Renewable Energy

Renewable Energy

 

Developments, opportunities and the impact of climate change on renewable energy production

Summary

While renewable energy currently only plays a minor role in the total energy production of developed countries, its share is forecast to grow to 40% of global power supply by 2040. Solar photovoltaic (PV) energy is likely to dominate this growth in renewable energy, outpacing wind energy capacity growth by a factor of two or more.

The main driver of this growth in renewable energy is the exponential decline in the production and installation costs for renewable energy. Already today, onshore wind energy is competitive with fossil fuels without government subsidies. Solar PV as an energy source will become cheaper than fossil fuel-driven energy production in the absence of government subsidies over the next few years.

While renewable energy sources reduce the emission of greenhouse gases, climate change is going to affect the effectiveness of renewable energy in different ways. Recent academic studies show that wind energy efficiency might decline in Europe, Japan and Central US due to climate change effects, while the southern hemisphere might see increased wind energy efficiency.

The efficiency of solar PV, on the other hand, is likely to increase in the UK and Central Europe due to climate change effects, and solar thermal power generation is going to be one of the biggest beneficiaries of climate change effects. Investors should keep these effects in mind when deciding on the form of renewable energy in which to invest.

Solar PV is a currently under-appreciated and under-invested source of renewable energy. The amount of investment needed in the coming years in solar PV is significantly higher than the amount needed for onshore or offshore wind. Yet, investors continue to focus their investments on wind rather than solar PV. This creates imbalances in the supply and demand of capital for wind and solar that make solar PV investments relatively more attractive going forward.

Additional investment opportunities exist in the relevant supporting infrastructure, such as batteries and energy storage systems, that will be increasingly important as renewable energy becomes the dominant form of electricity production.

 

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