Growth and Trends in Renewable Energy
At the beginning of December, the International Energy Agency (IEA) released the Renewables 2021 report, which includes analysis and forecasting up to 2026. The report offers an important window into the state of renewable energy, its growth, and its role in the transition to a net-zero carbon economy. It also discusses some of the key challenges facing the industry and the barriers to growth. Finally, the report explores the trends gaining traction in this vital space, as well as the contexts in which renewables operate.
For organizations grappling with the needs of sustainability in business, the IEA’s report provides vital illumination into the future of energy security and production.
An era of new growth
Arriving in the wake of the 2021 United Nations Climate Change Conference (COP26), IEA’s report highlights the likely effect of greater political support and the more ambitious targets set at the conference – even if the conference may have fallen short in other areas.
Globally, renewable energy is expected to increase by over 60 percent by 2026, driven by strong growth in China, Europe, the United States, and India. The majority of new generation is likely to come from solar photovoltaic technology, which already accounts for the majority production, followed by wind and hydroelectric power. Likewise, after several years of disrupted supply chains, demand for biofuels is also expected to rise dramatically as it rebounds from pandemic-era lows.1
Weathering new challenges
While the report forecasts record growth for many renewables, it also points to the challenges facing these sectors.
Rising commodity, energy, and shipping costs have the potential to hamper the production and installation of renewable energy solutions, while restrictive trade practises bring greater uncertainty for renewable investments. However, these challenges are somewhat offset by the rise in the price of natural gas and coal; renewable energy’s relatively fixed price offers a stable alternative to the vagaries of oil, gas, and coal rates.
Other challenges facing the effective rollout of renewable energy include problems with permitting and grid integrations, which hamper the ability to deploy new solutions at speed. In developing economies, a lack of grid availability and low investor confidence result in higher financing rates that make renewables less attractive. Finally, the social acceptance of renewable energy remains an important barrier to growth, as political considerations lead to the delay or cancellation of planned projects.
New trends to watch
While upward price pressures continue to influence the renewable energy market, the reality is that these solutions are expected to remain cost-competitive well into the future. This trend is helped in no small part by government spending and stimulus focused on clean energy projects, particularly in the wake of the economic downturn precipitated by the COVID-19 pandemic.
Renewables are also set to make progress in decarbonizing multiple sectors: the production of hydrogen from renewable sources promises to drive the increase in capacity of wind and solar power, while biojet fuels is also set to expand rapidly, should policy discussions between major players come to fruition.
Ultimately, while challenges remain, prevailing trends point to a future in which renewable energy provides the impetus for a new era of sustainability. On the University of Cambridge Institute for Sustainability Leadership (CISL) Business Sustainability Management online short course, you’ll have the opportunity to explore the impact of sustainability on your organization, while discovering how you can help accelerate and lead the adoption of sustainable practises.
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