Policy uncertainty threatens renewable expansion

• 10 years ago (2014-08-29)
• Junior Isles

Renewables 776

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The expansion of renewable energy will slow over the next five years unless policy uncertainty is diminished, the International Energy Agency (IEA) has said in its third annual Medium-Term Renewable Energy Market Report.

According to the report, power generation from renewable sources such as wind, solar and hydro grew strongly in 2013, reaching almost 22% of global generation, and was on par with electricity from gas, whose generation remained relatively stable. Global renewable generation is seen rising by 45% and making up nearly 26% of global electricity generation by 2020. Yet annual growth in new renewable power is seen slowing and stabilising after 2014, putting renewables at risk of falling short of the absolute generation levels needed to meet global climate change objectives.

IEA Executive Director Maria van der Hoeven said: “Renewables are a necessary part of energy security. However, just when they are becoming a cost-competitive option in an increasing number of cases, policy and regulatory uncertainty is rising in some key markets. This stems from concerns about the costs of deploying renewables.”

“Governments must distinguish more clearly between the past, present and future, as costs are falling over time,” she added. “Many renewables no longer need high incentive levels. Rather, given their capital-intensive nature, renewables require a market context that assures a reasonable and predictable return for investors. This calls for a serious reflection on market design needed to achieve a more sustainable world energy mix.”

For the first time, the annual report provides a renewable power investment outlook. Through 2020, investment in new renewable power capacity is seen averaging over $230 billion annually. That is lower than the around $250 billion invested in 2013. The decline is due to expectations that both unit investment costs for some technologies will fall and that global capacity growth will slow.