EY released the 59th edition of its Renewable Energy Country Attractiveness Index in May 2022 titled “Does the need for energy security challenge the quest for net zero?“. REGlobal presents an extract from this report…

Key findings:

  • Geopolitical tensions, post-lockdown demand for gas, and environmental concerns have thrust energy security to the top of agendas.
  • Emerging technologies and green fuels will be key to reducing the world’s reliance on gas.
  • Floating wind and solar have the potential to go mainstream as demand grows for new sources of renewable energy.
  • Green hydrogen is expected to be a key substitute for natural gas in the coming years.
  • Latin America is a green energy market to watch if it can overcome current barriers to growth.

Renewable Energy Country Attractiveness Index

Renewables highlights from around the world

Energy security has risen to the top of priority lists, as the war in Ukraine has led to increased geopolitical instability and spiralling gas prices and the world’s ongoing recovery from the depths of the COVID-19 pandemic has boosted energy demand.

Governments around the world are looking to accelerate and broaden the scope of their renewables programs to help reduce their reliance on imported energy at this volatile and unpredictable time. Here, key developments within 10 markets that are taking interesting and varied approaches to trying to secure their energy supplies are explored — from the tripling of onshore wind and solar in Germany to green hydrogen investment in India.

The US: breakthroughs sought in hydrogen and offshore wind

The U.S. Department of Energy is deploying US$10 billion in funding for the advancement of green and blue hydrogen as part of the Infrastructure Investment and Jobs Act, which was passed in 2021. Development of regional clean hydrogen hubs will be allocated US$8 billion as the market takes initial steps forward in developing a national clean hydrogen network. An additional US$1.5 billion will be allocated for research into, and development of, clean hydrogen manufacturing and recycling, and a clean hydrogen electrolysis program aimed at reducing the production cost.

On 11 May 2022, the Bureau of Ocean Energy Management held a wind energy auction for two lease areas offshore of North and South Carolina. If developed, the areas could have a capacity of 1.3 GW. In autumn 2021, the US identified up to seven potential offshore wind lease sales by 2025. Currently, the market has one operating offshore wind project, the 30MW Block Island Wind Farm off the coast of Rhode Island.

China Mainland: prioritizing geothermal and hydrogen sectors, and rural areas

China Mainland has announced it will prioritize geothermal, hydrogen and tidal energy as it seeks to develop new energy sources on a large scale. The market will adopt a region-specific approach, evaluating the presence of natural resources and industrial development in each district.

As China seeks to reach peak carbon emissions by 2030 and carbon neutrality by 2060, President Xi JinPing has highlighted that wind, solar and biomass will be relied upon heavily in its energy transition. He indicated that the government will seek to increase the development of large, integrated wind and solar project campuses. China is also seeking to promote renewable energy in rural areas, calling on developers to set up projects in grasslands and forested regions, and on land that is unsuitable for agricultural use.

The UK: battery storage and floating offshore big winners in recent auctions

Battery storage projects won record subsidies in February’s auction, with close to 1.1 GW of projects receiving capacity subsidies. This marks a more than four-fold increase versus last year. In total, 107 projects, most of which are new builds, received capacity, while only about 10% failed to win subsidies. Most battery storage schemes have a duration of more than two hours and had their capacity contracted for 15 years. They are to be built by winter 2025.

In January’s 2022 ScotWind tender,13 floating offshore scored a victory, with the Scottish government awarding more than half of the 24.8GW to floating wind projects. In total, 17 projects were successful, with the winners of the round agreeing to pay close to £700m (US$912m) of option leasing fees. Meanwhile, results of Round 4 of the UK’s Contracts for Difference (CfD) auction are expected to be announced in the early summer of 2022. Opened in December 2021 with a draft budget of £285m (US$371m), it is the biggest auction yet, aiming to secure up to 12GW of renewable energy generation for delivery between 2023 and 2027.

Germany: all-green target moved forward to 2035, first biomethane auction held

Germany has announced ambitious renewable energy commitments, vowing to reach 100% green power by 2035, moving forward its target date by 15 years. A near- term goal of 80% by 2030 has also been set, with the market promising to phase out Russian oil imports by the end of 2022. Currently, about 41% of its power comes from renewable energy.

New legislation, announced in late February, aims to triple annual additions of onshore wind from 3GW to 10GW in 2027. Offshore wind will be more than doubled, with cumulative capacity increasing to 70GW in 2045. And solar expansion will be nearly tripled, from 7GW to 20GW annually in 2028. This comes as Germany has decided to phase out nuclear power, with its last three reactors scheduled to go offline in 2022.

