Driven by the many benefits that this type of generation source brings to society, the global renewable energy landscape has experienced continuous growth over the past decade. in the context of this growing industry, there are a number of critical trends that provide both opportunities and challenges for EDPR. These trends impact all aspects of EDPR’s business and their timely identification has been a critical factor for our success.
GROWTh ShIFTING TOWARDS EMERGING WIND MARKETS
The development of renewable energy generation sources, once limited to a select number of developed countries has now grown into a global trend. Motivated by the clear benefits of these technologies, more and more countries are experiencing a large growth in renewables. In 2005, only 11 countries had more than 1 GW of installed wind capacity, by 2012 this number had more than doubled to 24. As a result of this growing trend, in the period from 2013-2020 it is expected that 70% of the onshore wind energy added will come from geographies other than the original markets of the European Union and the United States.
NEW TEChNOLOGIES INCREASE ThEIR WEIGhT IN ThE ENERGy MIx
A major trend that is shaping the renewable energy industry and the energy landscape as whole, is the steady increase in new alternative technologies to onshore wind. This increase is being driven by the higher competitiveness of other energy sources that due to the technological advancements of the last years are now gaining traction in the industry. Out of the technologies that will make a mark in this industry in the upcoming years are solar and offshore wind. It is expected that both these technologies will significantly increase their share of the global renewable energy mix, with solar being the most promising given its increased competitiveness.
CHALLENGING DEBT MARKETS
The evolution of debt markets since the start of the global financial crisis in 2008 has had a significant impact on the European utilities sector. This impact has been felt through the tightening of credit markets and the increase in the cost of borrowing. This trend is especially acute in on those companies that have exposure to countries that have experienced fiscal stress. For these companies the widening of the sovereign yields has had a knock-on effect on their cost of capital and their ability to tap global debt markets. This is patent in the cost that investors have to pay to insure corporate debt, the Credit Default Swap (CDS) spread. From 2008 to 2012 the 5 year CDS spread for Southern European utilities more than doubled. This trend has softened slightly following announcements by the European Central Bank in the second half of 2012.