Renewables forecasts revised up, but fossil makes gains, too
Source: Umair Irfan, E&E reporter • Posted: Thursday, October 27, 2016
The revision comes despite a September IEA report that showed that total global energy investment was down 8 percent in 2015 from the prior year.
“We are witnessing a transformation of global power markets led by renewables and, as is the case with other fields, the center of gravity for renewable growth is moving to emerging markets,” said IEA’s executive director, Fatih Birol, in a statement.
Over the next five years, 2.5 wind turbines and 30,000 solar panels will be installed every hour, on average, according to the 29-country energy consortium. Two-thirds of this build-out will come from China, the United States, the European Union and India, spurred by strong policy support and incentives.
The “Medium-Term Renewable Energy Market Report 2016” also found that over the next five years, photovoltaic prices will fall by 25 percent and onshore wind turbine costs will drop 15 percent.
By 2021, renewables are expected to produce 7,600 terawatt-hours of electricity, roughly equal to the current total generation of the United States and the European Union combined.
But fossil fuels are advancing, as well, with improving technology and falling capital costs, giving renewable sources a moving target for cost parity.
“In the past 18 months, the energy technology with the most radically declining cost was not solar PV; it was shale fracking,” said Laszlo Varro, chief economist at the International Energy Agency. “The new renewable technologies are not competing against stagnant fossil fuel technology.”
Warming is an ‘investment reallocation problem’
Speaking yesterday at the Center for Strategic and International Studies in Washington, D.C., he observed that total global energy investment in 2015 was $1.8 trillion, with the oil and gas sector receiving 48 percent, the largest single investment target. Renewables accounted for 17 percent of global energy investment in 2015.
According to IEA’s inaugural “World Energy Investment 2016” report, published last month, global energy investment in 2015 declined due to low prices for crude oil and natural gas leading to sharp drops in upstream investment in drilling.
For renewables, that means that while there is still a need for further innovation and technology development, getting greenhouse gas emissions down will require quickly replacing dirtier power sources with cleaner ones as more investment dollars are freed up.
“To a considerable degree, climate change is an investment reallocation problem,” Varro said. “A lot of the technologies that will be the backbone of a low-carbon energy system already exist and are already good enough. The task is to ramp up investment and bring it about on a very large scale.”
However, Varro cautioned that electricity only tells part of the story. Heating and transportation sources of greenhouse gas emissions are often left out of clean energy discussions, he said. “Electricity is roughly one-third of the total energy system, but it absorbs more than 90 percent of the total investment,” Varro said.
Ed Hirs, an energy economist at the University of Houston who was not involved with either report, said it’s difficult to count the growth of renewable energy as a straight win for the environment and for the economy.
“One of the challenges here is they [IEA] are talking about installed capacity, but they’re really not able to address this in terms of delivered electricity,” he said. While a solar array or wind farm may have a given peak power capacity, the amount of electricity it delivers in the real world is much lower as clouds form over the sun or the wind slows down.
This often forces energy developers to overbuild their renewable power systems or requires energy storage technology, particularly if it’s replacing a baseload power generator. Whether it’s possible to drive down the overall system costs while meeting environmental objectives remains an open question for energy developers and for politicians.
“The challenge facing the new administration is how far along they can go with a push toward low-carbon, no-carbon without raising the price at the meter, without raising the price at the pump and without raising the national debt,” Hirs said. “All three combine to keep presidents from being re-elected.”