Energy Transition Market Size and Trends

The global energy transition market is estimated to be valued at US$ 2.83 Tn in 2024 and is expected to reach US$ 5.42 Tn by 2031, exhibiting a compound annual growth rate (CAGR) of 9.7% from 2024 to 2031.

Energy Transition Market Key Factors

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Governments and businesses around the world are increasingly supportive of sustainable energy solutions to mitigate climate change and reduce dependence on fossil fuels. Major investments are being made in areas such as renewable power generation, energy storage, electric vehicles, green hydrogen, and carbon capture to accelerate the worldwide transition to cleaner sources of energy.

The market trend in the global energy transition industry points towards steady growth. The market is driven by the societal need to reduce greenhouse gas emissions and the falling costs of renewable energy technologies like solar and wind power. Stricter emission regulations by governments such as NOx Emissions Limits, Coal Consumption Reduction, Paris Agreement Commitments, etc. and commitments by corporations to reduce their carbon footprint are increasing the demand for sustainable energy products and services. Furthermore, advancing technologies in battery storage and renewable infrastructure are supporting the reliable integration of more green power onto national grids.

Market Driver - Increasing government policies and incentives for renewable energy adoption

More and more governments around the world are strongly pushing for cleaner forms of energy production through favorable policy changes and financial incentives. This transition is mainly driven by the climate change risks brought about by excessive reliance on fossil fuels. According to the International Renewables Agency, over 50 countries have come out with long-term plans to increase their renewable energy capacities and lower their carbon footprint. Tax credits, production tax credits, grants, loans, net metering policies, renewable portfolio standards, and feed-in tariffs are some commonly used incentives and mandates adopted by these nations like U.S., Canada, China, etc.

The European Union has some of the most ambitious renewable energy goals globally. Its latest plan called the "Green Deal" proposes a 55% reduction in emissions by 2030 and net-zero emissions by 2050. Under this scheme, strict carbon pricing and performance standards are being put in place for industries and sectors. European countries like Germany, Denmark, Portugal, Spain and Sweden have long provided subsidies for solar panels, tax exemptions for wind farms, priority grid connections for renewable projects and competitive prices for the energy they produce. Asia Pacific too has embarked on an unprecedented renewable scale up. China aims to install over 1,200 GW of wind and solar power by 2030 while India has a solar target of 100 GW by the same year. Thailand, Vietnam, and Indonesia are other fast-growing renewable markets in Southeast Asia boosted by long-term electricity purchase agreements.

North American nations are also stepping up their climate action through renewable subsidies and mandates. The U.S. has extended the production tax credit deadline for wind and solar projects multiple times. Over 30 states have also adopted renewable portfolio standards requiring utilities to source a certain percentage of supply from eligible renewable sources. In Canada, long-term contracts and carbon pricing back strong growth in solar, wind and hydro. Sub-Saharan Africa presents immense opportunities with its vast solar and wind resource potential. Countries here are giving import duty exemptions, low-interest loans and tax holidays to attract investments into their renewable energy programs.

Such policy support has been instrumental in bringing down technology and installation costs. At the same time, it provides long-term revenue visibility to project developers through fixed tariffs enabling billions of dollars of investments. With governments substantially raising their aims and commitments at international forums, renewable incentives are likely to be further augmented globally. This will promote the rapid scaling up of emission-free power across industries and sectors helping transition away from fossil fuels over the coming decades.

For instance, in March 2021, Siemens Energy, a global leader in the energy sector, launched a new digital platform designed to optimize the integration and management of renewable energy sources. This innovative platform leverages advanced data analytics and AI to help energy companies and utilities maximize the efficiency and reliability of their renewable energy assets.

Growing Consumer Demand for Sustainable and Clean Energy Solutions

Alongside government push, energy customers too are pulling the transition through their evolving requirements and preferences. Consumers today want reliable electricity which is also environment-friendly and economically efficient. They are increasingly willing to directly invest in clean technologies or opt for renewable energy supply programs. For individual households, rooftop solar systems and home batteries are attractive propositions to lower power bills through self-generation and storage. Over a million homes in countries like Australia, Germany and U.S. have already adapted such integrated solar-plus-storage solutions.

Businesses appreciate the branding and marketing benefits stemming from sustainable energy use. Many big corporations such as Siemens AG, General Electric Company, Vestas Wind Systems A/S, etc. now publicly commit to science-based emissions targets and sourcing a specific percentage of operations from renewables. Technology giants like Google, Facebook, and Amazon satisfy a major part of electricity demand through massive corporate renewable power purchase agreements. The manufacturing sector too sees a competitive advantage in switching to round-the-clock clean power through on-site solar plus wind hybrid projects. Companies at the forefront of sustainability stand to attract and retain top talent as well as gain customer favor in environment-conscious markets.

Individual consumer expectations on sustainability are also shaping energy policies indirectly. More young buyers today research sources and carbon footprint of the products they purchase. Automakers acknowledge this preference and rapidly expand electric vehicle ranges reducing dependence on oil.