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Renewable Energy Growth Set To Slow Amidst Political Uncertainty

The renewable energy industry is expected to see a significant slowing over the next five years, according to the International Energy Agency, unless political and policy uncertainty is dealt with.

These were the findings from the International Energy Agency’s (IEA) third annual Medium-Term Renewable Energy Market Report, released Thursday. According to the report, global renewable energy generation is expected to rise by 45% and will make up nearly 26% of global energy generation by 2020, however, those figures could be better, as annual renewable energy growth in new renewable power is set to slow and stabilise after 2014.

Renewable energy expanded at its fastest pace to date in 2013, according to the report, with renewable energy generation estimated to be on par with energy generated by natural gas. However, despite strong anticipated generation growth, the IEA believe that renewables are facing a transition period as new generation, capacity additions, and investment are all expected to level off through 2020.

“Renewables are a necessary part of energy security,” said IEA Executive Director Maria van der Hoeven. “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.”

As we have seen in countries such as the United States, Australia, and Germany, uncertainty in renewable energy policy can have dramatic impacts on the stability of the industry, specifically in terms of investment. The IEA make note that for the renewable energy industry to maintain its strong growth pattern, policies need to provide the certainty investors need to commit to backing the industry as it grows.

global renewable

“Governments must distinguish more clearly between the past, present and future, as costs are falling over time,” van der Hoeven 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.”

Renewable energy is playing a big part in none-OECD countries, representing almost 70% of renewable energy’s growth in 2013, yet meeting only 35% of the fast-growing energy needs of those countries — coal, in many cases, is filling the gap, which is representative not just of how far we have to go, but how far renewable energy can go.

However, “increased policy and market risks cloud the development picture, raising concerns over how fast renewable can scale up to meet long-term deployment objectives.”

An executive summary of the report is available for download (PDF).

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