ENERGY WATCH #2 - October 9, 2018
Renewables don’t grow fast enough, CO2 emissions keep rising – fossil fuels more expensive
by Karel Beckman
The share of renewables in meeting global energy demand is expected to grow by one-fifth in the next five years to reach 12.4% in 2023, according to the IEA’s Renewables 2018 market analysis and forecast report. Renewables will cover 40% of global energy growth.
The biggest growth will come from “modern bioenergy”.
“While the growth in solar PV and wind is set to continue in the electricity sector, bioenergy remains the largest source of renewable energy because of its widespread use in heat and transport, sectors in which other renewables currently play a much smaller role”, notes the IEA.
“Modern bioenergy is the overlooked giant of the renewable energy field,” said Fatih Birol, the IEA’s Executive Director. “Its share in the world’s total renewables consumption is about 50% today, in other words as much as hydro, wind, solar and all other renewables combined. We expect modern bioenergy will continue to lead the field, and has huge prospects for further growth. But the right policies and rigorous sustainability regulations will be essential to meet its full potential.”
According to the IEA, “untapped potential of bioenergy in cement, sugar and ethanol industries is also significant. Bioenergy growth in the industry, transport and electricity sectors combined could be as considerable as that of other renewables in the electricity sector. A significant proportion of this potential relies on wastes and residues that offer low lifecycle greenhouse gas (GHG) emissions and mitigate concerns over land-use change. In addition, using these resources can improve waste management and air quality.”
Solar PV dominates renewable electricity capacity expansion, notes the IEA. “Renewable capacity additions of 178 gigawatts (GW) in 2017 broke another record, accounting for more than two-thirds of global net electricity capacity growth for the first time. Solar PV capacity expanded the most (97 GW), over half of which was in China.”
Solar PV capacity is forecast to expand by almost 600 GW – more than all other renewable power technologies combined, or as much as twice Japan’s total capacity, reaching 1 terawatt (TW) by the end of the forecast period, notes the IEA. “Despite recent policy changes, China remains the absolute solar PV leader by far, holding almost 40% of global installed PV capacity in 2023. The United States remains the second-largest growth market for solar PV, followed by India, whose capacity quadruples.”
Despite the success of solar PV and bioenergy, not all the findings in the IEA report are positive. Thus, “onshore wind additions globally declined for the second year in a row, and hydropower growth continued to decelerate”, notes the IEA, although it adds that “wind capacity is expected to expand by 60%. Meanwhile, spurred by technological progress and significant cost reductions, offshore wind capacity triples…”
Another not so positive finding: to meet long-term climate and other sustainability goals, renewable energy is still not growing fast enough. “Should progress continue at the pace currently forecast, the share of renewables in final energy consumption would be roughly 18% by 2040 – significantly below the IEA Sustainable Development Scenario’s benchmark of 28%.”
Even worse: the Guardian interviewed Fatih Birol about the renewables report and discovered that very likely carbon emissions from the energy sector are set to grow this year – for the second year running. This is a “major blow to hopes the world might have turned the corner on tackling climate change”, notes the newspaper.
According to the Guardian, “preliminary analysis by the world’s energy watchdog [i.e. the IEA] shows the industry’s emissions have continued to rise in 2018, suggesting that an increase last year was not a one-off.”
Birol told the Guardian: “When I look at the first nine months of data, I expect in 2018 carbon emissions will increase once again. This is definitely worrying news for our climate goals. We need to see a steep decline in emissions. We are not seeing even flat emissions.”
“Emissions largely flatlined in 2014–16 after climbing for decades, raising hopes that global action on climate change was beginning to turn the tide – but in 2017 they grew by 1.4%. The IEA would not say exactly how much emissions were up this year, as it will not publish official figures until March 2019, but confirmed they had definitely risen to a historic high so far.”
Birol said the growing carbon pollution was a result of the global economy driving coal, oil and gas use. “Energy efficiency improvements and renewables are not good enough to reverse that,” he added.
Birol made clear that the growth in renewables had to be accompanied by coal plant closures in Asia if dangerous climate change is to be avoided. “If there are no early [coal power station] retirements, more than two-thirds of the emissions [in 2040] are already determined today. Unfortunately a big chunk of the problem in my view is the coal in Asia.”
