TODAY’S STUDY: THE SLOW, STEADY PROGRESS OF NEW ENERGY

Tracking Clean Energy Progress 2013

April 2013 (International Energy Agency)

Key Findings

Renewable energy and emerging country efforts are lights in the dark as progress on clean energy remains far below a 2°C pathway.

■ Governments have the power to create markets and policies that accelerate development and deployment of clean energy technologies, yet the potential of these technologies remains largely untapped. This report demonstrates that for a majority of technologies that could save energy and reduce carbon dioxide (CO2) emissions, progress is alarmingly slow (Table I.1). The broad message to ministers is clear: the world is not on track to realise the interim 2020 targets in the IEA Energy Technology Perspectives 2012 (ETP) 2°C Scenario (2DS). Industry and consumers will provide most of the investment and actions needed, but only with adequate opportunities and the right market conditions.

■ The growth of renewable power technologies continued in 2012 despite economic, policy and industry turbulence. Mature technologies – including solar photovoltaic (PV), onshore wind, biomass and hydro – were the most dynamic and are largely on track for 2DS targets. Solar PV capacity grew by an estimated 42%, and wind by 19% compared with 2011 cumulative levels. Investments remained high in 2012, down only 11% from the record level of 2011, but policy uncertainty is having a negative impact, notably on US and Indian wind investments.

■ Emerging economies are stepping up efforts in clean energy, but global policy development is mixed. Markets for renewable energy are broadening well beyond OECD countries, which is very positive. This reflects generally rising ambitions in clean energy although developments are not homogenous. For instance, China and Japan strengthened policies and targets for renewables in 2012 while other governments (e.g. Germany, Italy and Spain) scaled back incentives. Industry consolidation continued and competition increased. Partly as a result, investment costs continued to fall rapidly, particularly for onshore wind and solar PV.

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The global energy supply is not getting cleaner, despite efforts to advance clean energy.

■ Coal technologies continue to dominate growth in power generation. This is a major reason why the amount of CO2 emitted for each unit of energy supplied has fallen by less than 1% since 1990 (Box I.1). Thus the net impact on CO2 intensity of all changes in supply has been minimal. Coal-fired generation, which rose by an estimated 6% from 2010 to 2012, continues to grow faster than non-fossil energy sources on an absolute basis. Around half of coal-fired power plants built in 2011 use inefficient technologies. This tendency is offsetting measures to close older, inefficient plants. For example China closed 85 GW in 2011 and was continuing these efforts in 2012, and the United States closed 9 GW in 2012.

■ The dependence on coal for economic growth is particularly strong in emerging economies. This represents a fundamental threat to a low-carbon future. China and, to a lesser extent India, continue to play a key role in driving demand growth. China’s coal consumption represented 46% of global coal demand in 2011; India’s share was 11%. In 2011 coal plants with a capacity of 55 GW were installed in China, more than Turkey’s total installed capacity.

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■ Natural gas is displacing coal-fired generation in some countries but this trend is highly regional. Coal-to-gas fuel switching continued in 2012 in the United States, as the boom in unconventional gas extraction kept gas prices low. The opposite trend was observed in Europe, where low relative prices for coal led to increased generation from coal at the expense of gas. In total, global natural gas-fired power generation is estimated to have increased by more than 5% from 2010 to 2012, building on strong growth over the past few years.

■ Construction began on seven nuclear power plants in 2012, but meeting 2DS goals will require far more significant construction rates. The policy landscape is starting to stabilise after Fukushima, but some key countries remain undecided. Public opinion seems to be improving in many regions. Most safety evaluations after the Fukushima accident found that existing reactors can continue to operate if safety upgrades are implemented.

■ Carbon capture and storage (CCS) technologies – essential in a world that continues to rely heavily on fossil fuels – are mature in many applications but still await their cue from governments. While construction began on two new integrated projects in 2012, eight projects were publicly cancelled. There are signs of commercial interest in CCS technologies – public and private funds spent on CCS projects increased by USD 2.6 billion in 2012 – but CCS will not be deployed in the power and industrial sectors until policies are in place that motivate industry to accelerate demonstration efforts.

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A window of opportunity is opening in transport.

■ Hybrid-electric (HEV) and electric vehicles (EV) show very encouraging progress. HEV sales broke the one million mark in 2012, and reached 1.2 million, up 43% from 2011. Japan and the United States continue to lead the market, accounting for 62% and 29% of global sales in 2012 (740 000 and 355 000 vehicles sold). In order to hit 2020 2DS targets, sales need to increase by 50% each year. EV sales more than doubled in 2012, passing 100 000. This rate of sales growth puts EV deployment on track to meet 2DS 2020 targets, which require a 80% annual growth rate. Cumulative government targets for EV sales increased in 2012, with India announcing a total target of 6 million EVs and HEVs on the road by 2020. The target is to be backed by government funding of USD 3.6 billion to USD 4.2 billion, representing more than half of total required investment.

