Future of Energy

by Rana Adib, Executive Secretary, REN21

Industry View from

Renewable energy: the conventional fuel of tomorrow

Renewable power has become mainstream, but political barriers and fossil fuel subsidies still slow down the wide deployment of renewables across all sectors.

 

After years of steady growth, renewable energy has become a fully mainstream option in the power sector. Rapidly falling costs, namely in solar and wind (the world’s fastest-growing sources of new electricity), have helped lead renewables to occupy nearly two-thirds of power capacity additions in 2018 – the fourth consecutive year where more solar, wind and hydropower capacity was added than net coal, gas, oil and nuclear capacity combined. Having grown tenfold since 2000, more than 26 per cent of global electricity production now comes from renewable energy. Today, almost everywhere in the world, solar photovoltaics and wind energy represent the least-cost option of new power generation, and even outcompete existing coal generation in some locations.

 

Many power systems are adapting to rising shares of variable wind and solar by extending power grids, revising market design and employing digital tools for cost-efficient operation of the power systems. All these factors are leading to higher shares of low-cost renewables in power systems. In 2018, more than 90 countries had installed at least 1 GW of generating capacity, while at least 30 countries exceeded 10 GW of capacity. Nine countries generated more than 20 per cent of their electricity from wind and solar.

 

The private sector is also getting involved. Renewable power sourced by corporations through power purchase agreements more than doubled in 2018 compared with the previous year. Around the world, corporations including technology multinationals and manufacturers in energy-intensive industries, such as aluminium, cement, steel and even mining, are buying renewable energy and making commitments to power 100 per cent of their operations with renewables. For example, over 190 multinational companies have committed to 100 per cent renewable power through RE100.  

 

The increasing cost-competitiveness of renewable electricity and the predictability of energy costs has been repeatedly cited as the main driver for corporations’ interest in renewables. But there is also a growing concern that the centralised generation from fossil fuels and nuclear, which are more vulnerable to intense weather events including temperatures and storms, poses a real business risk. Fossil fuel and nuclear power plants that have been disabled due to adverse weather conditions in places such as Argentina, Australia, Canada and Germany, attest to this. As these climate-related weather events intensify, the possibility of a disrupted electricity supply will only grow.

 

Although the steady transition underway in the power sector is what catches headlines, it is not the whole story. Renewable energy continues to struggle to gain shares in the heating, cooling and transport sectors. Currently, renewables supply just under 10 per cent and just over 3 per cent of energy demand in the heating and cooling and transport sectors respectively. These shares barely increase annually even though these sectors account for over 80 per cent of final energy demand worldwide. Widespread deployment of renewable energy, however, is also crucial in these sectors for energy security and decarbonisation reasons.

 

Electrification of heating, cooling and transport is progressing and will certainly play a role in increasing renewable shares. There is also a wide range of renewable solutions that exist for heating including bioenergy, solar thermal and geothermal heat. In the transport sector, sustainable biofuels and electro-fuels (e.g. hydrogen) produced from renewable electricity will enable more renewable energy usage in road transport, as well as in shipping and aviation. A diverse portfolio of solutions is key to securing a rapid and cost-effective transition to a renewable energy future.

 

So why is the transition not happening in all sectors? One reason is the persistent policy imbalance that prioritises the power sector over the heating, cooling and transport sectors. One hundred and thirty-five countries have regulatory policies for renewable energy in the power sector, while only 70 currently have policies in transport sector and 20 countries have policies in the heating sector. There is a clear correlation between advances made by renewables in the power sector and implementation of ambitious and comprehensive regulatory policies. As such, more policies in heating, cooling and transport are needed to integrate renewable energy solutions into these sectors and transform the entire energy system.

 

An additional hurdle to renewable energy penetration is an uneven playing field, where fossil fuel prices are kept artificially low. Costs of new solar and wind are now on a par with fossil fuel prices in many areas, yet global subsidies for fossil fuels grew by around 33 per cent in 2018 to $400 billion. This compares with 2018’s total investment in renewable power of $289 billion. Fossil fuel subsidies remained in place in at least 115 countries in 2017, with at least 73 countries providing subsidies of over $100 million each year.

 

Despite this, there are continued positive signals. More than 1,000 organisations, managing around $8 trillion in managed financial assets, have committed to divest their assets from fossil fuel production and use. Cities and sub-national governments are increasingly setting far more ambitious targets than their national counterparts.

 

A transformation to a renewables-based energy system is underway despite persistent support for fossil fuels and a lack of effective policies. Many in the private sector have already identified renewable energy as the most sustainable, modern and cost-effective option to decarbonise their operations.  This increasing corporate interest in renewables demonstrates that they can be the fuel of tomorrow, meeting cost requirements and energy security needs for sustained business development.


More information on the status and trends of renewable energy can be found at ren21.net/gsr.

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