Falling renewable costs boost governments' green drive

The falling costs for renewable energy are increasing countries’ willingness and ability to adopt policies that help them achieve their Paris Agreement Commitments as the market growth is becoming driven by economics rather than subsidies and mandates, according to fresh reports from rating agency Moody’s. 

Wind and solar energy costs have declined by 60 percent to 80 percent since 2010, thanks to low capital costs, economies of scale and improving efficiencies. Other emerging renewable technologies, such as offshore wind and energy storage, have experienced steep falls in capital costs faster than expected. 

Also, costs of integrating renewables into national grids are becoming more manageable. With reduced reliance on subsidies, Moody’s believes it will reduce costs for end users and relieve political pressure on governments to address affordability concerns. Auctions by governments are also accelerating the market developments, while pushing down costs and providing clear project pipelines. 

Renewables are becoming the “central focus” of national energy policies for many countries – instead of a “subsidised supplement” – as they reach parity with conventional sources in many parts of the world. 

Moody’s also noted that the US’s decision to exit from the Paris Accord is unlikely to have a material impact on the global emissions trajectory. 

“Emerging markets are a key market for growth in renewables, with countries such as China and India leading the charge as new renewables become competitive with other sources of power even in developing nations,” said Swami Venkataraman, a senior vice president at Moody’s and lead author of the Renewable Energy – Global report. 

China, as one of the world’s largest renewables markets, continues to be supported by a favourable policy environment over the next five years, despite challenges in grid curtailment and a high degree of reliance on government subsidies, the rating agency said in a separate report focusing on the country. 

Moody’s estimated that the share of non-fossil fuels will reach 38 percent of China’s installed capacity in 2017 and to around 40 percent by 2020 – representing at least 660GW of installed capacity. As of end 2016, renewables accounted for roughly 35 percent, or 531GW. 

“The strategic importance of renewable energy has been increasing in Chain in recent years, due to the country’s rising awareness of the need to combat air pollution and increasing diversification of its energy sources to reduce its reliance on coal-fired power,” said Ivy Poon, a vice-president and senior analyst at Moody’s.