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    NAWE Power Regional Overview: Large Upside Risk To Already Robust Outlook

    January 26, 2022 - Fitch Solutions Sector Intelligence


      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      NAWE Power Regional Overview: Large Upside Risk To Already Robust Outlook

      • 13 Jan 2022
      • Global
      • Power

      Key View

      • The North America and Western Europe region is set to see significant growth in the non-hydro renewables sector over the coming decade, led by the solar sub-sector.
      • Western Europe will see net capacity additions grow more quickly than North America owing to its wide mix of markets with strong growth outlooks.
      • Upside risks are presented to the region’s largest growth markets, Germany and the US, given shifts in energy policy and elevated support by their governments.

      Solar Capacity Growth To Overshadow Wind In North America And Western Europe

      Within the North America And Western Europe (NAWE) region we highlight that the solar sub-sector will grow faster than the wind sector with annual average rates of 7.43% growth versus 5% growth, respectively. Subsequently we expect to see 237.8GW of new solar capacity come online against 213.8GW for wind. This is being driven by ease of access to deployments for large-scale utility systems as well as strong growth of smaller systems in many markets. For example, rooftop solar on commercial and residential buildings have seen a dramatic boom in markets such as Germany. This is being developed in conjunction with small-scale battery energy storage systems which offer consumers higher levels of price shielding amid volatile energy prices. While the solar power sector holds a stronger growth outlook, we forecast that the wind power sector in the NAWE will retain its dominance with 593.3GW of total installed wind capacity by year-end 2031 compared to 551.3GW for solar.

      Wind Retains Cumulative Capacity Lead Despite Solar Boom
      NAWE - Wind & Solar Capacity And Growth Rate, MW & % y-o-y

      e/f = Fitch Solutions estimate/forecast. Source: National Sources, EIA, Fitch Solutions

      Western Europe To Expand Renewable Capacity Lead Against North America

      We forecast Western Europe’s renewable capacity growth will accelerate over the decade with its lead against North America in terms of total installed capacity widening by 2031. We highlight that installed non-hydro renewables capacity by the end of 2021 reached 295.6GW in North America and 402.7GW in Western Europe, and it will rise to 513.4GW and 704.8GW by 2031 in the two regions, respectively. This margin will widen after 2025 when average annual additions in North America will fall from 35GW to 20GW and remain at this level over the rest of the decade. In contrast Western European net annual additions will continue to expand reaching an average of 33.4GW per year over the decade. We expect this to result in an increase in overall generation from the non-hydropower renewables sector of 490TWh in North America and 532TWh in Western Europe, representing a combined 31% of the global non-hydro renewables generation increase over our 10-year forecast period.

      Western Europe To Expand Lead Over North America As Installations Accelerate
      NAWE – Non-Hydro Renewables Capacity And Generation, MW & TWh

      e/f = Fitch Solutions estimate/forecast. Source: National Sources, EIA, Fitch Solutions

      Upside Risks To Regional Growth From Renewed Climate Policy Action From Germany

      We see large upside risks forming to our non-hydro renewables outlook in Germany from the development of new policy and funding for low-carbon power generation amid concerns over climate change. In Germany, we expect that a new coalition government, which includes the green party, will result in more low-carbon energy and climate related policies. The new government has announced new highly ambitious targets for the German


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