IEA talks Energy Transition, but still low-balls future growth of wind and solar

Among publications on the future of global energy flows, the International Energy Agency’s (IEA) World Energy Outlook (WEO) holds a special place. While the IEA is one of the most prestigious agencies for producing information on global energy across sectors, WEO forecasts consistently fail to keep pace with reality regarding the rise of renewable energy.

This flaw is continued in WEO 2015, which was released today. The report notes that there is an “energy sector transition underway in many parts of the world”, and that renewables have already become the second-largest source of electricity, due to 130 GW being installed in 2014.

However, even in its “New Policies” scenario IEA predicts that renewable energy growth will essentially flat-line, with only 144 GW installed annually through 2040. This is in stark contrast to decades of sharply growing wind and solar deployment, and IEA gives no explanation for the divergence between this odd assumption and historical growth rates.

Part of this appears to be due to IEA vastly underestimating falling solar and wind costs, again with a seeming disregard for historical trends. “A 40% cost drop by 2040 is ludicrously conservative,” Bloomberg New Energy Finance CEO Michael Liebreich told pv magazine.

Liebreich estimates that the global solar industry alone is growing 30% annually, and that costs are falling 20% with every doubling – meaning that a 40% cost reduction is likely to be achieved in less than 10 years, not 25.

“You are going to see much more substantial cost drops in solar,” states Liebreich.

When IEA does mention the future growth of clean energy in the report’s Executive Summary, in the fact sheets presented this is often within the context of global pledges made in advance of the COP21 meeting in Paris in late November. More than 150 nations have made commitments to reduce carbon emissions in advance of the global conference.

However, the two examples which IEA cites – the U.S. Clean Power Plan and China’s announcements of expanded carbon markets – will not necessarily be make-or-break events for renewable energy deployment.

Mandatory compliance under the Clean Power Plan does not start until 2022, and by this time solar and wind markets are likely to expand beyond Clean Power Plan targets due to raw economic competitiveness. A recent report by Texas’ grid operator predicts installed solar in the state will grow 50-fold to 2030 even without the Clean Power Plan, and that the plan will not have a great impact on the scale of deployment.

Likewise, China continues to ramp up its targets for annual solar deployment, and carbon markets have not been an essential policy driver for solar and wind markets in China – or anywhere else, for that matter.

This does not mean that these or the policies which have supported wind and solar, are irrelevant. BNEF’s Liebreich notes that even with falling oil prices, clean energy investments remain strong.

“We are seeing investments holding up, and the question is why is it holding up, it is a combination of policy drivers,” notes Liebreich, who references renewable portfolio standards and existing power plant pollution standards in the United States. “There’s a kind of a nutcracker effect between falling costs and the policy drivers.”

In the report, there are plenty of details that both the IEA and its clean energy critics can agree. These include a plateauing of coal demand in China and a de-coupling of energy demand and economic growth in developed nations. Also, IEA has acknowledged that renewable energy will be the leading source of new energy to 2040.

While describing the agency’s solar forecast as “overly conservative”, Liebreich calls the 2015 report a “landmark WEO” due in part to the statements about the transition to renewables.

The rate of this transition to renewable energy is still hotly debated. Here, IEA’s track record is very poor.

A report by Energy Watch Group released in September found that the 180 GW of solar PV which WEO 2010 projected would be installed in 2024 was achieved in January 2015. The report similarly found that wind capacity in 2010 exceeded 260% and 104% the agency’s 2002 and 2004 projections for that year.

Source: PV Magazine. Reproduced with permission.