Renewable energy’s relentless cost declines make solar and wind the cheapest and largest source of new electricity generation in many countries, including the world’s fastest-growing nations. But while cheap renewable energy means “coal strikes out,” reducing emissions enough to avoid dangerous climate change requires comprehensive policy action, according to the International Energy Agency’s (IEA) World Energy Outlook 2017.
IEA reports the average cost of electricity from solar photovoltaics (PV) dropped 70% from 2010 to 2016, and the average cost of power from wind farms declined 25% over the same period. IEA expects renewable energy will secure around $7 trillion in investment by 2040, and even though electricity demand is forecast to grow 60%, power sector emissions will only increase 5%
But despite IEA’s positive outlook for renewables, global emissions could still increase due to increased petroleum use in transportation and higher industrial emissions, which could raise temperatures a dangerous 3 degrees Celsius by 2100.
Or, IEA proposes an alternate approach where comprehensive policy can compliment cheap renewable energy and limit warming to safe levels by electrifying transportation and industry, doubling down on clean power deployment, and expanding energy efficiency measures.
Renewables Step Up To The Plate To Meet Growing Global Energy Demand
IEA’s “New Policies Scenario” aggregates all existing and announced global energy policies with all international Paris Agreement commitments. In this scenario, global energy needs rise 30% between 2017 and 2040 – the equivalent of adding another China and India – with two-thirds coming from developing countries in Asia.
Clean energy costs are falling just in time to meet this rising demand. IEA forecasts renewable energy will supply increased primary energy demand by 2040, adding 75 gigawatts (GW) of solar PV and 50 GW of wind annually. As a result, in IEA’s outlook, renewables account for 80% of new capacity additions in Europe and more than 75% of new capacity additions in China through 2040.
Energy efficiency improvements will also help blunt projected increases in energy demand by more than 50% and renewable energy will chip in by reducing non-generation emissions – renewables’ share of final energy consumption will nearly double from 9% to 16% by 2040, led by expanded direct use in heating and mobility worldwide.
This transformation is based on economics, not subsidies. IEA reports new wind installations are already cheaper than new natural gas generation in India and China, and cost parity for solar PV is within reach. The new paradigm is most important in developing nations, where consumers will add millions of appliances, electric vehicles, air conditioners, and heaters as incomes rise – for context, by 2040 electricity demand for cooling in China will exceed total electricity demand in Japan today.
“Coal consumption flatlines” against cheap renewable energy – but emissions still grow
Business-as-usual clean energy growth “marks the end of coal’s boom years” according to IEA. While coal-fired generation capacity grew nearly 900 gigawatts (GW) since 2000, less than 400 GW new capacity is anticipated between 2017 and 2040 – and most of that is already under construction. Coal’s share of global power supply will continue eroding as more renewable energy comes online, falling from 67% of generation today to 40% by 2040.
IEA notes “in the absence of large-scale carbon capture and storage (CCS), global coal consumption flatlines,” and that equation is unlikely to change. CCS is already two to three times more expensive than wind or solar, requires roughly $80 in subsidies per megawatt-hour to be competitive with solar, and only two CCS projects capturing coal-fired power plant emissions exist worldwide.
Even with coal beyond resuscitation in global electricity generation, the world’s climate outlook is still dire under IEA’s New Policies Scenario. Global emissions are still forecast to increase 5% by 2040 due to increased petroleum use in transportation and rising industrial emissions – putting global warming on a dangerous track.
IEA’s Sustainable Development Scenario
Fortunately, IEA’s “Sustainable Development Scenario” provides a roadmap for policymakers to keep temperature increases below the safe 2 degrees Celsius target. Under this scenario, by 2030 renewable energy reaches 40% of the world’s overall energy mix, natural gas consumption rises 20%, coal demand declines more than 50%, oil consumption peaks, and global energy demand falls 20% as fuel standards and energy efficiency accelerate. By 2040, the world would have 875 million electric vehicles and 3,250 GW installed solar PV capacity, and be twice as energy efficient as today.
Because of renewable energy’s declining costs, IEA estimates this scenario would only require 15% more investment than business-as-usual while empowering 125% GDP growth. Capturing methane emissions from oil and natural gas operations significantly contribute here, as IEA estimates up to 50% of these emissions can be mitigated at no net cost. Highly efficient appliances and decentralized renewables also play a large role, ensuring energy access to developing nations while reducing local emissions.
But “electrifying everything” and meeting new demand with cleaner energy by ensuring grid flexibility and efficient transmission investment truly unlocks IEA’s sustainable scenario – China will add the equivalent of today’s U.S. grid to its electricity system to meet demand and India will add the equivalent of today’s European Union grid to its system, both by 2040. Increased grid flexibility can cost-effectively integrate renewables, improve power reliability, and reduce outages from extreme weather. And if cheap renewable energy meets this demand, electrifying everything creates sustainable economic growth.
Combining Strong Policy, Cheap Renewables, And Smart Investment
Strong policies enacted now can help make meeting subsequent climate targets easier. China and India’s recent policy actions have already reduced the emissions gap required to meet the Paris Agreement’s targets and lowered projected global temperature increases. And, Sub-Saharan Africa nations are expected to provide energy access to millions by doubling renewable energy capacity over the next five years.
Redirecting investment toward cost-effective technologies helps meet the world’s climate goals. IEA’s annual Tracking Clean Energy Progress report outlines how governments can support technologies capable of driving large-scale emissions reductions. Phasing out the roughly $280 billion in global subsidies that promote fossil fuel (nearly double those of renewables) can make the transition even more efficient.
But investments must be accompanied by strong policy signals like well-designed and properly enforced building codes and appliance standards, support for electrified bicycles and sufficient electric vehicle charging infrastructure, reduced hydrofluorocarbon use in cooling and industrial applications, and strong fuel economy standards.
IEA’s outlook is another reminder that only comprehensive policy actions can secure a safe climate future – cheap renewable energy on its own is insufficient to avoid the costs of delay. But if we leverage this resource with a smarter grid, more efficient energy use, and cleaner transportation, the end of coal will be just the start of a cleaner economy.