Market Challenges And Opportunities

Global Green Energy Market Drivers:

Government policies and incentives: Government policies and incentives are playing a major role in driving the growth of market. Many countries, with targeted policy initiatives and financial aid program, are trying to promote renewable sources of energy like solar and wind.

For instance, the European Union (EU) introduced strict climate change laws and emission reduction targets as part of its European Green Deal. The EU aims to become climate neutral by 2050 and has committed US$1.8 trillion of investments towards green technologies and initiatives over the next decade. Countries like Germany, France and U.K. are aggressively encouraging renewable energy adoption through incentives like tax credits, feed-in-tariffs and renewable portfolio standards. As a result, solar and wind energy capacity and usage has been rising sharply across Europe in the past 2 years. According to Eurostat, renewable sources accounted for 38% of Europe's energy consumption in 2020, up from 34.6% in 2019.

Growing environmental concerns: Growing environmental concerns is driving significant growth in the market. Globally, governments and businesses are devoting more resources into renewable energy sources like solar, wind, and hydropower to reduce carbon emissions. According to data published by the REN21's 2023 Renewables Global status report, renewable energy capacity growth in 2021 remained strong despite the pandemic, with renewables accounting for over 90% of new power generation additions during the year.

As awareness about climate change impacts increases, citizens are demanding more large-scale transition to greener alternatives from fossil fuels which are heavily polluting. Many nations have announced ambitious targets over the next decade to increase the share of renewables in their total energy mix and move away from coal. For instance, the European Union's 'Fit for 55' climate package proposes reducing net greenhouse gas emissions by at least 55% by 2030 from 1990 levels. It aims for a 40% cut in greenhouse gas emissions from the energy sector, by increasing the share of renewable energy to at least 40% of final energy consumption in the EU by 2030.

Untapped potential in developing nations: Developing nations hold great untapped potential in the market that can drive the industry's growth trajectory going forward. With a significant portion of the world's population living in developing countries and growing energy demands in these regions, investing in and scaling up, sustainable energy solutions can have immense long-term economic and environmental benefits.

Countries like India, Brazil, Indonesia and others are experiencing energy consumption boom due to rapid industrialization and development. At the same time, easy access to resources like solar and wind power provides an opportunity to meet new demands through clean energy instead of replicating the fossil fuel dependent models of developed economies. Internationally, funded projects and public-private partnerships can help developing nations overcome the challenges of high upfront investment and lack of infrastructure to support mass adoption of renewable technologies.

Global Green Energy Market Opportunities:

Increasing investment in research and development: Investing more in research and development (R&D) could unlock tremendous opportunities in the market. As global demand for cheaper and cleaner sources of energy grows, the need for innovative technologies also accelerates the worldwide transition to renewables. Increased R&D spending by both private industries and public research institutions, would help drive the discoveries required to significantly decrease the costs of solar, wind, battery storage, and other renewable technologies over the coming decade.

Many analysts believe green technologies will witness their most drastic cost reductions and performance boosts in the next 10-15 years. More efficient solar photovoltaic panels, lightweight building integrated wind turbines, longer lasting, and higher capacity battery chemistries could all emerge from boosted research efforts.

Emerging markets for green electricity: Emerging markets for green electricity present a promising opportunity for advancement in the global renewable energy sector. Many developing nations are experiencing rapid economic growth and a ballooning demand for power. However, their electricity grids have traditionally relied heavily on fossil fuel sources that produce greenhouse gas emissions. A shift towards cleaner, locally-generated solar and wind power could help these countries leapfrog older carbon-intensive technologies to meet new demand. This would get them on a more sustainable path to power their growing populations and economies for decades to come.

Countries that make strategic investments in renewables will be well-positioned to capitalize on this emerging market. They can develop domestic industries to produce green technology components and position themselves as leaders in the global transition to net-zero emissions. International cooperation through financing mechanisms and knowledge-sharing can help to accelerate renewable energy deployment in developing regions. According to the International Renewable Energy Agency, renewable investments of US$40 billion per year in emerging economies through 2030 could generate US$16 trillion in total savings worldwide, by reducing fossil fuel consumption and improving public health.

Scope for rural electrification: Rural electrification presents a significant opportunity in the growing market. While energy access has expanded rapidly in urban and sub-urban regions across the world, rural and remote areas still lag far behind with unreliable or no access to electricity. The International Energy Agency estimates that over 770 million people worldwide still rely on kerosene for lighting and diesel generators for power till 2021. At the same time, reducing emissions from the energy sector is critical to address climate change. Transitioning rural populations to decentralized renewable energy solutions can achieve universal energy access while supporting climate action goals.

Technological advancement has enabled newer, more efficient and cost-effective solutions like rooftop and community solar home systems, mini-grids powered by solar-wind hybrid systems and micro-hydels. For example, an Impact Evaluation Survey conducted of households in Bihar and Uttar Pradesh, India, in 2022, found that, solar home lighting systems increased time for productive activities and education.

High initial investments and infrastructure costs: High initial investments and infrastructure costs pose a major challenge for the growth of the market. Setting up renewable energy power plants or projects requires huge capital expenditure due to the advanced technologies involved. Solar and wind energy projects need heavy investment in land acquisition, installation of solar panels or wind turbines, setting up electricity transmission infrastructure, grid connectivity, and others. According to International Renewable Energy Agency (IRENA), the levelized cost of electricity from utility-scale solar PV plants ranges between US$0.068– US$0.346 per kWh, with an average of US$0.143/kWh in 2020. Onshore wind energy costs US$0.050 - US$0.146/kWh. These costs are still higher as compared to traditional fossil fuel based sources.
Counter Balance: To overcome this restrain, follow the Governments rules and financial institutions can provide incentives and funding to support renewable energy investments, thereby reducing the burden of high initial costs.
Intermittency in renewable sources: Intermittency in renewable energy sources like solar and wind is one of the major hurdles slowing down the global growth of green energy market. These renewable sources are dependent on natural forces like sunlight and wind speed which fluctuate constantly, thus making the energy generation from them intermittent and variable in nature. This intermittency poses challenges for integration of large-scale renewable energy into existing power grids that are designed primarily for centralized fossil fuel generation.
The intermittent power from renewable sources can cause issues like voltage fluctuations and frequency variations in electricity grids. This makes it difficult for utilities to balance power supply and demand at all times. On a sunny and windy day, renewable energy output may exceed demand forcing utilities to curb production. Conversely, on still and cloudy days renewable output falls sharply increasing reliance on reserve generation capacity. Due to this variability, utilities need to maintain sufficient backup capacity from dispatchable sources to make up for shortfalls during low renewable output phases. This imposes additional costs on power systems and makes large-scale renewable integration challenging.
Counterbalance: one obvious source of counterbalance to the intermittency of renewables is storage, particularly in the form of batteries and other new technologies, and designing diversified renewable energy systems to balance multisector performance is another approach. For example, in many regions, hydropower is called to counterbalance the temporal variability of intermittent renewables like solar and wind.