Sustainability Trends 2024: The cost of clean energy technologies will decline by 15-20 percent by 2030, states a report from S&P Global Commodity Insights, noting that the increasingly crowded battery energy storage market will be among the spaces to watch
The pressing need for more flexible power systems around the world will translate into one terawatt (TW) of additional wind and solar installations in the next two years, propelling global installations to 3.5 TW, says an S&P Global Commodity Insights report. This is because, as the authors of the report point out, any power system reliant on intermittent renewable generation will call for increased flexibility in assets such as storage and demand response.
However, the most dramatic advances over 2024 will be in offshore wind. A record 60 gigawatts (GW) of new offshore capacity is set to be auctioned in at least 17 different markets, representing an unprecedented milestone. The clean-technology race will continue.
2024: TOP 10 CLEAN ENERGY TECHNOLOGY TRENDS
1. Clean Energy Technology Investment to reach nearly US$800 billion in 2024 and $1 trillion by 2030.
Clean technology could attract investments of $800 billion just in 2024, representing a jump of up to 20 percent from the 2023 levels, according to the S&P forecast. Solar is expected to lead the race, accounting for 55 percent of this investment, followed by onshore wind, which will grow more slowly. The fastest-growing segments for new investments will be battery energy storage and electrolysis.
Europe's first-ever mandate for CO2 storage reduces uncertainties around the infrastructure, providing a positive signal to the global CCUS market, as does the enhanced 45Q tax credit in the US Inflation Reduction Act.
The hydrogen industry is also progressing, with the approval of consumption mandates in Europe and auctions for support underway in several countries. The US Treasury guidance for the 45 V hydrogen production tax credit, which is expected in December 2023, will define the investment framework in the US.
2. The average capex of clean energy technologies is to decline by another 15 percent–20 percent by 2030
Oversupply and falling raw material prices are expected to drive down the cost of clean energy technology through 2024. The cost of solar and batteries, already much lower than in 2022, will continue to drop, dipping below even 2020 levels. Green hydrogen and CCUS have seen significant cost increases but represent only a fraction of clean energy technology investment.
3. Clean energy technology manufacturers are making decarbonisation core to both products and strategies
Renewable energy manufacturers will focus on decarbonising their core products and operations by 2030 as part of a broader effort to increase transparency and traceability in renewable supply chains. There are two key areas for decarbonisation: using low-carbon electricity resources and reducing material consumption through less-intensive manufacturing technologies and lower-carbon-footprint materials.
4. Oversupply is driving solar and storage manufacturers into a price war—compressing margins and jeopardising localisation efforts.
Solar and battery manufacturers' profit margins are expected to decline until 2024. As prices plummet, downstream solar players like installers will face high inventory levels and financial risks. The price war in 2023, triggered by oversupply and lower raw material costs, would lead to market consolidation in 2024. Small manufacturers will have negative margins, while large manufacturers must innovate or prioritise low prices.
5. Expect record-high offshore wind capacity auctions in 2024 despite rising capital costs
The upcoming year could witness an unprecedented milestone offshore, with an unprecedented 60 GW of new capacity expected to be auctioned in at least 17 different markets, reflecting the resolve to advance this crucial technology.
6. Western wind turbine giants face growing competition from the East
The global wind turbine supply market is divided into two groups: around fifteen Chinese manufacturers supplying China domestically and four Western firms catering to the rest of the world.
Western turbine makers face challenges due to high input costs, supply chain disruptions, mounting overheads, and onerous contracts. Chinese turbine makers compete with the Westerns in international markets through lower prices, technological innovation, and new supply chain investments.
China's turbine production surpasses Western counterparts by at least 30 percent in rated capacity, and the price gap has grown to nearly 70 percent between both groups. Expect pricing pressure and technology competition to continue, presenting Western turbine makers with the challenge of regaining profitability while safeguarding market share.
7. Expect higher global interest for low-carbon hydrogen as feedstock for ammonia, synthetic methane and synthetic liquids
Aided by subsidies and driven by mandates, investment in hydrogen as a feedstock is now flowing. In Denmark, green hydrogen production has been auctioned to green e-fuels and e-methanol facilities. The Danish results hint at possible similar outcomes of a broader EU auction through the European Hydrogen Bank, which aims to provide €800 million of support to renewable hydrogen producers.
In the Middle East, several blue hydrogen and green hydrogen facilities are underway to meet demand from Europe and Japan.
8. 2024 to be a milestone year for technology-based carbon dioxide removal (CDR)
The rapid development of methodologies to verify carbon crediting and certify CDR and significant funding for technology-based C02 removal will drive the project pipeline to unprecedented levels (88 million metric tonnes per annum CO2 capture capacity under the current pipeline). CDR has been identified as a critical tool for achieving climate targets, and buyers are willing to pay a premium for technology-based methods that are durable and easy to track.
The market is responding. Seven methodologies to verify carbon crediting from technology-based CDR have been announced. While the methods are still undergoing validation and verification, they will provide a more rigorous carbon credit estimation once finalised. The EU is expected to adopt a carbon removal certification framework in 2024.
The guidance on crediting and the increasing demand for technology-based carbon dioxide removal (CDR) are reducing uncertainty for potential buyers. This will probably lead to a significant increase in CDR projects in 2024. The trend is expected to accelerate due to government support and funding for CDR in Europe and the US. Projects that aim to capture biogenic and atmospheric CO2 are up-and-coming, given restrictions on the CO2 sources that can be used for synthetic fuels.
9. Efforts to alleviate grid congestion and permitting constraints will continue to streamline renewable power development
One of the major commitments made during COP28 is to triple global renewable capacity by 2030, achieving 11 terawatts (TW). The S&P Global Commodity Insights renewables outlook is aligned with this goal, based on the 2022 baseline and no foreseen limitations or shortages in the material or supply chain. However, due to the intermittent nature of solar power and insufficient storage capacity, adding significant solar capacity would only increase grid congestion and curtailment.
Globally, renewable deployment faces major bottlenecks due to grid-connection delays and grid congestion, delaying the build-out of energy storage that could help address the problem.
As a response, markets are expected to focus on two key means: higher investment in transmission and distribution (T&D) and storage and facilitation of the development of other renewable technologies (e.g., offshore, geothermal), which have suffered from cost hikes and challenges in big interconnection and permitting.
Starting in 2025, Transmission System Operators (TSOs) will be required to assess flexibility needs, driving additional large-scale energy storage procurements.