OF ALL of the optimistic futuristic dreams, a world of clean, renewable energy to combat climate change is perhaps the closest to realization, thanks to the growing acceptance of and demand for renewable energy (RE).
Not so long ago, the energy transition was an idealistic concept driven largely by researchers and environmentalists, with the most important drawback being the high cost associated with the deployment of clean energy technologies. But a decade-long cost reduction trends, spending, coupled with government policies has reinforced the broad consensus that renewables were vital for the global transition to a low or zero-carbon economy.
Following the signing of the Paris Agreement in 2015 clean energy investment grew by only 2 percent a year in the five years after the. But since 2020, the pace of growth has accelerated significantly to 12 percent. Spending on clean energy has been underpinned by fiscal support from governments and aided by the rise of sustainable finance, especially in advanced economies.
The drastically reduced price of PVs and wind turbines for instance, has ensured global attention for solar and wind energy. A similar situation is unfolding concerning emissions-free hydrogen production, so called “Green” hydrogen. Already today and even more in the very near future, renewable energies will be the only reasonable and feasible power source for both industrialised and developing countries, by reason of rising concern over energy security, climate change, and affordability.
Over the past three years, renewable energy has recorded some interesting development within the broader energy system, with a promising uptick in growth, leading to a small reduction in global CO² production from the electricity sector overall, as noted by the International Renewable Energy Agency (IRENA). In International Energy Agency’s (IEA’s) report, “World Energy Investment” published in May 2020, is a description of a drastically changed energy markets in the wake of the coronavirus pandemic. Also, the IEA’s Global Energy Review 2020 report indicated that renewable energy has so far been the energy source most resilient to COVID-19 lockdown measures.
According to data released in April 2021 by the IRENA, the world added more than 260 gigawatts (GW) of renewable energy capacity in 2020 despite Covid-19 pandemic, exceeding expansion in 2019 by close to 50 percent. Renewable electricity capacity additions broke another record in 2021, despite the continuation of COVID-19 induced logistical challenges and increasing prices for new solar PV and wind installations. The world added a record 295 gigawatts of new renewable power capacity in 2021, overcoming supply chain challenges, construction delays and high raw material prices, according to the International Energy Agency’s (IEA’s) latest Renewable Energy Market Update.
As we know today, renewables were the only energy source that posted a growth in demand in the first quarter of the year 2022. The IEA forecast global capacity additions to rise this year to 320 gigawatts; equivalent to an amount that would come close to meeting the entire electricity demand of Germany or matching the European Union’s total electricity generation from natural gas. Solar PV is on course to account for 60 percent of global renewable power growth in 2022, followed by wind and hydropower. Going forward, the IRENA estimates that 90 percent of the world’s electricity can be produced from renewable energy sources by 2050.
The IEA projects that spending on renewables in 2022 will exceed the record US$440 billion invested in 2021. Global clean energy spending is expected to surge 12 percent in 2022, reaching US$1.4 trillion as the world pours money into renewables, electric vehicles and energy efficiency. The sustained progress in demand growth and spending is yet another proof of renewable energy’s resilience and acceptance.
BUT…
But while renewables continued to be deployed at a strong pace even during the Covid-19 crisis, there is looming market uncertainties increasing the challenge to grow clean renewable energy at the expected pace capable of meeting long-term climate and sustainability goals. The IEA noted in 2021 that the continuing decrease in cost trends alone will not shelter renewables projects from a number of challenges. The pace of economic recovery, heightened pressure on public budgets and the financial health of the energy sector as a whole further exacerbate already existing policy uncertainties and financing challenges.
Now consider the following development around the world, and particularly within the broader energy sector:
First, the IEA may have suggested that global energy investment is set to increase by 8 percent in 2022 to reach US$2.4 trillion, with the anticipated rise coming mainly in clean energy, but that is less encouraging given that it also asserts that the growth in investment is still far from enough to tackle the multiple dimensions of today’s energy crisis and pave the way towards a cleaner and more secure energy future.
The writer is Director of Research & Finance at the Institute for Energy Security (IES).
BY Edmond Kombat