Policy uncertainty could slow renewables' momentum

The International Energy Agency has warned in its Medium Term Renewable Energy Market Report that expansion of renewable energy will slow over the next 5 years unless policy uncertainty is reduced. The report sets out that power generation from renewable sources grew significantly in 2013 reaching almost 22% of global generation.

In comparison global renewable generation is rising by 45% and making up nearly 26% of global electricity generation by 2020. However annual growth in new renewable power is expected to slow after 2014. This will risk renewables falling short of the meeting climate change objectives.

IEA Executive Director Maria van der Hoeven 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. This stems from concerns about the costs of deploying renewables.” “Governments must distinguish more clearly between the past, present and future, as costs are falling over time. 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 report highlights that policy and market risks could slow deployment advancement. It then goes on to look at the anticipated future:

1. Through to 2020, investment in new renewable power capacity has been averaging $230 billion annually.

2. The decline is a result of unit investment costs for some technologies and global capacity growth will slow.

3. Opportunities for competition are increasing for renewables under some country specific conditions and policy frameworks.

4. The role of biofuel for transport and renewable heat will increase but at a slower rate than renewable electricity.

5. Policies in the EU and United States for biofuels are uncertain.