The GEF Small Grants Programme

in Uzbekistan

Where the Wind Is Blowing: How Renewable Energy Markets Will Change

The domination of coal and gas in the energy market, and oil in the transport market, is coming to an end. The world is increasingly switching to the production of wind and solar energy.

More than 80% of the world's energy consumption is accounted for by hydrocarbons - oil, natural gas, coal. They also dominate in the production of electricity - about 70% of the world's electricity is provided by fossil raw materials. But today a new player is actively making itself known on the energy market, promising to squeeze and then bury traditional energy sources. We are talking about renewable energy, which has already grown from the category of "alternative", becoming the main, basic sector of the energy market. Suffice it to note that in the EU in 2014, 100% of the net increase in energy capacity was accounted for by renewable energy sources (RES). And even over a longer period, over the past 15 years, European renewable energy has taken the first place in terms of growth.

In Russia, there is still an opinion that RES is much more expensive than traditional methods of generating electricity based on coal or gas. This is no longer the case. Times are changing fast. In November 2015, the investment bank Lazard released another study on the US energy economics "Levelized Cost of Energy Analysis - 9.0". For outside observers who are accustomed to reading in our press about the "high cost and subsidies" of renewable energy sources, the results of this work may seem sensational. The so-called "new renewable energy sources", which primarily include wind and solar energy, are the cheapest ways to generate electricity.

Cost of electricity production excluding subsidies

Energy sources

Cost, MW / h

Wind power


Industrial-scale solar energy (photovoltaic, silicon)


Industrial-scale solar energy (photovoltaic, thin-film technologies)




Gas (combined cycle)


Gas (peak power plant)




Nuclear power




As follows from the above figures, only gas generation (combined cycle gas cycle) can compete with renewable energy sources, which is confirmed by statistics on the commissioning of new capacities in the United States. The abundance of its own cheap gas on the American market is contributing to the creation of new gas-fired power plants. At the same time, the volumes of their commissioning in 2015 are inferior to both wind and solar energy. Cases of conclusion of wholesale long-term contracts for the supply of wind energy at prices significantly lower than gas electricity are recorded. American Xcel energy buys wind power at $ 25 per MWh, while gas electricity under contracts of the same terms costs about $ 32 per MWh, and is additionally insured against price fluctuations in commodity markets. Note that such prices for wind electricity are comparable to the cost of electricity in the Russian wholesale market.

Coal generation is associated with high specific capital costs, a long construction cycle and, most importantly, is at risk due to the increasing importance of climate policy. Coal, the dirtiest raw material in terms of greenhouse gas emissions, is gradually becoming the fuel of yesterday.

The instability of electricity generation from renewable energy sources may require a number of measures aimed at painless integration into the power grid. Therefore, skeptics argue that the calculation of the cost of energy should take into account these costs. Lazard estimates such integration costs at $ 2-10 MWh. At the same time, it should be noted that the need for such measures and the corresponding costs arises only with significant volumes of "intermittent" generation and, on the other hand, underdevelopment of the network. For example, the largest German network operator 50 Herz claims (and he can see this better than anyone else) that the electric network can "absorb" the share of solar and wind generation in 70% without using any additional storage.

Price competitiveness is achieved by RES in different markets at different times. Coal generation is still cheaper in China, while gas generation is more expensive than both wind and solar electricity. In Germany and the UK, wind power is already cheaper than both coal and gas generation, Bloomberg New Energy Finance publishes.

Wind energy has become a key sector of the global energy sector. In the EU, the USA, China, it occupies a leading position in terms of the volume of commissioning of new energy capacities in both 2014 and 2015. In the EU, more capacity has been installed in wind energy over the past 15 years than in any other electricity sector. Solar energy is on the heels of the wind, which on the horizon of ten years may surpass wind generation in terms of the cost of producing electricity (LCOE). Solar energy (more precisely, its main, photovoltaic sector) is distinguished by simple engineering and short construction times.

