How Doable is Renewable?

Technological Trends and Proven Viable Options for the Future.

Nate Heywood, CFA

To accompany our initiation of the Renewable Energy space, we compiled an industry report of global trends that should prove relevant to the economic viability of technology investments across independent power producers and proponents of renewable generation. We believe the success of renewable adoption will be dependent on technological advancements providing relatively reliable and inexpensive power options, supported through government policy implementation. As the global population continues to grow and increase reliance on sustainable energy, the demand for carbon conscious alternatives to emission intensive technologies has increased; however, the current power mix remains dependent on traditional power sources, such as coal and natural gas, to ensure reliability of power delivery.

Renewable Technologies Under Focus
In the full report, we explore the technological trends that have shaped our current generation mix and proven viable options for future development. For Canadian-based renewable companies, we focus on wind, solar, hydro, and biomass technologies. Though each provide generation, they too have their drawbacks in terms of reliability, costs, externalities, and availability. To help combat some limitations of renewable energy, we also analyze energy storage.

Is Renewable Power a Fad or the Future?
By 2050, global power generation is expected to jump to ~44,000 TWh from expectations of ~26,000 TWh this year. Today, renewable power technologies account for 31% of total global power generation, which is expected to rise to nearly 50% by 2050. To reach a 50% renewable power mix, it is estimated that more than $10 trillion will need to be deployed on renewable projects over the next 30 years. We expect demand for renewable technologies will increase as total demand climbs, technology improves and as policy prioritizes clean energy.

Where is the Demand Coming From?
A significant portion of the forecasted demand growth through 2050 is expected to come from two categories of nations: 1) large countries, such as China and India, with expanding economies, and 2) developing countries in Africa and Asia. We believe government policies to support renewable projects will be a crucial component of long-term renewable power economic viability. While we believe there will be some new demand centres through electric vehicle (EV) adoption and increased air conditioning demand from developing nations, the larger components will be population growth and GDP expansion.

Cost of Technologies, New and Old
With improving costs to develop and operate renewable technologies, we have seen wider adoption of clean technologies for baseload power. Comparing levelized costs of electricity (LCOE), wind and solar have drastically decreased, natural gas has remained relatively constant, while coal has increased given carbon costs. The declining cost curve for renewable technologies should continue to support adoption and growth in renewable investments, particularly in wind and solar.

Nate Heywood, CFA 403-539-8584

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