TODAY’S STUDY: NEW ENERGY IN THE WORLD RIGHT NOW
Renewables 2014 Global Status Report
June 2014 (Renewable Energy Policy Network for the 21st Century)
In June 2004, delegates from 154 countries converged in Bonn, Germany, for the world’s first government-hosted international conference on renewable energy. REN21 emerged from that process to become the first international organisation to track renewable energy developments. At that time, there were visible upwards trends in global renewable energy capacity and output, investment, policy support, investment, and integration. Yet even ambitious projections did not anticipate the extraordinary expansion of renewables that was to unfold over the decade ahead.
Global perceptions of renewable energy have shifted considerably since 2004. Over the last 10 years, continuing technology advances and rapid deployment of many renewable energy technologies have demonstrated that their potential can be achieved. Renewables advanced further towards realising that potential during 2013.
■■CONTINUED RENEWABLE ENERGY GROWTH
Renewable energy provided an estimated 19% of global final energy consumption in 2012,i and continued to grow in 2013.
Of this total share in 2012, modern renewables accounted for approximately 10%, with the remainder (estimated at just over 9%) coming from traditional biomass.ii Heat energy from modern renewable sources accounted for an estimated 4.2% of total final energy use; hydropower made up about 3.8%, and an estimated 2% was provided by power from wind, solar, geothermal, and biomass, as well as by biofuels.
The combined modern and traditional renewable energy share remained about level with 2011, even as the share of modern renewables increased. This is because the rapid growth in modern renewable energy is tempered by both a slow migration away from traditional biomass and a continued rise in total global energy demand.
As renewable energy markets and industries mature, they increasingly face new and different challenges, as well as a wide range of opportunities. In 2013, renewables faced declining policy support and uncertainty in many European countries and the United States. Electric grid-related constraints, opposition in some countries from electric utilities concerned about rising competition, and continuing high global subsidies for fossil fuels were also issues. Overall—with some exceptions in Europe and the United States—renewable energy developments were positive in 2013.
Markets, manufacturing, and investment expanded further across the developing world, and it became increasingly evident that renewables are no longer dependent upon a small handful of countries. Aided by continuing technological advances, falling prices, and innovations in financing—all driven largely by policy support—renewables have become increasingly affordable for a broader range of consumers worldwide. In a rising number of countries, renewable energy is considered crucial for meeting current and future energy needs.
As markets have become more global, renewable energy industries have responded by increasing their flexibility, diversifying their products, and developing global supply chains. Several industries had a difficult year, with consolidation continuing, particularly for solar energy and wind power. But the picture brightened by the end of 2013, with many solar photovoltaics (PV) and wind turbine manufacturers returning to profitability.
The most significant growth occurred in the power sector, with global capacity exceeding 1,560 gigawatts (GW), up more than 8% over 2012. Hydropower rose by 4% to approximately 1,000 GW, and other renewables collectively grew nearly 17% to more than 560 GW. For the first time, the world added more solar PV than wind power capacity; solar PV and hydropower were essentially tied, each accounting for about one-third of new capacity. Solar PV has continued to expand at a rapid rate, with growth in global capacity averaging almost 55% annually over the past five years. Wind power has added the most capacity of all renewable technologies over the same period.
In 2013, renewables accounted for more than 56% of net additions to global power capacity and represented far higher shares of capacity added in several countries.
Over the past few years, the levelised costs of electricity generation from onshore wind and, particularly, solar PV have fallen sharply. As a result, an increasing number of wind and solar power projects are being built without public financial support. Around the world, major industrial and commercial customers are turning to renewables to reduce their energy costs while increasing the reliability of their energy supply.
Many set ambitious renewable energy targets, installed and operated their own renewable power systems, or signed power purchase agreements to buy directly from renewable energy project operators, bypassing utilities.
