At the launch of its latest World Energy Outlook, the International Energy Agency forecast a series of major changes to the global power mix, writes Kelvin Ross

The executive director of the International Energy Agency has declared that “renewables are not a niche fuel any more – they are the mainstream as of now”.

Launching the IEA’s annual World Energy Outlook in London in November, Fatih Birol said that last year, renewable capacity additions had hit a record 130 GW.

He said that whereas in past years hydropower has been the biggest renewable growth sector, in the near future it would be wind and solar that enjoy the largest climb in market share.

He highlighted the domination of renewable energy by stating that “for every dollar invested in the power sector, 60 cents will be on renewables”.

And he stressed that already two-thirds of growth in renewables was taking place in emerging countries rather than those of the OECD.

Indeed, it was an emerging country that he predicted would be the big success story between now and 2040.

India will be the engine of global energy demand growth,” he said. “India is moving to the centre stage of world energy. Some 600 million people will be connected to electricity in the next 25 years.”

China, meanwhile, is undergoing a fundamental shift in its energy mix. Birol said that currently it is “the champion of renewables” and this was having a profound effect on its traditionally-intensive use of coal.

The IEA forecasts that, between now and 2040, China’s coal use will plateau as the country’s economy rebalances and industrial coal demand falls.

“We are approaching the end of the single biggest demand-growth story in history,” said Birol, adding that China’s energy demand will slow and decouple from economic growth. “This will have implications for the entire world. China has the strongest energy-efficiency push and the country is going through a rebalancing of its economy.”

Birol explained that the rise of renewables and the cheapness of coal is having an impact on another power source – gas. A few years ago the IEA wondered if we were entering a ‘golden age of gas’. Today, Birol said that this had come to pass in the US, but the picture was very different elsewhere, particularly Asia.

“Coal and renewables are squeezing the share of gas,” he said. “Coal is still much cheaper than gas in Asia and it’s cheaper to build a coal plant than a gas plant.”

China is cutting its reliance on coal

Credit: EPS

He added that “solar and wind are also becoming more competitive, therefore gas is facing some strong competition”.

“Life is not so easy for gas in Asia, even though it is plentiful there.”

Birol highlighted that the upcoming climate talks in Paris next month were crucial. “The energy transition is underway, but it needs a strong signal from Paris. Paris is an excellent opportunity. I hope to see an agreement that must have energy at its core.”

He stressed that, as the largest source of greenhouse gas emissions, the energy sector must take centre stage in any global action on climate change.

Hailing recent legislation including the US Clean Power Plan and China’s new carbon trading scheme, which kicks in in 2017, he said: “We are seeing unprecedented political momentum.”

He said if the COP21 pledges made by 150 countries are met, it would result in a global temperature rise of 2.7 degrees – which, while short of the target of 2 degrees, would still have the effect of decoupling power sector emissions from energy demand.

This “happy divorce” would, he said, result in power sector emissions remaining flat through the 2030s.

And he stressed that at the Paris climate talks, “governments must ring-fence policies against market swings”.

Fatih Birol: “Renewables are mainstream”

Credit: IEA

IEA World Energy Outlook At A Glance

Electricity demand increases by more than 70 per cent between 2013 and 2040, with non-OECD countries responsible for seven out of every eight additional units of electricity demand

Installed power generation capacity reaches 10,570 GW in 2040, an increase of some 4400 GW over the level in 2014

The share of coal in the global power generation mix falls from today’s 41 per cent to 30 per cent in 2040, while the share of low carbon technologies increases from one-third in 2013 to 47 per cent in 2040

Global power sector investment totals nearly $20 trillion between 2015 and 2040, split between 6700 GW of new power plants and 75 million km of transmission lines

By 2040, the average efficiency of coal-fired power plants climbs to 40 per cent, with the level in India reaching that of the OECD and China today

Energy trade relationships continue to be rewritten, with Asia the final destination for 80 per cent of regionally traded coal, 75 per cent of oil and 60 per cent of natural gas in 2040

Fossil fuel subsidies were around $490 billion in 2014, but would have been $610 billion without reforms that have been enacted since 2009

Industry comment: Bob Smith, Executive Vice-President, Mytrah Energy

I am delighted that the IEA have confirmed what we at Mytrah have been saying for some time – that India is the most exciting power market in the world.

