The growing need for energy worldwide and a deeper environmental awareness has led to a new level of commitment by governments to develop renewable energy sources. Renewable energy technologies, such as hydro, wind, waste-to-energy, biomass, geothermal, and solar power offer the potential of increased energy security, reduced exposure to fuel price volatility, and with the exception of large hydro power projects, a more limited environmental impact than traditional sources of energy.
The pursuit of renewable energy technologies is not without its challenges, however. While many renewable energy technologies are experiencing rapid cost reductions as the technologies improve and the industries grow to scale, renewable energy is yet to be cost competitive with traditional sources of power such as coal and gas. It also poses other challenges, such as perceived higher risk by investors, unsuitable existing contractual or regulatory frameworks, and traditional infrastructure and associated subsidies that weigh decisions in favor of traditional thermal power.
In response, many countries are implementing policies to encourage renewable energies, which include:
- introducing fixed long-term elevated “feed-in” tariffs;
- auctioning new renewable energy capacity; and
- imposing requirements for utilities to source specific percentages (or “portfolio standards”) from renewable sources.
Countries are also looking to different financing, legal and commercial frameworks including PPPs to leverage private capital and expertise and to support the deployment of renewable energy projects.