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Stalling Renewables Growth Raises Concern About Global Decarbonization Efforts

Category: Energy & Environment,Finance

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In 2018, for the first time this century, global growth of new renewable energy capacity did not show a year-to-year increase. While this leveling off counters a long and steady trend of increased new renewable capacity each year – capacity added in 2018 is ten times higher than it was in 2001 – it has raised concern that efforts to advance a low-carbon energy transition may be stalling at just the wrong time.

Just about any ambitious climate plan in circulation – for example, the Intergovernmental Panel on Climate Change’s “1.5 degree” report and the Green New Deal resolution in the U.S. Congress – calls for massive mobilization of renewable energy investment. Though the last decade’s growth in renewables is impressive, many policymakers are looking for it to accelerate rather than flatten in order to help meet long-term decarbonization targets to mitigate climate risk. Let’s unpack how this development might affect such efforts.

Renewable Capacity Additions Are Historically High, But Emissions Still Grow

The International Energy Agency (IEA) reports that new renewable energy capacity additions in 2018 were about 180 gigawatts (GW), the same as in 2017. That is roughly equivalent to 180 nuclear power plants and accounts for two-thirds of annual global capacity additions last year. The International Renewable Energy Association reports that one-third of all power generating capacity is now from renewables.

That sounds like a lot, but the actual generation that comes from a given amount of renewable capacity is lower than nuclear and fossil fuel plants because of the intermittency of renewables. Currently, renewables, including hydropower, account for just under one-quarter of global power production. The gap between renewable capacity and generation shares will narrow if energy storage and grid infrastructure investments geared toward renewable integration grow to match the scale of renewable capacity additions.

Last year, renewable generation grew 7 percent, but this only supplied 40 percent of the growth in total global electricity demand. Consequently, global CO2 emissions from the energy sector rose by 1.7 percent, even with the impressive growth in renewables. For renewables to play a major role in curbing global emissions commensurate with the Paris Agreement, the IEA estimates that renewable capacity additions will need to grow by over 300 GW each year between now and 2030 – or roughly two-thirds higher than last year’s total.

The Renewables Mix Is Changing

Hydropower accounts for more than half of global renewable capacity today, but in the last decade capacity growth has been driven first by wind and now solar PV.

New solar PV capacity overtaking wind and hydro. 

Data Source: International Energy Agency

The big story here is last year’s slowdown in solar PV’s growth. As the IEA explains, global solar PV’s exponential growth had been compensating for slower increases in wind and hydropower since 2015. Solar PV’s growth flattened in 2018, however, as China suddenly changed its solar PV incentives to address cost and grid integration challenges.

Are China, EU and India Taking A Timeout?

China announced drastic cuts to support for solar developments in May 2018. Of the 97 GW of new solar capacity added last year globally, 44 GW came from China – but that actually marks a sharp decline from the 53 GW China installed in 2017.

China's capacity additions flatten as growth in the EU declines

Data Source: International Energy Agency

Other factors behind last year’s slowdown in renewable capacity are a drop off in wind investment in the EU and India. From 2017 to 2018, new onshore wind installations dropped almost a third in the EU. Twelve EU countries failed to install a single wind turbine last year, but the largest drop-offs came from Germany, which was down by more than half compared to 2017, and the UK. Wind industry analysts point to permitting issues, especially in Germany and France.

In India, wind installations were at 1,481 MW (down from 5,400 MW in 2016-17). Some observers blame the Ministry of New and Renewable Energy for capping wind power tariffs at such a low price.

US Capacity Additions – Trending Up Unevenly

Zooming in to the United States reveals that the last two decades have seen tremendous growth in renewable capacity, but that growth has been uneven. The United States is adding much more renewable capacity, but not always increasing year-over-year. The US added 18 GW in 2018 – up from the 17 GW in 2017, but not quite the 24 GW from 2016.

The US’s growth in renewable capacity should continue through the short-term. The US Energy Information Administration (EIA) expects non-hydro renewables to be the fastest growing source of US electricity generation for at least the next two years.

What Lies Ahead?

