“Everything we are seeing is pointing to transformational change in the energy sector”, says Adnan Z. Amin, Director-General of the International Renewable Energy Agency (IRENA). “We don’t need a miracle, it’s already happening.” Amin, under whose leadership IRENA has become the world’s fastest-growing intergovernmental organisation with over 170 member countries, says that renewables are growing much faster than most people, including many policymakers, realise. “Even among climate negotiators there is suprisingly limited knowledge about what renewables can accomplish.” Energy Post editor Karel Beckman interviewed the IRENA chief recently in Bonn for World Energy Focus, the monthly magazine of the World Energy Council.
Adnan Amin does not make the impression of a man who is in a desperate race to save the world from climate catastrophe. When we meet him in Bonn, Germany, where the Innovation and Technology Centre of the Abu-Dhabi based organisation is located, Amin appears suave and relaxed, in spite of just having experienced serious flight delay. He has reason to be: thanks to quickly falling costs, renewable energy is on a global growth trajectory that, as Amin puts it, “no one could have foreseen five years ago”.
Indeed, according to Amin, “the power sector is no longer a problem” when it comes to decarbonisation. We must now turn our attention, he says, to “the end-use sectors” (transport and heating/cooling), questions of market design (“we have graduated from the feed-in-tariff”) and “the next generation of technologies”, for example in storage and infrastructure. Amin is convinced that IRENA’s ambitious REMAP scenario (doubling of renewable energy to 36% in 2030) is perfectly realistic. He sees oil companies transforming themselves, believes there is “no more room for coal”, and is convinced the growth of off-grid technologies taking place in developing as well as developed countries is seriously underestimated. He is joined in the interview by Dolf Gielen, Director of the IRENA Innovation and Technology Centre in Bonn.
Bill Gates has said we need miracles to achieve a clean-energy breakthrough. What is your view?
Amin: The miracle is already happening. Everything that we have seen is pointing to transformational change in the energy sector. Costs of solar and wind are coming down rapidly. Last year we were blown away by solar PV prices as low as 5.4 cts/kWh in Dubai and 4.3 cts in Peru. Now we have had a record 2.99 cts in Dubai. Last year saw 8.3% growth in renewable energy capacity. Investment is up. Where Bill Gates has a point is that we now have to prepare ourselves for the next generation of techologies that will lead to us to an integrated energy system that’s sustainable. This means we need innovation and investment in infrastructure, storage, grids, and innovations in market design. We need to take advantage of the great opportunity low renewable energy prices is offering.
“I just came back from a meeting in Paris and I was struck by the fact that even people who have been around for a long time still have a very rough understanding of the economics of the energy transition today”
According to IRENA’s REMAP scenario (2016), the share of modern renewables in final energy consumption could and should double to 36% in 2030. But the report also notes that if all countries follow the national climate plans (NDCs) they have submitted to the UN, the renewables share will rise to just 21%. This means that growth has to increase six-fold. Is that realistic?
Amin: Yes. Costs of solar PV have gone down 80% in 5 years. Costs of wind and storage are also coming down. Five years ago no one could have anticipated this. And it is still continuing. We have also gained a lot of knowledge on what we need in terms of policy and regulations. Front-runner countries like Germany and Denmark are showing it is possible to integrate renewables into the energy system without major fixes. So we don’t think we are overly optimistic. We just came back from a visit to China. Researchers there think they can go much further than what is in the plans right now. In the US we have seen that Republicans and Democrats agreed to extend the renewable energy tax credit for 7 years. That will have a great impact, we will see a lot of growth in the US. And other countries are following the same path. We may even have been conservative in our outlook.
Dolf Gielen: This is a point that we made in the REMAP – we believe today’s policy plans underestimate what is going on in the market. Take solar. If you add up all the national projections, you get to 500-600 GW in 2030. Today we are 230 GW and adding 50 GW a year. So even at today’s growth rate you will hit 1000 GW in 2030. That’s not rocket science. If you assume some growth, you will get to 1500 GW. And it’s the same in other technologies. Battery storage for example. That’s being taken up by the market whether policymakers believe in it or not. All this is not fully reflected in the national plans. Nor has it been accommodated by the incumbent players.