By the end of 2013, China, the United States, Brazil, Canada, and Germany remained the top countries for total installed renewable power capacity; the top countries for non-hydro capacity were again China, the United States, and Germany, followed by Spain, Italy, and India. Among the world’s top 20 countries for non-hydro capacity, Denmark had a clear lead for total capacity per capita. Uruguay, Mauritius, and Costa Rica were among the top countries for investment in new renewable power and fuels relative to annual GDP.
In the heating and cooling sector, trends included the increasing use of renewables in combined heat and power plants; the feeding of renewable heating and cooling into district systems; hybrid solutions in the building renovation sector; and the growing use of renewable heat for industrial purposes. Heat from modern biomass, solar, and geothermal sources accounts for a small but gradually rising share of final global heat demand, amounting to an estimated 10%. The use of modern renewable technologies for heating and cooling is still limited relative to their vast potential.
The growth of liquid biofuels has been uneven in recent years, but their production and use increased in 2013. There is also growing interest in other renewable options in the transport sector. The year saw a continued rise in the use of gaseous biofuels (mainly biomethane) and further development of hybrid options (e.g., biodiesel-natural gas buses, and electric-diesel transport). There are limited but increasing initiatives to link electric transport systems with renewable energy, particularly at the city and regional levels.
Some highlights of 2013 include:
◾■ In the European Union, renewables represented the majority of new electric generating capacity for the sixth consecutive year. The 72% share in 2013 is in stark contrast to a decade earlier, when conventional fossil generation accounted for 80% of new capacity in the EU-27 plus Norway and Switzerland.
◾■ Even as global investment in solar PV declined nearly 22% relative to 2012, new capacity installations increased by about 32%.
◾■ China’s new renewable power capacity surpassed new fossil fuel and nuclear capacity for the first time.
◾■ Variable renewables achieved high levels of penetration in several countries. For example, throughout 2013, wind power met 33.2% of electricity demand in Denmark and 20.9% in Spain; in Italy, solar PV met 7.8% of total annual electricity demand.
◾■ Wind power was excluded from one of Brazil’s national auctions because it was pricing all other generation sources out of the market.
◾■ Denmark banned the use of fossil fuel-fired boilers in new buildings as of 2013 and aims for renewables to provide almost 40% of total heat supply by 2020.
◾■ Growing numbers of cities, states, and regions seek to transition to 100% renewable energy in either individual sectors or economy-wide. For example, Djibouti, Scotland, and the small-island state of Tuvalu aim to derive 100% of their electricity from renewable sources by 2020. Among those who have already achieved their goals are about 20 million Germans who live in so-called 100% renewable energy regions.
The impacts of these developments on employment numbers in the renewable energy sector have varied by country and technology, but, globally, the number of people working in renewable industries has continued to rise. An estimated 6.5 million people worldwide work directly or indirectly in the sector.
■■AN EVOLVING POLICY LANDSCAPE
By early 2014, at least 144 countries had renewable energy targets and 138 countries had renewable energy support policies in place, up from the 138 and 127 countries, respectively, that were reported in GSR 2013. Developing and emerging economies have led the expansion in recent years and account for 95 of the countries with support policies, up from 15 in 2005. The rate of adoption remained slow relative to much of the past decade, due largely to the fact that so many countries have already enacted policies.
In 2013, there was an increasing focus on revisions to existing policies and targets, including retroactive changes, with some adjustments made to improve policy effectiveness and efficiency, and others aimed to curtail costs associated with supporting the deployment of renewables. At the same time, some countries expanded support and adopted ambitious new targets.
Policy mechanisms continued to evolve, with some becoming more differentiated by technology. Feed-in policies in many countries evolved further towards premium payments in the power sector, and continued to be adapted for use in the heating sector. Particularly in Europe, new policies are emerging to advance or manage the integration of high shares of renewable electricity into existing power systems, including support for energy storage, demand-side management, and smart grid technologies.
