Key global challenges hampering renewable energy growth

The world's governments have agreed to triple renewable energy by 2030, a target set at the UN climate summit in December.

But right now, the post-pandemic global economy is throwing up obstacles that need to be overcome if the goal is to be achieved.

Here are the big hurdles to solar, wind and other renewable energy projects:

Costly credit

Central banks in the EU and the US have raised interest rates to fight inflation. This hits renewable energy harder than investment in fossil fuel projects.

Renewables have much higher up-front costs to build wind farms, solar arrays and more, and that borrowing costs money. After that, operating costs are negligible since the wind and sun are free, of course — but high-interest rates have made it harder to get new projects off the ground.

In many cases, the answer is raising the agreed price of the electricity flowing to the grid to cover the added costs.

Inflation

Everything costs more these days — not just food and rent, but the electric cables, power turbines, construction materials and services needed to build wind or solar installations.

One exception: solar panels have plunged in price due to massive Chinese production.

Supply chain crisis

Order backlogs and supply delays are growing because there are shortages of skilled engineers, raw materials and a lack of manufacturing capacity for complex machinery needed for renewable energy projects.

An order for a new wind turbine or a transformer to connect to the grid can take months or longer to arrive than it did before the Covid-19 pandemic.

'Not in my backyard'

The NIMBY syndrome is still an issue in many places.

The southern German region of Bavaria, for example, is notorious for its resistance to the noise and appearance of wind turbines in its picturesque landscape.

Installations have lagged in Bavaria and other regions despite the German government's push for more renewable energy after losing affordable Russian natural gas used to heat homes, generate electricity and power factories.

Developing world troubles

Low-income countries have long faced much higher borrowing costs than the richer parts of the globe because government subsidies or other credit guarantees are uncertain.

The result is that the same solar park if built today costs twice as much in Ghana as it would in the US because of interest rates alone, according to Todd Moss, a former State Department official who heads the Energy for Growth Hub in Washington