Renewables have become a popular source of power generation globally. At the end of 2018, global renewable generation capacity stood at 2,351 GW. Over 26 per cent of the total electricity generation in 2018 was based on renewable energy sources. National green targets and evolving policy frameworks are the key factors responsible for fuelling growth in the sector. About 171 GW of renewable generation capacity was added in 2018, an increase of 8 per cent over the previous year.
Of all renewable energy sources, hydro accounts for the largest share though rapid growth in solar and wind has reduced the overall share of hydropower to less than 50 per cent. Wind and solar energy account for the remaining share, with cumulative installed capacities of 564 GW and 486 GW respectively. Other renewable energy sources include 115 GW of bioenergy, 13 GW of geothermal energy and 500 MW of marine energy (tide, wave and ocean energy). Solar energy continued to dominate capacity additions in 2018 with a capacity increase of 24 per cent, followed by wind energy at 10 per cent. Hydropower capacity increased only 2 per cent during the year while bioenergy grew by 5 per cent.
Globally, renewable penetration in the energy sector has increased. In 2018, more than 90 countries installed at least 1 GW of generating capacity, while at least 30 countries exceeded 10 GW of capacity. A growing number of countries now have more than 20 per cent renewables in their electricity mix. A look at the key developments in the global renewable energy space in 2018 as well as the emerging trends…
Solar energy continued to drive growth in the global renewable energy space. About 94 GW of solar power generation capacity was added in 2018, a growth of 24 per cent over 2017. At the end of 2018, more than 32 countries had a cumulative capacity of 1 GW or more. Solar photovoltaic (PV) remained a key source of electricity generation in various countries. In Honduras, solar PV held a 12.1 per cent share in the total electricity generation in 2018, whereas in Italy and Greece its share stood at 8.2 per cent. There has also been a high demand for solar in Europe and emerging markets. However, the solar PV industry experienced some upheaval due to China’s decision to constrain domestic demand. As a result, Chinese modules flooded the global market, triggering trade disputes with some countries. Despite this setback, the overall solar power demand in Asia continued to grow.
The segment witnessed record low tariffs, driven by intense competition and low panel prices. Besides, investments were made in efficient generation and technology advancements. Technologies such as monocrystalline and bifacial solar panels gained traction. Solar thermal power capacity has also been growing though the growth is restricted to some pockets. This mainly included large-scale system installations. Around 33 GWth of new solar thermal capacity was added in 2018, taking the total global capacity to around 480 GWth. China accounted for about 74 per cent of global additions, followed by Turkey, Brazil and the US. Further, rising demand in the Middle East as well as in East and Central Africa allowed several southern European solar collector manufacturers to increase their production volumes.
The second assembly of the International Solar Alliance (ISA), held in India on October 31, 2019, was one of the key highlights of the past year in the solar power segment. As of October 2019, 81 countries have signed the ISA framework agreement, of which 59 countries have ratified it. In the past year, the ISA has also led specialised missions in solar resource-rich countries in Africa.
The wind power market witnessed a marginal growth in 2018. Prices continued to fall and the industry witnessed a growing interest in offshore wind power on account of successful European projects. In 2018, the segment added 51 GW of capacity – 47 GW onshore wind and 4.5 GW offshore wind. This led to a 9 per cent increase in total wind capacity, which stood at 591 GW as of end 2018. Around 12 countries met more than 10 per cent of their annual electricity consumption requirement through wind energy in 2018. China and the US continued to account for most of the wind capacity addition during the year, adding 21.1 GW and 7.6 GW respectively. Other countries that added more than 1 GW were Brazil, France, Germany, India and the UK. The wind power market in Europe and India faced contractions in 2018, whereas some markets continued to grow. Asia remained the largest market, accounting for about 52 per cent of the total capacity additions. Meanwhile, wind power prices declined owing to intense price competition. This can be largely attributed to the regime change in several regions, from feed-in tariffs to more competitive reverse auctions. The declining tariffs have posed several challenges for turbine manufacturers and developers. Other challenges in the segment are poorly designed and executed tenders, limitations in power systems and transmission infrastructure, and market failures.
