The International Energy Agency released their latest report, titled ‘Renewables 2019’. The report forecasts development in the renewable energy sector between 2019 and 2024 and expects that renewable power capacity overall will expand by 50% during this period. This is equivalent to an increase of 1,200 GW of generation capacity, which is equal to the total installed power capacity of the U.S. today. The IEA publication sheds light on possible challenges of a growing RE sector and looks into what factors may affect future development.

Solar PV will play a key role in the expected growth and is set to provide about two thirds of the predicted increase in capacity. Therefore, the technology receives a special focus within the report and it is pointed out that development of the sector has actually already started; according to the IEA figures, 40% of total solar PV capacity was installed in 2018 alone and this is expected to continue growing due to rapidly falling costs.

Solar PV – driving growth in renewable energies

In fact, over the past decade, levelized generation costs of commercial and residential systems have fallen below the variable retail electricity price in almost all countries without electricity subsidies. These investment costs are expected to fall a further 15-35% between now and 2024. Whilst Europe currently has the largest solar PV capacity in the world, most growth will come from China, and strong policy incentives in Japan, Korea and India mean that Asia-Pacific regions will surpass growth rates in Europe and North America. To sustain growth in distributed PV deployment, changes will need to be made to market designs and tariff and policy frameworks, to balance out the competing interests of PV owners with distribution companies and other consumers.

Tapping potential for further development

One of the main messages from the report, is the role played by governments in predicting the speed of growth in renewables. Renewable capacity growth could be 26% higher than currently predicted should governments address issues involving policy and regulatory uncertainty, high investment risks in developing counties and better system integration for wind and solar resources.

Governments have taken different approaches to deal with this. For many countries, competitive auctions of Power Purchase Agreements are becoming increasingly more popular for marketing renewables in comparison to administratively set government support schemes. This is due to various reasons, including reduced incentives from government feed-in tariffs and longer contracts through PPA auctions, allowing owners to have greater flexibility in production sales. Countries where governments are incentivizing renewable investments will see faster growth in expansion than those with unsupportive policy environments. This is especially the case in countries such as Egypt where, if procurement process transparency was improved, permitting procedures were simplified and auction implementation was faster, then renewable capacity growth would be 96% higher than already predicted.

More flexibility of supply systems needed

As variable renewables such as solar and wind become increasingly competitive with fossil fuels, grid integration is becoming a growing issue. Power systems currently lack the flexibility needed to effectively respond to fluctuations in supply or demand. System integration is most effective when embedded into support schemes which allow direct marketing for operators. By introducing floating premiums based on technology specific average market values, power systems can be adapted to minimize the impacts of fluctuations in supply. Pre-site selection and proactive network planning also supports grid integration.

Corporate influence on the future development

Quintessentially, what we see currently is that prices for renewable energy are declining, yet supply systems are not always fit to keep pace with increasing demand. In addition to governments trying to shape renewable energy supply for the future, the corporate sector has the chance and ability to decarbonize and contribute to the further expansion of the renewable energy sector by implementing forward-looking green energy procurement strategies.

If you want to learn more on how this can be achieved, please watch the recording of the latest First Climate / CDP webinar on options for corporate green energy sourcing.

CDP / First Climate Webinar “How to align your scope 2 emissions with a 1.5°C future”

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