Solar booms and surging investment: 5 takeaways from the IEA's latest renewables report
The International Energy Agency (IEA) delivered some upbeat news for the global green economy this week, predicting a massive surge in renewables deployment over the next five years. Upgrading its projections for the clean power sector yet again, the influential agency suggested that by 2024 developers will have added enough new renewables capacity to the global grid to match demand from the entire U.S. economy.
However, the predictions of a stellar five years for the global renewables industry once again proved bittersweet, as the IEA acknowledged projected deployments still were not coming fast enough to push the world onto a decarbonization trajectory compatible with the goals of the Paris Agreement. For that to happen, governments around the world must be prepared to intervene more in their power markets to remove obstacles to clean energy deployment, the agency warned.
As such, Fatih Birol, the IEA's executive editor, said the next five years will prove a "pivotal time" for the renewable energy market. "Renewables are already the world's second largest source of electricity, but their deployment still needs to accelerate if we are to achieve long-term climate, air quality and energy access goals," he said.
Nevertheless, today's report could mark a turning point for many renewables markets, with solar and biofuels, in particular, tipped for explosive growth. BusinessGreen has pored through the IEA's report to bring you the five must-know takeaways for green business executives.
1. After a sluggish 2018, renewables are getting their mojo back
2018 was a worrying year for the clean energy sector. Data from the IEA suggested renewables capacity additions remained flat in 2018, the first time the sector's growth rates have stalled since 2001.
But today's update suggests 2018 will go down as a blip, rather than the start of a worrying trend. Renewable power capacity additions are forecast to grow 12 percent in 2019, their fastest pace of growth in four years, as plummeting costs and the emergence of clean energy auctions in a number of key markets pumped up the project pipeline once again.
That growth is set to continue over the next five years, according to the IEA, with renewable power capacity expected to expand by 50 percent between 2019 and 2024, thanks to brighter deployment outlooks for major markets such as the European Union, the United States and China.
2. Surging growth in distributed solar presents fresh problems
Under the IEA's prediction, distributed PV is set to prove a key player in the green power boom. Capacity is expected to more than double by 2024 to 530GW, mainly down to a huge increase in installations on commercial buildings, the IEA said. The commercial market is set to boom, even in markets where subsidies have been axed, thanks in large part to falling solar technology costs. Some 227GW of distributed PV is expected to be installed on commercial and industrial rooftops between 2019 and 2024, according to the IEA, up from just over 100GW between 2013 and 2018.
But the rise of distributed solar also will bring technical problems if governments fail to manage the impact on power grids effectively, the IEA warned.
Distributed PV is increasingly a cheaper source of power than the national grid in many countries, and as solar costs fall further the cost gap is set to grow, the IEA said.
But more distributed solar capacity means less energy drawn from the grid, pushing a higher proportion of grid maintenance charges onto customers without their own generation sources. If current trends continue, it could see poorer domestic households paying more for power, while businesses and richer homes with the capital to invest in solar arrays can take advantage of cut-price energy.
3. Prepare for a biofuel boom
As government efforts to accelerate decarbonization shift towards transport, total biofuel output is expected to increase by a quarter by 2024, the IEA said.
China is set to emerge as the global leader for biofuel production with its ethanol production expected to triple by 2024 to 11 billion liters a year, driven by a rollout of ethanol blending mandates in a number of China's provinces.
Meanwhile, the IEA predicts a key driver for biofuel growth, particularly in developed nations, will be the hunt for greener aviation fuels.
Assuming a host of refineries making commercial aviation biofuel come online in the next few years as planned, aviation biofuel production will increase from just 15 million liters in 2018 to 1 billion liters a year by 2024. Under the IEA's accelerated scenario — which would require more biofuel refineries to come online — production could reach up to 3 billion liters a year by 2024.
4. Renewables could draw level with coal by 2024
By 2024 there could be as much renewable generating capacity on the global grid as coal capacity, if issues such as grid integration, policy uncertainty and financing challenges are addressed.
Under the IEA's base case scenario renewables are still second to coal power in the global generation rankings, but under its accelerated scenario renewable capacity expansion is 26 percent higher than under the base case, with annual capacity additions hitting 280GW by 2024. That would pull total global renewables capacity level with total coal generating capacity, according to analysis from Carbon Brief.
5. The IEA is almost always wrong
Perhaps not wrong exactly, but certainly pessimistic in its outlook for renewable energy. Renewables capacity consistently has outstripped the IEA's base case predictions since 2013, often by a considerable margin.
In this year's report, it admits it has deployed a "significant upward revision" of 14 percent in the forecast for renewables deployment compared to last year's report, owing to falling technology and installation costs and the growing number of governments running competitive auctions for clean energy contracts, particularly in Europe.
So while the IEA is predicting the world will not deploy enough clean energy for the world to hit its climate goals, it is worth remembering that there is a good chance the clean energy market will outperform the IEA's expectations once again. And if the world is to meet the goals of the Paris Agreement, it will have to.