There is some positive news too: all fossil fuels (coal, oil and gas) are currently becoming more expensive, making renewables more competitive.
Gas prices last year rose by some 20%. Higher gas and coal prices are “spurring more interest” in renewables, Bloomberg notes in a recent report.
“It’s an opportunity,’’ Paolo Bertuzzi, chief executive officer of Turboden, a unit of Mitsubishi Heavy Industries, said at a Bloomberg conference in London. “What’s important is not just the price but also the trend. If prices are rising, people start to think more about what to do about energy costs.”
The surge in coal stems from record demand for energy in China, which has driven up the cost of power generation fuels of all kinds, notes Bloomberg. That’s drawn cargoes away from Europe and boosted electricity prices from Britain to Italy.
Higher coal and power prices make renewables look like a better economic bet against fossil fuels, according to Ignacio Galan, CEO of Iberdrola. “Fossil fuel costs are increasing, and that’s helping renewable energy,” Galan said in an interview. “It signals that if you invest in fossil fuel sources, you will be penalized.”
Credit rating agency Moody’s also noted recently that renewables continue to grow at coal’s expense – and not just in Europe or the U.S., but also in developing nations.
“Emerging markets are set to eclipse developed nations next year in their capacity to generate wind and solar power as equipment costs fall and the energy market approaches peak coal”, according to Moody’s.
“While developed countries have long been leaders in renewable power generation, emerging economies are close to overtaking them, bringing their total installed capacity of wind and solar to 307GW and 272GW — respectively 51 per cent and 53 per cent of global capacity, according to Moody’s calculations.”
“China accounts for the lion’s share of the upsurge. But Middle East and north African countries are scheduled to have installed 14GW in solar plants by the end of 2018 — a seven-fold increase from 2015. Central and South America are also expected to reach 14GW, nearly five times more than in 2015, while India is set to hit 28GW, a jump of nearly six times.”
“Everyone knows the cost of installing solar and wind energy has been coming down, but recently we have seen prices hitting extreme lows in places such as Mexico, Chile, India and Abu Dhabi,” said Swami Venkataraman, senior vice-president at Moody’s Investors Service. “This fall in costs is definitely changing the calculus of [emerging market] governments, allowing them to pursue renewables much more aggressively,” he added.
Over in Australia, energy company Origin Energy, one of the leading energy providers in Australia, has said that “the cost of wind and solar farms has fallen so far it is now cheaper than the marginal cost of coal generation, and the company is moving on from the concept of 24/7 base-load”, according to the Australian website Reneweconomy.
The assessment was made by Greg Jarvis, the company’s head of energy trading and operations.
“I have been in this game for so long … the one thing I have seen is just the cost of renewables really change the game,” Jarvis says. “It is amazing what we have been seeing.”
“Renewables are cheaper than the marginal cost of black coal at the moment. They are very cheap.”
Jarvis puts the cost of solar in the mid $40s/MWh and the cost of wind at the low $50s/MWh. That cost of solar is around half the average price of wholesale electricity in most states this year, notes Reneweconomy.
“The assessment accords with other views in the market about the cost of wind and solar, including from UK billionaire Sanjeev Gupta, who is looking at solar to underpin the expansion of his newly bought steel business in Australia.”
Reneweconomy adds that “ with China now mulling a dramatic lift in its 2030 renewable energy target to 35 per cent from 20 per cent, the chances are that the costs of both wind and solar will fall dramatically again.”
And with the falling cost of storage – this is likely to enable “firm” renewables to emerge as a serious contender to existing fossil fuel plants.
Jarvis also made it clear that Origin Energy has moved on from thinking about new generation in terms of
baseload, “which stands in sharp contrast to current government thinking and the conservative commentariat.”
Asked if Origin Energy had moved beyond the idea – promoted by the federal government and many in mainstream media – that reliability depended on 24/7 base-load power, Jarvis said: “Oh, a long time ago. The idea of base-load power stations is well and truly gone.”
“We see a combination of fast gas, pumped hydro and battery storage, and combination of those with renewables is the future,” Jarvis said. “And let’s not forget what’s behind the meter, and how do you aggregate those resources,” he added, noting that Origin was now the biggest installer of rooftop solar in the country, and was also heavily involved in household battery storage.