India: green hydrogen policy unveiled

India unveiled its Green Hydrogen Policy in February 2022, with a goal to produce a cumulative 5m tonnes of hydrogen by 2030. The policy will promote green hydrogen and green ammonia projects by providing a 25-year waiver for transmission charges. Producers will also be allocated land at ports for storing green ammonia for export. By waiving transmission charges and increasing the size and scale of hydrogen manufacturing, India hopes to halve the price of clean hydrogen. 

The government has set a target to bring down the cost of green hydrogen to US$2.50/kg by 2025 and to as low as US$1/kg by 2030. It is estimated that the market will need investments of around US$25b from the public and private sectors to form a domestic green hydrogen supply chain with a national installed electrolyzer capacity of 25GW, to reach its goal of producing 5m tonnes of green hydrogen by 2030.

Italy: eyeing floating offshore wind, but renewables undersubscribed

Italy is planning tenders over the next five years to award 3.5GW of floating offshore wind projects. The auctions, between 2022 and 2026, will see developers bid for 20-year CfDs. The market has set a proposed tariff of €165/MWh (US$180/MWh) for the initial auction, with the price expected to be lowered for subsequent tenders. Currently, only one small-scale (30MW) fixed-bottom offshore wind project has been built in Italy.

South Korea: renewable standard raised as green energy ambitions grow

South Korea has raised its renewable portfolio standard policy for independent power producers with more than 500MW of capacity to 12.5% for 2022. The market will keep building momentum by increasing the ratio to 14.5% in 2023, 17% in 2024, 20.5%
in 2025 and 25% in 2026. Last year, the ratio was raised to 10%. The move is part of South Korea’s plan to reach its 2030 greenhouse gas reduction target of 40% and its target of carbon neutrality by 2050.

Amid its announcement of more ambitious climate targets at COP26, the market is expected to become a leader in offshore wind and clean hydrogen. Last year, plans were unveiled for the 8.2GW Shinan offshore wind project, which will supply power to Seoul and the port city of Incheon and is expected to cost KRW48t (US$40.3b). A second megaproject was also announced, with a 6GW floating wind complex to be developed off the coast of Ulsan. This would be the world’s largest floating offshore wind project and is scheduled to be built by 2030. South Korea has also announced that 624 hydrogen buses will be put on the roads of the port cities of Busan and Ulsan by 2025. The market currently has 112 hydrogen filling stations and is expected to add 38 more by the end of the year.

Turkey: 2.8GW of grid capacity earmarked for renewables

Turkey has set a target to increase the share of renewable sources in its generation mix from 59% to 65% by the end of 2023. Grid capacity will be allocated to 2.8 GW of renewable power projects in its US$5.4 billion tender round in early 2022. Grid connection rights will be provided for 1.3 GW of hybrid power plants combining solar and wind installations, while 784 MW will be reserved for single-technology projects of solar parks or wind farms. An additional 680MW will be provided for small-scale unlicensed renewable plants. The projects are expected to be completed within two years of the awards.

The Turkish government is also developing an offshore wind energy road map with international financial institutions, which it will publish later in 2022. It has indicated that offshore wind energy competitions with a capacity of 1.2GW are on the agenda for upcoming tenders. As a result, Turkey was recently named as one of the top four countries for offshore wind energy potential by the Global Wind Energy Council.

The Philippines: seeking to add 2GW of renewables and reach 35% renewable energy by 2030

The Philippines is targeting the addition of 2 GW of renewables capacity in its next tender. It is seeking to add 1.4 GW of solar, wind, hydro and biomass projects on the island of Luzon; 400 MW of biomass, solar and wind power in the Visayas region; and 200 MW of hydro, biomass and solar capacity on the island of Mindanao. Once a ceiling rate is determined, the government will auction the projects over a two-month period. Privately held power distribution business Manila Electric Company is also accepting bids for 850MW of solar and battery supply projects.

This comes as the Philippines’ proposed National Renewable Energy Program for 2020–40 has set a target of 35% green energy in the power mix by 2030 and 50% by 2040. In recent years, the share of renewable energy in the generation mix has declined: it sat at 34% in 2008 and is currently at 21%. In 2020, the market announced a ban on all new coal projects, leading to Philippines companies expanding their renewables portfolios.

South Africa: renewables growth seen as the solution to load shedding

South Africa has awarded 25 contracts for renewable energy projects, worth a combined US$2.8 billion, as it seeks to combat load shedding and reduce its reliance on coal. The country has been struggling with load shedding since 2007 because of a failure to build new power plants, and it is estimated that blackouts cost the economy more than US$30m a day.

The latest awards are expected to boost South Africa’s generation capacity by 2.6GW, roughly 4.5% more than at present, with the addition of 12 new wind farms and 14 PV plants. With South African electricity company Eskom in debt by several billion dollars, a number of companies are harnessing solar power, with the aim of being 100% dependent on solar by 2025.

The complete report can be accessed here