"2021 Renewable Energy Market Analysis"

2021 Renewable Energy Market Analysis

White Paper: nrg

In 2020, global renewable electricity sources grew at their fastest pace in 20 years, with immense renewable development expected to continue.1 Increasing 10% year-over-year, Q1 2021 was the strongest quarter on record for renewable installations. Rapidly improving technology, consumer and business demand for clean power, and policy support drove industrywide growth for wind, solar, and energy usage.

Both public policy initiatives and voluntary purchasing by corporate buyers drives demand for renewables. Across the US, 38 states have some form of clean energy goals in place, nine of which are for 100% renewable energy by 2050. These renewable targets are only continuing to expand, with many states increasing their targets. Additionally, companies are facing pressure from their shareholders, customers, and employees to reduce emissions and procure renewable energy. Most recently, in a historic climate court case, Royal Dutch Shell was ordered to limit its greenhouse gas emissions 45% by 2030 from 2019 levels.2 New climate goals are announced almost daily. Despite the unprecedented events of last year, 2020 was still a record year for corporate renewable procurements, with over 10,000 MW in the US.

Despite these long-term tailwinds, many projects are experiencing short-term headwinds that increase pricing to potential corporate partners. This white paper will explore current market dynamics affecting utility-scale renewable energy project developments.

The NRG Trading Advisors LLC (NTA) team has experience contracting and structuring over 4,000 MW of renewable, utility-scale transactions, and is advising multiple Fortune 500 companies on their energy and sustainability goals through the use of Virtual Power Purchase Agreements (VPPA). NTA expects the recent runup in VPPA pricing to start reversing course in the next 12 months and is therefore recommending a more patient approach to VPPA procurements for those with flexibility in their timelines. For customers with near term goals, the challenge is to find the needle in the haystack and structure the deal accordingly. Typically, in these cases, customers should prepare their management teams to expect greater economic risks.