Renewable energy could become the world’s second-largest source of power generation by 2015 if subsidies that currently support the sector are maintained, says the International Energy Agency (IEA).
The Paris-based agency says that energy subsidies are essential to the growth of renewable energy, which could account for half of new global power generation capacity between 2010 and 2035.
Launching the 2012 version of its World Energy Outlook (WEO), the IEA said that renewable energy subsidies in 2011 reached $88 billion, a 24 per cent increase over 2010 levels. However there are concerns that austerity measures in some regions, coupled with a rapid expansion in oil and gas production in North America, could threaten renewable energy growth.
The economic crisis could lead to cuts in government spending on renewable energy subsidies and to the emergence of “smart” subsidies, where government funds are focused on certain technologies or are made available for limited time periods in order to ensure value for money.
The IEA believes that continued financial support would help renewables to close in on coal as the primary source of power generation by 2035. Such a rapid growth would require the annual spend on subsidies to reach $240 billion by 2035 and for the total spend over the period of 2010-2035 to be $4.8 trillion.
In contrast, $523 billion was spent on subsidies in the fossil fuel sector in 2011, a rise of nearly 30 per cent over 2010.
Such subsidies will help to ensure that fossil fuels remain dominant in the global energy mix in the coming decades, says the IEA, which has also predicted a steep rise in oil and natural gas output in the USA and Iraq during the next few years.
Such trends in energy production, coupled with the growth in energy demand in the Middle East, India, China and other parts of Asia, will lead to a dramatic shift in the global energy map, the trend in power production and consumption shifting the centre of gravity from west to east.
The agency also believes that the need to improve energy efficiency measures around the world remains as great as ever and that government energy efficiency policies world wide represented an “epic failure”, according to IEA Chief Economist Fatih Birol.
The IEA predicts that global energy demand will rise by over one-third from 2010 to 2035, with electricity demand rising by 70 per cent. It says that improved energy efficiency measures would improve energy security, spur economic growth and mitigate pollution.
It has proposed six areas for policy action on energy efficiency, including measures to make energy efficiency more mainstream and integrating it into government decision-making processes.
“North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world, yet the potential also exists for a similarly transformative shift in global energy efficiency,” said IEA executive director Maria van der Hoeven. “By 2035, we can achieve energy savings equivalent to nearly a fifth of global demand in 2010.”
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