A modern photovoltaic power plant is, in fact, a typical box-based solution, the implementation of which is associated with a minimum set of preparatory and construction work. Europe's largest, recently connected to the grid in France, the Cestas solar power plant, with a capacity of 300 megawatts, was designed and built in just one year. In addition, solar energy has, in comparison with the wind, a great potential for "learning" - a decrease in specific capital costs due to a further increase in mass production and an increase in the efficiency of photovoltaic modules. Of course, wind power will also become cheaper further, but the potential here is not so high.

Thus, in the near future, a new energy structure will take shape with the obvious dominance of solar and wind generation, which will dominate in regions with suitable natural conditions (solar and wind potential). Accordingly, the use of fossil raw materials for the production of electricity will decline. The first victim, as we noted, will be coal, which is likely to be subject to restrictions in the form of a carbon tax and even, in some markets, a complete ban.

The fate of natural gas is in question. Whereas four years ago the International Energy Agency (IEA) announced the “golden age of natural gas”, today optimism has diminished. Gas facilities are being built in the United States, but almost never put into operation in Germany, India and China, where, it would seem, they are designed to replace outgoing coal. In these markets, “blue fuel” loses to other generation methods from the point of view of the economy - even at low prices for raw materials.

Oil is almost never used to generate electricity, therefore, the development of renewable energy sources does not pose a direct threat to the oil market. The danger comes from the other side. More than 60% of the oil produced in the world is burned today in the transport sector. Therefore, the development of alternative transport technologies in the future will lead to a decrease in demand for black gold.

Renewable energy has become a big business, employing approximately 8 million people worldwide. In 2014 alone, the volume of investments in renewable energy amounted to $ 310 billion. The popularity of clean energy has gone far beyond the energy sector itself. Hundreds of companies, including the largest TNCs not directly related to energy, declare their commitment to renewable energy. There is a global initiative RE100. This abbreviation stands for "100% Renewable Energy". Participants include IKEA, Johnson & Johnson, Goldman Sachs, Google, H&M, Mars, Microsoft, Nike, Unilever and many more. Corporations make a voluntary commitment to use exclusively clean energy in their daily activities. For example, IKEA is committed to providing itself with 100% renewable electricity by 2020.

Obligations to use renewable energy sources do not always mean that a company is fully self-sufficient in renewable electricity (for example, by installing solar modules on the roof). So, since 2007, Google has been a "climate neutral" company. At the same time, it provides itself with renewable energy sources with electricity by 30%. Climate neutrality is achieved by investing in renewable energy assets around the world that generate power that meets Google's consumption. Apple, the world's most valuable corporation by capitalization, provides 100% clean electricity to its North American operations and data centers around the world. In the global energy costs of Apple, renewable energy sources cover 87% today.

These examples, of course, receive a great public response, shape public opinion and, as a result, influence political decisions that stimulate the further development of renewable energy sources.

In Russia, at the corporate level, the use of renewable energy sources is still unpopular. This is due to the availability of relatively cheap fossil raw materials and electricity, insufficient development of Russian technologies proper, and, accordingly, the high cost of equipment. At the same time, in the small business segment in the southern regions, the use of solar generation is quite in demand - especially if the business operates in areas not covered by electricity and gas supply networks.

Renewable energy sources are developing more actively in the Russian energy sector. The main player is the Renova Group of Companies, whose companies have built the country's first plant for the production of photovoltaic modules (with the participation of Rusnano), open solar power plants (SPP) and operate them. New projects have already been formed for the construction of 280 MW of solar power plants by the end of 2019.

The development of wind energy is still at an early stage. There are well-developed plans for the localization of equipment production, at the same time, to date, only one project of a 35 MW wind farm has been selected, which is to be built in 2016. Further plans for the development of renewable energy sources are quite modest - by 2024, 6 GW of solar, wind generation and small hydroelectric power plants should be operational in total (in China, by this time there will be a hundred times more). At the same time, it is necessary to take into account the specifics of Russian raw materials, as well as the presence of excess energy capacities on the market.

The measures to support renewable energy sources in force in Russia create opportunities for their development, including for the local production of appropriate equipment. At the same time, targeted measures cannot fully compensate for the shortcomings of the environment as a whole. The high cost of capital and the lack of financial resources hinder the industrial development of Russia, including the power engineering industry.

reprinted from the site from her