Last year’s stalled growth in renewable capacity is worthy of attention, but it does not by itself indicate that we have hit “peak renewable.” Policies still matter – a lot – and in some places, policies have barely scratched the surface. While many countries declared renewables targets as part of their Paris Agreement pledges in 2015, some are still crafting those policies. In the United States, national commitments have devolved to subnational actions, and yet the needle is moving toward more renewables. Harmonized national polices – whether focused directly on renewables or decarbonizaation more broadly - would be more efficient than the current piecemeal approach in the US and could expand renewables and modify the mix considerably if adopted. Future elections will set the tone here.

China, the world’s largest energy user, is so big that whatever the Xi government and any successors choose to do with renewables will have an outsized effect at home and abroad, not just in terms of global adoption numbers but on global markets.

One thing that early adopters like Germany, the rest of the EU, and US states that enacted an RPS decades ago have done is provided the scale effect necessary to bring down the unit costs of wind and solar generation dramatically, so that they can compete on par with fossil generation in many cases. It is tempting to conclude that in due time renewables will outcompete fossil generation everywhere without reliance on targeted policies whatsoever, which would certainly help scale up adoption. But that is not guaranteed.

First, energy storage technologies and grid improvements must catch up to integrate the higher levels of renewables. Both movements are underway. Second, although the average unit cost of renewables has been declining through technical improvements and scale economies, the marginal cost of generation rises as you move from the choicest spots with the least expensive land and the most productive resources to those that are more expensive and less productive. That’s exactly what happened with dam construction in the United States. As the Atlantic explains, “by 1980 nearly all the nation's good sites – and many dubious sites – had been dammed.”

Geographic variation in policy has ensured that we are not necessarily starting with the most productive spots and moving on from there. This means that there may be more low-hanging fruit as policies migrate to new areas, but eventually highly ambitious global targets will run into site quality and cost constraints.

Policies will continue to play an important role for renewables for the foreseeable future. Policymakers should consider whether 100% renewable targets should be the sine quan non of climate policy or if high renewables adoption mixed with other emissions-free sources and carbon capture should be part of the portfolio. Whether mandating high levels of renewables is the most cost-effective way to reduce greenhouse gas emissions is the subject of much current debate, which I will wade into in another article.

[Will Niver of the Duke University Energy Initiative provided research and editorial support for this post. Jacob Bratsch of  the Energy Initiative produced the graphics.]

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In 2018, for the first time this century, global growth of new renewable energy capacity did not show a year-to-year increase. While this leveling off counters a long and steady trend of increased new renewable capacity each year – capacity added in 2018 is ten times higher than it was in 2001 – it has raised concern that efforts to advance a low-carbon energy transition may be stalling at just the wrong time.

Just about any ambitious climate plan in circulation – for example, the Intergovernmental Panel on Climate Change’s “1.5 degree” report and the Green New Deal resolution in the U.S. Congress – calls for massive mobilization of renewable energy investment. Though the last decade’s growth in renewables is impressive, many policymakers are looking for it to accelerate rather than flatten in order to help meet long-term decarbonization targets to mitigate climate risk. Let’s unpack how this development might affect such efforts.

Renewable Capacity Additions Are Historically High, But Emissions Still Grow

The International Energy Agency (IEA) reports that new renewable energy capacity additions in 2018 were about 180 gigawatts (GW), the same as in 2017. That is roughly equivalent to 180 nuclear power plants and accounts for two-thirds of annual global capacity additions last year. The International Renewable Energy Association reports that one-third of all power generating capacity is now from renewables.

That sounds like a lot, but the actual generation that comes from a given amount of renewable capacity is lower than nuclear and fossil fuel plants because of the intermittency of renewables. Currently, renewables, including hydropower, account for just under one-quarter of global power production. The gap between renewable capacity and generation shares will narrow if energy storage and grid infrastructure investments geared toward renewable integration grow to match the scale of renewable capacity additions.

Last year, renewable generation grew 7 percent, but this only supplied 40 percent of the growth in total global electricity demand. Consequently, global CO2 emissions from the energy sector rose by 1.7 percent, even with the impressive growth in renewables. For renewables to play a major role in curbing global emissions commensurate with the Paris Agreement, the IEA estimates that renewable capacity additions will need to grow by over 300 GW each year between now and 2030 – or roughly two-thirds higher than last year’s total.

The Renewables Mix Is Changing

Hydropower accounts for more than half of global renewable capacity today, but in the last decade capacity growth has been driven first by wind and now solar PV.

