IEA upgrades wind and solar forecasts again, as record 2020 becomes new normal

Unlike most other forms of energy generation, renewable energy has proven resilient during the Covid19 pandemic. But a new report from the International Energy Agency (IEA) shows that global renewable energy has done far better than simply riding through the pandemic, with record-breaking growth figures and significant revisions to what are now clearly pessimistic forecasts from the IEA.

Between 2019 and 2020, the annual addition of renewable capacity increased by 45% to 280 gigawatts, comfortably the highest year-on-year increase since 1999. This was driven primarily by a rush of new renewable energy installed in China prior to the winding down of a subsidy scheme, but the IEA predicts that a range of other factors will result in annual capacity additions being at or around this figure for the coming years. Wind rose 90% between 2019 and 2020, and solar rose 23%.

The IEA expects China’s significant wind and solar growth to slow in 2021 and 2022, but for that to be offset by rising growth in other regions, evening out to a ‘new normal’ of around 270 gigawatts of new renewable energy added each year. This, they anticipate, will be driven by cost declines in solar PV additions and ongoing policy support. Solar continues as the dominant engine of renewable energy growth, wind power levels off and hydro in China continues to expand, resulting in a ‘steady state’ into the first quarter of the 2020s.

Europe is the second largest market for renewable energy after China, with additions driven by a range of policies targeted towards meeting the European Union’s 2030 climate target. This includes Germany’s renewable energy act, feed-in tariff schemes in Turkey, corporate PPA agreements in Spain, Sweden and the Netherlands, along with the United Kingdom’s ‘contracts for difference’ auctions. The United States will also drive short term change, with the extension of tax credits that serve as the primary driver of new renewable energy. However, these are only extended until the end of 2021, with the Biden administration expected to extend or replace this policy some time this year.

The IEA’s forecasts of 2021 and 2022 have been revised from previous versions, published in May 2021 and November 2020. The largest proportionate upwards revisions come from China, with a range of policy changes driving the changes in the IEA’s predictions of renewable energy growth.

The report also mentions Australia’s significant growth in the solar PV Sector, pairing a focus with Japan. “Australia exceeded its large-scale renewable energy target (LRET) in 2020, and the resulting oversupply of certificates negatively affected the business case for utility-scale PV projects. As a result, some developers are seeking to sign corporate PPAs to ensure stable remuneration. Meanwhile, state-level incentives are prompting distributed PV growth with the rapid adoption of battery storage, especially in the residential sector”. This predicted levelling-off of PV growth in Australia aligns with predictions released recently by the Clean Energy Regulator, which warn of the same.

“Wind and solar power are giving us more reasons to be optimistic about our climate goals as they break record after record. Last year, the increase in renewable capacity accounted for 90% of the entire global power sector’s expansion,” said Fatih Birol, the Executive Director of the IEA. “Governments need to build on this promising momentum through policies that encourage greater investment in solar and wind, in the additional grid infrastructure they will require, and in other key renewable technologies such as hydropower, bioenergy and geothermal. A massive expansion of clean electricity is essential to giving the world a chance of achieving its net zero goals.”

The over-performance of renewable energy is still well below the levels required to move the world close enough to achieving the Paris climate agreement’s most ambitious climate goals. But this data confirms that 2020 was a major step in the right direction, and that there is plenty more to be gained with additional effort.