Renewables’ record high reflects new global reality
For the renewable energy sector, the future certainly is now.
After decades of discussion and development, false starts and inflated promises, renewables are finally primed to dislodge fossil fuels from the top of the energy tree and become the go-to source for powering our increasingly energy-demanding modern lives.
In its annual report on the state of the renewables sector, the International Energy Agency (IEA) tips renewables to overtake coal as the largest source of electricity generation by no later than 2025.
Globally, more than one-third of electricity capacity now derives from low-carbon sources, with renewables accounting for 26% and nuclear power a further 10%. Wind and solar have together reached the annual 2,000 GW mark, with hydropower providing another 1,400 GW.
Renewables’ momentum shows no sign of stopping. While coal, natural gas and oil-based electricity generation is set to dwindle over the coming years, by 2027, renewables are forecast to occupy 38% (not counting nuclear) of the entire global energy market. This trend will be led by electricity from wind and solar farms, expected to double in output by 2027, to meet more than one-fifth of global needs.
What is driving this current impetus behind renewables? It’s a valid question.
Such confidence seemed far from certain as recently as November last year, when heads of state gathered in Egypt for the latest UN Climate Change Conference (COP27).
Then, negotiators attracted the ire of environmental campaigners for continuing to favor short-term energy remedies over long-term green investments and, according to critics, effectively abandoning the 1.5oC global temperature rise limit. Governments were criticized for focusing on a pooled ‘loss and damage’ fund to compensate developing nations for climate breakdown, rather than tackling the underlying causes. In particular, they were denounced for resolving merely to ‘phase-down’ rather than ‘phase-out’ coal use.
One key difference is that we have now all experienced a long, cold winter without cheap Russian gas. A winter of vastly increased energy costs. A winter spent amid the specter of peak period power blackouts.
True, promoting the cause of green energy probably came some way down Russian president Vladimir Putin’s priority list when his forces invaded Ukraine in February last year. Yet, as the IEA notes, the resulting fossil fuel supply disruptions have “underlined the energy security benefits of domestically-generated renewable electricity, leading many countries to strengthen policies supporting renewables”. 
This dovetailing of energy security with long-term climate concerns will result in a very different energy profile emerging in the coming years, not just within Europe, but in the wider world too.
World united in shift to renewables
In China, the National Energy Administration (NEA) recorded 65.7 GW of new solar and 22.5 GW of new wind capacity in the first 11 months of 2022, reinforcing the country’s status as the world’s largest developer of renewable energy. Combined, these additions of 88+ GW sound impressive, but they could almost double to 160 GW in 2023 if all proposed schemes come to fruition.
Collectively, by the end of 2023 the country’s solar capacity could reach 490 GW and its wind capacity 430 GW, with clean energy accounting for almost one-third of the nation’s energy mix.
While coal currently remains China’s chief power source, clean power alternatives are fast catching up. At the start of 2015, renewables could provide less than 100 TWh (terawatt hours) of energy in China; by mid-2022 this had risen to circa. 250 TWh. Renewable energy generation grew 10% in 2022 – an amazing five times the growth rate of coal.
In India, 14.21 GW of renewable energy capacity was added during the first 10 months of 2022, eclipsing the 11.9 GW added during the same period in 2021. Some 151.94 BU (billion units) of electricity have been generated in India from renewable sources from January to September 2022, a sharp increase from 2021’s 128.95 BU. India is working towards 500 GW of installed renewable energy capacity by 2030.
It is a similar story in the United States, where the first eight months of 2022 saw an additional 7.5 GW of wind and 5.7 GW of solar capacity added to the grid. Together, wind and solar comprised almost 70% of all new energy additions in the US, pushing renewables’ share of electricity provision across the country to a new high of 23%. Corporate renewable procurement exceeded 11 GW in 2022, while private investment in renewables crossed the US$ 100 billion milestone.