As in past years, most renewable energy policies enacted or revised during 2013 focus on the power sector. A mix of regulatory policies, fiscal incentives, and public financing mechanisms continued to be adopted. Feed-in policies and renewable portfolio standards (RPS) remained the most commonly used support mechanisms, although their pace of adoption continued to slow. Public competitive bidding, or tendering, gained further prominence, with the number of countries turning to public auctions rising from 9 in 2009 to 55 as of early 2014.
Although the heating and cooling sector lags far behind the renewable power sector for attention from policymakers, the adoption of targets and support policies has increased steadily.
As of early 2014, at least 24 countries had adopted renewable heating (and cooling) targets, and at least 19 countries had obligations at the national or state/provincial level. Renewable heating and cooling is also supported through fiscal incentives, as well as through building codes and other measures at the national and local levels in several countries.
As of early 2014, at least 63 countries used regulatory policies to promote the production or consumption of biofuels for transport; this was up from the 49 reported in GSR 2013. Some existing blend mandates were strengthened, and the use of fiscal incentives and public financing expanded. In some countries, however, support for first-generation biofuels was reduced due to environmental and social sustainability concerns.
Although most transport-related policies focus on biofuels, many governments continued to explore other options such as increasing the number of vehicles fuelled with biomethane and electricity from renewable sources.
Thousands of cities and towns worldwide have policies, plans, and targets to advance renewable energy, often far outpacing the ambitions of national legislation. Policy momentum continued in 2013 as city and local governments acted to reduce emissions, support and create local industry, relieve grid capacity stress, and achieve security of supply. To accomplish these goals, they increasingly made use of their authority to regulate, make expenditure and procurement decisions, facilitate and ease the financing of renewable energy projects, and influence advocacy and information sharing. As cities seek to share and scale up best practices, highlight their commitments to renewable energy, and account for their achievements, local governments are increasingly prioritising systematic measurement and reporting of climate and energy data.
Global new investment in renewable power and fuels—not including hydropower projects > 50 megawatts (MW)i —was an estimated USD 214.4 billion in 2013, down 14% relative to 2012 and 23% lower than the record level in 2011. Including the unreported investments in hydropower projects larger than 50 MW, total new investment in renewable power and fuels was at least USD 249.4 billion in 2013.
The second consecutive year of decline in investment—after several years of growth—was due in part to uncertainty over incentive policies in Europe and the United States, and to retroactive reductions in support in some countries. Europe’s renewable energy investment was down 44% from 2012. The year 2013 also saw an end to eight consecutive years of rising renewable energy investment in developing countries.
Yet the global decline also resulted from sharp reductions in technology costs. This was particularly true for solar PV, which saw record levels of new installations in 2013, despite a 22% decline in dollars invested. Lower costs and efficiency improvements made it possible to build onshore wind and solar PV installations in a number of locations around the world in 2013 without subsidy support, particularly in Latin America.
Considering only net investment in new power capacity, renewables outpaced fossil fuels for the fourth year running. Further, despite the overall downward trend in global investment, there were significant exceptions at the country level. The most notable was Japan, where investment in renewable energy (excluding research and development) increased by 80% relative to 2012 levels. Other countries that increased their investment in 2013 included Canada, Chile, Israel, New Zealand, the United Kingdom, and Uruguay. Despite the overall decline in China’s investment, for the first time ever, China invested more in renewable energy than did all of Europe combined, and it invested more in renewable power capacity than in fossil fuels.
Solar power was again the leading sector by far in terms of money committed during 2013, receiving 53% (USD 113.7 billion) of total new investment in renewable power and fuels (with 90% going to solar PV). Wind power followed with USD 80.1 billion.
Asset finance of utility-scale projects declined for the second consecutive year, but it again made up the vast majority of total investment in renewable energy, totalling USD 133.4 billion.
Clean energy funds (equities) had a strong year, and clean energy project bonds set a new record in 2013. North America saw the emergence of innovative yield-oriented financing vehicles, and crowd funding moved further into the mainstream in a number of countries. Institutional investors continued to play an increasing role, particularly in Europe, with a record volume of renewable energy investment during the year. Development banks were again an important source of clean energy investment, with some banks pledging to curtail funding for fossil fuels, especially coal power.
