Renewables to Dominate in New Power Capacity Additions

Solar and wind will dominate power generation capacity additions as projections for investment reach $2.2 trillion by 2021, says a recent analysis report by Frost and Sullivan.

According to the report, solar and wind will total $603.4 billion and $533.7 billion respectively over the next three years.

The analysis notes that the “3D’s” of power, which stands for ‘Decarbonization, Decentralization and Digitalization’ will determine the global power market landscape.

Over $400 billion is expected to be invested in the annual generation capacity additions between 2017-2021.

“As the renewable and distributed energy markets mature, a large installed capacity of equipment will need to be serviced, offering attractive growth prospects within the operations and maintenance sector,” Vasanth Krishnan, energy and environment analyst at Frost and Sullivan said in the release.

The analysis says that the energy transition is proving to be costly for other sources of generation and that there is little evidence of an improvement in the short term.

At a global scale, the report states that the solar energy will account for most of the investments in 2018, clocking in with $123.03 billion with China as the biggest contributor to that growth.

When it comes to wind energy, Frost and Sullivan notes the transition to an auction-based system witnessed bids should reach a low, with that trend continuing as “cost optimization is garnering more focus than ever.”

The firm also highlighted the ‘Trump Effect’ and how the US president wanted to save coal but that the tide is against him. Finally, they said that the companies are positioning themselves for the energy transition and that the deal making is back.

Forecast for 2018

In terms of installed capacity forecast, the firm anticipates the renewable capacity to increase 9.7 percent in 2018 and that it will be driven by another year of solar with 100 GW+ capacity additions.

It was also said that the coal capacity will see an increase of 0.8 percent despite shutdowns while gas capacity will increase by 1.7 percent.

Due to the low borrowing costs, lower technology costs and government mandates, wind capacity might see a 59GW in 2018.

“To navigate through current trends and challenges, organizations must start embracing business models that enhance operational and process efficiency while reducing costs. Adopting disruptive digital solutions that focus on consumer needs will bring the organization closer to technological and efficiency transformation,” Krishnan said.

Investor takeaway

For the investors though, M&A activity will be the one to watch as Frost and Sullivan predicts more deals are expected in 2018 due to the organizations evaluating opportunities.

In Canada, the push for the renewable energy is at an high as noted in our Q1 Cleantech Update, however, compared to rest of the world, it’s the wind energy that’s the face of the Canadian industry. Alberta, in particular, was in focus with the prices for procuring power was at the lowest in the world.

With solar energy being the focus in many countries around the world, investors can consider this list 10 US solar energy stocks.

In short, this industry is a solid bet for the investors to put their money in.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.