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Tight and Twisting Terrain: Renewable Energy Markets Today

It’s worth opening any discussion about climate solutions with the continued urgency of our planetary situation. Earth had its warmest year on record in 2023.  It was also one of the wettest Januarys on record, which followed one of the wettest Decembers ever recorded, according to the NOAA Centers for Environmental Information. A look back at the global anomalous weather events of just the last several months shows everything from drenching atmospheric rivers, heavy snowfall, and flooding to wildfires and extreme drought.

No matter where in the world you may live or do business, averting the most catastrophic impacts of climate change requires a switch to clean, renewable energy as quickly as possible. It’s encouraging to see corporate leaders across the globe recognizing the need for a sea change in how they power their organizations, but this shift of course affects demand for renewable energy and in turn, the renewables markets. Those trends are likely to affect your own sustainability journey and influence your course of action.  Here are some observations of the current renewables background, some persistent trends that’ve emerged, and how your organization’s approach to clean power might be affected.


U.S. Corporate Demand for Clean Energy is Growing

Setting a credible “Net Zero” goal is the new badge of honor for corporate climate leaders, and a 100% renewable energy supply is one of the most impactful and attainable levers for early progress on that journey. In fact, the Net Zero standard  from the Science Based Target Initiative (SBTi) advises companies to target 80% renewable energy by 2025 and 100% by 2030. This creates huge demand for the generation (and transmission) of clean power.

Businesses’ climate commitments and voluntary procurement of renewable energy continue to accelerate in the U.S. Among the 200+ American companies to make new commitments to SBTi in 2021, roughly half of those have already established near-term targets. At Coho, we estimated that this group alone might constitute 20-30GW of new demand for renewable energy transactions; in 2022, 20.6GW-worth of deals were announced. And in 2023, more deals emerged for an additional 17.3GW of new demand, despite a 4% increase in U.S. PPA prices.

Additionally, the SEC (U.S. Securities and Exchange Commission) has issued newly proposed rules requiring publicly traded companies to disclose scopes 1, 2, and maybe even scope 3 emissions. These will further fuel overall demand for large-scale renewable energy supply. (Unfortunately, at the time of this writing, Reuters reported that sources indicated an overall softening of most of the proposed rules, including an omission of scope 3 disclosure requirements).

Many organizations have set goals with a 2030 target date and are realizing it’s “now or never” to secure projects. Others will wait on the sidelines until the last possible minute before their 2030 target date arrives, resulting in higher demand and higher PPA prices. Either case means as 2030 approaches, the project demand pinch may become sharper. In fact, if your organization were to contract a renewable project today, projections show it would come online at the end of 2026 or 2027 – meaning 2030 is, in practicability, closer than many companies realize.

As reported in Forbes Magazine, “More than 4,000 companies, representing over a third of the global economy’s market capitalization, had by the end of 2022 set targets to reduce or completely offset their carbon emissions to slow climate change—a goal known as “net zero”—according to the Science Based Targets Initiative, a global project of nonprofits including the United Nations Global Compact.”

Of course, overall, the United States should celebrate its very high demand for renewable energy—the hard-won outcome of decades of climate advocacy, technological innovation, public policy, and a rapid decline in cost. As we discussed in an earlier blogpost, there are enough renewable energy projects in development across the U.S. to meet this growing demand, with more added to the queue each year (also worth celebrating). As the U.S. grid expands and modernizes to accommodate these new loads, this growth should be seen as a win for the climate and for a robust energy future.


Global Demand for Clean Energy Is Growing

Globally, demand for renewable energy is soaring. Decarbonization was the focus of a powerful pledge made by 118 nations at this year’s UN Climate Change Conference in Dubai (COP28).  If upheld, the Global Renewables and Energy Efficiency Pledge would triple the global amount of renewables generated by 2030. Experts at our parent global sustainability consultancy ERM believe this will have big implications for companies in the short term and mid-range time periods, and buyers will need to be nimble and ready to take advantage of opportunities as they arise.

Europe’s renewable energy transition in particular is shifting into high gear. A milder than expected winter slowed the surging prices of 2022 and clean energy buyers welcomed a drop in prices across the board in 2023. Although geopolitical events continue to loom large—the war in Ukraine and more recently, the Israel-Hamas conflict—successful demand reduction and a robust supply side have ushered in some needed stability. The European Union’s renewable policies have also ramped up.  Following the Russian invasion of Ukraine, the continent’s dependence on Russian gas came into sharp focus, increasing pressures on renewable energy. Here are some of the policies aimed at incentivizing renewables in the European Union.

