The ongoing worldwide energy crisis is a stark reminder of the long-pending need for resilient energy systems. This highlights the critical importance of transitioning towards renewable energy. According to the International Energy Agency, global energy investments will increase by 7% in 2023, reaching USD2.75 trillion. This will be primarily driven by investments in clean power generation resources. However, much more needs to be done to address the emerging complex trade-off between demand and sustainability in energy generation and consumption cycles.
The demand pressures are currently affecting the short-term through high fossil fuel prices and a competitive scramble for supplies. While this might urge countries to address their near-term issues, it is important to remember the longer-term priorities of sustainability and resilience. A deliberate and focused policy push is needed for this. Globally, oil and gas companies are witnessing almost 10% higher investments this year, with cumulative profitability projected to cross USD2 trillion.
The accelerated push for renewable energy projects in several markets is an encouraging sign. Utility-scale power projects, such as those based on wind and solar, are the most important, given the burden on power generation for its fossil fuel dependence and emissions. Mature renewable energy technology options, such as onshore wind, are instrumental in scaling up the share of clean energy at competitive costs. Furthermore, hybrid configurations involving wind-plus-storage or even wind-plus-solar-plus-storage, are increasingly making commercial sense for the flexibility and dispatch that were long regarded as the bane of renewable energy projects.
Realizing such potential will depend on how quickly the bottlenecks ease. Apparently, there are terrawatts of ‘shovel-ready’ onshore wind capacity that are locked-up for want of permissions or interconnection requests. Similarly, competitive choices between wind versus solar needs to be resolved as complementarity can be more efficient for grid connectivity. Investors’ response to the select initiatives in this regard across the countries confirm how responsive the markets are to such steps.
The optimistic picture still carries its challenges and riders. High borrowing costs, a looming recessionary outlook, and the pricing adjustments across the supply chain – all contribute towards an uphill path. This is a phase that will have to be borne out until market forces balance. The capital flows in the overall energy market and onshore wind, in particular, are more likely to be aligned to fundamentals than transitory shocks. Therefore, we believe that the investment commitments are unlikely to change course drastically.
PAF’s Annual Primer series aims to offer an overview of the demand drivers, opportunities, challenges, and outlook prevalent in various major markets for different renewable energy technologies, including solar PV and onshore wind. We hope you find our annual review of the Global Onshore Wind Market informative and enjoyable to read. We look forward to briefing you on other renewable energy technologies in the upcoming months.
