Energy Outlook 2025: Renewable Energy

We expect the strong momentum in the renewable energy sector will continue into 2025 as governments, businesses and other organisations continue to push towards achieving their net-zero targets. 

A strong 2025 for wind projects 

After several years of solar leading the way in the growth of renewables, 2025 is set to be a strong year for wind energy, both onshore and offshore.

Asia-Pacific (APAC) will be leading the pack with China accounting for almost two-thirds of wind capacity in the current market. China’s production prevalence, with the country holding 60% of the world’s wind turbine production capacity, may also drive wind growth globally by pushing down project development costs in the event that their market leading manufacturers ramp up export to other jurisdictions. Whilst Taiwan’s offshore development has slightly slowed due to geopolitical pressures in the Taiwan Strait, the country continues to push for 15 GW of installed production by 2030. Japan and Korea are also emerging powers in the APAC wind market. Korea’s next grid allocation auction will take place in December 2024, and it seems likely that offshore wind will feature heavily in this round following government initiatives to bolster development. Meanwhile Japan have set sights on an ambitious 45 GW of operational capacity by 2040 which would take them into the top five wind energy markets.

In Europe, it is expected that we will see 260 GW of new wind power capacity from 2024-2030 as countries seek to reach national and EU targets. This will be assisted by the EU’s Net-Zero Industry Act (NZIA) which seeks to boost the EU’s manufacturing capacity for clean tech such as wind turbines and we are likely to see NZIA incorporated into future onshore and offshore wind auctions in the EU. There have also been some notable developments at the state level which will bolster the market in 2025. Hungary has lifted an effective 13-year ban on wind farms (although grid connection bottlenecks will remain an issue). In Poland, there has been a recent relaxation of the restrictive 10H rule for onshore wind as well as the introduction of a dedicated auction support system for offshore wind, although there remain concerns about the adequacy of auction prices. It should be noted that the outlook is less positive in some nations, for example in Finland, onshore wind investments have slowed due to high costs and interest rates, while offshore wind is pending regulatory changes. Spain aims to reach 62 GW of wind capacity by 2030, including 3 GW offshore, but must overcome challenges in regulatory processing, auction design and social acceptance. In Italy, we expect to see a first wave of release of building permits on Off-Shore Projects which have been pre-selected by the Italian Government. However, this will probably help in opening the market to technology companies and infrastructure investors interested in deploying capital demonstrating the feasibility of floating projects in the mediterranean area. 

Outside the EU, the UK’s recently elected Labour Government has lifted the de facto ban on new onshore wind generation projects which has stood since 2015 and they have further pledged to double and quadruple onshore and offshore wind generation respectively ahead of 2030. This was mirrored in the round six contract allocation for the UK Government’s ‘Contracts for Difference’ scheme which saw contracts awarded to 5.9 GW of offshore and onshore wind projects. This was particularly notable as no contracts were awarded to offshore wind in the 2023 round five allocation. It would therefore seem likely that European wind generation projects will carry this strong momentum into 2025. 

Whilst the 2025 offshore wind outlook for the US looked promising pre-election following a 53% increase in the offshore project pipeline from 2023 to 2024, Donald Trump’s win has placed the future of US offshore wind in doubt. Prior to his election, growth had been fuelled by the Inflation Reduction Act (IRA) which led to significant increases in investor confidence and a further 15 new, re-opened or expanded onshore wind generation projects being announced since its passing in August 2022. Trump, however, has shown great hostility to both the IRA and offshore wind industry, promising to rescind unspent IRA funding and end offshore wind development on day one of his term. The US will therefore be a less active market for offshore wind in 2025 and we will likely see investment rerouted to Europe and APAC.

Hyperscalers to dominate PPA market capacity as AI demand increases 

With AI technology continuing to grow in complexity and popularity, technology giants will remain the largest players in the corporate power purchase agreement (PPA) market as the demand for hyperscaler date centres increases. 

Corporate PPAs are agreements between an energy generator, usually wind or solar, and a corporate energy consumer; typically for a long period (10+ years). Such agreements carry a number of benefits, including assisting in net-zero goals, locking in pricecertainty and allowing an energy deal to be catered to the corporate entity’s needs. 

Sam Altman, the CEO of OpenAI has described powering AI as the “hardest part” in satisfying the demand for AI. This is because AI computing requires a large amount of energy which will only increase as AI models become more sophisticated and deal with larger data sets. Each search with OpenAI’s ChatGPT typically requires 2.9 Wh per request, almost 10 times the 0.3 Wh required for a Google Search. 

The growth of AI has been exponential and this rate of growth will continue for the next few years at least. Such growth will come with a massive demand on data centres to match the computing requirements and these data centres will need reliable, substantial, and cost-effective energy supply. The risk of price volatility and supply instability when obtaining energy on the open market could be colossal for data centre owners and so tech companies will therefore continue to seek PPAs in order to benefit from long-term stability and price. 

The world’s top five hyperscaler operators (Amazon, Google, Meta, Microsoft and Apple) have a combined renewables portfolio comprising more than 45 GW. This accounts for more than 55% of corporate wind and solar capacity globally. Such dominance in the market would seem likely to continue into 2025 as the demand for hyperscalers will be required to match the growth of AI. 

Conversely, AI may also provide the solution in this energy demand conundrum by increasing data centre and grid efficiency by optimising power and cooling or forecasting workloads for resourcing. As various AI use cases evolve, so do the regulatory frameworks in which AI operates, which is explored in the energy digitalisation section.

