The IEA’s projections for wind and solar capacity look much too low, continuing a history of vastly underestimating renewables growth. Their projections are not a reliable basis for projecting the world’s future power generation mix, argues energy expert Adam Whitmore on his blog On Climate Change Policy.
I previously looked at the IEA’s track record of underestimating the growth of renewables by a huge margin. Since then the 2013 and 2014 World Energy Outlooks have been published, and it seems timely to ask how the credibility of their outlook has improved. The answer appears, regrettably, to be “not much”.
The chart below shows the IEA’s long term projections for global capacity additions of wind and solar PV, taken from the current version of its central New Policies Scenario, and compares these with historical growth and short term projections. The short term projections are likely to be quite accurate, especially for wind, as projects due on this year or next are usually already in progress.
Annual net global installations of wind and solar: comparison of IEA long term projections (New Policies Scenario) with historical data (to 2014) and short term projections (2015-6) Historical data is from BP, the Global Wind Energy Council and Bloomberg. Short term projections are from Bloomberg, as of February 2015. Long term projections are from the IEA World Energy Outlook, 2014, New Policies Scenario. IEA projections are for 2012-2020 and for each 5 years thereafter, and are shown at the mid-point of each interval.
The historic and short term forecast data shows a clear and strong upward trend in the rate of capacity installation for both technologies, although for wind this has somewhat moderated in recent years, and there has been considerable year to year policy-driven volatility.
The IEA’s projections show a sharp reversal of this trend, with net installation rates falling to well below current levels, and staying there or falling further for the next two and a half decades. The average annual installation rate projected by the IEA over the period 2020-2040 is nearly 30% below last year’s out-turn for wind, and nearly 40% below what’s likely to be put in this year.
For solar PV the decrease is even greater, with projected installation rates 40% below last year’s out-turn, and nearly 50% below what’s likely this year. This implies a substantial contraction in the wind and solar PV industries from their present size, rather than continuing growth or stabilisation. The IEA projects correspondingly small proportions of the world’s electricity generation coming from wind and solar PV. Even a quarter century from now their projections show wind accounting for only 8.3% of generation (in TWh) and solar PV a mere 3.2%.
It may well be that renewables installation rates begin to grow more slowly and even eventually plateau as markets mature. But a sudden fall by around a third or a half of current levels sustained into the long term seems to run against the main prevailing drivers.
The imperative to reduce carbon emissions from power generation is ever greater. This looks likely to continue to be a strong driver for renewables growth through direct mandates for renewables and (especially in the long term) through incentives from carbon pricing. Renewables are also highly compatible with other policy objectives such as security of energy supply.
Renewables are much more cost competitive than they were, both with other low carbon generation and with conventional fossil fuels, especially if fossil generation includes the cost of its emissions. Costs for wind and especially solar are expected to continue to fall.
Some argue that the total subsidy needed by solar and wind will limit their growth. However as costs fall any remaining subsidies required will continue to fall even faster in percentage terms (so for example a 20% decrease in costs may lead to a 50% decrease in required subsidy). This is likely to limit the total additional costs of renewables even as volumes grow, and especially in the 2020s and 2030s as the proportion of projects requiring no subsidy grows ever greater.
There is also scope to increase the installed base of renewables globally to well above the levels projected by the IEA without causing significant problems for grid integration. In any case such obstacles are likely to reduce over time with improved grid management, greater interconnection, and falling costs of batteries.
Given these drivers the IEA’s projections appear to be close to or below the bottom end of the credible range for rates of deployment, especially for solar, rather than the central case they are intended to represent. They do not form a reliable basis for assessing the future of the world’s power generation mix.
This article was first published on Adam Whitmore’s blog On Climate Change Policy and is republished here with permission.
See also his earlier article (from October 2013) on the IEA’s projections of renewables, which has this interesting chart:
On Energy Post, we earlier published critical reviews of the IEA’s renewables projections by Terje Osmundsen here and by Rolf de Vos and David de Jager of Ecofys here.
Jeffrey Michel says
IEA figures at the beginning of 2014 indicated that 150 GW of solar capacity had been installed globally at that time. By comparison, the global air conditioner industry projects the manufacture of about 100 million units this year alone. Solar power generation is well matched to air conditioning demand, which peaks when the sun is near its zenith. However, if each air conditioner has a nameplate capacity of 4 KW (an average value derived from the most common 3 kW and 5 kW units), then as much as 400 GW of new air conditioning demand is being added to the grid each year. In other words, the total of all global solar capacity realized to date would not be capable of powering even one year’s production of new air conditioners, which in many cases are being installed only to enhance human comfort. At what point in time can solar generation instead be expected to become a major source of power for fulfilling the essential needs of global civilization?
William Sharpe says
>400 GW of new air conditioning demand
This is false, as many of those new units are replacing older and less efficient air conditioners, and not all units are running at the same time. e.g. you typically don’t use your home unit when at work, and businesses do not run their units on weekends or holidays.
You only need to look at global new electricity generation, more then half of which is renewable, to see that the world’s increasing energy needs can be serviced without fossil fuels.
Also the whole point of this article is that production and deployment of renewables is accelerating instead of flat-lining as the IEA predicts. Just because solar is not currently adding 400 GW of capacity per year does not mean that it will never reach that level of production as its economics continue to improve.
Jeffrey Michel says
When I was a child in the United States, movie theatres would hang a sign “Air Conditioned” under their marquee. Today, 100 million homes in the country have air conditioners. An Arizona power utility told me that the peak-shaving potential of rooftop solar installations remains too deficient to be of significance. Cooling demand rises in the afternoon when the sun has passed its zenith, and evenings after work people expect a cool living room. According to the Netherlands Environmental Assessment Agency, world energy demand for air conditioning will surpass heating needs after 2070. For solar panels to fulfill that requirement, they would have to harvest far more energy from the sun than solar thermal installations due to inherent inefficiencies. Perhaps Energy Post can publish an article on the practical implementation of such visions.
Karel Beckman says
The graph was replaced by a slightly amended version on 26 March. The editor