Published on October 6th, 2015 | by Guest Contributor49
Does The International Energy Agency Underestimate Renewables?
October 6th, 2015 by Guest Contributor
Originally published on Energy Post.
By Karel Beckman
In a new market report on renewable energy, the International Energy Agency (IEA) notes that renewables will represent “the largest single source of electricity growth over the next five years”, reaching a share of 26% of world power supply in 2020, compared to 22% in 2013. Yet critics say the IEA is still underestimating the speed at which renewables like solar and wind are likely to grow. Energy Post editor Karel Beckman tries to figure out whether they are right.
In its latest annual Renewable Energy Medium-Term Market Report, published on 2 October, the IEA could hardly have been more positive about the prospects of renewables. This is significant, as the IEA, founded in the 1970s to coordinate the oil emergency stocks OECD member nations keep on hand in case of an oil supply crisis, is today arguably the world’s most influential energy think tank.
The report notes that, “driven by falling costs and aggressive expansion in emerging economies, renewable electricity additions over the next five years will top 700 gigawatts (GW) – more than twice Japan’s current installed power capacity. They will account for almost two-thirds of net additions to global power capacity.” Non-hydro sources such as wind and solar PV will represent nearly half of this total global power capacity increase, says the IEA.
As a result of this growth, the IEA sees the share of renewable energy in global power generation rising to over 26% by 2020 from 22% in 2013 – “a remarkable shift in a very limited period of time”. By 2020, notes the report, “the amount of global electricity generation coming from renewable energy will be higher than today’s combined electricity demand of China, India and Brazil.”
“Some countries and regions now have the potential to leapfrog to a development paradigm mainly based on increasingly affordable renewable power”
The IEA also points out that the growth of renewables is not a “luxury” that only rich countries can afford. On the contrary, it says “the geography of deployment will increasingly shift to emerging economies and developing countries, which will make up two-thirds of the renewable electricity expansion to 2020. China alone will account for nearly 40% of total renewable power capacity growth and requires almost one-third of new investment to 2020.”
The most important reason for the positive growth prospects is that “renewable generation costs have declined in many parts of the world due to sustained technology progress, improved financing conditions and expansion of deployment to newer markets with better resources.” The IEA notes that “announced prices for long-term generation contracts at reduced levels are emerging in areas as diverse as Brazil, India, the Middle East, South Africa and the United States. As such, some countries and regions now have the potential to leapfrog to a development paradigm mainly based on increasingly affordable renewable power. This is especially true in Sub-Saharan Africa.”
Fatih Birol, the new Executive Director of the IEA (formerly he was their Chief Economist) said at the presentation of the report in Istanbul: “Affordable renewables are set to dominate the emerging power systems of the world.”
The IEA reports that globally average costs for onshore wind generation fell by 30% in the period 2010-2015, and they are expected to decline a further 10% by 2020. Utility-scale solar PV fell two-thirds in cost and are expected to decline another 25%. This means that “high levels of incentives are no longer necessary for solar PV and onshore wind.” However, the IEA does add that “their economic attractiveness still strongly depends on the regulatory framework and market design”. For offshore wind, solar thermal power and bioenergy, “continued policy support” will be necessary “to bring them down the learning curve”.
For this reason, Birol said “this is hardly the time for complacency. Governments must remove the question marks over renewables if these technologies are to achieve their full potential”.
The WEO-reports “assume linear growth, whereas history shows exponential growth for the new renewable energy technologies”
In a new study, published on 22 September, the Energy Watch Group, a Berlin-based “independent network of scientists and parliamentarians” founded by the former member of the German Parliament Hans-Josef Fell, blames the IEA for “consistently undermining the potential of solar and wind energy in the last decade”.
The Energy Watch Group (EWG) together with Lappeenranta University of Technology looked back at the IEA’s past projections for renewables in its flagship annual publication, the World Energy Outlook (WEO), over the period 1994-2014 and concludes that they have been “misleading”.
Specifically, the study finds that:
- The WEO 2010 projections for solar PV capacity for the year 2024 (180 GW) have been achieved in January 2015 and exceeded threefold the WEO projections for 2015.
- Real wind capacity in 2010 exceeded 260% and 104% the WEO 2002 and 2004 projections respectively for this year. WEO projections for wind energy from 2002 for 2030 had been achieved 20 years earlier, in 2010.
- Independent analysts have been more correct in their projections of the successful expansion of renewable energy than the WEO. Only forecasts of the conventional energy industry, including BP, Shell and Exxon Mobil, were similarly low as IEA projections.
