Slowdown in expansion of clean energy market threatens climate change objectives, analysts say
By Megan Darby
Growth of the renewable energy sector is under threat from policy uncertainty, the International Energy Agency warned on Thursday.
Investment in clean sources of energy is a key plank of global efforts to cut carbon emissions and tackle climate change.
Wind, solar and hydro and other renewables generated almost 22% of power worldwide in 2013, the IEA’s Medium-Term Renewable Energy Market Report said.
Yet expansion of the clean power market is set to slow after 2014, the authors found. It could fall short of delivering the generation needed to meet climate change objectives.
Maria van der Hoeven, executive director of the IEA, 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.”
The price of renewable technologies is falling in many cases, making generators less dependent on high subsidies.
However, developers bear most of the cost up-front, to be repaid over several years. To get finance, they need predictable returns, van der Hoeven explained.
“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.”
The barriers to investment are different in developed and developing countries.
In Europe, the climate and energy policy framework to 2030 is still under negotiation. The existing strategy runs to 2020.
Draft proposals included a target to get 27% of energy from renewable sources by 2030. National leaders are set to sign off the package in October.
There is also uncertainty about plans to reinforce the European grid to accommodate renewables with variable output.
In non-OECD markets such as China, which account for 70% of renewables growth, there issues with availability of finance, grid capacity and non-economic barriers.
Decreasing costs are making renewables increasingly competitive against conventional power plants, the IEA found.
In Brazil, onshore wind has outbid gas-fired power stations in auctions while in northern Chile, an unsubsidised solar market is taking off.
Worldwide, the IEA forecasts US$230 billion of investment a year to 2020 – lower than the US$250 billion invested in 2013.
That reflects lower unit investment costs as well as declining global capacity growth.