Renewables to Reap Lion's Share of New Power Plans, IEA Says

  • Annual investment to drop 15% as cost of wind and solar plunge
  • Emerging market nations will get two-thirds of new capacity

Renewable energy will be the largest source of new power generation capacity worldwide over the next five years, installing 700 gigawatts, which is more than double what utilities produce today in Japan, the International Energy Agency said.

While installations surge, investment will fall 15 percent to $230 billion a year by 2020 as the cost of wind and solar farms declines, the Paris-based institution said in a report on Friday.

The findings, released in Istanbul at a meeting of energy ministers from the Group of 20 nations, are meant to prod policymakers toward adopting more stable mechanisms for supporting renewables. Britain, Japan and Germany have angered clean-energy investors in recent months by slashing subsidies in order to contain run-away booms. The IEA said more thoughtful policies would help renewables gain against more polluting fuels.

“Governments must remove the question marks over renewables if these technologies are to achieve their full potential,” said IEA Executive Director Fatih Birol. The report said that “wavering policy commitment to decarbonization and diversification in response to such efforts can undermine investor confidence, and retroactive changes can destroy it.”

The IEA does not expect the low prices of fossil fuels from oil to coal to affect the growth of renewables. Policy drivers such as energy diversification, pollution and decarbonization goals remain strong, it said. The exception is biofuels which compete with transportation fuels, Birol said at the meeting in Istanbul.

“The decoupling between economic growth and emissions is just at the beginning,” he said Friday. “To see a divorce, we need renewables and efficiency.”

Annual investment in new green energy capacity is expected from $270 billion in 2014 because of a combination of decreasing costs for the systems and slowing capacity growth. The IEA expects onshore wind and solar photovoltaic to make up two thirds of new investment in clean energy.

Costs for these technologies are falling as manufacturers are able to scale up production cheaply, particularly in China. The price of utility-scale solar have fallen more than 60 percent between 2010 and 2015. Onshore wind turbine costs slid by a third, according to data from the IEA. The organization projects that these prices will continue to fall an additional 10 percent for onshore wind and a quarter for solar in the next five years.

The IEA projected that renewable energy will rise to more than 26 percent of the world’s electricity mix in 2020, from 22 percent in 2013. In five years, the organization expects that clean energy could generate the equivalent of the combined power demand of China, India and Brazil.

Emerging-market nations will take two-thirds of the new capacity. China will account for nearly 40 percent of the growth and almost a third of new investment, the report said.

Onshore wind may become the most prominent clean energy technology in this time frame, accounting for over a third of new installed capacity. It will be followed by solar photovoltaic with another third and hydropower with a fifth, the report said.

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