The expansion of renewable energy will slow over the next five years unless
policy uncertainty is diminished, the International Energy Agency (IEA) said
today in its third annual
Medium-Term
Renewable Energy Market Report.
According to the report,
power generation from renewable sources such as wind, solar and hydro grew
strongly in 2013, reaching almost 22% of global generation, and was on par with
electricity from gas, whose generation remained relatively stable. Global
renewable generation is seen rising by 45% and making up nearly 26% of global
electricity generation by 2020. Yet annual growth in new renewable power is seen
slowing and stabilising after 2014, putting renewables at risk of falling short
of the absolute generation levels needed to meet global climate change
objectives.
Non-OECD markets, spurred
by diversification needs in many countries and increasing air quality concerns
in China, in particular, comprise almost 70%
of the growth. Renewables are seen as the largest new source of non-OECD
generation through 2020. Yet they meet only 35% of fast-growing electricity
needs there, illustrating the still-large role of fossil fuels and the potential
for further renewable growth. Renewables account for 80% of new power generation
in the OECD, but with more limited upside due to sluggish demand and growing
policy risks in key markets.
“Renewables are a
necessary part of energy security. However,
just when they are
becoming a cost-competitive option in an increasing number of cases, policy and
regulatory uncertainty is rising in some key markets. This stems from concerns
about the costs of deploying renewables,” said IEA Executive Director Maria van
der Hoeven.
“Governments must
distinguish more clearly between the past, present and future, as costs are
falling over time,” she added. “Many renewables no longer need high incentive
levels. Rather, given their capital-intensive nature, renewables require a
market context that assures a reasonable and predictable return for investors.
This calls for a serious reflection on market design needed to achieve a more
sustainable world energy mix.”
The report noted that
policy and market risks threaten to slow deployment momentum. For example, in
many non-OECD markets including China, constraints include non-economic
barriers, an absence of needed grid integration measures, and the cost and
availability of financing. In the European Union (EU), uncertainties remain over
the precise nature of the post-2020 renewable policy framework and the build-out
of a pan-European grid to facilitate the integration of variable
renewables.
For the first time, the
annual report provides a renewable power investment outlook.
Through 2020, investment
in new renewable power capacity is seen averaging over USD 230 billion annually.
That is lower than the around USD 250 billion invested in 2013. The decline is
due to expectations that both unit investment costs for some technologies will
fall and that global capacity growth will slow. With decreasing costs,
competitive opportunities are expanding for some renewables under some
country-specific conditions and policy frameworks. For example, in Brazil, with
good resources and financing conditions, onshore wind has continued to outbid
new-build natural gas plants in auctions. In northern Chile, high wholesale
electricity prices and high irradiation levels have opened a new unsubsidised
solar market.
The roles of biofuels for
transport and renewable heat are also increasing, though at slower rates than
renewable electricity. Uncertainty over policy support for biofuels is rising in
the EU and the United States, slowing expectations for production growth and
threatening the development of the advanced biofuels industry at a time when the
first commercial plants are just coming online.
The annual report
highlights the potential energy security implications of energy use for heat,
which accounts for more than half of world final energy consumption and is
dominated by fossil fuels. But the contribution of renewables to meet heating
and cooling needs remains underdeveloped, with more limited policy frameworks
compared with the electricity and transport sectors. Although modern renewable
energy sources are expected to grow by almost 25% to 2020, their share in energy
use for heat rises to only 9%, up from 8% in 2013.
The
Medium-Term
Renewable Energy Market Report
is part of a series of
annual reports the IEA devotes to each of the main primary energy sources: oil,
gas, coal, renewable energy and–as of last year–energy
efficiency.
The
Medium-Term
Renewable Energy Market Report 2014
is on sale at the IEA
bookshop. Accredited journalists who would like more information or who wish to
receive a complimentary copy should contact
[email protected]
.
To
download the executive summary of Medium-Term Gas Market Report, please
click
here.