Russia – Ukraine War : A Boon to Renewable Energy Sector

The existing global energy crisis as a result of Russia’s invasion of Ukraine has shaped new opportunities for renewable energy sector across the world. Fossil fuel disruptions have inspired many countries to focus on renewable energies and strengthen the policies supporting them. Also, the increased cost of fossil fuel has given solar PV and wind generation an edge against other fuels.

Russia’s invasion of Ukraine, is a spinning point for renewables across the world, especially Europe. The energy crisis hit EU while it was already debating ambitious renewable energy targets under the Fit for 55 Package. Post Russia’s invasion of Ukraine in Feb 2022, energy security emerged as an additional strong motivation to accelerate renewable energy deployment. ?According to a report published by IEA, renewables are projected to grow by 85 % compared to the cumulative growth in past 5 years. Renewables are set to account for over 90 % of the global electricity expansion and will transform the global energy mix by the year 2027, thus becoming the major source of electricity on earth.

The transformation shall be largely driven by China, European Union, United States and India as these countries are implementing their existing policies and regulatory framework to back the renewable energy reforms and also bringing new policies more quickly than expected in response to the global energy crisis.

China is predicted to install almost half of the new global renewable energy capacity over 2022-2027, as the growth accelerates in next 5 years. China’s cumulative renewable energy capacity is expected to double during this period thus increasing by almost 1070 GW. Solar PV and wind shall account for 90 % of this renewable energy growth, followed by hydropower contributing to the majority of the remainder. Policy guidelines and targets in China’s new 14th Five-Year Plan on renewable energy forms the basis of this projection. The country intends to accomplish a targeted electricity generation of 33 % from renewables and 18 % from solar PV and wind by the year 2025. The government has recognized large scale deployment bases for onshore wind and utility scale solar PV projects. The government has also allowed large consumers to sign clean energy power purchase agreements with new projects developed without subsidies. Green energy certificates can be exchanged among developers and consumers, which gives developers some extra premium from these certificates on the top of market-based tariffs, thus making the projects extra bankable. ?These market reforms enable the use of solar PV and wind generation thus increasing their ratio in the energy mix. ?

In United States, the Inflation Reduction Act is providing an unprecedented long-term sustenance for wind and solar PV projects. The legislation extends tax credits for renewables until 2032. On the top of that, 37 out of 50 states have renewable portfolio standards and targets supporting the expansion. By the year 2027, US annual solar PV and wind energy capacity shall double as compared to the year 2021.

With an addition of 145 GW, India is also forecast to double its renewable capacity during the year 2022-2027. Solar PV shall account for almost 75 % of this growth followed by onshore wind plants contributing to 15 % of this growth and rest shall majorly be dominated by hydropower. Though, the renewable energy capacity deployment in India is always dominated by utility scale power projects contracted through competitive auctions, however due to increased consumer awareness and government policy support, the distributed solar PV is expected to play a vital role in the country’s renewable energy mix.

New PV Manufacturing Policies in United States, India and EU will lead to more diversified global solar PV manufacturing: -

The high level of dependence of global PV supply chain on China has led European Union, India and the United States to introduce policy initiatives and to support domestic solar PV production. Solar PV manufacturing investment in India and United States is expected to reach almost USD 25 billion over 2022-2027, a sevenfold increase as compared to the last 5 years. India’s Production Linked Incentive (PLI) initiative and United States’ Fully Monetizing Manufacturing Tax Credits closes nearly 80 % of domestic PV manufacturer’s investment cost gap with the lowest cost manufacturers in China. Such policies and incentives could lead to an unprecedented expansion of solar PV manufacturing outside of China in next 5 years. However, diversification of the solar PV manufacturing units could benefit only if the production cost falls to ensure the competitiveness with the lowest cost producers from China.

Hydrogen Production from Wind and Solar PV finds a new area of growth in the Current Energy-Crisis: -

The global renewable hydrogen capacity is forecasted to grow 100 times in next 5 years. Twenty-Five countries across the globe have adopted policies and targets that would result in the production of 50 GW of wind and solar PV supported hydrogen generation units over the 2022-2027 period. Though the renewable capacity dedicated to hydrogen production accounts for only 2 % of the global energy forecast, but hydrogen production is expected to play a significant role in helping the world achieve its long term decarbonization role goals and shall help many countries like India, European Union to attain energy security.

As the current energy crisis is reviving energy security concerns, the renewable energy has emerged as a viable solution to the problem. Countries across the world want to reduce their reliance on fossil fuel imports, thus have raised their renewable energy targets and are focusing on addressing the policies and regulatory framework to drastically increase the ratio of renewable energy in their total energy mix and narrow the gap to net zero by 2050.

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