New IRENA Report: Renewables 2017 – Solar leads the charge in another record year for renewables
Solar leads the charge in another record year for renewables
Boosted by a strong solar PV market, renewables accounted for almost two-thirds of net new power capacity around the world in 2016, with almost 165 gigawatts (GW) coming online. This was another record year, largely as a result of booming solar PV deployment in China and around the world, driven by sharp cost reductions and policy support.
Last year, new solar PV capacity around the world grew by 50%, reaching over 74 GW, with China accounting for almost half of this expansion. For the first time, solar PV additions rose faster than any other fuel, surpassing the net growth in coal.
This deployment was accompanied by the announcement of record-low auction prices as low as 3 cents per kilowatt hour. Low announced prices for solar and wind were recorded in a variety of places, including India, the United Arab Emirates, Mexico and Chile.
These announced contract prices for solar PV and wind power purchase agreements are increasingly comparable or lower than generation cost of newly built gas and coal power plants.
A bright future for renewables to 2022, solar PV entering a new era
This record performance in 2016 forms the bedrock of the IEA’s electricity forecast, which sees continued strong growth through 2022, with renewable electricity capacity forecast to expand by over 920 GW, an increase of 43%. This year’s renewable forecast is 12% higher than last year, thanks mostly to solar PV upward revisions in China and India.
Solar PV is entering a new era. For the next five years, solar PV represents the largest annual capacity additions for renewables, well above wind and hydro. This marks a turning point and underpins our more optimistic solar PV forecast which is revised up by over one-third compared to last year’s report. This revision is driven by continuous technology cost reductions and unprecedented market dynamics in China as a consequence of policy changes.
Under an accelerated case – where government policy lifts barriers to growth – IEA analysis finds that renewable capacity growth could be boosted by another 30%, totalling an extra 1,150 GW by 2022 led by China.
Solar PV and wind capacity in China could by then reach twice the total power capacity of Japan today.
China is the undisputed renewable growth leader
China alone is responsible for over 40% of global renewable capacity growth, which is largely driven by concerns about air pollution and capacity targets that were outlined in the country’s 13th five-year plan to 2020. In fact, China already surpassed its 2020 solar PV target, and the IEA expects it to exceed its wind target in 2019. China is also the world market leader in hydropower, bioenergy for electricity and heat, and electric vehicles.
Today, China represents half of global solar PV demand, while Chinese companies account for around 60% of total annual solar cell manufacturing capacity globally. As such, market and policy developments in China will have global implications for solar PV demand, supply, and prices. In the Renewables 2017 main case forecast, total solar PV capacity around the world reaches 740 GW by 2022 – more than the combined total power capacities of India and Japan today.
If uncertainties and barriers are addressed, solar PV growth could accelerate even more. Two important challenges in China – the growing cost of renewable subsidies and grid integration – limit growth in the main case forecast.
China’s renewable energy policies are being modified quite substantially in order to address these challenges. China is moving away from its feed-in-tariff (FIT) programme to a quota system with green certificates. Together with ambitious power market reform, new transmission lines, and the expansion of distributed generation, these new policies are expected to speed up deployment of solar (and wind). However, the timing and implementation of this policy transition remains uncertain.
Renewable markets around the world
The United States
Despite policy uncertainty, the United States remains the second-largest growth market for renewables. The main drivers remain strong for new onshore wind and solar capacities, such as multi-year federal tax incentives combined with renewable portfolio standards as well as state-level policies for distributed solar PV.
Still, the current uncertainty over proposed federal tax reforms, international trade, and energy policies could have implications for the relative economics of renewables and alter their expansion over the forecast period.
India’s moves to address the financial health of its utilities and tackle grid-integration issues drive a more optimistic forecast. By 2022, India is expected to more than double its current renewable electricity capacity. For the first time, this growth over the forecast period is higher compared with the European Union.
Solar PV and wind together represent 90% of India’s capacity growth as auctions yielded some of the world’s lowest prices for both technologies. In some Indian states, recent contract prices are comparable to coal tariffs. India’s accelerated case indicates that renewable capacity expansion could be boosted by almost a third, providing that existing grid integration and infrastructure challenges are addressed, policy and regulatory uncertainties are reduced, and costs continue to fall. With this growth India would equal the United States, becoming the joint second-largest growth market after China.
The European Union
In the European Union, renewable growth over the forecast period is 40% lower compared with the previous five-year period. Overall, weaker electricity demand, overcapacity, and limited visibility on forthcoming auction capacity volumes in some markets remain challenges to renewable growth. Policy uncertainty beyond 2020 remains high.
If adopted, the new EU Renewable Energy Directive covering the post-2020 period would address this challenge by requiring a three-year visibility over support policies, thereby improving the market’s predictability.
Developing Asia and Sub-Saharan Africa
For the first time, Renewables 2017 tracks off-grid solar PV applications more closely in developing Asia and sub Saharan Africa. Over the forecast period, off-grid capacity in these regions will almost triple – reaching over 3 000 MW in 2022 – from industrial applications, solar home systems (SHSs), and mini-grids driven by government electrification programmes, and private sector investments.
Although this growth represents a small share of total PV capacity installed in both regions, its socio-economic impact is nonetheless significant. Over the next five years, SHSs – the most dynamic sector in the off-grid segment – are forecast to bring basic electricity services to almost 70 million more people in Asia and sub Saharan Africa. It will also lead to new business players bringing innovative payment solutions that allow low-income populations initial access to electricity services.
THE FULL REPORT CAN BE SEEN HERE