How long till the renewable "wind"ow opens?
Over the past decade, renewables have developed from niche technology to global industry. With environmental concerns rising to the top of global and regional agendas, the debate has shifted from “When will renewables take off?” to “How much faster will they grow?” As the cost of renewables continues to fall sharply and their growth rates soar, a virtuous cycle is set in motion. The need for clean power in emerging economies only adds to the momentum.
In 2021, the renewable energy industry remained remarkably resilient. Rapid technology improvements and overall decreasing costs of renewable energy resources, along with the increased competitiveness of battery storage, made renewables one of the most competitive energy sources in many areas. Government support programs shielded renewable companies from market risk, while technology risk and high barriers to entry shielded industry players from significant competition.
Renewable energy growth is poised to accelerate in 2022, as concern for climate change and support for environmental, social, and governance (ESG) considerations grow and demand for cleaner energy sources from most market segments accelerates. Today’s industry is coming under enormous cost pressure from extremely competitive reverse auctions. At the same time, the technology risk is beginning to fall as suppliers mature, allowing new entrants to join the fray. Non-traditional renewable players, such as institutional investors and oil and gas majors, are investing significant sums to play their parts in the global race for renewables.
According to a recent seminar held by Westwood Global Energy, the offshore wind market is at a mature level in Europe; such that it will account for 40% of global engineering, procurement, construction, and installation (EPCI) over the next 5 years, likely to be led by floating wind projects towards the end of the decade. In addition, several emerging European nations are also in advanced stages of developing offshore wind projects. O&G companies have made visible strides in building their offshore wind portfolios in Europe and further investments are expected to be made. The fate of most renewable players will depend on how well they cope with the trends affecting the industry. Winners will focus on international expansion, flexible operations, technology digitalisation and commercial management.
The year ahead promises new growth paths for the renewable energy industry, potentially aided by supportive policies from an administration focused on combating climate change. Yet, some challenges still linger. Perceived skill shortages are, and will remain a challenge, requiring not only new talent through graduates and entry level trainees but from transitional expertise. The need to explore how new technologies, business models, policies, and investments can help address these challenges and accelerate growth. This, coupled with maximising existing talent from more mature industries, traditional Oil & Gas being a prime example, will go a long way to address these challenges.