California-based analysts Frost & Sullivan have predicted that an estimated $US3.40 trillion, over $4 trillion in Australian dollars, will be invested in the renewable energy sector over the coming decade, in what the analysts predict will be a “crucial” decade for the industry.
In a new report published this week, Frost & Sullivan claimed that “the 2020s will be crucial for all the participants in the power industry as the transition toward renewable energy is expected to increase, while coal takes a downturn in most developed markets.”
Though a somewhat old claim and one that is repeatedly being proven across the globe, Frost & Sullivan add weight to their primary argument.
The consultants point to fall costs in renewable energy technology and renewable-friendly energy policies adopted by several countries as “prominent reasons” why solar PV and wind energy capacity additions are expected to increase dramatically this decade.
Specifically, Frost & Sullivan expect an estimated $US3.4 trillion will be invested in renewable energy over the next decade, including $US2.72 trillion ($A3.70 trillion) in wind and solar alone.
Moreover, according to the report, Frost & Sullivan expect 54.1% of installed power generating capacity will be renewable (including hydropower), including a combined 37.9% of wind and solar.
“Decentralization, decarbonization, and digitalization are the three key pillars of the global energy transition,” said Vasanth Krishnan, Senior Research Analyst, Industrial Practice, Frost & Sullivan.
“The power sector will witness strong growth in decentralization during the decade, with annual global investment increasing from $US53.14 billion in 2019 to $US92.54 billion in 2030.
Pressure will continue to build for further decarbonization within the power system as the rate of adoption of digital technologies increases in both existing and future plants to boost operational performance.”
As the decade progresses, Frost & Sullivan expect, not only that renewable energy will increase in volume and fossil fuels will decline, but that attendant trends such as the shift towards electric vehicles will help to create numerous opportunities for the energy industry’s incumbents, through collaboration and partnerships with industries such as mobility.
The report, focusing on the most important market trends across 5 major geographies – North America, Latin America, Europe, the Middle East, China, and India – identifies a surge in the need for flexibility as the most significant trend.
Conventional power plant operators will require “extreme physical and digital agility” to compete with alternative power sources such as renewables while staying profitable in the longer term.
Part of this, according to Frost & Sullivan – which obviously pays no allegiance to one technology type over another – will require digital solutions be implemented at conventional thermal power plants so as to increase operational efficiency and asset utilisation to meet the present and future needs of a smart power grid.
“The surge in need for flexibility is the most significant trend observed across developed markets,” Krishnan added.
“System operators are coming under increasing pressure to manage the system with uncertain renewable output, declining coal output, and demand-side variability.
“As a result, technologies and solutions such as battery energy storage systems (BESS), gas engines, demand-side response (DSR), and virtual power plants (VPP) are witnessing unprecedented adoption rates amongst utilities, solution providers, and end consumers.”
The report further identifies significant growth opportunities for market participants across the five regions, varying greatly depending on the region.
In North America, for example, high energy costs will drive a strong market growth for energy service and performance contracting, which Frost & Sullivan believes will more than double in size during the next ten years, and finish the decade worth $US19.14 billion ($A26 billion).
In Latin America, population and GDP growth, coupled with increasing electrification and industrialisation, will drive electricity demand by 3.15% per annum through to 2030.
Europe will see $US12.91 billion ($A17.5 billion) invested annually in battery energy storage, with total installed capacity expected to increase from 2.91GW in 2019 to 70.02GW by 2030.
Energy storage will also “accelerate rapidly” in China, according to Frost & Sullivan, bolstered by the fact the country already accounts for 62% of global battery storage production capacity and incoming investment intended to boost capacity even further.
Frost & Sullivan expect renewable energy technologies will account for 72.04% of all new capacity additions in India over the coming decade.
Meanwhile in the Middle East, supported by Saudi Arabia’s shifts in energy policy, the solar market will witness a significant surge in activity levels, with Saudi Arabia, the UAE, Qatar, and Iran all expected to become major markets for solar PV.