Barriers slow progress in clean energy

Renewable energy is at the forefront of efforts to combat climate change and reduce reliance on fossil fuels. Technologies such as wind, solar and geothermal energy are expanding, but their progress is fraught with challenges similar to those in the emerging energy markets. From offshore wind farms to large-scale solar projects and geothermal installations, developers are navigating a complex web of financial, regulatory and logistical barriers that complicate the path to final investment decision (FID).

Offshore wind

Wind energy is one of the fastest-growing renewable energy sources, with both onshore and offshore wind farms offering large-scale power generation. Offshore wind has huge potential, providing higher capacity due to the stronger, more consistent winds found offshore. The leading countries in this sector include the US, UK, Netherlands, Germany, Taiwan, Japan and South Korea. However, the sector is encountering delays across all stages of development.

The UK’s 1.2GW Dogger Bank A farm, developed by Equinor, SSE Renewables and Vargrønn, has been delayed by more than a year because of construction setbacks. Norway’s Sørlige Nordsjø II wind auction for a 1.5GW wind farm was delayed over issues with financial models and permitting before it was awarded to Ventyr Energi. And across the Atlantic, the US Revolution offshore wind farm has also faced setbacks, with startup pushed to 2026 over construction delays and nearby substation issues.

Solar power setbacks

Solar power is a widely scalable, cost-effective renewable energy source and currently the cheapest form of renewable energy. It supports diverse applications across residential, commercial and utility-scale power generation. The UK and Spain are home to some of Europe’s largest solar project pipelines, while the US leads in North America and India is making notable progress in the Asia-Pacific region.

However, large-scale solar farms do face obstacles. In the UK, major projects have been delayed by lengthy approval processes: Sunnica Energy’s 500MW Sunnica solar farm, Low Carbon’s 500MW Gate Burton project and Canadian Solar’s 350MW Mallard Pass Solar Farm each waited up to four years.

Geothermal

Geothermal energy uses the Earth’s internal heat to generate electricity or provide direct heating, offering a reliable baseload renewable energy source that contrasts with the intermittent nature of wind and solar power. Leading markets for geothermal energy include Iceland, Kenya and Indonesia.

In Indonesia, the 65MW Bukit Kili geothermal power project, developed by PT Dyfco Energy, has faced delays in obtaining environmental permits and meeting other planning requirements, pushing startup to 2030. Hitting milestones in large projects will be critical if Indonesia is to meet its 9.3GW target by 2030, and such setbacks will make this harder. Similarly, the 100MW Kalinga geothermal project, developed by Chevron Geothermal Indonesia and Aragorn Power, went through many planning phases before moving to the development stages.

Struggles to reach FID

Projects are finding it challenging to reach FID for several reasons. The rise in inflation is affecting all stages of project development and the value chain. Developers are struggling to maintain profitability in cleaner energy sectors, so the supply chain, including original equipment manufacturers and SMEs, is also suffering and reluctant to commit to large-scale projects. As a result, many projects are at a standstill.

Developers have been forced to delay or shelve projects, exit markets and sell stakes in their ventures, particularly in offshore wind farms. Even large-scale projects at early stages are facing challenges, as the initial investments required have ballooned and the associated risks have increased substantially. There needs to be financial certainty in order to get these projects moving forward.

Some offshore wind auctions have also been delayed or cancelled, such as in Lithuania and Estonia, simply due to a lack of bids or financial interest. Similarly, geothermal projects are seeing slower growth as high upfront exploration costs, technological barriers and environmental concerns hinder progress. Even in countries where geothermal already plays a significant role, investment is declining because of unattractive incentives and lengthy permitting processes.

In some solar markets, gaining planning approval can be a long process – projects of around 100MW may wait three to four years for approval from local authorities or governments. The lack of investors willing to take on the inherent risk of these projects is also hindering sector growth.

Bridging gaps with policy and support

Strategic policies are needed to create a path for development and investment, and to move projects to FID. And financial mechanisms will be critical in boost investor confidence and reducing risk. In the UK, the Contract for Difference scheme has helped provide financial certainty, making it easier for projects to secure backing and move to construction.

Many regions are pushing for more renewable energy, driven by political agendas and the need for energy security to reduce dependence on fossil fuel imports. While there is a push for innovation and technological advances, which could mitigate these headwinds, progress must move faster. The supply chain is in limbo, awaiting decisive action to bring these policies and financial mechanisms to fruition and ensure that the renewable energy sector can meet its targets.

By Nabil Ahmed, Energy Analyst at EIC

Image credit | Getty