Across the Atlantic, solar power in Europe surged by almost 50% in 2022, with the EU installing 41.4 GW of new solar capacity – enough new power to supply some 12.4 million homes. By necessity this growth is far from over, with the IEA calculating Europe must install a further 60 GW of solar capacity this year to counteract diminishing supplies of gas from Russia. There are now 10 EU countries adding at least 1 GW of solar capacity annually, led by Germany’s 8 GW in 2022.
The EU also installed 15 GW of new wind farms in 2022, up by a third from 2021. More than 90% of this new capacity came via onshore farms, with Germany, Sweden, Finland, Spain and France setting the pace.
Efficiency is the new buzzword, with modern wind farms generating more electricity per MW than previously possible. Europe’s new onshore wind farms have average capacity factors (periods of peak operation) above 35%, delivering 3 TWh of electricity a year for each GW installed. Their offshore cousins deliver capacity factors of 50%, producing 4.4 TWh annually for each GW installed.
Traditional nuclear (fission) energy, despite its hazardous byproduct, is maintaining its status as a popular low-carbon technology for electricity worldwide. Japan introduced 4.2 GW of new nuclear power capacity in 2022. In the UK, two third-generation EPRs (Evolutionary Power Reactors) are now under construction at Hinkley Point C in Somerset, mirroring similar developments in Finland, France and China. The decarbonization plans of swathes of Eastern Europe and Japan also encompass nuclear power. Globally, around 10% of our electricity already derives from traditional nuclear energy. And if the promising advances being made in ground-breaking fusion energy technology continue to exceed expectations (see below), a future of limitless, clean nuclear power could be closer than we ever imagined.
The droughts which hindered large-scale hydropower generation in 2021 (-3% output from 2020) continued to blight the European sector into 2022, with the EU reporting a further 15% drop in hydropower output during the first nine months of the year. The EU’s hydropower decline will likely prove only a temporary setback, as European states continue to wean themselves off natural gas and establish greater energy independence.
Outside the European Union, however, hydropower staged something of a comeback in 2022, with Brazil, the USA and China all exceeding 2021’s output. Altogether, hydropower plants in 2022 generated ~300 TWH more electricity than in 2021, with 2023 forecasting a further circa. 400 TWh year-on-year growth.
The continued global ascension of renewable energy in 2022 is no anomaly however, but just the latest evidence of an unstoppable journey.
Around the world legislators and lawmakers are united in ensuring eco-energy becomes the dominant source of power for our homes and businesses in the tantalizingly near future.
A frenzied five years for renewables sector
Looking ahead, between now and 2027, the renewable energy sector is estimated to grow by approximately 2,500 GW globally – an 85% advance on the previous five years. Put another way, the world is set to add as much renewable power in the next five years as it did in the past two decades.
Renewables will account for 90% of global electricity expansion during this time, propelled by a wave of ambitious pieces of domestic legislation: Europe’s REPowerEU strategy, China’s 14th Five-Year Plan, the US Inflation Reduction Act, Japan’s Green Transformation Policy and India’s Production Linked Incentive Scheme.
- Europe: The REPowerEU plan aims to increase renewables’ share of the total energy mix to 45% by 2030 – markedly higher than the previous target of 40%. Germany and Spain are leading the charge. Spain is increasing grid capacity for renewable projects and simplifying its permissions process for new solar and wind plants. Germany, meanwhile, is introducing higher auction volumes and working to improve returns for solar PV schemes. Both these policies align with the EU’s Fit for 55 campaign, aiming to reduce greenhouse gas emissions by 55% across the continent by 2030.
- China: Ambitious new targets in China’s 14th Five-Year Plan will see it claim almost half of new global renewable energy capacity between now and 2027. Market reforms, together with comprehensive support from provincial governments, are designed to add economic certainty to the renewable energy sector. With utility-scale renewables now cheaper than coal-based equivalents, some forecasters expect China to achieve its 1,200 GW wind and solar capacity target five years head of its original 2030 deadline. Additionally, China has vowed to invest some US$ 90 million over the next five years in solar PV (photovoltaic) manufacturing – triple the amount earmarked for investment by the rest of the world combined.