Middle East and North Africa market market to grow substantially 

With early signs of growth in 2024, the MENA market will emerge as a major player in the renewables space during 2025. The IEA already estimates that countries in the MENA region will add 62 GW of renewable energy capacity over the next five years in their attempt to meet the pledges made at COP28. 

The MENA region has colossal wind and solar potential with the World Bank estimating that 22-26% of all the solar energy that hits the Earth is concentrated in this region. Such potential has the capacity to supply at least 50% of global electricity consumption. Meanwhile 75% of MENA has average wind speeds that exceed the minimum threshold for utility scale wind farms. This is coupled with vast areas of land currently not being used for human activity where projects could be located as well as more manageable permitting and licensing regulations in comparison with Europe and the US. 

In Egypt, the national energy regulator announced a framework for Peer-to-Peer (P2P) energy projects in 2024 as they aim to increase the share of renewables in their energy mix to 42% by 2035. A number of energy companies, as well as investors such as the European Bank of Reconstruction and Development have already shown interest, and we will likely see projects announced under this framework in 2025. 

Developments in Saudia Arabia such as the Vision 2030 programme are aiming to reduce the Kingdom’s reliance on oil with the renewable energy market predicted to grow from 8.33 GW in 2024 to 23.74 GW by 2029. 

In Morocco, there are a number of large-scale renewables projects including the Noor Ouarzazate Solar Complex (the world’s largest concentrated solar power plant) and Tarfaya Wind Farm, which are part of the country’s aim to generate 52% of electricity from renewables by 2030. In addition, the XLinks project is planning to link Morocco and the UK via the world’s longest undersea power cable which demonstrates Morocco’s desire to not just increase its own energy security through renewables, but to leverage its solar and wind project friendly geography to boost its economy via energy export in 2025 and beyond. 

A boost for BESS co-location 

Co-located BESS assists in dealing with renewable power intermittency as it can store excess energy produced at peak generation times and sell when required and most profitable. It therefore assists with grid stability, cost efficiency and project revenue. Co-located BESS projects further benefit from shared infrastructure which reduces the combined project cost in comparison to standalone projects.

This is becoming increasingly useful for stabilising national grids and investment in the area is increasing. For example, the government in the Netherlands has announced €100m in subsidies for solar plus storage in 2025. 

Governments are further making regulatory reforms which will boost battery co-location in 2025, including in Australia, where the Energy Market Commission introduced changes in June 2024 for registering co-located BESS and renewables projects under a new category of ‘integrated resource providers’. This single registration, rather than having a regulatory registration for each of the battery and generation aspect, streamlines the regulatory process for co-located BESS developers. EirGrid, the Irish national grid service, is also undertaking steps to allow co-located systems to participate in the energy market, including the DS3 program for ‘fast-acting system services’ which offers BESS projects a guaranteed revenue for providing grid assistance. 

Will this be a breakout year for blockchain solutions? 

Alongside the continued adoption of AI, blockchain solutions will also see increased prevalence in 2025. 

AI will be used to provide valuable insights into wind and solar resource availability, power generation forecasting, demand patterns and wholesale price predictions among other use-cases such as predicting equipment failures. 

Blockchain, meanwhile, will present an efficient way to allocate generation assets to a specific consumption point which will increase traceability. Given the number of organisations approaching net-zero target dates, such traceability can be crucial in certifying that energy consumed has come from a renewable source. This will be particularly important in corporate PPAs and the secure nature of blockchain allows easy audit and verification. 

The decentralised nature of blockchain also facilitates peer-to-peer energy trading via smart contracts. Smart contracts are selfexecuting contracts which automatically execute when predefined conditions are met – e.g. when a generator is producing more energy than required by a consumer under a PPA, it can automatically sell the excess to another party at a set price. 

This has significant use in the context of microgrids which is something we will see more of in 2025 – likely in virtual form. These virtual microgrids will consist of several nonproximate renewable assets and consumers across a national grid trading energy with each other. This blockchain use-case provides flexibility, enhances grid stability, and allows for efficient energy distribution and trading among participants.

Continued growth in the M&A market 

2025 will be another active year for the renewables M&A market as favourable market conditions and looming deadlines for sustainability pledges from key corporate groups will drive significant partnerships, consolidation and investment in the sector; with these corporate groups looking to align with their climate targets and enter into new verticals to support their strategic goals. For example, in the RE100, a global initiative for companies committing to procure 100% renewable electricity in their operations, there are 71 members targeting 2025 as their date for 100% renewable supply. This includes global names such as EY, AB InBev, Nike and UBS. 

Solar and wind energy projects will be at the forefront of renewable M&A activity; driven by advancements in technology and decreasing costs which presents a perfect market for consolidation. The increasingly favourable project financing outlook will also assist in the M&A market as new renewables projects are announced. 

Following a period of sustained high interest rates, valuation gaps and cost inflation, 2025 looks likely to be characterised by a trend for interest rate cuts across key jurisdictions and decreasing inflation which will bolster the M&A market. Government incentives and regulatory frameworks, such as the US Inflation Reduction Act and the European Union’s Green Deal, will further stimulate global M&A activity by making renewable investments more attractive. In the UK, the recent establishment of Great British Energy, a new publicly owned energy company focussed on investments in clean energy, will provide investment opportunities for the private sector across the United Kingdom.