The International Energy Agency (IEA) has revised up its renewable capacity growth forecast, with global renewable electricity capacity now expected to increase by 42%, or 825 GW by 2021. That's 13% than what previously forecast, reaching a 28% share of the electricity generation mix by the end of the five-year period.
The higher expected growth is due mostly to stronger policy backing in the United States, China, India and Mexico, IEA said in its renewable energy medium term market report.
Moreover, over the forecast period, costs are expected to drop by a quarter in solar PV and by 15% for onshore wind.
That would continue an already visible trend, with recently announced record-low long-term remuneration prices ranging from $30/megawatt hours (MWh) to 50/MWh for both onshore wind and solar (PV) plants.
These projects are expected to become operational over the medium term in markets as diverse as North America, Latin America, Middle East, and North Africa, IEA explained, adding that recent tender results in Europe for large-scale offshore wind projects indicate possible 40% to 50% cost reductions for new plants by 2021.
“While these contract prices should not be compared directly to average generation costs, and final project delivery costs may ultimately differ at the time of commissioning, still they signal a clear acceleration in cost reductions, increasing the affordability and improving the attractiveness of renewables among policy-makers and investors” IEA stressed.
Moreover, 2015 marked a turning point for renewables, IEA noted, adding that 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 the gains were represented by “record-level” wind additions of 66 GW and solar PV additions of 49 GW.
Notably, 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 center of gravity for renewable growth is moving to emerging markets,” commented IEA’s executive director, Fatih Birol.
The development is driven by different factors, such as more competition, enhanced policy support in key markets, and technology improvements.
In addition, a push to cutting air pollution and diversifying energy supplies to improve energy security also play a key role in growing low-carbon energy sources, particularly in Asia.
Policy uncertainty, costs still weighing on renewable growth
Despite the record growth of 2015 and more optimistic expectations for the the coming five years, IEA notes however that there are still elements slowing down the green transition.
Namely, policy uncertainty which “persists in too many countries, slowing down the pace of investments.” Moreover, “rapid progress in variable renewables such as wind and solar PV is also exacerbating system integration issues in a number of markets” while “the cost of financing remains a barrier in many developing countries”.
Furthermore, progress in renewable growth in the heat and transport sectors “remains slow and needs significantly stronger policy efforts.”
The IEA also foresees a “two-speed world” for renewable electricity over the next five years.
Despite Asia taking the lead in renewable growth, that would only covers a portion of the region’s fast-paced rise in electricity demand, it said, adding that China alone is responsible for 40% of global renewable power growth, but that represents only half of the country’s electricity demand increase.
That 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.
In response to that, the IEA report identifies a number of policy and market frameworks that could further boost renewable capacity growth.
Those include: addressing infrastructure challenges and market design issues to improve grid integration of renewables; implementing stable and sustainable policy frameworks that give greater revenue certainty to capital-intensive renewables and reducing policy uncertainties; developing policy mechanisms that reduce cost of financing and lower off-taker risks especially in developing countries and emerging economies.
“I am pleased to see that last year was one of records for renewables and that our projections for growth over the next five years are more optimistic,” said Birol. “However, even these higher expectations remain modest compared with the huge untapped potential of renewables.”
“The IEA will be working with governments around the world to maximize the deployment of renewables in coming years” he added.