- USA: The US Inflation Reduction Act (USIRA) of August 2022, secured the financial security of renewables by extending the tax credits scheme until 2032. By 2027, annual solar and wind additions will be double those recorded at the start of the decade. This drive towards renewables isn’t just confined to the cosmopolitan coastal regions – some 37 states now boast portfolio standards and goals supporting renewable energy expansion. By favoring cleaner fuels, the USIRA could spur a 20% increase in biofuel and renewable diesel production, triggering a new wave of research on practical applications for waste and residues.
Elsewhere, Japan’s Green Transformation Policy, approved in February this year, set out a revised decarbonization route map for the country. Japan’s new strategy incorporates nuclear power, a greater dependency on renewables, and a revised carbon pricing mechanism.
India’s Production Linked Incentive Scheme aims to stimulate further investment in renewables by supporting the manufacture of high-efficiency solar PV modules and Advanced Chemistry Cell (ACC) batteries.
A world fit for human habitation is incompatible with a society still reliant on fossil fuels. If renewable energy is to truly inherit our power stations, grids and forecourts, it must be backed by a new wave of cutting-edge technologies. Let’s take a look at some of the industry’s most promising recent breakthroughs, and those looming on the horizon.
Technology underpins rise of renewables
Technology is only ‘expensive’ at the point of investment. In the long term, embracing more sophisticated renewable technologies could help the global economy save US$ 12 trillion by 2050. The World Economic Forum (WEF) argues that governments must concentrate not just on scaling-up existing technologies during 2023, but on spearheading new ones too.
Scientists are producing increasingly efficient green hydrogen (obtained by electrolyzing water using clean energy), helping to power regions deprived of adequate wind and solar resources. In March 2022, Australian researchers unveiled patented capillary-fed electrolysis cells of 95% efficiency, outperforming current technologies by around a quarter. This new technique could bring down the cost of green hydrogen to AU$ 2 per kilo by 2025.
In September the same year, the EU granted €5.2 billion in subsidies for green hydrogen projects, with billions more expected to flood into the market via the USIRA. Not before time – by some estimates, hydrogen demand could range from 150 to 500 million tons per year by 2050.
Potentially even more game-changing was the announcement in December 2022 that researchers had for the first time achieved nuclear fusion ignition. A team from the National Ignition Facility (NIF) in California used 2.05 MJ of energy to heat fuel with lasers, releasing 3.15 MJ of energy in the process. The experiment produced enough energy to boil a kettle of water, but its success validates a technology which was for decades stuck in the realms of the hypothetical. The results at NIF, declared the WEF, are “likely to spur further research to develop the technology, bringing us closer to a future in which nuclear fusion could provide near-limitless, safe and clean energy.” 
Abdul Latif Jameel, through the Jameel Investment Management Company (JIMCO), is already helping to turn this possibility into a reality. It is a key investor in two of the global pioneers in the rapidly developing fusion energy sector: Commonwealth Fusion Systems (CFS) – an MIT Plasma Science and Fusion Center spinout based in Boston that counts Jeff Bezos and Bill Gates among its backers – and Canada-based General Fusion, which is also backed by Bezos.
General Fusion is constructing a demonstration plant at Culham, near London – the hub of UK fusion research for decades – that is scheduled to start operating in 2025. The company aims to have its first reactors on the market in the early 2030s. Boston-based Commonwealth Fusion Systems is taking a different approach, based on tokamak technology. Bob Mumgaard, Chief Executive Officer and Co-founder, CFS, says the company aims to have a working reactor by 2028.
