Renewable Energy Market

Market Overview

The global renewable energy market size was valued at USD 1085 billion in 2023. It is estimated to reach USD 2450 billion by 2032, growing at a CAGR of 9.47% during the forecast period (2024–2032). Rising energy demand, renewable energy in power generation and favorable government initiatives are the key drivers for the growth of the global market.

Renewable energy is generated from sources that do not have a finite end, such as solar, wind, and hydropower. These primary renewable energy resources are continuously replenished and never run out, unlike conventional energy sources, which are expensive and damaging to the environment. Solar energy is used for heating and lighting homes and commercial buildings. This form of renewable energy resource is also used for generating electricity, heating water, and several other industrial and commercial uses.

On the other hand, wind power is also one of the prominent forms of renewable energy. Electricity may be produced or utilized to pump water using wind energy. In addition, hydroelectric energy sources use the gravitational potential of water bodies. Geothermal energy is also a form of energy trapped under the earth’s surface. It is used for diverse purposes, such as electric power production and heating and cooling buildings.

Market Dynamics

Global Renewable Energy Market Drivers

Rising Energy Demand and Renewable Energy in Power Generation

According to the New Energy Outlook 2018 by Bloomberg NEF, the global electricity demand will reach 38,700 terawatt-hours by 2050 as compared to 25,000 terawatt-hours in 2017, owing to the growing urbanization, increasing population, rise in infrastructure activities, and enhanced access to electricity. Moreover, technological advancements across industrial, commercial, and residential sectors further expand the availability of products that consume more energy. Growth in energy demand primarily comes from developing economies. These countries contribute to more than two-thirds of the increase in energy consumption.

Furthermore, the rising concern regarding reducing carbon emissions drives the need for an increasing share of clean energy in the power generation mix. Renewable energy sources, such as wind and hydroelectricity, are less prone to large-scale failure as the installation of these power plants is spread out over a large area, avoiding power cut in the entire region in the event of a severe weather event occurring in any location. Wind, solar, and hydroelectric energy systems generate electricity without any air pollution emissions, which non-renewable energy sources, such as coal and natural gas, emit. All these factors, coupled with increased awareness about environmental safety and security, have fuelled global market growth for renewable energy.

Favorable Government Initiatives

Government initiatives and policies primarily drive the global market. Due to growing investments in wind, solar, and other renewable energy sources, which decrease dependency on unconventional power plants, the focus on reducing global dependence on coal and other fossil fuels is well advanced, as seen by the renewable investment record. Moreover, the development of clean energy sources from financial establishments, such as the International Finance Corporation (IFC), the Asian Development Bank (ADB), and the World Bank, could also cause a surge in the market share of renewable energy sources.

Several new solar and wind energy projects are being established across the globe. They will continue contributing to the global energy mix in the next few years. Additionally, governments worldwide provide incentive plans, including a federal investment tax credit that applies to all significant solar energy technologies, such as wind, solar PVs, solar heating and cooling, and concentrating technology. Thus, such initiatives and increasing research and development activities are expected to drive the global market.

Global Renewable Energy Market Restraint

High Cost of Investment for Infrastructure Set Up

Setting up a renewable energy plant includes high capital costs for solar panels, batteries, installation costs, and wind turbine components, such as rotors, blades, nacelles, towers, and transformers. Additionally, the need for customer information regarding subsidies and technologies hampers the growth of the global market. However, the initial costs associated with setting up renewable energy plants have decreased considerably in the last ten years due to a decline in the prices of renewable energy equipment. Thus, the high capital investments for sound renewable energy infrastructure are restraining the market.

Global Renewable Energy Market Opportunities

Scope of Renewable Energy as a Power Source in Remote Areas

With the increase in research and development activities related to renewable energy, renewable energy sources, such as solar power plants, can provide sufficient energy to power buildings, especially in remote locations of underdeveloped areas. Globally, billions of people stay in secluded areas without access to the power supply. Establishing new utility lines in these isolated areas takes a lot of work, as they can be highly challenging and expensive. Due to the advancements in solar panel technology, it is advantageous to have solar panel systems in remote areas, as they provide a very reliable and cost-effective power source.

