PARIS — Power generation from renewable sources such as solar, wind, and hydro grew strongly in 2013, reaching almost 22 percent of global generation, and was on par with electricity from gas, whose generation remained relatively stable, according to a new report from the International Energy Agency (IEA). Global renewable generation is seen rising by 45 percent and making up nearly 26 percent of global electricity generation by 2020. Yet annual growth in new renewable power is seen slowing and stabilizing after 2014.

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

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

For the first time, the annual report provides a renewable power investment outlook. Through 2020, investment in new renewable power capacity is seen averaging over $230 billion annually. That is lower than the approximately $250 billion invested in 2013. The decline is due to expectations that both unit investment costs for some technologies will fall and that global capacity growth will slow. With decreasing costs, competitive opportunities are expanding for some renewables under some country-specific conditions and policy frameworks. For example, in Brazil, with good resources and financing conditions, onshore wind has continued to outbid new-build natural gas plants in auctions. In northern Chile, high wholesale electricity prices and high irradiation levels have opened a new unsubsidized solar market.

The roles of biofuels for transport and renewable heat are also increasing, though at slower rates than renewable electricity. Uncertainty over policy support for biofuels is rising in the EU and the United States, slowing expectations for production growth and threatening the development of the advanced biofuels industry at a time when the first commercial plants are just coming online.

The annual report highlights the potential energy security implications of energy use for heat, which accounts for more than half of world final energy consumption and is dominated by fossil fuels. But the contribution of renewables to meet heating and cooling needs remains underdeveloped, with more limited policy frameworks compared with the electricity and transport sectors. Although modern renewable energy sources are expected to grow by almost 25 percent to 2020, their share in energy use for heat rises to only 9 percent, up from 8 percent in 2013.

The Medium-Term Renewable Energy Market Report is part of a series of annual reports the IEA devotes to each of the main primary energy sources: oil, gas, coal, renewable energy and, as of last year, energy efficiency.

To download an executive summary of the Medium-Term Renewable Energy Market Report, click here.

Publication date: 9/15/2014

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