Let’s start off in Europe where, unlike any other world area, there is a mandated adoption of renewable power as part of their long-term strategic energy plan. In 2007, a binding agreement was signed by European leaders to target 20% of their energy needs from renewables. This is spurring investment in newer technologies, with an example being that the continent is the global leader in offshore wind technology. Mastering the complexities of offshore wind will benefit other world areas that look to invest in this technology. Although current economic woes have put the 20% target in some jeopardy, there seems to be the necessary political will to make the tough decisions required to reach this goal.
In North America, the abundance of natural gas from shale is driving down electricity prices and is altering the landscape of the power market. As power producers evaluate their generation assets, those coal plants which are smaller in size (~200MW or less) and have not undergone a recent retrofit are prime targets for decommissioning. With low gas prices projected for years and years, the decision to retire these assets and replace them with cleaner burning simple-cycle or combined-cycle gas plants is the prevailing investment choice.
So what about renewables? There are a number of factors to consider, but the primary factor is that the availability of cheap gas has made investment in renewables less financially attractive. To compound this issue, the Production Tax Credit for renewable power is slated to expire at the end of this year. I recently heard some experts predict that if the PTC goes away, 80% of investment in renewable/wind activity will go away with it.
Let’s take a quick look at Asia and focus on China, where power requirements continually increase to support its population redistribution to its cities. The central planning group has made it clear that it will make massive investments in renewable power. China is the world’s largest user of coal and will continue to rely on this fuel, but their move to renewables is a formally stated law to help them mitigate their carbon emissions and diversify their generation portfolio.
Regardless of the world area, one of the biggest challenges in bringing on more wind/solar power is grid management. Since renewable sources are intermittent, global grid systems originally designed for base loaded fossil plants will require investment to accommodate changes in how loads are dispatched. This will be a bit of a challenge, as large infrastructure investment must coincide with investments in renewable assets.
What is the Outlook for Global Renewables?
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The opinions expressed here are the personal opinions of the authors. Content published here is not read or approved by Emerson before it is posted and does not necessarily represent the views and opinions of Emerson.