered generation capacity by 2025, according to Fitch Ratings sectoral analysis. These revised figures can from China’s 14th five-year plan (2021-2025) that continuously evaluates the demands of domestic internal power consumption, generation capacity and need for energy imports.
The global floating solar PV boom continues in APAC, where 69% of new installations have occurred in the region, with Japan, India and China being the dominant forces. Over the next decade, the market is expected to grow from a burgeoning $0.7 billion market to $24.5 billion – undoubtedly one of the more exciting growth prospects over the near-to-medium term.
Africa will continue to need adaptive and progressive options for solving their growing energy access problems. A technical document prepared by the African Union for COP27, stated emphatically the need to allow African states capacity to expand their oil and gas production across the continent – a precarious position for anyone supportive of climate justice.
South Africa, for one, has pushed through energy reforms for a liberalisation of coal and gas-powered energy procurement in order to stymie the rolling electricity blackouts that have stifled economic growth. The reforms will allow a doubling of renewable procurement to 5200MW, a watershed moment for a country that enjoys access to some of the world’s best coal resources but also world-beating environment for solar, wind and tidal power.
African states should be unapologetic in their pursuit of energy access, fossil fuel or renewables alike, that being said, renewables hold the greatest potential within the Africa. Liberalisation policies that support foreign investments are supported by massive institutional investors, including the IFC, AfDB, EBRD and World Bank – with a record $9.4 billion in financing over the FY21 to FY22.
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