Renewable energy embraces a range of sub-sectors, but the field is dominated by three: photovoltaic solar (which accounted for 47 percent of new global capacity added in 2016), wind power (34 percent) and hydropower (15.5 percent).1 But the future of all three depends on innovation in battery storage and energy aggregators, both of which are becoming increasingly important to investors.
According to respondents, the biggest sub-sector rise in M&A activity over the next 12 months will be in offshore wind (cited by 43 percent), followed by hydropower (39 percent) and photovoltaic solar (16 percent). Thermal solar and onshore wind are each mentioned by just 1 percent of respondents.
Among the countries that respondents see as attracting the most investment in each of the three sub-sectors mentioned above, 53 percent say the UK is the top choice for offshore wind, followed by Germany at 28 percent. Just 2 percent of respondents see the US as the most appealing target for offshore wind investments.
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Large, grid-scale battery systems are vital to the future of renewables because they make it possible to store surplus energy and create sustainable power supply from inconsistent and varied sources. Currently, the lack of efficient and effective electricity storage systems means wind turbines have to be turned off when demand drops, or when the grid becomes overloaded. Batteries would allow renewable energy projects to act more like conventional power stations, with the option to provide a constant output if required.
Like battery storage, hydrogen offers another way to make the most of electricity that might otherwise be wasted, through `power-to-gas' technology. The key is electrolysis, the process by which water molecules are split into hydrogen and oxygen using electricity. Converting electricity to hydrogen (or, in an additional step, to methane), means the gas can be used as a substitute for natural gas or other fossil fuels. Hydrogen has an extremely high energy density, emits no CO2 when burned and, unlike electricity, can be stored indefinitely.
Renewable energy aggregators have emerged in response to the increasing fragmentation of power generation, particularly in California, where regulators have been trying to open up the power sector to give consumers
While still very new, aggregators provide centralized management of supply and demand. This is achieved by coordinating power generation (from sources such as wind farms and solar installations), consumption (commercial and domestic) and storage (such as batteries). Demand and supply are monitored and dispatched by the aggregator, so the grid is kept in balance.
Overall, 91 percent of respondents say renewable energy aggregators will be important in facilitating investment in renewable energy projects, with just over half (52 percent) saying they will be very important. Nearly three-quarters (73 percent) of respondents say renewable energy aggregators will be a significant part of the market in the next 3 to 6 years.
Another area of technology that respondents believe will impact the renewable energy market is smart grids, which use real-time digital communications to coordinate supply and demand. As we shift from centralized power plants to decentralized generation, existing grids will struggle with the number of feed-ins. Trying to integrate renewable sources at medium- and low-voltage levels with inconsistent output will add to the complications.
Smart grids will provide consistent and secure supply, allowing energy providers to improve performance and to oversee operations while getting the most from their assets, attracting investment from electricity companies and
1 - “2016 Was Another Record Year for Renewable Energy”. The United Nations Framework Convention on Climate Change (UNFCCC). 7 June 2017.
2 Renewables 2017: Solar leads the charge in another record year for renewables.” IEA. 4 October 2017.
3 - “As California Mulls Retail Electricity Choice, Utilities Are Losing Customers in Droves”. GTM. 17 May 2017.