■■DISTRIBUTED RENEWABLE ENERGY IN DEVELOPING COUNTRIES
In many parts of the world, the lack of access to modern energy services continues to impede sustainable development. Recent assessments suggest that as many as 1.3 billion people still do not have access to electricity, and more than 2.6 billion people rely on traditional biomass for cooking and heating.
However, during 2013, people in remote and rural areas of the world continued to gain access to electricity, modern cooking, heating and cooling as the installation and use of distributed renewable energy technologies increased. This expansion was a direct result of improvements in affordability, inclusion of distributed energy in national energy policies, greater access to financing, increased knowledge about local resources, and more-advanced technologies that can be tailored to meet customers’ specific needs.
Furthermore, increased use of mini-grids supported the spread of renewable energy-powered electrification in un-electrified peri-urban and rural areas. Recent technical advances that enable the integration of renewables in mini-grid systems, combined with information and communication technology (ICT) applications for power management and end-user services, have allowed for a rapid growth in the use of renewables-powered mini-grids.
There is a growing awareness that stand-alone cooking and electricity systems based on renewables are often the most cost-effective options available for providing energy services to households and businesses in remote areas. As a result, an increasing number of countries is supporting the development of decentralised renewable energy-based systems to expand energy access.
With the rising awareness that off-grid, low-income customers can provide fast-growing markets for goods and services, and with the emergence of new business and financing models for serving them, rural energy markets are increasingly being recognised as offering potential business opportunities. Many companies have become active across Africa, Asia, and Latin America, selling household-level renewable energy systems and devices. Commercial lenders, social venture capitalists, local and international development entities, governments, and others are actively engaged in the financing of distributed renewable energy. In 2013, levels of participation and progress varied from country to country depending on support policies, broader legal frameworks, and political stability.
■■MARKET AND INDUSTRY TRENDS
BIOMASS FOR HEAT, POWER, AND TRANSPORT.
Biomass demand continued to grow steadily in the heat, power, and transport sectors. Total primary energy consumption of biomass reached approximately 57 exajoules (EJ) in 2013, of which almost 60% was traditional biomass, and the remainder was modern bioenergy (solid, gaseous, and liquid fuels). Heating accounted for the majority of biomass use, with modern biomass heat capacity rising about 1% to an estimated 296 gigawatts-thermal (GWth). Global bio-power capacity was up by an estimated 5 GW to 88 GW. Bio-power generation exceeded 400 Terawatt-hours (TWh) during the year, including power generated in combined heat and power (CHP) plants. Demand for modern biomass is driving increased international trade in solid biofuels, including wood pellets.
Liquid biofuels met about 2.3% of global transport fuel demand. In 2013, global production rose by 7.7 billion litres to reach 116.6 billion litres. Ethanol production was up 6% after two years of decline, biodiesel rose 11%, and hydrotreated vegetable oil (HVO) rose by 16% to 3 million litres. New plants for making advanced biofuels, produced from non-food biomass feedstocks, were commissioned in Europe and North America. However, overall investment in new biofuel plant capacity continued to decline from its 2007 peak.
GEOTHERMAL POWER AND HEAT.
About 530 MW of new geothermal generating capacity came on line in 2013. Accounting for replacements, the net increase was about 455 MW, bringing total global capacity to 12 GW. This net capacity growth of 4% compares to an average annual growth rate of 3% for the two previous years (2010–12). Direct use of geothermal energy—for thermal baths and swimming pools, space heating, and agricultural and industrial processes— is estimated to exceed 300 petajoules (PJ) annually, but growth is not robust. Governments and industry continued to pursue technological innovation to increase efficient use of conventional geothermal resources. In parallel, the use of low-temperature fields for both power and heat continued to expand, increasing the application of geothermal energy beyond high-temperature locations.
