The IEA’s First Renewable Energy Investment Outlook

IEA Energy Snapshot of the Week

IEA Energy Snapshot of the Week

The Medium-Term Renewable Energy Market Report 2014 released last week provides the first IEA five-year renewable power investment outlook and warns that growing risks to deployment are expected to slow renewable growth through 2020. As shown in this chart, investment in new renewable power capacity through 2020 is seen averaging over USD 230 billion annually – but lower than the approximately USD 250 billion deployed in 2013. The projected decline is due to expectations that global capacity growth will slow and that unit investment costs for some technologies will continue to fall. With decreasing costs, competitive opportunities are expanding for some renewables under some country-specific conditions and policy frameworks.

According to the report, power generation from renewable sources such as wind, solar and hydro grew strongly in 2013, reaching almost 22% of global generation, and was on par with electricity from gas, whose generation remained relatively stable. Global renewable generation is seen rising by 45% and making up nearly 26% of global electricity generation by 2020. Yet annual growth in new renewable power is seen slowing and stabilising after 2014, putting renewables at risk of falling short of the absolute generation levels needed to meet global climate change objectives.

“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,” said IEA Executive Director Maria van der Hoeven.

“Governments must distinguish more clearly between the past, present and future, as costs are falling over time,” she added. “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.”

Categories: Economic Indicators

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