■ Fuel economy levels for new passenger light-duty vehicles LDV vary by up to 55% from country to country, demonstrating enormous scope for improving efficiency through policy.Fuel economy improvements accelerate where implementation of fuel economy standards and other policy measures has been scaled up. The pace of improvement in some regions shows the strong potential to bring fuel-saving technologies – most of which are already commercially available – into the market through policy action.

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■ Global biofuels production – including bioethanol and biodiesel – was static in 2012. Despite strong growth of 7% in biodiesel output in the United States (to 4 billion litres) and Latin America (to 7 billion litres), global volumes remained at roughly 110 billion litres. The slowdown in production growth reflects higher feedstock prices and lower production volumes in key producing regions. This is principally due to extreme weather conditions such as the 2012 drought that compromised the US corn harvest. The events in 2012 highlight the vulnerability of conventional biofuels production to high feedstock prices, which account for 50% to 80% of total production costs.

■ The advanced biofuels sector added about 30% of capacity in 2012. More than 100 plants are now operating, including commercial-scale projects, with 4.5 billion litres in total capacity by end-2012. Yet some large-scale projects were cancelled or shelved in 2012; in part, this reflects a lack of adequate policy mechanisms for advanced biofuel deployment in most regions.

More effort needed in industry, buildings and systems integration.

■ Industrial energy consumption could be reduced by around 20% in the medium to long term by using best available technologies (BAT). To meet 2DS goals, it is necessary to optimise production and process techniques, and achieve technological advances, in both OECD and emerging economies. There has been reasonable progress in implementing these changes across industrial sectors but more is needed.

■ Several regions stepped up industry energy and emissions-reduction policies in 2012, including Europe, South Africa and Australia. The South African Department of Trade and Industry’s Manufacturing Competitive Enhancement Programme announced a new project that provides USD 640 million over five years from 2012 to support companies that invest in clean technology among other areas of investment. Australia’s Clean Energy Future plan commenced in 2012. The plan includes a carbon price and complementary programmes to support energy efficiency measures in industry, including a USD 10.3 billion Clean Energy Finance Corporation and a USD 1.24 billion Clean Technology programme.

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■ In 2012 governments implemented several important policy measures to promote energy-efficient buildings and appliances. These include the EU Energy Efficiency Directive (EED), the United Kingdom’s Green Deal and Japan’s Innovative Strategy for Energy and Environment. All of these include measures to address financing barriers to improvements of new and existing building stock. For appliances, the Indian Bureau of Energy Efficiency increased the stringency of energy performance standards for air conditioners by 8%, following introduction of a mandatory labelling programme in 2010. Forty-six countries agreed to phase out incandescent lamps by 2016 under the “en-lighten” initiative, which aims to accelerate a global market transformation to environmentally sustainable lighting technologies. Australia introduced a first-of-a-kind phase-in policy for best available lighting products.

■ Technologies for improved systems integration and flexibility, such as stronger and smarter grids, are vital. Demonstration and deployment of smart-grid technologies intensified in 2012, but better data and deployment indicators are required to provide an accurate picture of progress. Smart-grid deployment is starting to provide experience that can be built on. Investment in advanced metering infrastructure, distribution automation and advanced smart-grid applications increased in 2012, to reach USD 13.9 billion. Progress in individual technology areas is important; what matters most is the successful transition of the whole energy system to a clean energy platform. The deployment of smart grids is vital.

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Public investments in energy RD&D must at least triple, as the energy share of research budgets remains low.

■ Energy’s share of IEA countries’ total RD&D investments is small; it has varied between 3% and 4% since 2000, after peaking in 1980 when it was more than 10%. Governments have preferred other areas of research, such as health, space programmes and general university research. Defence research receives the most government support, and while it has also seen its share of funding decline, it remains dominant with 30%.

■ Nuclear fission accounts for the largest share (24% in 2010) of investment in energy technology RD&D among IEA countries, but renewables, hydrogen and fuel cells have seen the biggest increases since 2000. In particular, spending on renewable energy RD&D has risen sharply over the last decade and now accounts for more than 24% of total public spending on clean energy RD&D. In general, the United States and Europe spend more on RD&D for renewables than the Pacific region or emerging economies.

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Poor quality and availability of data are still serious constraints in tracking and assessing progress.

■ A broad concern for much energy data, quality is a particular constraint in emerging economies, for energy-efficiency data in buildings and industry, and in cross-cutting areas such as smart grids and integration of heat and electricity systems. Data that define the energy balance of each country need to be more timely and reliable so that the energy system as a whole can be analysed accurately and so that effective policies and investments can be replicated. RD&D data in emerging economies are still scarce, and data for private RD&D are collected in few countries.

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