India is expanding its renewables industry through a combination of ambitious government targets and private-sector actions; and China is stepping up activity in its dominant domestic market, while targeting exports where it already holds a competitive advantage, such as solar components. Other Asian markets, including Malaysia and Indonesia, are looking at how their solar markets can still flourish in the face of increased competition from larger economies.
Such competition can help speed up technological advances and bring down costs, which should benefit the energy transition and spur the investment needed to decarbonize and keep global temperature rises in check.
Markets leaning on renewables to help push their economies out of recession could also benefit from the need to strengthen domestic supply chains; creating jobs, expanding various industries, increasing gross domestic product, as well as enhancing people’s welfare.7
However, localized supply chains will have to be rapidly built or strengthened if net-zero targets are not to be delayed. Building these out will require new structures and partnerships to be created, and this will take time – especially as the International Monetary Fund expects economic growth to fall in 2023 and only rebound slightly in 2024.8
Despite such a slow-growth outlook, the investment landscape for low-carbon technologies has continued to evolve in recent years, as economies recover from the impacts of the COVID-19 pandemic while setting increasingly ambitious decarbonization targets. After an initial steady double-digit growth, energy transition deal volumes exploded over the last two years, with more growth expected as capital continues to flow into the space. In North America, deal volumes across all investor segments remained strong in 2022 following 2021's record year, though with a modest reduction in overall volumes.9
Conditions, therefore, appear ripe for turbocharging renewable energy demand and accelerating the journey to net zero – but it remains to be seen whether market interventions such as the US Inflation Reduction Act will speed up or delay the energy transition.