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Policy & Politics IEA report renewable energy market

Published on September 1st, 2014 | by Tina Casey

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Renewable Energy Now Accounts For 80% Of New Generation (What’s The Catch?)

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September 1st, 2014 by  

According to the latest report from the International Energy Agency, renewable energy now accounts for 80 percent of new generation among the 34 developed countries in the Organization for Economic Co-operation and Development. But, don’t break out the bubbly just yet. The new IEA report raises a number of concerns about the prospects for continued rapid growth in renewable energy investment through 2020, and the picture gets particularly murky when you throw non-OECD members into the mix.

IEA report renewable energy market

Image (cropped): Ivanpah solar power plant by Craig Dietrich.

Renewable Energy Growth In Developed Countries

The annual IEA Medium-Term Renewable Energy Market Report covers fossil fuels as well as renewable energy and energy efficiency.

The efficiency angle is an interesting twist as applied to the prospects for future growth in renewable energy investment in developed countries, so let’s take a step back and view the IEA report through a wider lens before we get into the details.

Although the report foresees the prospect of slow growth for renewable energy generation in OECD countries, that’s not straight-up bad news.

One factor the agency takes into account is the falling cost of renewable energy. To put it simply, as prices go down investors don’t have to kick in as many dollars for the same wattage as in the past.

Here in the US, for example, costs for solar power and wind power have been sinking like a stone thanks partly to technology improvements spurred on by taxpayers via the Energy Department. Also helping exert downward pressure are Obama Administration initiatives designed to reduce the “soft costs”  of solar power including manufacturing, financing, and installation.

The cost factor is reinforced by energy efficiency improvements, which can also put a damper on the growth in demand. Looking again at the US for a model, the Obama Administration has been pushing to ramp up energy efficiency for appliances in addition to overseeing the implementation of new Bush-era efficiency standards for light bulbs. That’s on top of a broader energy efficiency push that includes programs like the Better Buildings initiative as well as initiatives for manufacturing and transportation.

To the extent that energy efficiency improvements help to forestall the need to build new central power plants, that’s also going to rein in the pace of growth. Advanced energy storage and smart grid technologies could come into play, too. That includes more EV owners coming into the market and practicing off-peak charging.

When you combine these factors with the rise of distributed renewables, what you get is a generally sluggish demand for more kilowatt-hours from central power plants.

Even with sluggish growth for total kilowatt-hours, OECD policies that favor climate management and distributed generation could still enable healthy growth for renewables, as fossil-burning central power plants are taken offline and replaced with something cleaner.

The Renewable Energy Catch, Part One

However, that gets to the nut of the problem. The main reason that the baseline forecast in the IEA report calls for sluggish growth in the coming years is policy uncertainty, as expressed in the Executive Summary:

In this report’s baseline case forecast, annual growth in new renewable power capacity is expected to stabilise over 2013 – 20 , a departure from the previous decade’s upward trend of rapidly increasing annual growth in some technologies. This trajectory reflects growing risks to deployment in some key OECD markets.

IEA emphasizes that the baseline approach is a conservative one that does not take policy change into account:

…Nevertheless, this conservative outlook is not inevitable – with certain market and policy enhancements, the most dynamic renewable technologies could grow faster through 2020 than in this report’s baseline case.

Looking to the US once again, it’s difficult to see how an aggressive, bipartisan renewable energy policy could gel consistently until the lobbying efforts of the Koch brothers and other fossil stakeholders are neutralized.

The Renewable Energy Catch, Part Deux

When you take non-OECD countries into account the picture looks even gloomier, partly because overall energy demand is rising quickly in those countries, not stabilizing as in OECD countries.

Combine that with uncertainty over clean energy policy in OECD countries (the US wind tax credit kerfluffle provides a good example), and here’s how the IEA report describes the outcome (emphasis added):

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.

[snip]

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.

If you don’t have time for the whole report you can skim the Executive Summary for a rundown on some of the bright spots and strong market drivers as well as the negative forces, but we bolded that last phrase because it zeroes in on the critical role that the US and other fossil-exporting nations play in getting non-OECD countries on board with more renewables.

 

Take the US for example. With strong policies in place, growth in the US renewable energy market could remain strong domestically and yet the US could still contribute an outsized share to future growth in global carbon emissions, due to its extraction and export of fossil fuels.

Aside from demand for US coal overseas, pressure is growing on the US to export more natural gas, which is problematic in terms of unresolved fugitive emissions issues. Another pressure point is crude oil, derived from conventional operations as well as fracking and tar sands.

Let’s also include the US role in enabling Canadian fossil fuels — namely, tar sands oil — to reach global markets.

There’s much more in the report. If you spot anything of particular interest, drop us a note in the comment thread.

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About the Author

Tina Casey specializes in military and corporate sustainability, advanced technology, emerging materials, biofuels, and water and wastewater issues. Tina’s articles are reposted frequently on Reuters, Scientific American, and many other sites. Views expressed are her own. Follow her on Twitter @TinaMCasey and Google+.



  • Hans

    “Renewable Energy Now Accounts For 80% Of New Generation…..”

    Generation what? Nominal Capacity? Average production? Makes a big difference.

    • eveee

      It’s production in Twhrs. See the exec summary link.

      • Hans

        That is great news. However, I think an article should be understandable without reading the linked material. Links should be there for additional information, not for essential information.

  • eveee
    • TinaCasey

      Might have something to do with that policy uncertainty angle…the latest report seems to be a plea for rational policymaking rather than a straightup forecast.

      • eveee

        Tina-I like your take on this. By all means let’s use it as a plea for rational policy making.

  • JamesWimberley

    The IEA are backing a strong case for stable policies with alarmist projections that overstate their importance. Grid parity makes policy less central, and policy wonks don’t like to recognize this.. Uncertainty is a fact of life for investors: markets change, taxes change, etc. That’s why they demand say 8% returns, not the 3% they could get risk-free in Treasuries.

    I suspect the IEA staff decided for political reasons not to point the finger at the one kind of policy change that really does scare off investors for a long time: retroactive changes in contracts they thought were solid. That is what has happened in Spain, Italy, the Czech Republic, and I think Bulgaria. It’s as bad as an Argentine debt default. So they threw these in with normal policy shifts in incentives, as in the USA, Germany, UK, France – in fact everywhere. These are an irritation not a tragedy.

    BTW, solar installations in Germany picked up in July: doubling from June and the first-half average. The policy uncertaintly round the EEG reform delayed investment decisions, it didn’t change their bottom line very much.

  • Will E

    IEA was always badly wrong in analysis of future Wind and Solar.
    their reports are only usefull for looking back, to see how far they missed it.

  • Matt

    Part of “strong policies in place” for any OECD country (US included) would be a heavy sin tax on any exported fossil fuel. Say 25% of peak spot sale price over last year. I don’t think I’m going to die in the next 15 years but I do have a life insurance policy, to protect my wife and kids; just in case. World leader (political and corp) need to think of GHG and climate change in these terms.

    • TinaCasey

      Interesting parallel with tobacco and alcohol taxation…

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