Renewable power has been making significant strides in recent years, capturing a progressively larger share of the global energy market. As per a report by the International Energy Agency (IEA), renewable energy is set to account for over 90% of global electricity expansion over the next five years. This rapid growth is expected to result in renewables overtaking coal as the primary source of electricity generation as early as 2025.
This shift is being propelled by various factors such as technological advancements, increasing environmental awareness, and policy support from governments worldwide. Last year, the United States saw renewable electricity generation surpass coal for the first time. A similar trend is anticipated globally, with forecasts suggesting that renewables will become the largest source of global electricity generation by early 2025.
However, the transition is not without challenges. Some countries, like China, continue to rely heavily on coal for meeting peak electricity loads and managing variability. Despite these hurdles, the momentum is decidedly in favor of clean energy, setting the stage for a major market shift in the near future.
The Current Energy Landscape
The global energy market is currently in a state of transition, with renewable energy sources steadily gaining ground on traditional fossil fuels. The total primary energy supply (TES) saw the share of OECD countries drop from 62% in 1971 to 37% in 2019. This shift is largely due to the increased adoption of renewable energy technologies, driven by environmental concerns and policy support.
In terms of specific energy sources, the current demand for fossil fuels, which includes coal, oil, and gas, stands at 66% of total energy demand. However, this dominance is expected to decrease as renewable energy sources continue to expand. This trend is evident in the fact that global energy consumption growth slowed in 2022 (+2.1%), but remained higher than its average 2010-2019 growth rate (+1.4%/year).
Coal, while still a significant player, is seeing its role diminish. It's being outpaced by renewables, which are set to account for over 90% of the increase in total electricity supply globally. Notably, in 2022, the United States saw renewable electricity generation surpass coal for the first time.
Despite these shifts, it's important to note that the energy market is complex and influenced by a multitude of factors including technological advancements, government policies, and economic conditions. It's clear, however, that renewable energy is becoming an increasingly dominant force in the global energy landscape.
Projected Growth of Renewable Energy
The renewable energy sector is experiencing unprecedented growth, with projections indicating a significant increase in the coming years. The Energy Information Administration expects renewable deployment to grow by 17% to 42 GW in 2024, accounting for almost a quarter of electricity generation. Moreover, the total renewable electricity capacity worldwide is expected to rise to 4,500 gigawatts (GW).
Several factors are driving this rapid expansion. Technological advances have played a major role in making renewable energy more efficient and cost-effective. Innovations in wind turbine design, solar panel efficiency, and energy storage solutions have all contributed to lowering the cost of renewable energy production.
Policy support from governments worldwide has also been instrumental in promoting the growth of renewables. Many countries have implemented policies such as feed-in tariffs, renewable portfolio standards, and tax incentives to encourage the development and deployment of renewable energy technologies.
Increasing environmental awareness among consumers and businesses alike is another crucial factor. As the impact of climate change becomes increasingly apparent, there is growing demand for cleaner, more sustainable sources of energy. This trend is reflected in the projected growth rates for the renewable energy market, which is expected to reach over US$ 2182.99 billion by 2032.
Furthermore, the International Energy Agency forecasts that by 2028, renewables will account for 42% of global electricity generation, with wind and solar power making up 25%. This indicates a significant shift towards renewables and away from traditional fossil fuels.
The Decline of Coal
The global energy landscape is currently undergoing a significant transformation, with coal energy witnessing a projected decline. According to the U.S. Energy Information Administration, coal production is expected to decrease by 19% in 2024 as domestic consumption falls and inventories decline. Moreover, coal use is not anticipated to decline until 2026, following a major expansion of renewable capacity.
Several factors are driving this downward trend. One of the primary reasons is increasing environmental regulations. Governments worldwide are implementing stringent policies to reduce carbon emissions and combat climate change. These regulations have made it more costly and complex to operate coal-fired power plants, leading to a reduction in coal consumption.
Another critical factor is the growing competition from renewable energy sources. With technological advancements making renewable energies more efficient and cost-effective, they are increasingly becoming a preferred choice for electricity generation. In fact, the capacity of coal-fired generating plants in the U.S. is projected to drop below half of 2022 levels by 2050.
The declining prices of coal also reflect this reshaping of the global energy market. Average annual coal prices are forecast to decrease in 2023 compared to 2022 but remain well above their five-year average.
Furthermore, the closure of coal-fired power plants is contributing to the decline of coal energy. For instance, another 173 coal-fired power plants are expected to close or stop using coal in the coming years, with capacity projected to hit 116 gigawatts by 2030.
Impact on the Energy Market
The shift towards renewable energy and the projected decline in coal energy is expected to significantly reshape global energy markets. According to the International Energy Agency, renewables are set to account for over 90% of global electricity expansion over the next five years. This shift away from coal is largely driven by environmental concerns, policy support, and advancements in renewable technologies.
For renewable energy developers and investors, this shift presents a multitude of opportunities. The increasing demand for clean energy is driving growth in renewable sectors such as wind, solar, and hydroelectric power. Moreover, the reduction of pollution and climate impacts alone could save the world up to $4.2 trillion per year by 2030, indicating a promising economic outlook for green energy.
However, there are challenges that come with this transition. The variability and intermittency of renewable energy sources require improvements in energy storage and grid infrastructure. Additionally, the large upfront capital costs associated with renewable projects may be a barrier for some investors.
On the other hand, the decline in coal energy will impact countries and industries reliant on coal production and consumption. Coal demand is projected to decrease by between 25 and 85 percent between 2019 and 2050. This decline reflects increasing environmental regulations and competition from more sustainable energy sources.
In response to these changes, coal industries might need to explore transitions to cleaner technologies or alternative industries. For countries heavily dependent on coal, this transition could pose significant socioeconomic challenges, including job losses in the coal sector and the need for economic diversification.
Strategies & Tools for Renewable Energy Developers
As the global energy market shifts away from coal and toward renewables, renewable energy developers have several strategies and tools at their disposal to maximize their benefits.
Diversifying their energy portfolio: Given the volatility of the energy market, diversifying their portfolio across various renewable technologies (e.g., solar, wind, hydroelectric, geothermal) and geographical locations can help developers spread risk and optimize returns. This strategy not only allows companies to benefit from the growth of different renewable sectors but also provides a hedge against region-specific risks like regulatory changes or natural disasters.
Forming strategic partnerships: Collaborating with other companies, governments, and non-governmental organizations can provide access to new markets, technologies, and resources. For instance, partnerships with technology companies can enhance efficiency and reduce costs, while collaborations with local communities can ensure the social acceptance of renewable projects.
Leveraging financial tools: Renewable energy developers can use various financial instruments to fund their projects and manage risk. These include green bonds, power purchase agreements, and renewable energy certificates. Such instruments can provide long-term funding at attractive rates, lock in future revenue streams, and demonstrate environmental commitment.
Using advanced analytics and tools: Platforms like LandGate offer data and analytics tools that can help developers identify and evaluate potential project sites. These tools can provide information on land values, mineral rights, wind and solar potential, and other key factors3. This data-driven approach can lead to more informed decision-making and better project outcomes.
In conclusion, by diversifying their portfolio, forming strategic partnerships, leveraging financial tools, and using advanced analytics and tools, renewable energy developers can position themselves to thrive in the shifting energy market.
To learn more about how LandGate’s data and tools can help power the global transition to renewable energy, schedule a demo with a member of our dedicated energy team.