In the offshore segment, seven countries in Europe and two in Asia added 4.5 GW, taking the cumulative global capacity to 23.1 GW, an increase of 24 per cent. Apart from this, about 150 new offshore wind projects are currently being developed. The segment also witnessed rapid technological improvements. Europe has been the centre of offshore development, with the UK, Germany and Denmark in the lead. The existing European Union (EU) policies aim to increase the offshore wind capacity fourfold over the next decade. China is also set to expand its market, having added 1.6 GW of offshore wind capacity in 2018.
In 2018, the bioenergy segment recorded the highest growth in five years, adding 6 GW of capacity, an increase of 5 per cent over 2017. This growth was due to a surge in Brazil’s ethanol output. Overall, Asia accounted for 50 per cent of the capacity addition. Asian countries have ambitious biofuel mandates aimed at strengthening energy security and driving demand for agricultural feedstock. Meanwhile, Europe led the use of bioenergy in heating applications, largely driven by the Renewable Energy Directive issued for the EU.
China generated the maximum bioelectricity in 2018, followed by the US, Brazil, India and Germany. The mandate of 10 per cent ethanol blending in a growing number of provinces and increasing investments in production capacity will further drive China’s bioenergy growth. Meanwhile, the US and Brazil emerged as leaders in biofuel production, together producing 69 per cent of all biofuels. Bioenergy growth in Brazil will be further propelled by the introduction of the Renovabio programme in 2020. While the domestic bioenergy markets were largely driven by policy changes, the trade patterns globally were influenced by changing import tariffs. The industrial sector continued to focus on the development of advanced biofuels that can support sustainable operations. Further, microalgae are gaining traction as third-generation biofuels, although much more research is required before they realise their commercial potential. Jet fuel has emerged as a new application of bioenergy. Further, new and emerging technologies can convert captured carbon into ethanol, which can be used to make jet fuel. While progress has been made in developing and deploying these new fuels, they still account for a very small share in total biofuel production.
Growth in the hydropower segment continued to be slow. In 2018, a capacity of around 20 GW was added to reach a total installed capacity of around 1,132 GW. The worldwide power generation during this period was around 4,210 TWh. China was in the lead, accounting for about 35 per cent of the total capacity addition for 2018. It was followed by Brazil, Pakistan and Turkey, each adding more than 1 GW of capacity. In addition, pumped hydro storage has emerged as a popular energy storage solution. Given the ongoing renewable capacity expansion, there is an increasing demand for storage solutions. The installed pumped storage capacity increased by 1.9 GW in 2018, taking the total capacity to 160 GW. This represents the majority of the global energy storage capacity. New capacity was installed in China, Austria and the US. Some of the new pumped storage projects are being optimised to ensure fast response to changing grid conditions. Hydropower facilities can aid the effective integration of variable renewable energy sources, such as solar PV and wind power.
Since hydropower is the oldest renewable energy segment, many hydropower facilities are now in need of repair and upgradation. More than half of all hydropower facilities globally have already undergone upgradation and modernisation. This may divert some of the industry resources towards plant upgradation and modernisation.
Geothermal energy witnessed slow but steady growth in 2018, concentrated in resource-rich areas. The geothermal energy generation capacity increased by around 539 MW in 2018, to stand at about 13.3 GW. Much of the expansion happened in Turkey, which added 219 MW of capacity, and Indonesia, which added 137 MW. The countries together accounted for about two-thirds of the new installed capacity. Other countries that added geothermal energy to their renewable energy portfolio in 2018 included the US, Mexico and New Zealand. The geothermal energy output in 2018 stood at 630 petajoules, of which about 50 per cent was in the form of 89.3 TWh of electricity while the other half was heat. Other additions included Croatia’s first geothermal power plant apart from projects in Iceland, Kenya and the Philippines. The direct application of geothermal energy, particularly for space heating, gained traction in 2018, with significant activity witnessed in Europe and China. The geothermal energy segment is grappling with several industry-specific challenges and inadequate government support. Despite these concerns, the global geothermal industry remains upbeat. International agencies and development banks have been exploring opportunities in the segment, which will help address some of these challenges and fund new development.
Ocean energy is the smallest renewable energy segment. Most of the ocean or marine energy projects are small-scale demonstrations of less than 1 MW or are at the pilot stage. Only about 2 MW of capacity was added in 2018, resulting in a total operating capacity of 532 MW.