Energy production, whatever the technology used, cannot be considered in isolation from energy storage, and 2022 was a banner year for advances in battery technology. In summer 2022, it was revealed that engineers were developing a new type of ‘gravity battery’, capable of storing huge amounts of potential energy for use at peak times. The system uses daytime renewable energy to winch heavy weights up a tall shaft, then allows the weight to descend at night, generating electricity from the movement of cables – the same principle as the pendulum powered grandfather clock! Proof of concept demonstrations produced around 250kW of energy – enough to power 750 homes – all stored in a cheaper, greener way than mineral-hungry lithium batteries.
In December of that year, meanwhile, researchers at the University of Sydney in Australia announced a breakthrough in batteries made using sodium sulfur, a molten salt processed from seawater. The process uses pyrolysis (decomposing materials at high temperatures) and carbon-based electrodes to supercharge the reactivity of the sulfur, resulting in a storage medium four times more efficient than lithium batteries.
Indeed, storage now forms a key component of energy policies worldwide, with countries such as Germany, Spain and Portugal all auctioning combined renewables and storage projects in 2022, with China and India set to follow suit. While in Mexico, FRV, our flagship renewable energy business that is part of Abdul Latif Jameel Energy, is developing and deploying so called ‘behind the meter’ energy storage projects under an innovative ‘Energy Storage-as-a-Service’ (EnSaaS) model focused on the industrial sector.
FRV and its innovation arm FRV-X are also pioneering battery energy storage system (BESS) projects in the UK at Holes Bay, Dorset; Contego, West Sussex; and Clay Tye, Essex; plus a hybrid solar and BESS plant at Dalby, Queensland in Australia. FRV acquired two additional BESS projects in the UK in autumn 2022, as well as a majority stake in a BESS project in Greece.
Looking ahead, new technologies will continue to justify renewable energy investments in the coming years.
A new type of transparent film for placing over windows will allow buildings and vehicles to harvest energy from natural sunlight. Companies such as Silicon Valley-based Ubiquitous Energy are developing the technology, which allows visible light to penetrate while capturing the energy from infrared and ultraviolet light for heating, cooling and battery recharging.
Other tech firms are eyeing another largely untapped source of clean, free energy – the ocean.
Australia’s Wave Swell Energy has just finished a year-long test off the coast of King Island for an artificial blowhole. The system works by drawing water into a central chamber and compressing air to rotate a turbine. Swedish company Eco Wave Power is pioneering devices which float on the water surface and rely on rising waves to increase fluid pressure, spinning an internal hydromotor. Units are already in place off Israel and Gibraltar, with the next installation planned this year in waters off Los Angeles. Scottish company AWS Energy is also betting on wave energy. Its technology involves tethering a massive underwater buoy, called an Archimedes Waveswing, to the ocean floor. The Archimedes Waveswing undulates with the waves to turn a generator, feeding the grid.
So, with legislative support buttressed by such innovative leaps in technology, why isn’t renewable energy yet meeting all of the world’s growing power needs?
Joined-up thinking essential for energy emergency
Renewable power projects may be more prolific than ever, but the IEA estimates they must maintain a 60% growth rate over the next five crucial years in order to preserve the hope of a net-zero scenario by 2050.
Several challenges – none of them insurmountable – remain on this journey.
Coal remains stubbornly resilient, particularly in China. Even as its cities battle daily smog, carbon dioxide emissions from coal-fired electricity production in China exceeded a record 4.5 billion tons in 2002 – more CO2 than emitted by Europe’s entire energy sector the previous year. Globally, coal is expected to be responsible for 30% of global electricity generation until at least 2027.
To make coal less appealing, we need to make the alternatives more attractive.
Lawmakers, argues the IEA, must encourage renewable energy schemes to prosper by introducing more liberal permissions and auctions processes. Holistic thinking is essential, ensuring that energy storage and distribution infrastructure expands in tandem with production capacity.
Emerging economies must establish the kind of policy and regulatory frameworks that will stimulate inward investment and move towards more harmonious international standards. Comprehensive financing options must be available to ensure the rapid funding of proposed projects.