“If you look at the price gap between stationary storage and car batteries, that’s a factor 2 to 3. So that magnitude of cost reduction is still possible for today’s lithium-ion batteries”
Amin: Even among climate negotiators there is a lack of comprehension of the potential of renewable energy for decarbonisation. I just came back from a meeting in Paris and I was struck by the fact that even people who have been around for a long time still have a very rough understanding of the economics of the energy transition today. They tend to look at their own country and not see the larger picture. They still believe renewable energies are too expensive, that they can’t be handled by the grid, that there will be large system costs. They say they don’t know how to do it. But in the energy community this is not the case at all.
Where do you see the cost of storage going?
Amin: Let me tell you one anecdote. We visited a technology company in China where we were shown a new storage device, comparable to the Tesla Powerwall. We were told this is going to deliver the same kind of storage capability at one-third of the cost. We will certainly see sharp decreases in cost, but it’s difficult to predict which technologies will win out and how.
Gielen: If you look at the price gap between stationary storage and car batteries, that’s a factor 2 to 3. So that magnitude of cost reduction is still possible for today’s lithium-ion batteries. What I see as a bigger problem is if we all start driving EVs, we will need an awful lot of lithium. At our latest conference there was a lot of buzz about ultracapacitators for cars. If something like that would work where you don’t need that amount of materials that would be a real breakthrough.
In countries like the US there is a debate about centralised versus decentralised generation. What do you think is the wave of the future?
Amin: I don’t think it’s either-or. The trick is to achieve the optimal combination. I do believe that people are underestimating what is happening in off-grid. We have all been talking for many years about 1.3 billion people without access to modern energy services. Nobody ever questions this figure. But when we looked into this recently we discovered there is a lot of investment going into solar home systems, particularly in developing countries. You don’t see this in the energy statistics, that’s why we looked at the trade statistics. There are thousands of these home systems developed by entrepreneurs. They provide very low-cost basic power services for cell phone charging, refrigeration, and that sort of thing. So we see this picture changing dramatically, although we would still like to see it change more quickly. We need to improve the investment framework in developing countires. The aid model doesn’t work. We need to incentivise entrepreneurs to start new businesses. That will lead to new revenues and new skills being developed.
“I do believe that people are underestimating what is happening in off-grid”
Energy transition is often presented as win-win but surely there are also losers. Do you talk to the international oil companies or fossil fuel producers?
Amin: Yes, we talk to them. We see a huge change in attitude. Their scenarios are changing. They are investing in renewables. They more and more see themselves as energy rather than oil companies. Utilities like Enel are already developing towards a service-oriented model. Oil companies will follow. Oil producing countries also. Why do you think Abu Dhabi hosts IRENA? They are looking at a world beyond oil.
Do you think low oil prices will hinder the energy transition?
Amin: Low oil prices? In the renewable energy sector we are pushing the price down! But very few countries use oil for power generation, so there is no direct relation there. Renewables could form a virtuous combination with gas as balancing fuel. Nobody wants coal anymore. Even countries that are investing in oil are looking for an exit. Investors are beginning to realise that a lot of these assets will be stranded in 5, 6, 7 years.
What are the most promising developments in market design?
Gielen: We see a clear trend away from feed-in-tariffs (FITs) towards auctions. Auctions have resulted in much better prices. Amazing prices. Although the devil is in the detail: you have to look carefully at how you organise your auction. On the whole in power market redesign there is still a lot of testing go on. We don’t think there is a one-size-fits-all solution.
Amin: FITs were essential to bring costs down initially. But they are a long-term fiscal burden. We have graduated from FITs to more market-reflexive methods. You know, the power sector is really not a problem anymore. More important is how renewable energy can change end-use sectors such as mobility and heating.
“I think that countries that don’t have money for power from renewables don’t have money for power from anything”
Do we need a supranational framework to advance the energy transition, especially in developing countries?
Amin: I don’t think there is much appetite for that. For countries sovereignty over their energy resources is essential. Security of supply comes first. I think that countries that don’t have money for power from renewables don’t have money for power from anything. It’s not a trade-off. There is a business case for renewable energy. Especially for off-grid in developing countries.
What is the finish line for IRENA?
Amin: All of us who work in this field are very passionate about what we do. This is not just a job. We believe in what we are doing. Our real job is to support countries in the transition. That job is being made easier by the way technology and economics are working out. If we are successful in positioning the business case for renewables as both a driver for growth and employment as well as a critical plank of climate policy – if this becomes the operating model for the majority of countries – we will have succeeded.