Supportive government initiatives & investments to bring new vigor in the renewable energy sector
Optimum utilization of renewable energy has always been on the forefront with rising in environmental concerns. Various governments across the world and private companies have been raising funds to start new projects to produce renewable energy. Various initiatives have been taken such as joint ventures to combine forces and prove the prowess in the industry. Many wealth funds have overlooked the companies operating in the renewable energy sector, but two other sovereign wealth funds have invested billions in a company operating in the sector. The market for renewable energy is booming with supportive government initiatives and funding from wealth funds. According to the research firm Allied Market Research, the global renewable energy market is expected to reach $1,512.3 billion by 2025. Following are some of the activities taking place in the industry that would prove significant in the next few years:
Investments in India in the renewable energy sector doubles in past five years:
A rise in investments in the renewable energy sector is a clear sign of march toward the greener world. Investments in the renewable energy sector of India doubled over the past five years, reaching nearly $20 billion in 2018. According to the joint study by the International Energy Agency (IEA) and Council on Energy, Environment, and Water (CEEW), the reduced risk perception among financiers for projects in the country has led to the significant growth of the sector in the past five years. According to the report, the interest rate spreads have reduced by 75 to 125 basis points from 2014 to 2018. Supportive government policies, huge targets, and declining costs of technology have led to the attractiveness of financing of wind and solar projects. The utility-scale installed capacity of solar PV contributed to nearly 27 GW and wind to nearly 36 GW by May 2019. India has become a leading country in renewable energy production across the globe with capacity expansion plans. There has been an installation of capacity of nearly 80 gigawatts (GW). The nation has plans to run the largest renewable energy program with an objective to attain 175GW by 2022 and 500GW by 2030.
Joint ventures to progress Brazil power sector:
Joint ventures are crucial to gain a major market share and progress toward growth. BP has joined hands with Bunge to form the joint venture and create a huge bioenergy company. BP will include its biofuel and biopower businesses from Brazil and Bunge will include its sugarcane ethanol from Brazil to form BP Bunge Bioenergia. This joint venture would help BP in growing its current biofuels business by 50%. Brazil is the second-largest market in the world for ethanol as a transportation fuel. Nearly 70% of the vehicles in the nation run on ethanol and the demand is expected to grow in the next decade. Commenting on the joint venture, Bob Dudley, the CEO of BP Group, commented that this deal is a significant step toward the transition to low carbon future. Biofuels will play a crucial part in enabling the energy transition and Brazil will show how they can be utilized at scale. The combination is expected to create new possibilities for enhanced efficiency and growth in the future. Commenting on the joint venture, Gregory A. Heckman, Bunge’s Chief Executive Officer, outlined that this step is a major step to enhancing its sugar and bioenergy business as an industry leader.
BP Bunge Bioenergia will own 11 biofuels sites in the country. The joint venture is expected to possess the flexibility to manufacture a mix of ethanol and sugar with a combined crushing capacity of 32 million metric tonnes per year. Moreover, there will be a generation of renewable electricity, powered by waste biomass from the sugar cane, through the cogeneration facilities to power its sites. Moreover, it plans to sell surplus electricity to the Brazilian power grid.
Raising funds for new projects in renewable energy:
Raising funds to contribute to new renewable energy projects is one of the major strategies adopted by market players. Greenko Energy Holdings received funding of around $950 million from GIC Holdings Pte. Ltd and Abu Dhabi Investment Authority (ADIA). Both wealth funds agreed to give an additional $329 million on July 17. Greenko owns 4.2 gigawatts (GW) in operating asset and 7 GW in under-construction assets. Mahesh Kolli, President and Joint Managing Director of Greenko Group, told Mint that the firm has been successful in raising near a billion dollar in funding over three times from its global investors. This marks the highest yield bond from India and the largest green bond in Asia. The recent $495 million investment by the sovereign wealth funds in Greenko had taken place in June this year. This funding will be utilized for building power storage projects. Through multilateral and bilateral agencies and other sovereign wealth funds not paying much attention to businesses that contribute toward climate change, these two sovereign funds have invested nearly $2.2 billion in Greenko.
