Summary
Europe’s renewable energy industry is a dynamic infrastructure market that has evolved over almost a quarter of a century. The sector has grown from a dependence upon government support policies, designed to springboard the various technologies, to standalone independent business models that, in many cases, no longer need any state intervention whatsoever.¹ The renewable energy market has become a mature and sustainable business.
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Key takeaways
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Many of the first investors in the European renewable energy market were pension funds and other institutional investors looking to match long-term annuity obligations to stable and predictable cash flows with low or no correlation to other capital markets. Such a profile can still be found today albeit the market landscape has changed.
Today, as more capital in the renewable sector is flowing to traditional operational assets, investors are exploring opportunities across different sub-sectors of the renewable energy space, moving up the project value chain, in order to maintain the same return level.
Thanks to increasing efficiencies in construction and technological advances, the cost of providing renewable energy has dropped dramatically. Solar and onshore wind power are now both as competitive as traditional power generation.2
Source: BloombergNEF. Note: The LCO range represents a range of costs and capacity factors. Battery storage systems (co-located and stand-alone) presented here have a four-hour storage. In case of solar- and wind-plus-battery systems, the range is a combination of capacity factors and size of the battery relative to the power generating asset (25% to 100% of total installed capacity). All LCOE calculations are unsubsidised and exclude curtailment. Categorisation of technologies is based on their primary use case.
The development of a healthy purchase power agreement (PPA) market is another indication that alternative revenue structures to feed-in tariffs and subsidy mechanisms can also attract new investment in the sector.
In this paper, we look at some of the changes that the European renewable market is going through and why these changes make Europe one of the best regions for investing in renewable energy. We also discuss the different opportunities available to investors in this changing market environment.
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1 Irfan, U. (2018). Europe is building more wind and solar — without any subsidies. Vox. Retrieved April 29, 2020, from https://www.vox.com/2018/5/30/17408602/solar-wind-energy-renewable-subsidy-europe
2 Gray, M., & Sundaresan., S. (March 2020). How to waste over half a trillion dollars: the economic implications of deflationary renewa- ble energy from coal power investments, pp. 5, 9-10, 18-19. Carbon Tracker Initiative.
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Key takeaways
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