Additionally, the grid-stabilizing system, including control systems, batteries, inverters, and virtual generator control software, enable the use of renewable generation in remote areas. It provides electrical power support to isolated communities and industrial zones, such as mines and construction sites, where fuel cost plays a significant role, making the global market flexible, cost-effective, and interconnected. Therefore, the scope for renewable energy use in remote areas is expected to create opportunities for market growth over the forecast period.

Regional Analysis

Based on region, the global renewable energy market is divided into North America, Europe, Asia-Pacific, South America, and the Middle East and Africa.

Asia-Pacific Dominates the Global Market

Asia-Pacific is the most significant global market shareholder and is anticipated to grow at a CAGR of 8.10% during the forecast period. Asia-Pacific is one of the largest markets for renewable energy in the world. There is an increased demand for energy because of the growing population and rising per capita disposable income in the region. Moreover, these rapidly growing economies in this region are also the top polluters in the world. According to the International Renewable Energy Agency, Asia accounted for around two-thirds of the worldwide increase in renewable generating capacity in 2017. Renewable energy capacity doubled over the past five years, reaching nearly 9168 GW in 2017, with China and India contributing the highest in the region. Furthermore, countries in Asia-Pacific are focusing on renewable energy sources such as wind, bioenergy, solar, and hydropower due to environmental concerns, price volatility, and security of supply. Solar energy is identified as the best alternative to other conventional fossil fuel energy sources and can be used to reduce carbon emissions by effectively meeting electricity needs.

North America is expected to grow at a CAGR of 8.79% over the forecast period. The demand for electricity in the region is expected to keep growing during the forecast period, owing to economic growth. In 2015, 20% of North America's electricity was generated from renewables, which is expected to reach 29% by 2025. The North American region is bifurcated into US, Canada, and Mexico. The US is one of the most developed countries in the world, and companies in the country have made substantial investments in innovative renewable energy production methods. In 2017, about 17% of the total US electricity consumption was provided by renewable energy sources. The prominent renewable energy sources will be solar and wind over the forecast period. In addition, the generation of wind and solar energy is steadily growing in Canada and is witnessing the highest growth rate among renewable energy sources. Geothermal and ocean energy are also being harnessed in the country and have a combined installed capacity of about 1,200 MW.

Furthermore, Mexico has an installed wind energy capacity of more than 1,000 MW and has the potential to produce about 30 GW of electricity. The energy transmission supply networks in Mexico could be more robust. However, such networks are expected to grow stronger, leading to the growth of the global market over the forecast period.

Europe is a primary region driving the demand for renewable energy in the global market. The European Union's directive has set a target of using a minimum of 20% of the total energy consumption from renewable sources by 2020 and increasing it to 27% by 2030. The European Union (EU) member states have all created national renewable energy action plans outlining the measures they will take to meet the EU's goal. In addition, Germany is the leading market in the region. Germany has been steadily increasing its renewable energy share in its national energy mix. By the end of 2017, 5,407 MW of offshore wind power had been added to the nation's grid, reported the Federal Ministry for Economic Affairs and Energy. In 2017, biomass and solar energy accounted for 21% and 18.26% of the renewable energy mix. Thus, rising investments and the need to curb carbon emissions in the county would drive the market during the forecast period.

The South American countries witness enormous demand for energy, most of which is met by fossil fuel power plants. The region is spending more money on renewable energy to decrease the effects of climate change.e South America is increasing its focus on generating power through wind, solar, geothermal, and hydropower sources. Countries such as Argentina, Brazil, Chile, and Colombia have formulated legislation to promote clean energy development.