- WEO projections overestimate the potential of coal industry in the last years and do not reflect the latest trend of divestment of finance from the coal industry in the last years as well as China’s starting coal exit and increasing investment in renewables.
- WEO from 2000 to 2006 highly overestimated oil-based electricity.
- Despite a decline of nuclear energy in the last 10 years, WEO still projects an annual expansion of about 10 GW nuclear in the next decade. Given a few commissioned and financed nuclear projects and the 100-200% overruns over the planning costs in Europe and delays, WEO projections appear highly overestimated.
The main reason why the IEA has tended to underestimate the prospects of solar and wind, says EWG, is that the WEO-reports “assume linear growth, whereas history shows exponential growth for the new renewable energy technologies.”
EWG does have a point. If we look at the World Energy Outlook 2010, the share of renewables in electricity generation is given as 19% in 2008 (incidentally, the same as in 2000). It is expected to rise to 23% in 2035 under the IEA’s Current Policies scenario, which assumes that current climate and energy policies will continue, but no new ones will be introduced by governments. This level was already reached in 2014.
The IEA’s New Policies Scenario, which assumes that all policies that governments have announced will be adopted, expects renewables to rise to 32% in 2035. This still seems a modest share, if we consider that the IEA in its latest medium-term market report puts the renewables share at 26% in 2020 already. The medium-term market report does not give any projections beyond 2020.
The false WEO predictions lead to high investments in the fossil and nuclear sectors
Just looking at solar PV, the EWG study notes that “the achieved capacity of about 177.6 GW of PV at the end of 2014 plus the installations of January 2015 had been projected in the WEO 2010 for the year 2024. The real installed PV capacity in 2014 has exceeded threefold the 2010 WEO projections for that year.”
The IEA’s new medium-term market report (which was not included in the EWG study) does show a slightly higher solar PV projection for 2020 (430 GW) than the WEO 2014 (less than 400 GW). This is four times the level projected in the WEO 2010 for 2020. Still, it is nowhere near what EWG thinks solar power will amount to.
Whereas the WEO2014 projects some 650 GW of solar PV installed for 2030, EWG notes that projections from other sources are much higher. “The recent numbers for 2030 are 1764 GW (Greenpeace), and 1840 GW (Bloomberg). Most interestingly the renewable energy experts of the IEA, who seem to have a rather small influence on their own WEO colleagues, project 1721 GW. However, there are also market expectations for cumulated installed PV capacity of 2100 to 2300 GW.”
EWG concludes that “the WEO seems to be no reliable source for solar PV projections.”
We won’t know who is right of course until 2020 and 2030 roll along, but it is noteworthy that the IEA in its new medium-term report sees “annual installations [of all renewable energies] level off, falling short of what’s needed to put renewables on track to meet longer-term climate change objectives”. So the IEA persists in not projecting “exponential growth”, as EWG would like to see.
The question is, how bad is this? According to EWG, the IEA by “consistently underestimating” the potential of renewable energy “and promoting conventional energy resources” has been “holding back the global energy transition for years. The false WEO predictions lead to high investments in the fossil and nuclear sectors, hinder global development of renewable energy and undermine the global fight against climate change”, charges the President of EWG Hans-Josef Fell.
EWG adds that “the WEO reports are being approved by OECD governments, some of which have high stakes in conventional industry. Therefore, the Energy Watch Group calls the scientific community and civil society to examine closer political and business dependencies within IEA.” The study’s lead author and professor of Solar Economy at Lappeenranta University of Technology in Finland Christian Breyer says that “from a scientific point of view, these structural errors [in the IEA’s WEO reports] are incomprehensible, from a social perspective they are irresponsible.”
But EWG does not present any evidence to show that the IEA’s projections “lead to high investments in the fossil and nuclear sectors”. The opposite may also be true: by underestimating the growth potential of renewables, the IEA may motivate governments and investors to invest more in renewables. It would certainly be interesting to know whether and how the IEA’s projections affect investment decisions in energy.
In addition, even though the IEA may have underestimated the growth potential of solar and wind, it does consistently call on governments to support those technologies vigorously. Similarly, it has been urging policymakers for many years to take action on climate change. In an interview Energy Post had with Fatih Birol last year he said that “radical action is needed to actively transform energy supply and end use”. Birol and the IEA have been giving out similar messages for many years. To charge, as EWG does, that they are “undermining the global fight against climate change”, seems unfounded.