Renewables Rise: Forecasts for a Transformative Year in Energy
The global energy sector is on the brink of a historic transformation, with renewables poised to surpass coal as the leading source of electricity generation by the end of the decade. This significant shift is driven not only by climate considerations but also by the economic advantages of renewable technologies like solar photovoltaics and onshore wind. Nicolas Daher, Lead Energy Analyst at The Economist Intelligence Unit, underscores that the levelized cost of electricity from renewables has now outcompeted coal in most geographies. The result is an accelerating energy transition that is increasingly dictated by market forces rather than regulatory mandates or environmental targets alone.
Economic competitiveness is proving to be the decisive factor in the expansion of renewables. While initial growth in the sector was fuelled by climate policies and the push for net-zero emissions, renewables are now thriving independently of these imperatives. This is particularly evident in countries like China, where concerns about local air pollution and the high healthcare costs associated with coal-fired power plants have added momentum to the shift.
Similarly, Southeast Asia and India continue to install new coal capacity, yet they are also investing heavily in renewables to meet their growing electricity needs. This dual approach reflects the complex interplay of economic development and environmental priorities across different regions.
Evolving Demand Patterns
Looking ahead, global energy demand is expected to grow, albeit at a sluggish pace, due to high energy prices and economic uncertainties. Fossil fuel prices, which spiked during the war in Ukraine, remain elevated, constraining growth in demand. In 2024 and beyond, emerging markets and developed economies will exhibit divergent consumption patterns. While developing nations in Latin America and Africa focus on expanding access to electricity, developed nations are increasingly prioritising efficiency and decarbonisation.
China remains a pivotal player in shaping global demand. Its rapid adoption of new energy vehicles, which now account for 50% of domestic car sales, is driving a green revolution. However, the country’s economic challenges are slowing overall energy demand growth. In the US, the energy landscape is shaped by political dynamics, with the potential rollback of renewable subsidies under a Trump presidency adding further uncertainty. Despite these challenges, the growing economic advantages of renewables ensure their continued expansion, even amid geopolitical turbulence.
The Role of Emerging Technologies
Energy storage technologies are emerging as a linchpin for integrating renewables into the energy mix. Daher highlights the critical importance of storage in stabilising renewable energy systems, particularly in regions where solar and wind are becoming dominant sources of electricity.
China, again, is leading the way in battery storage investments, solidifying its position as a global leader in renewable energy technology. However, Europe is also making strides, with interconnection projects between northern and southern regions aiming to balance wind and solar power generation more effectively.
Offshore wind is another area of significant innovation. Floating offshore wind platforms, which allow turbines to be installed in deeper waters, are poised to unlock vast new resources in regions like Southeast Asia, Latin America, Europe’s Atlantic coast, and the North Sea. These technologies are expected to overcome many of the barriers currently limiting offshore wind development, such as inconsistent winds and high costs. As floating platforms become more commercially viable, they will play an increasingly transformative role in meeting global electricity demand.
Meanwhile, the hydrogen economy faces more mixed prospects. Although often touted as a key component of the energy transition, hydrogen technologies are hampered by bottlenecks in production and infrastructure. Daher notes that green hydrogen, which relies on renewable electricity, faces significant challenges in scaling up due to competition with other sectors for renewable resources. While there is potential for hydrogen to play a role in industrial applications, its widespread adoption remains a longer-term goal, he says.
Geopolitical and Regulatory Influences
Geopolitical factors continue to shape the energy transition, introducing both challenges and opportunities. Trade tensions between the US and China, particularly around renewable energy technologies, are raising costs for developers and slowing the adoption of renewables in key markets.
China’s dominance in manufacturing solar panels and batteries has made it a critical player in the global energy transition, but it has also exposed vulnerabilities in supply chains. Countries like Vietnam, which serve as alternative manufacturing hubs for Chinese companies, are becoming increasingly important in mitigating these risks. However, US trade tariffs on China look likely to spread to other Asian nations where Chinese companies are operating.
Policy and regulatory trends further complicate the landscape. In Europe, the rise of conservative and right wing political movements has tempered enthusiasm for green policies, while in the US, a potential second Trump administration could reduce subsidies for renewables, slowing their adoption.
However, public support for renewable energy remains strong, particularly in states that have benefited from job creation under the Inflation Reduction Act. As a result, any policy changes are likely to be incremental rather than sweeping.
Latin America and Africa present a more optimistic picture. Countries like Brazil are making bold moves to expand their renewable energy capacity, driven by a combination of more sustainably minded political leadership and economic opportunity.
In Africa, where electricity access remains a pressing issue, solar and wind projects are gaining traction as cost-effective solutions for rural electrification. These developments highlight the potential for the global South to play a leading role in the energy transition, even as traditional powerhouses in the North face political and economic headwinds.
Public and Private Sector Collaboration
Collaboration between public and private entities is proving essential in driving the energy transition. Private companies, particularly tech giants like Google and Microsoft, are increasingly investing in renewable energy projects to power hungry data centres and meet corporate sustainability goals. These partnerships are not limited to renewables; nuclear energy is also benefiting from agreements that ensure reliable electricity supply for energy-intensive operations.
Daher emphasises the growing importance of public-private partnerships in bridging investment gaps and accelerating the deployment of clean energy technologies. In some cases, private-sector targets for decarbonisation are even more ambitious than those set by governments, reflecting a broader societal push for sustainability.
As energy demands from emerging technologies like artificial intelligence and data centres grow, such partnerships will become even more critical in ensuring that supply meets demand sustainably.
The Road Ahead
The energy sector is entering a period of profound change, marked by both opportunities and challenges. Renewables are on track to become the dominant source of electricity, driven by their economic competitiveness and technological advancements. However, the transition is far from straightforward. Geopolitical tensions, regulatory uncertainties and infrastructure bottlenecks threaten to slow progress, requiring coordinated efforts from governments, industry and civil society.
Emerging technologies such as floating offshore wind platforms, advanced energy storage, and potentially nuclear fusion hold the promise of redefining the energy landscape. But realising their potential will require sustained investment, international cooperation, and a commitment to innovation. As Daher points out, the energy transition is not just a technical challenge but a political and economic one, shaped by the interplay of market forces, policy decisions and global power dynamics.
In 2024, the focus must remain on overcoming these challenges and ensuring that the energy transition delivers on its promise of a sustainable and equitable future. With renewables leading the charge, the world has a unique opportunity to reshape its energy systems for the better, but only if it acts decisively and collectively.
Sources: Nicolas Daher, Energy Lead, The Economist Intelligence Unit (transcription from interviews); Analysis and forecasts from The Economist Intelligence Unit; Supporting insights from the International Renewable Energy Agency (IRENA).
