Necessity the ‘mother’ of invention
Nothing generates change as swiftly as need; they say that “necessity is the mother of invention” and there is no doubt that necessity has fuelled (pardon the pun), the growth in renewable energy. However, it is worth keeping in mind that this is still a reasonably nascent industry; so the opportunity is still enormous.
The move to renewable energy sources
Previously this necessity was driven by the harbingers of doom talking about the issues caused by the diminished oil resources; i.e. how long would there be enough to satisfy global demand? Not so long ago predictions were that the resource would run out within 50 years. However, according to David Eyton, BP Group head of technology, speaking in 2015 – “The world is no longer at risk of running out of oil or gas, with existing technology capable of unlocking so much that global reserves would almost double by 2050 despite booming consumption”.
He states that “Energy resources are plentiful. Concerns over running out of oil and gas have disappeared”. Key to this statement is the question “what type of energy resources”? Largely this refers to renewables such as solar, wind, nuclear and biomass.
Attitudinal change and the social conscience
Gaining even greater relevance now is not just the need to develop other forms of energy, but that the world has changed and so have attitudes towards renewable energy. The desire for clean, renewable and sustainable energy is now much greater. Hindsight is a wonderful perspective, no-one could have foretold the environmental damage that the use of fossil fuels has been responsible for. Yet still major industrial nations are pushing back, witness the US leaving the Paris Climate Accord and even with aggressive climate action policies the International Energy Agency estimates that fossil fuels will constitute 59% of the total primary energy demand in 2040.
Inevitably change will take time, however despite the above it feels as though we are past a tipping point and developments in the market certainly reflect this.
Renewables are accelerating in adoption
Change is now accelerating and according to the REN21 Global Survey Report – “For the third consecutive year, global energy-related carbon dioxide emissions from fossil fuels and industry were nearly flat in 2016, due largely to declining coal use worldwide but also due to improvements in energy efficiency and to increasing use of renewable energy.”
According to the report – “Renewable power generating capacity saw its largest annual increase ever in 2016, with an estimated 161 gigawatts (GW) of capacity added.” It continued – “In 2016, renewables accounted for an estimated nearly 62% of net additions to global power generating capacity. Solar PV saw record additions and, for the first time, accounted for more additional capacity, net of decommissioning, than did any other power generating technology.”
Solar PV was the big addition in 2016
“Solar PV represented about 47% of newly installed renewable power capacity in 2016, and wind and hydropower accounted for most of the remainder, contributing 34% and 15 .5%, respectively.”
In terms of generating capacity solar PV is viewed in many markets across the world as the leading source of additional power. There was a 50% increase in the annual market, equivalent to 31,000 solar panels being installed every hour. 85% of additions were concentrated across five countries, however growth continues in globally. In many regions, including the UK, government policies have been inconsistent towards renewable energy and subsidies have been diminished. However, market forces have changed and serious external investors are now seeing the attraction of this market and looking at ways to deploy serious levels of capital to create portfolios of assets.
External investment and a maturing market
The market is maturing but is still relatively new, however witnessing institutional investors coming into the market is sure sign that it is gathering pace. Aviva is one such investor rapidly acquiring assets as part of its portfolio; after a recent transaction Fergus Helliwell – Associate Director commented, “Since 2012, the Aviva Investor’s Infrastructure platform has been the premier institutional investor in the small-scale solar sector in the UK, having executed numerous acquisitions on behalf of our clients. As we expand our activities in the UK infrastructure market, we continue our focus on secure and long-dated income streams for our clients.”
More and more institutional investors are following suit giving businesses a greater opportunity to leverage from the benefits of solar PV. This investment is seen as an increasingly attractive element of a balanced portfolio, generating what are rated as predictably good returns over sustained time-period.
The opportunity for commercial rooftop owners now and into the future
In its Solar Strategy document in 2014 the government estimated that the UK had at least 250,000 hectares of south facing commercial rooftops, with only about 11% of the potential deployed. Yet many businesses and commercial property owners remain unaware of the benefits to deploying solar PV on their buildings. Often, they are not aware of the reduction they can receive in electricity bills, the benefits to their CSR (Corporate Social Responsibility) credentials but also the options that make the investment in these benefits a real possibility.
Most businesses are familiar with Capital Expenditure and Asset Finance, less so however with being able to receive immediate reductions in electricity prices without any investment via a fully funded Power Purchase Agreement (PPA). This approach opens the solution to many more businesses and should accelerate adoption as familiarity grows around it. The PPA route opens the renewables opportunity to many more property owners; businesses benefit, investors benefit as does the environment.
Renewable band wagon is gathering pace
A business needs to establish which approach is in its best fiscal interest, but there can be little doubt the renewables band wagon is gathering pace. Solar PV provides businesses with the opportunity to significantly reduce spend, address its CSR policies and do so with a myriad of funding options.