New solar PV capacity overtaking wind and hydro. 

Data Source: International Energy Agency

The big story here is last year’s slowdown in solar PV’s growth. As the IEA explains, global solar PV’s exponential growth had been compensating for slower increases in wind and hydropower since 2015. Solar PV’s growth flattened in 2018, however, as China suddenly changed its solar PV incentives to address cost and grid integration challenges.

Are China, EU and India Taking A Timeout?

China announced drastic cuts to support for solar developments in May 2018. Of the 97 GW of new solar capacity added last year globally, 44 GW came from China – but that actually marks a sharp decline from the 53 GW China installed in 2017.

China's capacity additions flatten as growth in the EU declines

Data Source: International Energy Agency

Other factors behind last year’s slowdown in renewable capacity are a drop off in wind investment in the EU and India. From 2017 to 2018, new onshore wind installations dropped almost a third in the EU. Twelve EU countries failed to install a single wind turbine last year, but the largest drop-offs came from Germany, which was down by more than half compared to 2017, and the UK. Wind industry analysts point to permitting issues, especially in Germany and France.

In India, wind installations were at 1,481 MW (down from 5,400 MW in 2016-17). Some observers blame the Ministry of New and Renewable Energy for capping wind power tariffs at such a low price.

US Capacity Additions – Trending Up Unevenly

Zooming in to the United States reveals that the last two decades have seen tremendous growth in renewable capacity, but that growth has been uneven. The United States is adding much more renewable capacity, but not always increasing year-over-year. The US added 18 GW in 2018 – up from the 17 GW in 2017, but not quite the 24 GW from 2016.

The US’s growth in renewable capacity should continue through the short-term. The US Energy Information Administration (EIA) expects non-hydro renewables to be the fastest growing source of US electricity generation for at least the next two years.

What Lies Ahead?

Last year’s stalled growth in renewable capacity is worthy of attention, but it does not by itself indicate that we have hit “peak renewable.” Policies still matter – a lot – and in some places, policies have barely scratched the surface. While many countries declared renewables targets as part of their Paris Agreement pledges in 2015, some are still crafting those policies. In the United States, national commitments have devolved to subnational actions, and yet the needle is moving toward more renewables. Harmonized national polices – whether focused directly on renewables or decarbonizaation more broadly - would be more efficient than the current piecemeal approach in the US and could expand renewables and modify the mix considerably if adopted. Future elections will set the tone here.

China, the world’s largest energy user, is so big that whatever the Xi government and any successors choose to do with renewables will have an outsized effect at home and abroad, not just in terms of global adoption numbers but on global markets.

One thing that early adopters like Germany, the rest of the EU, and US states that enacted an RPS decades ago have done is provided the scale effect necessary to bring down the unit costs of wind and solar generation dramatically, so that they can compete on par with fossil generation in many cases. It is tempting to conclude that in due time renewables will outcompete fossil generation everywhere without reliance on targeted policies whatsoever, which would certainly help scale up adoption. But that is not guaranteed.

First, energy storage technologies and grid improvements must catch up to integrate the higher levels of renewables. Both movements are underway. Second, although the average unit cost of renewables has been declining through technical improvements and scale economies, the marginal cost of generation rises as you move from the choicest spots with the least expensive land and the most productive resources to those that are more expensive and less productive. That’s exactly what happened with dam construction in the United States. As the Atlantic explains, “by 1980 nearly all the nation's good sites – and many dubious sites – had been dammed.”

Geographic variation in policy has ensured that we are not necessarily starting with the most productive spots and moving on from there. This means that there may be more low-hanging fruit as policies migrate to new areas, but eventually highly ambitious global targets will run into site quality and cost constraints.

Policies will continue to play an important role for renewables for the foreseeable future. Policymakers should consider whether 100% renewable targets should be the sine quan non of climate policy or if high renewables adoption mixed with other emissions-free sources and carbon capture should be part of the portfolio. Whether mandating high levels of renewables is the most cost-effective way to reduce greenhouse gas emissions is the subject of much current debate, which I will wade into in another article.

[Will Niver of the Duke University Energy Initiative provided research and editorial support for this post. Jacob Bratsch of  the Energy Initiative produced the graphics.]


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