High upfront costs and poor policy support continues to hinder ‘dispatchable’ (controllable and adjustable) renewable technologies such as hydropower, bioenergy and geothermal energy. Hydropower may expand by just 17-33 GW over the next five years, down from its single-year high of 45 GW back in 2013. Bioenergy’s global growth is concentrated in China, Turkey and Brazil thanks to these countries’ waste-to-energy strategies and feed-in tariffs – attributes absent in other states. Geothermal energy lacks policies designed to counter the high financial risk of new explorations (which frequently prove uneconomic), leading to predicted growth of less than 6% over the next five years.
Renewable energy markets remain sensitive to wider financial and geopolitical trends. The growth of renewable energies slowed during 2022, in the US, because of rising costs, international trade policy pressures, economic inflation and supply chain problems. COVID-19 lockdowns in China, for example, affected the delivery of wind turbine and solar PV components.
Given these supply issues, Europe is under pressure to invest more boldly in its own manufacturing base to deliver the clean energy transition. Under IEA forecasts, for Europe to meet its goal of 69% eco-friendly electricity by 2030, annual net additions must double for wind and rise by 30% or more for solar. Auctions must be redesigned to reflect both the increasing cost of renewables and their associated energy security benefits.
Many of these challenges are expected to continue into 2023, potentially applying the brakes to the renewable energy transition just as acceleration is needed.
The private sector is uniquely equipped to help counter these headwinds.
Power to the people: The fight of our lifetimes
The fight against climate change is really a fight for renewable energy. Private capital is a particularly potent tool in this era-defining race against time.
Private capital, can be, by its very nature, patient capital, free from the whims of profit-focused investors or the vagaries of short-term electoral calendars. Private capital can adopt a more far-sighted stance, targeting its funds at strategies offering benefits over decades, rather than merely years or months.
Here at Abdul Latif Jameel, we are playing our part here in this singular mission. FRV now operates more than 50 solar and wind plants spanning five continents, and is anticipating an installed energy capacity of 4 GW by 2024. In February 2023, it opened an office in the UK, where it currently has more than 80 MW of projects in operation, 200 MW under construction and more than 1 GW under development. Further, in 2022 its battery storage energy plants at Contego and Holes Bay were the two best performing battery assets in the country, according to the ranking prepared by the monitoring tool MODO Energy. It also announced its intention to enter the German market, with plans to supply 800,000 homes with clean energy. The opening of the London and German offices will positively contribute to FRV’s goal of reaching 1 GW of installed capacity in Europe by 2025.
In addition, it recently confirmed plans to develop its first solar plant in New Zealand. The 52 MW project at Lauriston, north of Christchurch, will generate enough power to supply 9,800 homes when fully operational, expected to be in 2024.
While in neighboring Australia, FRV has reached financial close on its solar development at Walla Walla in New South Wales, it’s fifth solar farm in the state and its tenth in Australia as a whole, representing a total power capacity of 1 GW.
As well as renewable power generation, we are driving the business case for the use of transformational renewable energies in transportation, too, via investments in electric mobility pioneers such as Greaves Electric Mobility, Joby Aviation and Rivian. And pilot programs in decarbonizing public transport with green hydrogen taxis in Madrid and hydrogen buses in Alicante, Spain, again through FRV.
We are in the foothills of an exciting new energy landscape, one which could transform global prosperity: the green economy. If the WEF is correct, industries pivotal to our net-zero transition could be worth more than US$ 10 trillion by mid-century.
“More jobs on the ground and fewer pollutants in the air is a scenario we must strive for together,” says Fady Jameel, Deputy Chairman and Vice President, Abdul Latif Jameel.
“The number of people around the world slipping into energy poverty is growing for the first time in a generation, bringing the shadow of inequality and strife to our societies.
The shift towards green energy is a mission which should inspire us all.
“Renewables can help bring down the cost of powering our homes, offices and vehicles. It can give people control back over their lives while helping to preserve our delicate ecosystem for generations to come.”