Most Middle Eastern and African nations are oil and gas producers, and they have been supplying electricity to their national networks for many years. However, in the last decade, countries in the region have been gradually trying to move towards renewable resources to reduce their dependence on conventional fuels. In addition, Saudi Arabia is the most prominent market in the region. Saudi Arabia uses oil and gas to generate power, but in recent years it has been setting up renewable energy projects to support the electrical grid. The Saudi government has set a target to generate 9.5 GW of electricity from renewables by 2023, thereby driving regional market growth.

Segmental Analysis

The global renewable energy market is segmented by type and end-user.

Based on type, the global market is divided into hydropower, wind energy, solar energy, bioenergy, geothermal energy, and ocean energy.

The hydropower segment is responsible for the largest market share and is expected to grow at a CAGR of 11.22% over the forecast period. Hydropower is a process wherein the kinetic energy from the falling water is harnessed to move a turbine to generate electricity. It is one of the most typically used renewable sources of energy. The largest producer of renewable energy, hydropower accounts for around 71% of all energy produced globally. In 2017, the global hydropower installed capacity reached 1,200 GW. Further, several opportunities are available for developing hydropower generation, including almost 10,000 TWh/year of unutilized hydropower potential. Some leading countries using hydropower generation are China, India, Canada, and Russia.

The rotor blades are rotated by the wind's force and consistency, transforming kinetic into mechanical energy. This energy is then converted into electricity using a generator. According to the International Energy Agency, about 1 billion GW of wind energy can be harnessed from the total land coverage on earth. Most wind farms are located in inland areas. Still, energy producers are moving towards offshore sites because offshore sites offer more prominent areas for setting up power plants, and the wind speeds are generally high. In addition, wind power generation reached 515 GW in 2017, accounting for about 4% of total power generation. Some major countries with the maximum amount of wind energy generation are China, India, France, Germany, Spain, Canada, and the US.

Based on end-user, the global market is segmented into industrial, residential, and commercial.

The industrial segment owns the highest market share and is anticipated to grow at a CAGR of 9.20% over the forecast period. Energy in the industrial segment has various applications, such as steam generation, heating, cooling, lighting, and air conditioning. The industrial sector uses about 54% of the total energy generated worldwide. Industrial production is expected to grow substantially owing to the increasing demand for manufactured products.

In addition, there are three types of industries based on energy consumption: energy-intensive, non-energy-intensive, and non-manufacturing. The energy-intensive manufacturing industries are among the most significant users of renewable energy sources for production because renewable energy helps reduce waste and operating costs. Some major energy-intensive manufacturing sectors are power, iron and steel, chemical and petrochemicals, automotive, oil and gas, food and beverage, and others.

Residential end users can power their homes using renewable energy resources, such as solar, geothermal, and wind. Solar power is the most widely used energy resource among residential users, as it requires minimum space, and its maintenance costs are meager. Small water streams are also used to rotate turbines, which eventually generate electricity. The residential segment is expected to grow gradually during the forecast period since many government bodies provide subsidies to individuals or families who utilize renewable energy. Using renewable energy sources helps end users provide energy for their homes, even if disconnected from the power grid. Furthermore, residential users who generate surplus electricity can pass it on to the grid, which will add to the additional income of the users. Residential end users who are located remotely drive the market for global renewable energy.

Recent Developments

• December 2022- Canadian Solar Inc. announced that its majority-owned subsidiary CSI Solar Co., Ltd. ("CSI Solar") had signed a 256 MW solar module contract with SOLA Group, an independent power producer situated in Cape Town. The 256 MWs will serve the two largest utility-scale solar power plants in South Africa based on private power purchase agreements (PPAs).
• January 2023- Canadian Solar Inc. revealed that CSI Energy Storage, a division of its majority-owned subsidiary CSI Solar Co., Ltd. ("CSI Solar"), has been chosen to provide up to 550 MWh of SolBank energy storage products to Pulse Clean Energy ("Pulse") for use in various UK-based projects.