Renewable Energy Incentives in the European Union

Country Source Mechanism
Austria Austria supports solar incentives Expansion of utility scale renewable energy
Bulgaria Grants for renewable energy storage ( Renewable energy projects and energy storage
Croatia EC approves Croatian renewable energy scheme ( Market premiums through auction process
Czech Republic EU approves Czech biomethane initiative Construction and operation of new or converted biomethane production plants
Denmark EU approves Danish renewable energy scheme Two-way contract for differences premium granted through a bidding process from 2021-2024.
Estonia Subsidies for renewable energy storage Support s companies already producing renewables to invest in electricity and thermal storage
France EU approves French renewable energy scheme Tax credits for companies investing in key components for renewable production, until 2025.
Germany EU approves German renewable energy scheme  Market premiums for large scale producers and feed in tariffs to smaller scale producers, until 2026.
Greece EU approves Greek renewable energy scheme Supports renewable energy production (PV, onshore wind, storage, biogas, biomass, landfill gas, hydro, geothermal) and high efficiency combined heat and power (CHP).
Hungary Grants boost energy storage development Supports investment in technologies to increase grid flexibility and promote use of green energy
Italy EC approves Italian scheme for energy storage Storage developers paid through bidding process
EC clears Italian scheme for renewable hydrogen Supports companies replacing methane and fossil fuel with renewable hydrogen
Slovakia EU approves Slovak scheme for equipment production Supports companies producing equipment related to net zero transition (batteries, solar panels, electrolysers, heat pumps, etc).
Romania Romanian scheme to propel renewables Grants for solar, wind and hydropower


As Europe’s energy landscape shapes itself into a cleaner, more independent grid at a much faster pace than originally planned, it has become an attractive PPA market and global buyers may consider prioritizing addressing the EU load.*


Markets Will Stay Challenging For Some Time

High demand for renewable energy means that corporate buyers must compete for the most attractive projects and deals. The competition can be tough, especially when facing off with voracious energy consumers like Amazon, Google, and Meta. Additionally, companies must compete with governments and utilities, which are often favored by developers for their extremely low default risk. There are no signs that demand, and therefore competition, will ease any time soon.

Unfortunately, competition is not the only obstacle clean energy buyers face. Other industry woes have made it harder for clean energy developers to price projects with confidence and deliver projects on schedule. Here are some of the biggest factors creating project development risk:

  • Insufficient grid infrastructure: Independent estimates indicate that to meet the U.S.’ growing clean electricity demands, we’ll need to expand transmission systems by 60% by 2030 and may need to triple those systems by 2050. (Read our recent blog for more on the U.S. transmission grid.)
  • Global inflation combined with high interest rates: Interest rates have gone up in an effort to combat inflation, but this drives up the price of green energy projects around the world. Even at higher prices, renewables are still competitive with fossil fuels in the long term, but most green projects require significant upfront investment. This makes it easier, especially for developing nations, to invest instead in traditional fossil-fuel dependent projects.
  • Trade barriers: Import duties (primarily on solar panels from Southeast Asian countries with Chinese-made components being imported to the U.S.) are scheduled to begin in June of 2024, and could raise the costs of imports used as inputs to production for U.S. solar developers.


Don’t Stay On The Sidelines

If your organization has a 2030 climate goal, it cannot afford to wait for today’s clean energy market to settle down. While the renewables landscape seems daunting, it’s important—especially now—to stay in the game and set your company up for long-term climate mitigation success. Here are some steps your organization can take now to position itself favorably:

  • Create strong internal alignment so that your organization can act strategically and efficiently. Procurement leaders should know where their organization can be flexible and where they have hard limitations, as developers will favor prepared counterparties with a fast path to a done deal.
  • Specifically, get your internal stakeholders comfortable now with the concept of VPPAs so they’re informed and ready to act quickly when opportunities become available. This includes exploring ways to package VPPAs with related available levers (such as tax credit transferability, discoverable savings in retail energy in deregulated markets, etc.) to reach economic thresholds your organization needs to continue its transition to renewable energy.
  • Push your utility to offer renewable energy programs (read more in this discussion by Coho’s Renewable Senior Engagement Manager John Izevbigie).
  • Stay informed on the dynamics impacting the clean energy market. In so doing, you can better navigate those pressures and accelerate solutions. For example, your organization can explore how to advocate for grid infrastructure improvements. Consider visiting the Americans for a Clean Energy Grid (ACEG) website for information on how you can make your voice heard.

Coho has developed a wide spectrum of successful solutions to work effectively in myriad market conditions. Talk to us about how we can help you design the best strategy for meeting your organization’s RE energy needs, so you can make solid progress on your sustainability journey even in today’s challenging landscape.


Additional recommended reading:

U.S. Department of Energy: Queued Up…But In Need of Transmission

Canary Media: Suddenly, US Electricity demand is Spiking. Can the Grid Keep Up?

Coho’s Svena Bhasin: What Is a Virtual Power Purchase Agreement (VPPA?)


*Coho, an ERM group company, is registered with the U.S. Commodity Futures Trading Commission as a commodity trading adviser and is a member of the National Futures Association (NFA ID: 0542152). Information in this article is provided for general informational purposes only and should not be considered legal or commodity trading advice or as forming the basis of any advisory relationship with Coho. Trading in commodity interests and financially settled energy contracts, such as virtual power purchase agreements, can be complex and involves risk of loss that can be substantial.  At a minimum, you should consult with your own legal and accounting advisors in considering whether to enter into any such contract.