The combination of rapid economic growth and a relatively low per-capita consumption places India at the centre of the world energy stage, with demand growth exceeding all other countries over the next 25 years.

What is particularly interesting is that the IEA also sees renewables taking 60 per cent of the energy investment globally at the moment, and forecasts India to take 20 per cent of the world solar power growth.

As one of the largest renewable companies in India, Mytrah is well placed to take advantage of this dramatic increase in renewable energy demand.

Attracted by the rapidly growing market and the lack of large government subsidies, we have built a portfolio of 578 MW of wind power in India over the last five years.

Wind is cost-competitive with fossil fuels in India and has the great advantage of being very quick to construct – an ideal solution for a rapidly growing market.

We agree with the IEA that solar will also be a very large market in India now that costs have fallen to the point where substantial subsidy is not required.

We commissioned our first solar projects this year and have a substantial pipeline in development.

The IEA recognizes that the potential for growth in Indian renewables is clearly very substantial and we are delighted that this is becoming more widely recognized.

At Mytrah, we have learned that execution in this sector can be very challenging, especially for those unfamiliar with India.

We aim to continue our successful track record by delivering a large part of the renewable energy that India requires over the next 25 years.

Industry Comment:Javier Cavada Camino, President, Energy Solutions, Wärtsilä

According to the IEA, renewable generation will reach 50 per cent in the European Union by 2040, about 30 per cent in China and 25 per cent in the US and India.

This is great news from the climate perspective.

But the fact that two-thirds of the renewable growth comes from wind and solar energy can create remarkable flexibility challenges.

Gigawatts of backup power need to be pushed online within a very short time due to changing weather and forecast errors. Baseload will largely disappear, replaced by sharp spikes of fluctuating net demand.

To absorb the variations of wind and solar energy, power systems need much more flexibility. It comes in four forms: energy storage, interconnectivity, demand response and flexible generation.

Each of these mechanisms will be needed, but the only technology readily available in large scale today is flexible generation based on natural gas.

The most flexible generation technology is gas power plants based on multiple internal combustion engines. Their output can be started to full power in less than two minutes, regardless of plant size.

The engines can be started and stopped continuously without impact on maintenance. This inherent ultra-flexibility makes internal combustion engine plants an ideal companion for wind and solar energy.

This is also why the IEA predicts a “comeback of a well-known technology”.

Indeed, rapid load-following internal combustion engine generation not only supports wind and solar energy but enables more of them.

Very high shares of renewables – and the impressive figures of the IEA – will only be possible with enough flexibility in power systems.

Industry Comment: Dr Tilman Tütken, Vice-President, MAN Diesel & Turbo

There can be no argument about the global rise of renewable energy, which will – without a doubt – continue to take a leading role on the path to decarbonization.

Renewables alone, however, won’t cut it. That can be observed firsthand in Germany, where carbon dioxide emissions started to rise again after decades of decline in 2009. Subsidized renewables pushing into the market led to an erosion of wholesale prices for electricity. Most gas-fired plants could not compete on that price level. Consequently, the share of energy generated from coal increased substantially.

On a global scale, we need to prevent this mechanism. Little would be won if the rise of renewable energy increased the worldwide share of coal-fired generation. Not only would it thwart decarbonization efforts, it would also prevent the ‘capability turn’ in thermal generation needed to efficiently integrate intermittent energy sources. Most power plants in operation today were not designed for the necessary tasks, e.g., quick ramp-ups or efficient partial load operation.

Technologies which provide these capabilities are in place, e.g., gas engines, which are low in emissions, quick and flexible and also allow heat recovery and energy storage integration. Yet with coal still being the cheaper fuel in most parts of the world, natural gas has a hard time to compete. This could be changed by the global installation of an effective emission trading system. An added price tag to carbon dioxide emissions would help to outbalance that competitive disadvantage.

By the time this is published the COP21 summit may have achieved some progress on the way to the global installment of such a system. My fingers are crossed. We need to make sure that the rise of renewables indeed leads the way to a more decarbonized and efficient global energy footprint.