Renewable Energy Drive in Major Countries
The author is an analyst of NH Investment & Securities. He can be reached at ys.jung@nhqv.com. -- Ed.
EU announces European Green Deal roadmap
In Dec 2019, the EU announced the European Green Deal roadmap, including policies in a range of areas (eg, industry and trade) aimed at reducing greenhouse gas emissions and curtailing climate change. Member states have begun discussions over adopting a carbon border tax mechanism and setting standards for green investment, and have announced the Just Transition Mechanism, which is part of the European Green Deal investment plan and will mobilize at least EUR100bn of investment to provide additional targeted support to the regions most impacted by the transition towards a climate-neutral economy and with less capacity to deal with the challenge. With Europe suffering substantially from both the economic and social impacts of Covid-19, the EU has regarded the European Green Deal as a key measure to stimulate the economy.
Offshore wind power market to grow, backed by large-scale PPP projects
The key points for government-led energy policies include: 1) greater renewable energy penetration; 2) energy efficiency improvement; and 3) a shift in energy sources (eg, the shift to EVs). In the wind power market, given that large-scale offshore wind farms are being constructed under public-private partnership (PPP) projects, market growth is anticipated moving forward.
Small-scale solar power projects to lead solar power market growth; efforts underway to nurture hydrogen industry
Solar power market growth is expected to be led by small-scale projects, rather than by government-led projects. Meanwhile, hydrogen is garnering attention as a new source of energy. Germany has announced policies to foster the industry for green hydrogen (hydrogen produced using clean electricity from renewable energy sources) and plans to expand green hydrogen capacity to 5GW by 2030.
State governments lead US’s renewable energy drive
At the federal government level, the US is providing two types of renewable energy subsidies: 1) investment tax credit (ITC) for PV; and 2) production tax credit (PTC) for wind power. Under the current schemes, however, the federal government’s subsidies are set to decline from 2020, with subsidies for wind power projects to be discontinued from 2021, and those for PV to stop from 2022 (residential PV) and 2023 (commercial PV). While it is possible that these federal subsidy schemes will be extended, for now, such a development is far from guaranteed.
Biden’s election to result in strengthening of US renewable energy policies
That said, stressing the need for wider renewable energy penetration, state governments have charged aggressively to promote renewable energy via policy supports or the implementation of mandatory regulations. For example, the State of Virginia enacted the Virginia Clean Economy Act, under which it aims to provide 100% of its power consumption via renewable sources by 2050. Meanwhile, Nevada has introduced a similar policy, and under the state leadership, the largest US PV complex construction project is to be carried out in the state of Nevada.
Considering that democratic presidential candidate Joe Biden’s election pledges include clean energy policies, we believe that, depending on the results of the upcoming presidential election, US energy policy could soon change on a federal level.
Japan seeking to expand wind capacity
In Japan, the government has been encouraging power producers to construct wind farms, aiming to develop at least 10GW of wind capacity by 2030.
China moving towards subsidy-free market amid ongoing transition towards renewables
The Chinese government has implemented a variety of policies to nurture the renewable energy industry since 2017. Starting from 2019, in a bid to reduce its significant renewables-related subsidy burden, the country has been encouraging firms to greater shift towards zero-subsidy projects, with projects seeking financial support from the government now required to proceed through a bidding process.
Green New Deal represents Korean government’s key policy
The Korean government has announced its economic policy direction for 2H20. Key policies include a Digital New Deal, a Green New Deal, and measures to strengthen employment security. Regarding the Green New Deal, W12.9tn is earmarked for investment over 2020~2022, with details to be announced in July.
MOTIE raises renewable energy budget by 82%
The main architecture of the Green New Deal consists of: 1) the green transformation of living infrastructure; 2) the establishment of an innovative green industry ecosystem; and 3) the expansion of low-carbon/distributed energy—which includes the building of smart grids and the encouraging of greater renewable energy use. Of note, the third supplementary budget plan submitted by the Ministry of Trade, Industry, and Energy (MOTIE) includes an 82% hike in the budget allocated for renewable energy from the previous W419bn to W760.5bn. In addition to supporting solar energy panel installations in rural areas, the ministry aims to promote schemes for which local residents can share profits from renewable energy projects, as well as support greater penetration of solar energy in industrial complexes.