If governments fail to take action, the coming years will see a slowdown in the progress of renewables

The expansion of renewable energy will slow over the next five years unless policy uncertainty is diminished, the International Energy Agency (IEA) said in its third annual Medium-Term Renewable Energy Market Report.

According to the report, power generation from renewable sources such as wind, solar and hydro grew strongly in 2013, reaching almost 22% of global generation, and was on par with the electricity produced from gas that has remained relatively stable. Global renewable generation is expected to increase by 45%, representing around 26% of all power generation by 2020. However growth in new renewable power sources seems to be slowing down, having stabilised after 2014, which means that renewables are running the risk of falling short of the overall generation levels needed to meet global climate change objectives. [sam_block id=”10″ name=”Banner central 728x90px”]

Non-OECD markets, spurred on by their need to diversify and concern regarding air quality, specifically in China, comprise almost 70% of the growth. Yet renewable only represent 35% of the growing electricity needs, illustrating the high level of importance that fossil fuels continue to have and the potential for greater growth in renewables. Renewables account for 80% of new power generation in the OECD however appear to be limited thanks to sluggish demand and an increase in political risks in key markets.

“Governments must distinguish more clearly between the past, present and future, as costs are falling over time,” said IEA Executive Director Maria van der Hoeven. “Many renewables no longer need high incentive levels. Rather, given their capital-intensive nature, renewables require a market context that assures a reasonable and predictable return for investors. This calls for a serious reflection on market design needed to achieve a more sustainable world energy mix.”

For the first time, the annual report includes a renewable power investment outlook. Through 2020, investment in new renewable power capacity is expected to average over USD 230 billion annually. This is lower than the USD 250 billion invested in 2013. The decline is due to expectations that both unit investment costs for some technologies will fall and that global capacity growth will reduce. With decreasing costs, competitive opportunities are expanding for some renewables within some country-specific conditions and policy frameworks.

The role of biofuels for transport and renewable heat are also increasing, though at slower growth rates than renewable electricity. Uncertainty over policy support for biofuels is rising in the EU and the United States, checking expectations for growth and threatening the development of the advanced biofuel industry just when the first commercial plants are coming online.

The annual report highlights that the contribution of renewables to meet heating and cooling needs remains underdeveloped, with more limited policy frameworks compared with the electricity and transport sectors. Although modern renewable energy sources are expected to grow by almost 25% to 2020, their share in energy use for heat represents a mere 9%.