The state of renewable energy
Will Richardson discusses the current state of play in the renewable energy sector, and explores what lies ahead in 2019
2018 proved to be an interesting time for the renewable energy sector, particularly with regards to policy changes. Solar power was arguably most affected, thanks to China’s shock decision to curb future approvals for solar power installations, the US imposing new tariffs on imported solar cells and modules, India cancelling some pretty significant mega-tenders and Japan cutting its feed-in tariffs, to name just a few.
Thankfully, 2019 looks more promising, with early signs of much-needed policy clarity from major players, exciting large-scale projects placed on the table and expectations that the global solar market could exceed 100 gigawatts this year.
Business and investment
Following the revision of the EU’s Renewable Energy Directive in December, there is now greater pressure on member states to break down the barriers that have historically prevented organisations from committing to longer term power-purchase agreements (PPAs). This should make the market much more favourable and encourage more corporate companies to increase their procurement of renewable energy.
Thanks to continued developments in the sector, it is now more affordable than ever for businesses to use renewably-sourced energy. By opting for REGOs (Renewable Energy Guarantees of Origin), which are issued by energy regulator Ofgem, businesses can confidently report to stakeholders that the energy used is from renewable sources. Under the REGO scheme, Ofgem uses the GHG Protocol for calculating carbon emissions from electricity production: if all of an organisation’s energy is REGO-certified, its emissions for electricity are zero. Energy suppliers can match a business’s estimated consumption to the output of REGO-certified suppliers and essentially back a business’s action on climate issues with a publicly-trusted guarantee. As it continues to become easier and cheaper to purchase energy from renewable sources, more and more businesses are set to come on board this year.
Of all of the renewable energy sectors, solar is increasingly proving to be the most attractive option for investors, with many willing to take bigger risks on their solar investments. Where previously it was difficult to spark interest in a solar project during its initial development stages, investors are now more willing to stump up the cash earlier on – in return for an increased profit share, of course. This boost in confidence will naturally permeate throughout the sector, resulting in even more interest as the year progresses.
Hydrogen has been quoted by many as a ‘zero-emission fuel’ as its only by-product is water vapour, making it an extremely attractive option for the automotive market. Hydrogen fuel cell-powered cars, such as Hyundai’s 2019 Nexo crossover, are certainly capturing interest as countries search for practical ways to hit emissions targets. Recent figures suggest that there are less than 100 hydrogen-powered cars in operation in Britain, and that crucial decisions now being made by the UK government could see higher levels of deployment by 2020.
It is presently extremely expensive to produce hydrogen from renewable sources, with fossil fuels such as natural gas and coal gas being the main sources for current production. However, there is much progress being made in the area of ‘water splitting’ – a process by which an electrical current separates hydrogen from water molecules. Another option currently being explored is integrating the splitting process with wind or solar power, further reducing the carbon footprint associated with hydrogen’s production. This is certainly an area worth keeping a close eye on as the year progresses.
Blockchain is still associated with the world of cryptocurrencies, but it is making waves across a number of sectors – including energy. Blockchain technology provides a decentralised system, effectively removing the need for energy suppliers at all. It creates unique opportunities for efficient peer-to-peer buying and selling, while reducing price inequality. It is linked to rise of microgrids, where smaller grid systems are linked to local power sources (also known as distributed generation sources). This is still in its relative infancy, but there are likely to be many more microgrids emerging across the globe this year, as countries and communities put this technology into practice.
Many industry observers have suggested that the offshore wind industry has now ‘come of age’ and is ready to expand significantly in the coming years. Regionally, Europe has showcased exactly what can be achieved with offshore wind, with the UK in particular remaining ahead of the game and providing a clear blueprint for others to follow. With rising confidence across the board, it is clear that offshore wind leasing will continue to expand and diversify even further as the year progresses. In Scotland, the first Offshore Wind Leasing Round by Crown Estate Scotland is expected to take place in April 2019, and in the US a recent offshore wind auction broke records after achieving $405m in new leases. A surge in zero-subsidy tenders will also fuel this growth.
Will Richardson is founder of environmental management consultancy Green Element