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Record demand for European renewable power in H1/2020 – despite COVID-19

Demand for renewable power documented with Guarantees of Origin (GO) has steadily increased year-on-year, and the annual growth (CAGR) is a robust 16 percent during the period from 2012 to 2020. The continued growth of 15 percent in 2020, is especially impressive given the context of the COVID-19 pandemic.
"The fact that especially corporate demand for renewables seems unaffected is truly inspiring during these unusual and trying times,” says Tom Lindberg, Managing Director of ECOHZ.

Demand for renewable power documented with Guarantees of Origin (GO) has steadily increased year-on-year, and the annual growth (CAGR) is a robust 16 percent during the period from 2012 to 2020. The continued growth of 15 percent in 2020, is especially impressive given the context of the COVID-19 pandemic (graphic courtesy ECOHZ).

New statistics from the Association of Issuing Bodies (AIB) show that demand in 2020 for Guarantees of Origin (GO) documented renewable power is up by a brisk 15 percent compared to the same period in 2019. The Q2/2020 figures reported by the AIB partly included figures related to Q3 for some countries but these have been adjusted by ECOHZ accordingly to create a consistent dataset, enabling a comparable analysis to 2019.

The demand for renewable energy documented with Guarantees of Origin shows record growth during the first half of 2020, despite the negative effect COVID-19 is having on global and local economies. The demand for renewables reached 530 TWh at the close of Q2 2020. This is the highest figure recorded, even compared to previous full years – with the year 2019 being the only exception. The fact that especially corporate demand for renewables seems unaffected is truly inspiring during these unusual and trying times, commented Tom Lindberg, Managing Director of Norway-headed energy solutions  provider ECOHZ.

It is worth noting that the statistics are somehow skewed, meaning that the second half of the year traditionally shows significantly lower volumes. This means that annual figures for 2020 will not automatically be double of the first half-year.

But given that the market suddenly does not deflate, we will likely experience a record figure for the full 2020 as well, remarked Lindberg.

Much of the continued growth is still likely coming from strong ambitions among a growing group of corporates with extensive energy use across international markets.

We are also seeing the effect of numerous market and policy changes deployed in the last few years. Among these are EU’s new Renewable Directive strengthening and clarifying the use of Guarantees of Origin. We also see a stronger emphasis to report and document sustainability results on global and local levels. In Europe specifically, we see countries implementing various forms of Full Disclosure (FD) policy, with Holland deploying FD at the energy consumer level, said Tom Lindberg.

According to Lindberg, this policy change creates increased transparency and will again result in increased demand. New platforms for allowing access to renewables have also appeared in 2019 and 2020, including various auction concepts in a select group of countries.

Finally, a nascent development to purchase and report renewables on a monthly basis, and in some cases on shorter time intervals (e.g. day, hour) also contributes to a more robust market. There are very few reasons these developments will not continue.

Also, on a positive note is the inclusion of four new AIB countries in 2020 – Serbia, Slovakia, Greece, and Portugal. These countries have contributed little to the volume growth so far in 2020 but will likely have a positive effect moving forward, Tom Lindberg said.

Revisiting market developments in 2019 – demand outpacing supply

The supply side also continues to grow during 2020, across most national markets and all renewable technologies. Wind and solar have doubled, hydro has also grown and still dominates the market supply.

Even with strong growth in the supply, market demand easily outpaced supply in 2019. Demand volumes were up by 18.5 percent, ending at 621 TWh and breaking the “600-barrier” for the first time, remarked Lindberg.

The 2019 growth is even more impressive given that the historical annual growth (CAGR) is 15.6 percent in the period from 2010 to 2019. With a total supply of 667 TWh and demand at 621 TWh in 2019, the market surplus shrunk to 46 TWh – the lowest since 2015.

The growth in renewable power demand outpaces renewable power supply in 2019, according to new statistics from the Association of Issuing Bodies (AIB).
“Even with strong growth in the supply, market demand easily outpaced supply in 2019. Demand volumes were up by 18.5 percent, ending at 621 TWh and breaking the “600-barrier” for the first time,” remarked Tom Lindberg, Managing Director for ECOHZ, a Norway-headed provider of renewable energy solutions (graphic courtesy ECOHZ).

This may indicate a development where the market will enjoy a better balance, and where prices again could start to rise.

During earlier years one has often seen only a few countries contributing heavily to the growth. This has changed and we now see market growth across almost all national markets. This is very encouraging, and represents robustness not experienced previously, said Lindberg.

Wind and solar the fastest-growing technologies

Hydropower has provided much of the renewable energy with Guarantees of Origin in Europe and still has a big share, but changes are occurring rapidly. Hydropower’s share fell from 64 percent in 2018, to 61 percent in 2019. It is also worth noting that hydropower’s share was approximately 90 percent 10 years ago. The falling share of hydro can primarily be explained by the increased availability of both solar and wind, Lindberg explained.

Wind power has grown fast, from a 19 percent share in 2018 to 23 percent in 2019. Solar’s share is still small but has grown to a 5 percent share in 2019. Both technologies are expecting to continue to grab market share from hydro.

Hydro- and wind power still the dominant technologies in terms of market supply 2019 (graphic courtesy ECOHZ).

Drivers behind demand

Lindberg notes that households, organisations, and businesses all contribute to market growth. However, it is the corporate sector is the main driver because more corporations see sustainability as necessary for future competitiveness.

Several initiatives exist to support corporate sustainability ambitions. Two notable initiatives according to Tom Lindberg are WeMeanBusiness and RE100.

The RE100 initiative now has over 260 members – the world’s most influential businesses that have made a commitment to go ‘100% renewable’. Global reporting initiatives like CDP and Greenhouse Gas Protocol (GGP) are enabling this movement.

Also, the EU with the REDII is strengthening the Guarantees of Origin system by further embedding it into European legislation.

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