IEA (2021), Renewable Power, IEA, Paris https://www.iea.org/reports/renewable-power
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Renewable power deployment as a whole still needs to expand significantly to meet the Net Zero Emissions by 2050 Scenario share of more than 60% of generation by 2030. Yearly generation must increase at an average rate of nearly 12% during 2021-2030, almost twice as much as in 2011-2020.
Of all energy sources in the electricity sector, only the use of renewables expanded in 2020, despite economic disruptions caused by Covid-19. Renewables-based electricity generation increased by 7.1% (a record 505 TWh) – almost 20% higher than average annual percentage growth since 2010.
Solar PV and wind each accounted for about one-third of total 2020 renewable electricity generation growth, with hydro representing another 25% and bioenergy the remainder. The first annual decrease in electricity demand since the financial crisis of 2008, combined with record PV and wind capacity additions in 2020, prompted the renewables share in total electricity generation to increase a record two percentage points. The share of renewables in the global electricity supply reached 28.6% in 2020, the highest level ever recorded.
Renewable power generation needs to continue expanding almost 12% annually over 2021-2030 to meet the Net Zero level. Despite record renewable capacity additions, generation growth was still significantly below the necessary level in 2020. Much faster deployment of all renewable technologies will be needed to put the world on track with the Net Zero Emissions by 2050 Scenario.
As the IEA Net Zero Emissions by 2050 Scenario models faster growth of renewables by 2030 than the Sustainable Development Scenario does, the status of solar PV was changed from “on track” to “more efforts needed”. Record generation growth in 2020 and the expected increase in capacity additions in upcoming years will not be sufficient to ensure Net Zero levels. Enlarging annual capacity additions from 134 GW in 2020 to 630 GW in 2030 will require considerable effort.
The status of bioenergy for power generation was also changed from “on track” to “more efforts needed”, as recent policy changes and deployment are not strong enough to ensure the long-term capacity and generation growth necessary to reach the higher Net Zero level.
Meanwhile, the tracking status of onshore wind, offshore wind and hydropower remain unchanged at “more efforts needed”, while CSP, geothermal and ocean power are still well below the growth rates necessary to meet long-term Net Zero levels.
Despite mobility and logistical challenges caused by the Covid-19 crisis, renewable capacity additions increased in by more than 46% from 2019 to 2020, breaking another record. An exceptional 192% rise in global wind capacity additions led the expansion. Also underpinning this record growth was the 25% expansion of new solar PV installations to almost 135 GW. The renewables industry adapted rapidly to the new market conditions, which allowed developers to quickly commission new installations by the policy deadlines in China, the United States and Viet Nam.
Furthermore, during the crisis many governments, including those of the United States, China, India and the European Union, reinforced their commitment to pursue faster deployment of renewable technologies, which is expected to accelerate capacity growth in the coming years.
Nevertheless, countries could boost renewables deployment even further by increasing the share of investment devoted to renewable energy in the stimulus packages designed to reinvigorate their economies. This could tap into the structural benefits that increasingly affordable renewables can offer, including opportunities for job creation and economic development, while reducing emissions and fostering innovation.
For all renewable power technologies, long-term target and policy stability is essential to ensure investor confidence and continued growth. At the same time, policies need to adapt continuously to changing market conditions to achieve greater cost-competitiveness and improve integration of renewables into the system.
Various policy instruments have been used to support renewable electricity deployment through different stages of technological maturity. Options include administratively set feed-in tariffs or premiums, renewable portfolio standards, quotas and tradeable green certificate schemes, net metering, tax rebates and capital grants. Some of these instruments have been introduced simultaneously.
Recently, auctions for the centralised competitive procurement of renewables have become increasingly widespread and have been instrumental in discovering renewable energy prices and containing policy costs in many countries, especially for solar PV and wind.
However, the success of such policies in achieving deployment and development objectives relies on their design and ability to attract investment and competition.
Distributed solar PV expansion, driven by rapid cost reductions and policy support, is transforming electricity markets. The rapid adoption of residential, commercial and industrial PV systems is blurring the roles of electricity producers and consumers in many countries. This trend deserves careful attention from policymakers.
Currently, some distributed solar PV policies – such as buy-all, sell-all and annual net metering with retail-price remuneration – can have undesired effects in the long term. Unmanaged rapid growth of distributed PV can disrupt electricity markets by raising system costs, challenging the grid integration of renewables and reducing the revenues of distribution network operators.
Sustainable distributed PV deployment therefore depends on sound market design as well as policy and regulatory frameworks that balance the opposing interests of distributed PV investors, system operators, distribution companies and other (non-PV) electricity consumers. Tariff reforms and appropriate policies will be needed to attract investment in distributed solar PV while also securing enough revenues to pay for fixed network assets and ensuring that the cost burden is allocated fairly among all consumers.
Increasingly competitive, renewables – especially solar PV and wind – are rapidly transforming power systems worldwide. However, reforms to market design and policy frameworks will be needed to ensure investment at scale both in new renewable capacities and in power system flexibility to integrate high shares of variable renewables in a reliable and cost-effective manner.
As variable renewable energy shares increase, policies ensuring investment in all forms of flexibility become crucial.
These include, for example, policies and measures to:
- Enhance power plant flexibility by improving operations of the existing conventional fleet, especially reservoir hydropower plants.
- Unlock demand-side management, for example by allowing the participation of pools of consumers in the system services market.
- Support energy storage including pumped hydropower storage.
- Improve and enhance grid infrastructure.
Some renewable technologies are still relatively expensive and/or face specific technology and market challenges, so require more targeted policies.
These policies could address:
- Better remuneration of the market value of storage for CSP, and for pumped-storage and reservoir hydropower technologies.
- Timely grid connection and continued implementation of policies that spur competition to achieve further cost reductions for offshore wind.
- Improved policies to tackle pre-development risks for geothermal energy.
- Larger demonstration projects for ocean technologies.
Other policy actions need to reflect the multiple benefits of using bioenergy for electricity, including rural development, waste management and dispatchability.
As the transport, heating and cooling, and power sectors become increasingly interdependent, cross-linked decision making and policies designed to be beneficial across sectors will be crucial.
For example, the success of EV deployment will depend critically on the strengthening of electricity distribution networks and smart charging systems at the local level.