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2018 Renewable Outlook Stable: Renewables Can Now Self-Sustain

Time:2018-02-15 Source: Hit:46

Renewables have been growing in developed and developing markets over the last decade. Why? Falling costs thanks to advancements in technology, first with wind power and evolving with solar in recent years. In fact, more efficient technology has made renewables competitive to the point that the phasing out of incentives has begun. Over the past decade, investors have gained confidence in how these sources of energy can be predicted. And the more costs continue to decline for renewables, the more they will take market share away from the traditional energy markets.

Proof of the sector’s staying power, and solar in particular, rests with the very ratings Fitch assigns to these projects and how stable they have performed over time. Whereas the somewhat uneven rating performance of wind projects belies a market very much in its infancy and trying to find its footing, Fitch-rated solar projects have been upgraded over the last year and are emblematic of a renewable energy source that has ironed out the proverbial kinks in recent years.

So with renewable energy undoubtedly entrenching itself as a global industry over the last decade, what will the next 10 years bring? The short answer is “more growth” and notably, “self-sustaining growth.” As the market evolves, growth will this time be supported by advancements in battery storage technology. While developing markets will see demand for power continue to grow, the same trend will likely flatten out for developed markets, though the expected roll-out of electric vehicles could add to demand.

Solar installed capacity in Western Europe and North America is expected to advance steadily through 2026. Credit: Fitch

Solar installed capacity in Western Europe and North America is expected to advance steadily through 2026. Credit: Fitch

Power consumption will also become more dynamic over the next decade. The roll-out of smart meters in developed markets will allow for better real-time demand and price signaling, with digital integration within households likely to accelerate this process. Self-generation may culminate in a move toward local distributed systems in some locations, though self-generation is not universally achievable. Gas-fired generation is still very important and may in fact increase thanks to the abundance and flexibility of global liquefied natural gas. Even coal, deemed by many to be a globally obsolete form of energy generation, will remain in countries with domestic coal resources, though its slow and inevitable decline is continuing in developed markets.

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