The IEA raises its five-year renewables growth forecast

1 November 2016


The International Energy Agency has significantly increased its five-year growth forecast for renewables, in recognition of strong policy support in key countries and sharp cost reductions. Renewables overtook coal last year to become the largest source of installed power capacity worldwide.
The latest edition of the IEA's Medium-Term Renewable Market Report now sees the renewables sector growing 13% more between 2015 and 2021 than it did in last year's forecast, due mostly to stronger policy backing in the United States, China, India and Mexico. Over the forecast period, costs are expected to drop by a quarter in solar PV and 15% for onshore wind.
Last year marked a turning point for renewables. Led by wind and solar, renewables represented more than half the new power capacity around the world, reaching a record 153 GW, 15% more than the previous year. Most of these gains were driven by record-level wind additions of 66 GW and solar PV additions of 49 GW.  
About half a million solar panels were installed every day around the world last year. In China, which accounted for about half the wind additions and 40% of all renewable capacity increases, two wind turbines were installed every hour in 2015.
"We are witnessing a transformation of global power markets led by renewables and, as is the case with other fields, the centre of gravity for renewable growth is moving to emerging markets," said Dr Fatih Birol, the IEA's executive director.
The many factors behind this growth include increased competition, enhanced policy support in key markets, and technology improvements. While climate change mitigation is a powerful driver for renewables, it is not the only one. In many countries. Cutting air pollution and diversifying energy supplies to improve energy security play an equally strong role in growing low-carbon energy sources, especially in emerging Asia.
Over the next five years, renewables will remain the fastest-growing source of electricity generation, with their share growing to 28% in 2021 from 23% in 2015. They are expected to cover more than 60% of the increase in world electricity generation over the medium term, rapidly closing the gap with coal. Generation from renewables is expected to exceed 7600 TWh by 2021 – equivalent to the total electricity generation of the United States and the European Union put together today.
But while 2015 was a record year, there are still grounds for caution says the IEA. Policy uncertainty persists in too many countries, slowing down the pace of investments. Rapid progress in variable renewables such as wind and solar PV is also exacerbating system integration issues in a number of markets; and the cost of financing remains a barrier in many developing countries. And finally, progress in renewable growth in the heat and transport sectors remains slow and needs significantly stronger policy efforts.
The IEA also sees a two-speed world for renewable electricity over the next five years. While Asia takes the lead in renewable growth, this only covers a portion of the region's fast-paced rise in electricity demand. China alone is responsible for 40% of global renewable power growth, but that represents only half of the country's electricity demand increase.
This is in sharp contrast with the European Union, Japan and the United States where additional renewable generation will outpace electricity demand growth between 2015 and 2021.
The IEA report identifies a number of policy and market frameworks that would boost renewable capacity growth by almost 30% in the next five years, leading to an annual market of around 200 GW by 2020. This accelerated growth would put the world on a firmer path to meeting long-term climate goals.


India is on track
India is on track to install more than 10GW of renewables per year from 2017 as large-scale renewables, rooftop solar and off-grid sectors show impressive growth.
According to a new report from Bloomberg New Energy Finance India now has the third biggest power sector in the world after China and the USA. But as economic growth continues and population rises, it faces the triple challenge of meeting growing demand, cutting pollution and offering modern energy to more than 300 million people not yet connected to the power grid.
Financing India’s Clean Energy Transition, published in October, examines the recent growth across the country’s off-grid, small energy grids, rooftop solar and utility-scale renewable energy segments and looks at challenges in their future growth including financing trends.
Total annual investments in utility-scale projects crossed the $10 bn mark last year. The Indian government’s ‘175GW renewables by 2022′ target includes 135 GW of utility-scale projects. This implies that cumulative capacity would have to increase more than three times between 2016 and 2022, from 39GW in 2015 to 135GW, requiring investment of nearly $100bn (an average $14bn/year).
Indian project developers are trying to meet this capital requirement by various means, including increasing borrowings from multilateral organisations and issuing green and masala bonds.  Masala bonds are issued outside India but denominated in Indian Rupees, rather than the local currency.
The small and rooftop solar sector will need another $50 bn to meet its own ’40GW by 2022 target’. Rooftop solar in particular has become the fastest growing renewable power sub-segment in India’s clean energy market. Starting from a small base, annual installations have increased by nearly three times (from 72MW to 227MW) in the past three financial years and this trend is expected to continue.
The cost of electricity from new rooftop projects is falling, and now lies between $69 and $92 per MWh. Lower and lower costs are driving market growth. Shantanu Jaiswal, lead India analyst at Bloomberg New Energy Finance, said that rooftop solar power costs are “now competitive with tariffs paid by industrial and commercial consumers and often comparable to average residential electricity rates”.
Subsequent increases in power demand in off-grid areas can be met by small renewable grids. These started to provide 76 000 rural households with scheduled power in FY 2013-16.

 



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