Insight into the Transformation of Energy Markets

Renewables: Moving from Niche to Mainstream

The renewables sector is entering an exciting new phase. Rapidly evolving technology, economies of scale and regulations and changing attitudes among policy makers means that, despite reductions in subsidies, renewables are winning market share from fossil fuels around the world.

The announcement in September that the US and China will formally ratify the Paris climate change agreement was greeted around the world as a major step in the battle against global warming and was seen by many as providing an additional boost for the already fast growing renewable energy sector.

The historic agreement comes in the wake of a number of factors that are stepping up the pace of growth in renewables. Once considered a niche industry driven by environmental policies rather than economic realities and the need to meet energy needs, the renewable energy market is experiencing rapidly accelerating growth as costs fall while reliability and consistency of supply improves.

The Paris agreement is set against a backdrop of technological innovation and falling production costs brought about by economies of scale. The price of both wind and solar are being driven down by competitive tendering as markets move from feed-in tariffs to long term power auctions.

Falling costs

The cost of building offshore wind farms has fallen to an all time low. In September Vattenfall, a Swedish manufacturer won the Danish Near Shore Wind Tender to build two facilities to power around 375,000 households.

The price of just over €60/MWh is considerably lower than the previous record, set just two months earlier by Danish group Dong Energy, which won a contract in the Netherlands for €72.70/MWh.