Ocean energy is currently being developed in various regions across the globe, but it is concentrated around Europe, particularly off the Scottish coast, where several arrays of tidal turbines were deployed in 2018. The resource potential of ocean energy is immense, but it remains largely untapped despite decades of development efforts. Financial and other support from governments, particularly in Europe and North America, have continued to promote ocean power technologies, especially tidal stream and wave power devices. Certain technologies for harnessing tidal, wave energy and ocean thermal energy seem to be getting closer to commercialisation. However, they still have a long road ahead. In order to grow, the segment will require supportive policies and revenue guarantees.
Investments in renewables
Global investment in renewable energy (excluding hydropower projects larger than 50 MW) amounted to about $288.9 billion in 2018. This is a significant amount even though it is lower than the investment made in the previous year. Developing and emerging economies provided more than half of these investments.
The investment made in new and renewable energy, including hydropower, exceeded the investment in fossil fuel-based and nuclear power by a large margin. Renewable energy investments continued to focus on the solar power segment, particularly solar PV, which secured an investment of $139.7 billion during 2018. Asset finance of utility-scale projects such as wind farms and solar parks dominated investment at $236.5 billion. Small-scale solar PV installations (less than 1 MW) secured an investment of $36.3 billion, 15 per cent lower than the previous year.
Investment in developing and emerging countries fell by 25 per cent to $152.8 billion, largely owing to a slowdown in China. Despite this, they retained their lead position in renewable energy investment in 2018. In contrast, investment in developed countries stood at $136.1 billion, up by 11 per cent. Renewable energy investment varied across regions. It increased in Europe, Africa, the Middle East, the US and most parts of Asia, and declined in the Americas (excluding the US), China and India. China accounted for 32 per cent of the total renewable energy investment (excluding hydropower larger than 50 MW), down from 45 per cent in 2017. It was followed by Europe at 21 per cent, the US at 17 per cent and Asia-Oceania (excluding China and India) at 15 per cent. India, Africa and the Middle East accounted for 10 per cent each.
Distributed renewables for energy access (DREA) systems are being increasingly deployed to generate electricity across the world. These systems help increase access to electricity in remote areas. Around 390 MW of off-grid capacity was added in 2018, a 5 per cent increase over the previous year. The total off-grid capacity stood at 8.8 GW at the end of 2018. The off-grid capacity continues to rise as new generation plants are discovered or reported by countries each year. Just over half of this capacity is located in biomass processing facilities. Of the total off-grid solar PV generation, solar mini-grids and household devices account for about 30 per cent (15 per cent each) of the off-grid solar capacity and the remaining 70 per cent is used in non-residential applications.
The increasing uptake of distributed solar PV systems in homes, commercial buildings and industrial facilities is expected to bring significant changes in power systems. While pico-solar systems dominate the off-grid solar market, larger solar home systems are also gaining popularity. The mini-grid sector expanded in 2018, with some 2,000 solar mini-grids in operation in Asia and 800 in Africa. Mini-grid start-ups attracted around $51 million in investment.
The market for clean cooking solutions has also been growing. Although the sector is yet to be scaled to the level of off-grid solar PV, various delivery models are being tested. These models are based on an integrated approach, which involves the sale of both stoves and associated fuels. Development finance institutions increased their support to DREA in 2018, directing around 7 per cent of their total investment towards energy projects to off-grid systems. The off-grid electricity access sector attracted a record $512 million of corporate investment in 2018, an increase of about 22 per cent over the previous year. Start-ups involved in the off-grid solar PV sector raised $339 million in 2019, up 6 per cent from 2017.
Renewable technologies are emerging as the cheapest option for power generation in most countries. Cost reductions in solar and wind have been achieved owing to factors such as economies of scale in manufacturing, increasing competition across the supply chain, introduction of auctions in many countries, record low cost of finance, and efficiency improvements in generating equipment.
According to the International Energy Agency’s “Renewables 2019” report, the total installed renewable energy capacity is expected to increase by 50 per cent, or almost 1,200 GW, between 2019 and 2024. Solar PV will account for about 60 per cent of this growth, followed by onshore wind power, which will contribute 25 per cent. In fact, renewable energy growth could even exceed this projection, provided certain key challenges are addressed. A universal strong policy and regulatory framework is needed to propel the sector forward.
However, there are high investment risks in the sector, particularly in developing countries. The power grids of many countries also face issues in system integration of large-scale wind and solar capacity owing to their intermittent nature. Despite these challenges, the outlook for the renewable energy sector remains positive.