Global renewables investments hit a speed bump

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After strong growth, renewables face diverse challenges in China and Europe, while new coal build in Asia continues to show resilience. Bruno Brunetti presents S&P Global Platts Analytics’ latest findings on the evolution of the global power mix

As the extent of the impact of the coronavirus outbreak on economic activity and power demand emerges, newbuild activity in global power faces old and new sets of challenges.  The short-term focus has been shifting due to coronavirus-related disruptions of manufacturing activity and logistics, but delays will most likely be short-lived.

The global power capacity mix has already been shifting toward renewables. S&P Global Platts Analytics estimates that solar photovoltaic, wind and hydro made up almost 67% of total power capacity additions over the past year. The question is whether renewables investments will accelerate, but so far we do not see major signs that this could happen soon.

Solar PV now accounts for about a third of the total incremental power capacity additions annually, but as presented in our latest Global Solar PV Outlook, 2019 marked an inflection point for the technology. Solar additions were 4% lower year on year in 2019 and near-term challenges emerged for solar PV development, as policy support is being withdrawn across key markets and it is unclear at this time if stimulus packages that are being proposed across the globe could boost solar.

China’s PV capacity growth declined by over a third, with lingering concerns around delays of subsidy payments for plants already commissioned in prior years, which are straining developers’ finances. Platts Analytics expects a stabilization in the Chinese market in the second half of the year, under the assumption that the coronavirus is successfully contained.

Although logistics concerns are dampening short-term additions, down the road we see an acceleration of solar installations in a number of markets in Europe, the Middle East and emerging Asia, but as projects are becoming more exposed to wholesale markets, the current low and volatile fuel pricing environment poses further bearish risks for developers.

Commissioning of wind projects has been increasing more significantly due to some pockets of policy support that will be ending soon. Wind additions were up by 22% year on year across the globe during 2019, or around 62 GW. Over 40% of this capacity was added in China (25.7 GW, an increase of about 25% year on year). The current supporting mechanism with feedin tariffs (FiT) for onshore wind will be phased out by 2021, so an incentive remains in place to bring projects online by then.

The US is the other region where wind capacity additions remain robust, with policy support through the Production Tax Credit further extended through 2020. According to EIA data, about 10 GW came online in 2019, compared to about 8.6 GW added in 2018. S&P Global Platts Analytics expects up to 15 GW to come online in 2020, the highest annual increment in history.

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