A tailwind for renewables
Non-fossil fuel energy projects saw further momentum in 2018, thanks to falling costs and increased comfort with the technologies
Renewable energies continued their upward growth trajectory in 2018, with falling costs and technological breakthroughs encouraging the uptake of non-fossil fuel energy sources.
Increased commercial activity was a pointer to the increasing interest in renewable energies' possibilities. In October, Danish energy firm Orsted—formerly DONG—bought US-based Deepwater Wind, a sign that the once-lagging US wind sector was finally started to make some headway.
And the resource potential in the US is significant and largely untapped: its onshore wind resources are some of the best in the world, with Iowa, Kansas and Oklahoma alone are rich in high, sustained wind flows. In those central states, wind now accounts for 36pc, 35pc and 31pc shares respectively of total generation, according to the US Energy Information Administration (EIA).
Deepwater Wind's 30MW Block Island wind farm in Rhode Island—the US' first offshore facility—started production in late 2016. In 2017, the firm applied to the Maryland public service commission for approval of its proposed 120MW Skipjack facility, while competitor US Wind submitted a 250MW Maryland project for approval. In August 2018, Vineyard Wind concluded an agreement with Massachusetts electric distribution companies to hook up its large-scale 800MW wind farm which has a levelised cost of energy (LCOE) of $65/MWh.
Onshore wind energy in Eastern Europe, Russia and the Caspian will experience a compound annual growth rate of 9pc from 2018 to 2027, according to research from consultancy Wood Mackenzie Power & Renewables. Wind power auctions have fast become a favoured policy tool of Eastern European countries as they follow a global trend of moving away from FIT In other markets globally, such auctions have led rapid growth, with Brazil and Saudi Arabia being only two examples said WoodMac.
Wind power auctions have fast become a favoured policy tool of Eastern European countries
In other markets, solar made headway in 2018. In Mexico, proposed solar farms were outbidding alternatives including coal in new Mexican generation capacity auctions at prices down to $17.70/MWh. The US, Saudi Arabia, India, Chile and world leader China have also seen low-priced solar winning bids.
Germany spent much of 2018 devoting its renewables auctions to solar projects, awarding in excess of 200MW of capacity in November. In April, Germany's Federal Network Agency awarded combined capacity of 210 MW to 32 solar projects with an average final price of €0.0467 per kWh (which was higher than the €0.0433 per kWh awarded to the solar-only auction in February). In November it followed up with the announcement of awards of a total combined capacity of 201 MW to 36 projects at an average cost of €0.0572 per kWh.
The Middle East-North Africa (MENA) also burnished its reputation as a renewables hotspot in 2018. Egypt reached financial close in 2018 on its 250-MW wind project from a led by France's Engie in the Gulf of Suez, underscoring strong appetite for renewables in the North African economy, which has a reported 1.2GW of capacity under construction from key players such as Saudi Arabia's ACWA Power and Marubeni of Japan.
In Morocco, another North African growth market, Italian energy major Enel announced financial close in November on a project for the construction of a 180-MW wind farm. Located in Midelt, the wind park will be part of the 850-MW Projet Eolien Integre complex. Morocco also completed two solar farms in the southern Saharan provinces of Laayoune and Boujdour with a joint capacity of 100 MW, part financed through so-called green bonds - the first time such instruments have been deployed in the kingdom. Morocco is planning to generate 42pc of its energy from renewables by 2020, with one-third of that total coming from solar, wind and hydropower.
Back in Europe, the continent's power utilities were also investing heavily in energy storage in 2018, as part of an effort enabling them to diversify their portfolios with more energy-efficient assets. Key players such as Germany's E.ON and Vattenfall were selling off their generation assets and investing in power trading capabilities, storage and smart metering.