Fossil fuels are still dominating global energy supply and power generation, but as the world is growing increasingly aware of the dangers posed by climate change, renewable energy has started to attract more media attention and more industry investments in recent years.
The role of renewable energy in the future global power mix is expected to grow in the coming decades, but the pace of that growth will depend on supportive government policies, technological advances, and investments in clean technologies and energy efficiency.
Renewable energy trends in different parts of the world vary greatly, but one trend is emerging as a common global feature—renewables are set to gain growing market shares in electricity generation as many stakeholders have started to realise that if the world were to curb global temperatures and save the planet for future generations, the use of cleaner energies and technologies must increase.
Electrification in transport is also gathering pace with many legacy auto manufacturers venturing into the electric vehicle market. Battery costs are falling and analysts estimate that within a decade, the costs of EVs could be brought down to parity with the costs of making vehicles with internal combustion engines (ICEs).
Yet, even if demand for oil for cars were to start slowing down in a decade or two, oil consumption will still be supported and driven by rising demand for petrochemicals and from the aviation industry, experts say.
Clean energy technologies will drive cleaner transportation in the future, but currently the strongest growth in alternative energies takes place in global power generation.
According to the Renewables 2018 report by the International Energy Agency (IEA), the share of renewables in meeting energy demand worldwide is set to increase by one-fifth over the next five years, and reach 12.4 percent in 2023. The electricity sector will see the quickest pace of growth in renewables, as various renewable energy sources are expected to provide nearly 30 percent of power demand in 2023, up from 24 percent in 2017, according to the IEA.
Over the next five years, renewable energy is projected to meet more than 70 percent of global electricity generation growth, led by solar photovoltaics (PV) and followed by wind, hydropower, and bioenergy. Hydropower will continue to be the largest renewable source, meeting 16 percent of global electricity demand by 2023, followed by wind (6 percent), solar PV (4 percent), and bioenergy (3 percent), the IEA has estimated.
The renewables share in the heat sector—heating for buildings or industry—is expected to grow at a slower pace compared to the power sector, but it is seen making up the largest overall share of renewable energy in meeting energy demand in 2023. Renewable heat consumption is set to jump by 20 percent over the next five years, reaching a share of 12 percent of the heating sector demand by 2023.
In the World Energy Outlook 2018, the IEA has recently released forecasts for global energy through 2040. In the electricity sector, changes are the most dramatic since its creation more than a century ago, the Paris-based agency said.
“Policy support and technology cost reductions are leading to rapid growth in variable renewable sources of generation, putting the power sector in the vanguard of emissions reduction efforts but requiring the entire system to operate differently in order to ensure reliable supply,” the IEA notes.
In several policy scenarios examined, renewables and coal switch places in the global power mix in the New Policies Scenario—the share of power generation from renewable energy is expected to grow from around 25 percent currently to some 40 percent in 2040, while coal is expected to take the opposite path.
The Sustainable Development Scenario—which offers a pathway to meeting various climate, air quality, and universal access goals in an integrated way—forecasts that the share of renewables in the power mix could grow from one-quarter now to two-thirds in 2040, in heat – from 10 percent today to 25 percent in 2040, and in transport from the current 3.5 percent to 19 percent, including both direct use and renewables-based electricity.
In terms of global investments in renewables, the IEA’s World Energy Investment 2018 report found that after several years of growth, the world’s overall investment in renewable energy went down by 3 percent in 2017. A change in Chinese solar PV policy support creates the risk of a further drop, the IEA warned.
“Such a decline in global investment for renewables and energy efficiency combined is worrying,” Fatih Birol, the IEA’s Executive Director, said, commenting on the report.
“This could threaten the expansion of clean energy needed to meet energy security, climate and clean-air goals. While we would need this investment to go up rapidly, it is disappointing to find that it might be falling this year.”
In wind energy, technology development continues to drive costs down, Wood Mackenzie Power & Renewables said in new research.
Technology developments and breakthroughs have become a key driver in making wind a competitive source of power generation, according to the lead author of the research and senior analyst Shashi Barla.
“Now that auction systems are driving down power prices worldwide, product and service evolution is paramount. While the shift away from generous incentive mechanisms leads to a short-term market dip, the forecasted growth over the next decade makes the market ripe for innovation,” Barla said.
Total global clean energy investments in the third quarter of 2018, including equity raising by EV makers, came in at US$67.8 billion, a 6-percent decline compared to the same period in 2017, according to figures from research company Bloomberg NEF (BNEF). The drop in Q3 leaves investments through September this year trending 2 percent below the investments for January-September 2017. For full-2018, total clean energy investments could end up at last year’s level, especially if “a few more multibillion-dollar offshore wind deals are concluded before Christmas,” BNEF reckons.
The three single largest renewable energy asset financings in Q3 2018 were the 860MW Triton Knoll Offshore Wind Farm in the UK at an investment cost of US$2.6 billion, the Enel Green Power South Africa portfolio, at $1.4 billion for 706MW, and the Guohua Dongtai offshore wind farm phase four offshore China, at an estimated $1.2 billion for 300MW, according to BNEF.
In the UK power generation market, renewables are gaining increasing shares in recent months and years.
According to the Q3 2018 provisional energy statistics from the Department for Business, Energy and Industrial Strategy, the share of renewable electricity supplied by Major Power Producers (MPP) reached 26.1 percent, a record high for a three month period. Wind, solar, and bioenergy all saw significant rises in generation in Q3 versus Q3 2017, jumping by 12 percent, 26 percent, and 23 percent, respectively.
In September alone, renewables accounted for almost a third of MPP electricity supply, thanks to soaring wind generation.
Renewable energy is set to gain more prominence in the global energy system, but it will likely need even more investments and policy support to start making a meaningful contribution to reducing global carbon emissions. Just days ago, the IEA warned that energy-related carbon dioxide (CO2) emissions from advanced economies are set to increase in 2018 for first time in five years.