There are two ways of approaching the bumpy road ahead: either navigate around obstacles or find the smoothest possible path forward.  

For renewable energy investment in 2024, a wide road heads toward 2030 and beyond, but new challenges still lie over the horizon. The social and environmental need for green energy remains crucial, yet political headwinds could slow progress.

Decarbonisation is essential in fighting climate change – not only by phasing out fossil fuels but by expanding affordable green energy access for heating, transport and industry. Meeting the 1.5°C climate target requires renewable energy capacity to triple by 2030. There’s a clear call for governments, industries, financial institutions and civil society to scale renewables and make progress on key climate challenges.

At ING, we want to play a leading role in accelerating the transition to a low-carbon economy. By 2025, we’re committing €7.5bn annually to wind, solar and battery storage investments – tripling our 2022 target. We’ve already supported landmark projects, including a €570mn loan for an 842 MW solar project in Spain and a €674mn credit for solar and battery projects across Europe. This underscores our ambition to lead in renewable energy, despite recent sector challenges.

Why isn’t renewable energy straightforward?
The early 2020s showed that renewable energy’s journey isn’t a straightforward one. The 2010s ended on a wave of optimism, with rising investments, cheaper financing and stronger corporate sustainability commitments. But the COVID-19 pandemic disrupted supply chains, raised costs and, following Russia’s invasion of Ukraine in 2022, created an energy price shock that directly impacted renewables.

Greater financing costs became a challenge for the capital-intensive renewable sector. Trade barriers, local content requirements and political scepticism about environmental, social and governance (ESG) investments added complications. Additionally, issues such as grid capacity constraints and the risk of ‘price cannibalisation’ – as more renewable energy entered the grid – added to the sector’s hurdles.

What is the track record of renewable finance? 
Those issues have not been enough to halt the global momentum of renewables. In 2023, global renewable energy investment surpassed $620bn – a record, spearheaded by China. It was 8% up on 2022, and nearly double the figure for 2015. Several factors are driving growth.

Renewable energy, especially wind, solar and batteries, remains cost competitive. Corporate energy users are increasingly adopting power purchase agreements (PPAs) with renewable providers to manage electricity costs amid fossil fuel price volatility. This trend, initially popular in the US, is now expanding across sectors like aluminium, automotive and telecommunications in Europe.

Political support has also been instrumental, with initiatives like the US Inflation Reduction Act (IRA) extending tax credits for renewables and the European Union’s binding 42.5% goal for renewables by 2030. However, it remains to be seen what the impact of the outcome of the US election will be on US initiatives like the IRA. As inflationary pressures ease and central banks begin reducing interest rates, the financing cost issue that emerged in 2021–2023 may be past its worst.

Renewable energy, especially wind, solar and batteries, remains cost-competitive – corporate energy users are increasingly adopting power purchase agreements with renewable providers to manage electricity costs amid fossil fuel price volatility.

Looking ahead, renewable energy will see global expansion, but specific investors and lenders will focus on their areas of expertise. The US is a prime destination, driven by available land, rising electricity demand and government incentives. Europe, though with less land and slower demand growth, boasts a strong pipeline of offshore wind projects. Australia needs new renewable capacity to replace retiring coal plants.

Solar energy is particularly attractive due to its steep cost reductions and quick build times, making it a compelling option for utilities and developers. Although issues like the ‘duck curve’ – where peak solar generation doesn’t align with demand – may create overcapacity in certain markets, solar’s overall potential remains strong.

Wind offers the advantage of diversified generation across various locations and times, with large-scale offshore wind projects providing significant financing opportunities that support debt providers.

How will we reach our 2030 goals?
While renewable energy has significant growth potential, reaching ambitious 2030 government targets remain challenging. Offshore wind projects require substantial infrastructure; solar projects face network limitations; and onshore wind developments often encounter lengthy permitting processes.

Governments can and must do more if 2030 climate targets are to be met. Their actions send the strongest signal of support for green power. By streamlining permitting processes, adjusting auction models, and maintaining political stability, governments can help pave the way for a thriving renewables sector and reinforce investor confidence.

Reaching 2030 targets will require coordinated action to overcome these obstacles. The renewable energy sector and its investors must continue to advocate for government support, ensuring the path ahead is smooth for green power’s transformative potential.

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.

• Further reading: ‘Accessing finance for the development of clean energy projects in emerging markets’. It is critical for the clean energy transition that emerging markets do not become locked into relying on fossil fuels. But this requires significant capital investment and attractive policies and legal frameworks in these markets, explains Chinenye Ajayi, Solicitor, Power and Infrastructure Practice at Olaniwun Ajayi LP.
• The concept of a ‘just transition’ has increasingly become a compulsory issue for discussion amongst climate policymakers. But what does this mean, and will it really make any difference? How can any organisation or individual align with this process, asks Dean Cooper, Global Energy Lead at WWF.