Global hydropower generation during the year was an estimated 3,750 TWh. About 40 GW of new hydropower capacity was commissioned in 2013, increasing total global capacity by around 4% to approximately 1,000 GW. By far the most capacity was installed in China (29 GW), with significant capacity also added in Turkey, Brazil, Vietnam, India, and Russia. Growth in the industry has been relatively steady in recent years, fuelled primarily by China’s expansion. Modernisation of ageing hydropower facilities is a growing global market. Some countries are seeing a trend towards smaller reservoirs and multi-turbine run-of-river projects. There also is increasing recognition of the potential for hydropower to complement other renewable technologies, such as variable wind and solar power.
Ocean energy capacity, mostly tidal power generation, was about 530 MW by the end of 2013. In preparation for anticipated commercial projects, a handful of pilot installations were deployed during the year for ongoing tests. Particularly in the United Kingdom and France, there are indications that significant capacity growth will occur in the near future, due to concerted industry focus and government support. Major corporations continued to consolidate their positions in the ocean energy sector through strategic partnerships and acquisitions of technology developers.
SOLAR PHOTOVOLTAICS (PV).
The solar PV market had a record year, adding more than 39 GW in 2013 for a total exceeding 139 GW. China saw spectacular growth, accounting for nearly one-third of global capacity added, followed by Japan and the United States. Solar PV is starting to play a substantial role in electricity generation in some countries, particularly in Europe, while lower prices are opening new markets from Africa and the Middle East to Asia and Latin America. Interest continued to grow in corporate- and community-owned systems, while the number and size of utility-scale systems continued to increase. Although it was a challenging year for many companies, predominantly in Europe, the industry began to recover during 2013. Module prices stabilised, while production costs continued to fall and solar cell efficiencies increased steadily. Many manufacturers began expanding production capacity to meet expected further growth in demand.
CONCENTRATING SOLAR THERMAL POWER (CSP).
Global CSP capacity was up nearly 0.9 GW (36%) in 2013 to reach 3.4 GW. While the United States and Spain remained the market leaders, markets continued to shift to developing countries with high levels of insolation. Beyond the leading markets, capacity nearly tripled with projects coming on line in the United Arab Emirates, India, and China. An increasing range of hybrid CSP applications emerged, and thermal energy storage continued to gain in importance. Industry operations expanded further into new markets, and global growth in the sector remained strong, but revised growth projections and competition from solar PV in some countries led a number of companies to close their CSP operations. The trend towards larger plants to take advantage of economies of scale was maintained, while improved design and manufacturing techniques reduced costs.
SOLAR THERMAL HEATING AND COOLING.
Solar water and air collector capacity exceeded 283 GWth in 2012 and reached an estimated 330 GWth by the end of 2013. As in past years, China was the main demand driver, accounting for more than 80% of the global market. Demand in key European markets continued to slow, but markets expanded in countries such as Brazil, where solar thermal water heating is cost competitive. The trend towards deploying large domestic systems continued, as did growing interest in the use of solar thermal technologies for district heating, cooling, and industrial applications. China maintained its lead in the manufacture of solar thermal collectors. International attention to quality standards and certification continued, largely in response to high failure rates associated with cheap tubes from China. Europe saw accelerated consolidation during the year, with several large suppliers announcing their exit from the industry. Industry expectations for market development are the brightest in India and Greece.
More than 35 GW of wind power capacity was added in 2013, for a total above 318 GW. However, following several record years, the market was down nearly 10 GW compared to 2012, reflecting primarily a steep drop in the U.S. market. While the European Union remained the top region for cumulative wind capacity, Asia was nipping at its heels and is set to take the lead in 2014. New markets continued to emerge in all regions, and, for the first time, Latin America represented a significant share of new installations. Offshore wind had a record year, with 1.6 GW added, almost all of it in the EU. However, the record level hides delays due to policy uncertainty and project cancellations or downsizing.