Boosted by a strong solar PV market, renewables accounted for almost two-thirds of net new power capacity around the world last year, with almost 165 GW coming online, according to a new report, writes Kelvin Ross
New solar PV capacity grew by 50 per cent last year, with China accounting for almost half of the global expansion.
That’s one of the headline findings from the International Energy Agency’s latest renewables market analysis and forecast.
The IEA notes that for the first time, solar PV additions rose faster than any other fuel, surpassing the net growth in coal.
|Almost 165 GW of new renewables capacity came online last year according to the IEA|
Boosted by a strong solar PV market, renewables accounted for almost two-thirds of net new power capacity around the world last year, with almost 165 GW coming online, according to the new report.
And renewables will continue to have a strong growth in coming years, according to the IEA, which is forecasting that by 2022, renewable electricity capacity should increase by 43 per cent.
“We see renewables growing by about 1000 GW by 2022, which equals about half of the current global capacity in coal power, which took 80 years to build,” said Dr Fatih Birol, IEA executive director. “What we are witnessing is the birth of a new era in solar PV. We expect that solar PV capacity growth will be higher than any other renewable technology through 2022.”
The IEA’s renewable forecast for this year is 12 per cent higher than last year, thanks mostly to solar PV upward revisions in China and India. The report states that three countries – China, India and the US – will account for two-thirds of global renewable expansion by 2022. Total solar PV capacity by then would exceed the combined total power capacities of India and Japan today.
In power generation, the report states that renewable electricity is expected to grow by more than a third by 2022 to over 8000 terawatt hours, which is equivalent to the total power consumption of China, India and Germany combined.
“By then, renewables will account for 30 per cent of power generation, up from 24 per cent in 2016,” says the IEA. “The growth in renewable generation will be twice as large as that of gas and coal combined. Though coal remains the largest source of electricity generation in 2022, renewables close the generation gap with coal by half in just five years.”
The IEA notes that the increased deployment of solar PV and wind last year was accompanied by record-low auction prices, which fell as low as 3 cents per kilowatt hour. Low announced prices for solar and wind were recorded in a host of places, including India, the United Arab Emirates, Mexico and Chile. These announced contract prices for solar PV and wind power purchase agreements are increasingly comparable or lower than generation cost of newly built gas and coal power plants.
According to the report, China remains “the undisputed leader” of renewable electricity capacity expansion between now and 2022, with over 360 GW of capacity coming online, or 40 per cent of the global total.
China’s renewables growth is largely driven by concerns about air pollution and capacity targets that were outlined in the country’s 13th five-year plan to 2020. In fact, China already exceeded its 2020 solar PV target three years ahead of time and is set to achieve its onshore wind target in 2019. However, the IEA notes that the growing cost of renewable subsidies and grid integration issues remain two important challenges to further expansion.
Under an accelerated case – where government policy lifts barriers to growth – the IEA analysis finds that renewable capacity growth could be boosted by another 30 per cent, totalling an extra 1150 GW by 2022, led by China. Solar PV and wind capacity in China could by then reach twice the total power capacity of Japan today.
|Increased solar and wind deployment in 2016 was accompanied by record-low auction prices|
India capacity to double
Meanwhile, India’s move to address the financial health of its utilities and tackle grid-integration issues drive a more optimistic forecast from the IEA, which predicts that by 2022, India renewable capacity will more than double.
“This growth is enough to overtake renewable expansion in the European Union for the first time,” said Birol. “Solar PV and wind together represent 90 per cent of India’s capacity growth as auctions yielded some of the world’s lowest prices for both technologies.”
Despite policy uncertainties at the federal level, the US remains the second-largest growth market for renewables. The IEA says that the main drivers for onshore wind and solar – such as multi-year federal tax incentives combined with renewable portfolio standards as well as state-level policies for distributed solar PV – remain strong. “Still, the current uncertainty over proposed federal tax reforms, international trade and energy policies could alter the economic attractiveness of renewables and hamper their growth over our forecast period.”
The report also provides detailed analysis on the renewable consumption of electric cars and off-grid solar deployment in Africa and developing Asia.
|China remains “the undisputed leader” of renewable electricity capacity expansion|
Off-grid capacity in these regions will more than triple reaching over 3000 MW in 2022 from industrial applications, solar home systems and mini-grids, driven by government electrification programmes and private sector initiatives. While this represents less than 5 per cent of total PV capacity installed in both regions, the economic impact is nonetheless significant, and brings basic electricity services to almost 70 million more people in developing Asia and sub-Saharan Africa in the next five years.
The IEA stresses that system integration is going to become increasingly important between now and 2022.
“Wind and solar together will represent more than 80 per cent of global renewable capacity growth in the next five years,” says Birol. “By 2022, Denmark is expected to be the world leader, with 70 per cent of its electricity generation coming from variable renewables.”
The report notes that in some European countries such as Ireland, Germany and the UK, the share of wind and solar in total generation will exceed 25 per cent.
In China, India and Brazil, the share of variable generation is expected to double to over 10 per cent in just five years.
“These trends have important implications going forward,” says Birol. “Without a simultaneous increase in system flexibility – grid reinforcement and interconnections, storage, demand-side response and other flexible supply – variable renewables are more exposed to the risk of losing system value at increasing shares of market penetration since wholesale prices are depressed precisely when wind and solar production exceeds demand.
“Market and policy frameworks need to evolve in order to cope simultaneously with multiple objectives, including providing long-term price signals to attract investment, ensuring efficient short-term electricity dispatching, pricing negative externalities and unlocking sufficient levels of flexibility as well as fostering a portfolio of dispatchable renewable technologies, including hydropower, bioenergy, geothermal and CSP.”
|The US remains the second-largest growth market for renewables, according to the IEA report|
The report highlights that renewable policies are spurring more competition. “Renewable policies in many countries are moving from government-set tariffs to competitive auctions with long-term power purchase agreements for utility-scale projects,” says Birol. “Increased competition has allowed reducing remuneration levels for solar PV and wind projects by 30-40 per cent in just two years in some key countries such as India, Germany and Turkey.”
The IEA states that this competitive price discovery mechanism through tenders has squeezed costs along the entire value chain, thus becoming a more cost-effective policy option for governments.
“Auctions can also allow a better control of deployment, total incentives, and system integration aspects. Almost half of renewable electricity capacity expansion over 2017-22 is expected to be driven by competitive auctions with PPAs, compared to just over 20 per cent in 2016,” says Birol.
The report also deals with renewable heat. It states that heat used for water and space heating in buildings and for industrial processes represents almost 40 per cent of global energy-related CO2 emissions. Therefore, decarbonising heat remains an important challenge. The share of renewables in heat consumption in the IEA forecast increases slowly, from 9 per cent in 2015 to almost 11 per cent in 2022.
The building sector is expected to lead the growth in renewable heat consumption, with the fastest growth in this sector seen in China, the European Union and North America. In industry, China and India see a significant growth in renewable heat consumption.
The report adds: “In terms of sources, bioenergy will lead renewable heat consumption growth over the outlook period, followed by renewable electricity for heat. Global solar thermal energy consumption is also expected to increase by over a third, although growth is forecast to be slower than in previous years.
“China alone provides over a third of overall renewable heat growth over the outlook period, driven by strengthened targets for solar thermal, bioenergy and geothermal as well as by increasing concerns over air pollution in cities. The European Union is the second-largest growth market as a result of the binding targets of the Renewable Energy Directive, and it remains the global leader in terms of absolute renewable heat consumption.”