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California Energy Markets / Bottom Lines

[June 8, 2018 / No. 1491]

Renewables See Big Gains in Global Power Sector; Other Sectors Lag

Renewable energy accounted for 70 percent of net additions to global power generating capacity last year, according to a new report from the Renewable Energy Policy Network for the 21st Century, a statistic that underscores how the power sector is driving a worldwide shift to renewables.

While that momentum, driven in part by falling costs, technological advances, increased access to finance and increasing leadership by sub-national governments, is positive for efforts to reduce carbon emissions, it won’t on its own be enough to deliver the reductions necessary to meet goals laid out in the 2015 Paris climate accord, the June 4 report noted. Efforts to switch to cleaner sources of energy in the heating, cooling and transportation sectors—which together account for more than three-quarters of total global energy demand—continue to lag far behind the power sector.

If you do not move forward in these sectors we will not be able to reach the Paris goals.

One downside to the strong economic growth seen last year in developing countries is higher emissions stemming from an estimated 2.1 percent increase in global energy demand, which was twice the average increase over the previous five years, according to REN21. Global carbon-dioxide emissions rose by an estimated 1.4 percent in 2017—the first increase in four years.

"Overall there is a very positive message, in fact the good news is 2017 was a record year in terms of installed capacity in renewable power," said Rana Adib, executive secretary of REN21.

The more challenging issue is the uptake in sectors outside of power. Worldwide, just 3 percent of the transportation sector, for example, is driven by clean fuels, with liquid biofuel accounting for 90 percent of that total. In the heating and cooling sector, which commands less attention than the power sector, renewable energy accounted for 10.3 percent of global energy consumption for heat, with another 16.4 percent coming from biomass. The report notes that while this sector did add geothermal, bio-heat and solar-thermal capacity, growth was very slow.

"If you do not move forward in these sectors we will not be able to reach the Paris goals," Adib said.

Within the transportation sector, which accounts for about a third of total global energy demand, marine and aviation are among the most challenging areas to convert to low-carbon sources of fuel, Adib said. There are signs of movement, including a planning initiative started last year for emissions reductions for internationally governed marine and aviation sectors; new CO2 standards were also adopted last year for aircraft, and earlier this year the shipping sector adopted a climate-change strategy.

For road transport, 2017 saw a record number of announcements by car manufacturers introducing electric-vehicle models, a trend that continued into this year. In the wake of the Volkswagen emissions scandal, several countries—India, the Netherlands, Slovenia, France and the United Kingdom—announced plans to ban sales of new diesel and gasoline-powered cars.

Renewable energy accounted for 70 percent of net global power capacity additions
Renewable energy accounted for 70 percent of net global power capacity additions, the largest increase in history.
Source: Renewable Energy Policy Network; data: multiple sources

Global investment last year in renewable power and fuels was $279.8 billion, a total that excludes investment in hydropower plants larger than 50MW. While that total is a 2 percent increase compared with 2016, it is 13 percent below 2015, a record year for investment, according to the report.

Investments in solar photovoltaics accounted for 57 percent of the global total, with wind a distant second at 38 percent.

"The costs of these rapidly growing technologies have fallen so quickly that renewable energy capacity installations in 2017 exceed those in 2016 despite lower absolute investment, as each dollar represents more capacity on the ground," the report said.

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China was the largest investor in renewables last year, with a 45 percent share, followed by Europe at 15 percent and the U.S. at 14 percent. Overall U.S. investment in renewables fell 6 percent last year compared with 2016.

A big driver of renewables investment is the corporate sector; as of early last year, 48 percent of U.S.-based companies in the Fortune 500 had emissions-reduction targets. Worldwide, corporations contracted for 5.4 GW of new renewable power through power-purchase agreements, up 26 percent compared with 2016.

Shareholder activism is a driving force at some companies, and is increasingly pressuring fossil-fuel companies to make more investment in renewable energy. As California Energy Markets pointed out in a recent piece on Shell (see CEM No. 1489 [8]), while investment by oil companies in renewables is still dwarfed by investments in their core business, statistics over the past couple of years show a heightened interest in renewables by fossil-fuel firms. According to the REN21 report, large oil companies in 2016 more than doubled the number of acquisitions, project investments and venture-capital stakes in renewable energy compared with 2015. –Mavis Scanlon


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