Can global renewables deliver on COP26 pledges?

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COP26 pledge to do better could help limit global warming to 1.6°C but more evidence needed. >> Read here

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Highlights from the Renewable Energy Trends Report November 2021

Utility solar PV PPA prices are down 24% from $62/MWh in 2020 to $47/MWh in October 2021. A total of 22.7 GW_AC of solar PPAs have been signed year-to-date.

Utility wind PPA prices are down 8% from $61/MWh in 2020 to just under $56/MWh in October 2021, with 15.4 GW_AC of utility wind PPAs announced so far this year.

Global auctions saw the award of 9.6 GW_AC from seven countries in October, bringing the total to 73.3 GW_AC in 2021 so far. Additionally, more than 35.9 GW_AC of capacity is awaiting awards and 16.4 GW_AC of auctions are ongoing.

October saw 7.4 GW worth of M&A transactions from operating assets and 54.4 GW of development projects. 

Over 56 GW_AC of new renewable energy projects were added to the database in October. Year-to-date, new capacity additions crossed 1.1 TW_AC worth of project.

COP26 pledges put the world in position to limit global warming to 1.6°C

The last-minute compromises made to the Glasgow Climate Pact – in particular the easing of declared goals pertaining to coal – caused widespread consternation from all corners of the globe, but Rystad Energy’s assessment of the outcome is overwhelmingly positive with regard to prospects for averting critical levels of global warming. By analyzing the results of the COP26 summit using rigorous scenario methodology – combined with our own data-driven forecasts for energy supply – we conclude that a rise of 1.6°C versus pre-industrial levels stands as a likely trajectory for global temperature development, while the pre-summit target of limiting global warming to 1.5°C is still within reach. Rystad Energy will not, however, change its base case for oil and gas demand until further evidence supports an adjustment.

Gigawatts deployed, terawatts needed: Growing pains for solar PV

Around 1,000 gigawatts (GW_DC) of solar PV capacity will need to be installed each year by the early 2030s to stay in line with a 1.5-degree Celsius scenario. However, in the short to medium term, the solar PV sector will feel some major growing pains due to commodity price inflation and high shipping costs. Rystad Energy expects inflationary pressures to hit PV modules as we move into 2022, with prices forecast at over $0.35 per watt peak (Wp). This is almost double the price of a module in 2020. Thus, the implications are enormous given that modules are the single largest capital expenditure (capex) contributor of a solar project. Shipping and polysilicon are expected to have the largest impact on price spikes in the short term (to the end 2022), while costs associated with copper and silver are lined up to represent a larger risk in the medium term (two to four years). As the solar PV industry needs to do much of the heavy lifting over the next decade if the world is to decarbonize, Rystad Energy warns that such high module prices have not been seen since the end of 2016. Historical data suggests the expected module price tag would result in only 90-100 GW_DC of capacity being deployed globally next year, resulting in a rare outcome for PV – a year of negative growth for a technology that has been on an uptrend for the past decade.

Only six year ago, solar PV was a technology that required significant subsidies to begin deployment. Today, it’s one of the cheapest sources of electricity in history. Power purchase agreements (PPAs) in South America are frequently below $30/MWh, while in the Middle East, PPAs are closer to $10/MWh. The global pipeline of renewable technologies is significant (see Figure 1), and solar PV ranks high. For the past two years, over 100 GW_DC of rooftop and utility PV deployments have been achieved annually. However, if the world is to reduce emissions in line with a 1.5ᵒC scenario, installations have to rise to over 1,000 GW_DC per year by 2030 and solar panel manufacturing capacity has to quadruple.

Turbine size growth set to limit annual additions for onshore and offshore wind

The ongoing energy transition has spurred technological advancements in wind power technology. One observable trend is the growing size of wind turbines, which have provided developers with significant advantages, including the quick upscaling of wind farms and potential cost savings. But as turbines go from under 2 megawatts (MW) to above 4 MW, the number of units installed each year is set to fall for onshore wind projects – while utilization for larger offshore turbines will flourish as manufacturers introduce the market to 12 MW+ units. In this commentary, we deep dive into the distribution of onshore and offshore wind turbines by size and attempt to explain the technical and financial impact of using large units.

As more developers and countries commit to net-zero targets, wind energy conversion technology is expected to consolidate and mature in coming years. As shown in Figure 4, China, Europe, and North America are leading globally with their installed onshore wind capacities, accounting in 2021 for more than 80% of the total 780 gigawatts (GW). By 2025, Rystad Energy expects onshore wind installed capacity to reach around 1.1 terawatts (TW), indicating an almost 50% boost compared to 2021. Meanwhile, offshore wind has been enjoying rapid growth in recent years, driven by commitments from leading countries including the UK, Germany, China, Denmark, and Netherlands. By the end of this year, we forecast that about 45 GW of offshore wind capacity will be installed, spurred by the feed-in-tariffs incentives in China nearing phased-out starting next year. By 2025, we estimate that more than 100 GW of offshore wind capacity will be installed globally, as more projects come online in Asia and the Americas. Europe will also continue to grow, especially post-2024.

Our articles and commentaries

The above are samples and extracts from the full commentaries we offer in our Client Portal, which is part of our comprehensive energy intelligence offering. You may also find relevant content of interest in our press releases, freely accessible here.