Appetite for renewables remains strong, despite economic uncertainties
Despite ongoing economic uncertainties globally, investor appetite for renewables remains strong, with optioned renewable capacity increasing by 15% year-on-year in the nine months from January through to October 2020, compared with the same period the previous year.
This sets a new record, juwi Renewables global hybrid director David Manning said during a conference on May 4.
He added that there was also an increasing focus on the importance of environmental, social and governance (ESG) matters in the mining sector as concerns over emissions and the continued mining of thermal coal increasingly come into focus.
Mining producers and energy executives are seeing emissions and pollution as the most important ESG issue, Manning said, noting that most are divided on where the focus will be: Scope 1 and Scope 2, where pollution is created by the miner’s operations; or Scope 3 emissions, where the pollution is created by the materials that are used by a miner’s customers.
“Scope 1 and 2 emissions are relatively small for the mining sector compared with Scope 3 emissions, but they’re much easier to address with the rapid uptake of low-cost renewables,” Manning said.
Miners like BHP, Anglo American and Rio Tinto, for example, have all set targets to become carbon neutral by 2040 or 2050 at their own operations, yet the three miners have “yet to find a solution” for Scope 3 emissions, the majority of which comes from their highly profitable iron-ore businesses.
Glencore, meanwhile, is so far the only major miner to have found a pathway to carbon neutrality by 2050 and this includes its Scope 3 emissions, though Manning said this was mainly because Glencore “doesn’t have any iron-ore in its portfolio” and that the group plans to be thermal coal free within the next 30 years.
At the same time, Manning noted that the shares of publicly listed renewable equipment manufacturers and project developers have been outperforming most major stock market indices and the overall energy sector.
“This is thanks to the expectations of healthy business growth and finances over the medium term.”
The International Energy Agency (IEA) also predicts that renewable energy electricity capacity will increase again after a lean 2020.
“The IEA also predicts that [the world] will bounce back from that in 2021 and reach the same levels of renewable energy capacity additions as 2019 and it is even likely that we will exceed that for a new record capacity,” Manning added, noting that two factors should drive the acceleration leading to fast growth.
The first would see the commissioning of delayed projects in markets where construction and supply chains were disrupted, as well as prompt government measures in the key markets of the US, India and some European countries having authorised developers to complete projects several months after policy or option deadlines, which originally fell at the end of 2020.
Secondly, growth is set to continue in some markets, such as the US, the Middle East and Latin America, this year, where the pre-Covid-19 project pipeline was robust, as a result of the continued cost declines and uninterrupted policy support.
India is also expected to be the largest contributor to the renewables upswing this year, with the country’s yearly additions almost doubling from that of 2020.
“A large number of optioned wind and solar photovoltaic projects are expected to become operational following delays owing to not only Covid-19, but also to contract negotiations and land acquisition challenges,” Manning said.
SOUTH AFRICAN MARKET
Turning to the local market, Manning noted that there are a number of mechanisms by which mines in South Africa could obtain renewable energy, and with the cost of renewable energy and battery storage being lower than conventional generation, the electricity market is rapidly changing.
Through the Renewable Energy Independent Power Producer Procurement Programme, along with the cost of renewable energy and battery storage approaching grid parity, the electricity market in South Africa is “rapidly changing”.
Corporate power purchase agreements and self-finance solutions through on-site or off-site generation is further seen to be the most effective ways to obtain the cheapest renewable energy, while improving reliability and maximising security.
“This is an exciting new market where juwi is working closely with a number of mines to develop on-site generation, but also support off-site generation through existing developments, of which we have around 1.5 GW of permitted wind and solar sites around the country,” Manning commented.
He added that the company was seeing “a massive uptick” in interest in renewable energy for mine sites.
In regard to this, procurement processes for about 1.7 GW of renewable energy projects are either under way or under development. This is expected to increase to 2.5 GW in the next 12 to 18 months.
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