Renewables to surpass gas by 2016 in the global power mix


Power generation from hydro, wind, solar and other renewable sources worldwide will exceed that from gas and double that of nuclear by 2016, according to a report by the International Energy Agency (IEA).

The organization’s second annual Medium-Term Renewable Energy Market Report, published on Wednesday, predicts that renewable power will increase by 40% in the next five years despite a difficult economic context.

Renewables are now the fastest-growing power generation sector and will make up almost a quarter of the global power mix by 2018, up from an estimated 20% in 2011, according to the IEA.

Furthermore, the share of non-hydro sources such as wind, solar, bioenergy and geothermal in total power generation will double, reaching 8% by 2018, up from 4% in 2011 and just 2% in 2006.

"As their costs continue to fall, renewable power sources are increasingly standing on their own merits versus new fossil-fuel generation," said IEA Executive Director Maria van der Hoeven as she presented the report at the Renewable Energy Finance Forum in New York.

"This is good news for a global energy system that needs to become cleaner and more diversified, but it should not be an excuse for government complacency, especially among OECD countries."

While renewables are increasing across all sectors, the report cautions that renewable development is becoming more complex and faces challenges, including a growing debate about the costs of renewable support policies in several European countries that are suffering from stagnating economies and energy demand.

Van der Hoeven warned that "policy uncertainty is public enemy number one" for investors: "Many renewables no longer require high economic incentives. But they do still need long-term policies that provide a predictable and reliable market and regulatory framework compatible with societal goals. And worldwide subsidies for fossil fuels remain six times higher than economic incentives for renewables."

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The report has based its forecasts on the impressive growth registered in 2012, when global renewable generation rose by more than 8% despite a challenging investment, policy and industry context in some areas. In absolute terms, global renewable generation in 2012 – at 4,860 TWh – exceeded the total estimated electricity consumption of China.

Two main factors are driving the positive outlook: First, investment and deployment are accelerating in emerging markets, where renewables are helping to address fast-rising electricity demand, energy diversification needs and local pollution concerns while contributing to climate change mitigation. Countries that are not members of the Organization for Economic Co-operation and Development (OECD), led by China, are expected to account for two-thirds of the global increase in renewable power generation between now and 2018. Such rapid deployment is expected to more than compensate for slower growth and smooth out volatility in other areas, notably Europe and the U.S.

Second, in addition to the well-established competitiveness of hydropower, geothermal and bioenergy, renewables are becoming cost-competitive in a wider set of circumstances. Solar, for example, is attractive in markets with high peak prices for electricity, such as those resulting from oil-fired generation. In addition, decentralized solar photovoltaic generation costs can be lower than retail electricity prices in a number of countries.

The IEA also sees gains for renewable sources for heat, though at somewhat slower growth rates than renewable electricity. As a portion of final energy consumption for heat, renewable sources, excluding traditional biomass, should rise to almost 10% in 2018, from over 8% in 2011, although the potential of renewable heat remains largely unexploited.

In related news, the IEA has tapped Kenneth J. Fairfax, current U.S. ambassador to Kazakhstan and a career diplomat with the U.S. State Department, as the Agency's new deputy executive director. Fairfax will succeed current Deputy Executive Director Richard H. Jones in September.

Van der Hoeven said Fairfax's "far-reaching international experience and expertise will be essential in supporting the Agency's efforts to forge closer relationships with countries beyond the current IEA membership."

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