Based on David Bartlett's recent article: Global trends in renewable energy

There has been a significant shift in the renewable energy market over the last ten years. Previously, the incremental development and high costs of renewable energy discouraged growth in the industry, but in recent times, advancements in the commercial and technological arena have transformed the landscape. Now, renewables are competing on a similar scale to fossil fuels for global investment. Between 2006 and 2015, investment in renewable energy totalled $2.2 trillion.

These developments are of particular interest to middle market companies – constantly striving to uncover the next stage of growth, despite tough economic headwinds. With the potential to be more agile and adaptable than larger organisations, middle market businesses can quickly take advantage of the investment opportunities – locally, as well as on a global scale. 

Outlined below are the five key components of the renewable energy market that we think middle market companies should be attuned to and we hope will provide inspiration for their business strategies.

1. Solar and wind are driving the renewable energy market

• In 2015, solar represented 56% of global renewable energy investment and wind represented 38%. Solar power is the fastest growing renewable energy technology, growing by 12% over the previous year, while wind is growing at a more moderate rate, at 4% annually.
• Many factors have drawn investors towards these areas including, technological developments, especially in wind turbines, blade designs and solar photovoltaic technology, which have boosted performance and reliability in both solar and wind power. Moreover, energy storage systems have improved and economies of scale that lower the cost of solar and wind energy have been realised. 

2. Hydropower represents the largest share of renewable energy capacity

• Hydropower (61.3%) represents the largest share of renewable energy capacity, surpassing both solar and wind.
• However, while hydropower has the largest share, it is the slowest growing of all renewable energy categories and holds substantial untapped potential. Environmental regulation, distances between upstream hydro sources, and the fact that much of the world’s non-utilised hydro resources are in politically unstable countries are some of the factors hindering the realisation of hydrocarbon’s full potential.

3. China is the top renewable energy investor

• China was the leading global investor in renewable energy in 2015, generating $102.9 billion or 36% of worldwide investments, significantly ahead of the U.S. at $44.1 billion. China also leads the charge in the technology category, landing the top spot in hydro, wind and solar power for installed capacity and third spot in bioenergy.

4. Emerging markets are leaders in renewable energy

• Emerging economies, including Brazil, India, Thailand and Turkey, rank as global leaders in renewable energy. Together in 2015, emerging economies generated $156 billion in renewable energy investments and in doing so, surpassed advanced industrialised countries for the first time.
• Emerging markets took advantage of many factors that allowed them to quickly move up the ladder in the renewable energy industry. First, they took advantage of opportunities to leapfrog the international technology curve, which allowed them to quickly adopt renewable energy technologies from developed economies. The rising cost competitiveness of renewable energy and the less regimented regulatory structures of developing countries also contributed to their ascent.

5. Renewable energy is now competing on the same level as fossil fuels

• For the first time, the share of renewables in new power generation power exceeded that of fossil fuel. The growth of renewable energy has also coincided with a steep decline in hydrocarbon prices which, in the past, has negatively affected renewable energy investments.
• The changes in the technological and commercial landscapes have altered investors’ thinking. First, the costs of solar and wind have decreased significantly, making it possible for renewables to compete with fossil fuels. Also, new technology has allowed renewable energy plants to be constructed quickly and international pressure for greenhouse gas reduction has increased, in turn, making fossil fuels less attractive.
• This perfect storm has produced a positive outcome for renewable energy however, fossil fuels still represent over 80% of global power capacity. Therefore, despite the growth of renewable energy, the global economy will remain dependent on hydrocarbons.

As is evidenced, many factors have contributed to the changing landscape of the renewable energy market and have helped it grow to compete with the likes of fossil fuels. The sector reached a record in 2015, seeing $285.9 billion of global investment in renewable energy. Even though the reliance of fossil fuels is not expected to waver, there are still opportunities to advance renewable energy for the sake of business and the environment.