Global renewables' outlook intact despite pandemic firefighting: S&P Global

The global growth outlook for renewables generally remains intact even if stimulus plans are likely to prioritize employment and direct support measures over green growth, according to joint research published by S&P Global Platts Analytics and S&P Ratings Sept. 24.

Key risks for the renewables sector are reductions in direct subsidies and tax credits as observed in China, Europe, and the US, permitting barriers and a cloudier outlook for long-term electricity prices.

"On the other hand, continued strong investor appetite and declining costs are allowing renewables to compete increasingly at grid parity prices, but with lower returns and rising market risks," S&P Global said in a series of reports timed to coincide with New York's Climate Week.

"As a result, larger renewables players, with strong balance sheets and vertical integration to mitigate merchant risks, may be better positioned and could move to consolidate the industry," the research said.

US presidential elections in November could prove a major catalyst for renewables if former Vice President Joe Biden wins and gets a $2 trillion clean energy spending plan through Congress.

Without such stimulus, US renewable capacity additions could wane due to the end of federal tax credits in 2021 it said.

In Europe, meanwhile, the coronavirus pandemic had accelerated policy support, with a third of EU recovery funds to be allocated to green investments, combined with ambitious 2030 objectives for sustainable hydrogen.

China's pandemic-induced stimulus plans imply some headwinds for renewables due to a relaxation of restrictions on new coal-fired power plants to support employment and the local economy. Moreover, the economy's trend to lower energy intensity has stalled.

"The country's next five-year plan (due in March 2021) will reveal whether the country's energy policies this year are a blip, or signal something more permanent," the research said.

A heightened focus on energy security could imply more support for the domestic coal sector, but Platts Analytics expects the government to continue to support renewables "especially now that China has committed to achieving carbon neutrality by 2060."

A positive signal was the announcement of a growing number of grid-parity wind and solar projects in recent months, Platts Analytics' head of global power planning Bruno Brunetti said.

Through August, 15.9 GW in wind and 47.8 GW in solar capacity had been approved for China's grid-parity pilot program, data from S&P Global Ratings showed.

Indian efforts took the biggest hit from the pandemic due to reduced construction activity, the research showed.

"Total renewables additions are down 40% so far in 2020 year on year. India's renewables industry, meanwhile, had already been facing more structural constraints, ranging from slowing growth in power demand, high counterparty risks and transmission bottlenecks," it said.