Renewable energy industry outlook

Renewable Energy Industry Outlook The renewable electricity market has witnessed an unprecedented acceleration in recent years, and it broke another annual deployment record in 2017. The market’s main driver last year was solar photovoltaics, which is boosting the growth of renewables in power capacity around the world. As costs decline, wind and solar are becoming increasingly comparable to new-build fossil fuel alternatives in a growing number of countries. China remains the dominant player, but India is increasingly moving to the centre stage. Government policies are introducing more competition through renewable auctions, further reducing costs.

Solar energy Solar energy is the conversion of sunlight into usable energy forms. Solar photovoltaics (PV), solar thermal electricity and solar heating and cooling are well established solar technologies.

Solar photovoltaics Solar photovoltaic (PV) systems directly convert solar energy into electricity. Solar PV combines two advantages. On the one hand, module manufacturing can be done in large plants, which allows for economies of scale. On the other hand, PV is a very modular technology. It can be deployed in very small quantities at a time. This quality allows for a wide range of applications. Systems can be very small, such as in calculators or off-grid applications, up to utility-scale power generation facilities.

In 2017, cumulative solar PV capacity reached almost 300 GW and generated over 310 TWh, 26% higher than in 2015 and representing just over 1% of global power output.

Utility-scale projects account for 55% of total PV installed capacity, with the rest in distributed applications (residential, commercial and off-grid). Over the next five years, solar PV is expected to lead renewable electricity capacity growth, expanding by almost 440 GW under the Renewables 2017 main case.

As PV generates power from sunlight, power output is limited to times when the sun is shining. However, as the IEA’s analysis on the system integration of variable renewable renewables has highlighted, a number of options (demand response, flexible generation, grid infrastructure, storage) exist to cost-effectively deal with this challenge.

Concentrating solar power Concentrating solar power (CSP) devices concentrate energy from the sun’s rays to heat a receiver to high temperatures. This heat is then transformed into electricity – solar thermal electricity (STE).

From a system perspective, STE offers significant advantages over PV, mostly because of its built-in thermal storage capabilities. CSP plants can continue to produce electricity even when clouds block the sun, or after sundown or in early morning when power demand steps up. Both technologies, while being competitors on some projects, are ultimately complementary.

The deployment of CSP plants is at a stage of market introduction and expansion. In 2016, the installed capacity of CSP worldwide was 4.8 GW, compared to 300 GW of solar PV capacity. CSP capacity is expected to double by 2022 and reach 10 GW with almost all new capacity incorporating storage. CSP with storage can increase the flexibility of an energy system, facilitating the integration of variable renewable technologies such as solar PV and wind.

Solar heating and cooling Solar thermal technologies can produce heat for hot water, space heating and industrial processes, with systems ranging from small residential scale to very large community and industrial scale. The required temperature to meet the heat demand determines the collector type and design.

Cumulative installed capacity of solar thermal installations reached an estimated 456 GWth by the end of 2017. However, the market continued to slow in 2017 for the third year in a row, as total annual installations decreased by 9% owing mainly to a continual slowdown in China.

To 2022, solar thermal heat consumption is expected to grow by over one-third, with installations in the buildings sector driving most of the increase. In the growing global market for cooling, there is also a huge potential for cooling systems that use solar thermal energy.

By the end of 2016, an estimated 1,350 solar cooling systems were in operation globally.

Wind energy Wind energy is developing towards a mainstream, competitive and reliable power technology. Globally, progress continues to be strong, with more active countries and players, and rapidly increasing installed capacity and investments.

Technology improvements (such as larger turbines) have continuously reduced costs, with some particularly impressive cost reductions for offshore wind in recent years. The industry has overcome supply bottlenecks and expanded supply chains.

Wind-generated electricity met close to 4% of the world’s electricity demand in 2015—a record-setting year with more than 63 GW of new wind power capacity installed. The global wind energy potential is vast: wind could account for up to 30% of global power generation by 2040, according to the World Energy Outlook 2016.

Like with solar PV, the output from wind power is variable. However, countries like Denmark, which already has a wind share of around 40% of electricity production, have demonstrated that this variability can be dealt with through appropriate system operation and market design measures.

Onshore wind is a proven, mature technology with an extensive global supply chain.

Onshore technology has evolved over the last five years to maximise electricity produced per megawatt capacity installed to unlock more sites with lower wind speeds. Machines have

become bigger with taller hub heights, larger rotor diameters and in some cases bigger generators depending on the wind and site-specific conditions.

Onshore wind leads global renewable energy growth, accounting for over one-third of the renewable capacity and generation increase in 2015. Onshore wind generation is expected to almost double by 2021 and reach 1545 TWh. Deploying turbines in the sea takes advantage of better wind resources than at land-based sites. Offshore turbines, therefore, achieve significantly more full-load hours.

Furthermore, offshore wind farms can be located near large coastal demand centres, often avoiding long transmission lines to get power to demand, as can be the case for land-based renewable power installations. This can make offshore particularly attractive for countries with coastal demand areas and land-based resources located far inland, such as China, several European countries and the US. While needing to satisfy environmental stakeholders, offshore wind farms generally face less public opposition and, to date, less competition for space compared with developments on land. As a result, projects can be large, with the 630 MW London Array wind farm currently being the largest in the world.

In 2015, global offshore wind generation reached an estimated 38 TWh, 50% higher than in 2014. At the end of 2015, global offshore wind cumulative capacity was 12 GW, and this is expected to triple by 2021.

The expansion of offshore wind is being helped by rapid costs reductions thanks to competitive auctions and larger turbines sizes. In late 2016, the winning bid for the Borssele III and IV Wind Farms in the Netherlands reached a new record low cost of â‚Ź55/MWh. Ocean energy Ocean power accounts for the smallest portion of renewable electricity globally, and the majority of projects remain at the demonstration phase. However, with large, well-distributed resources, ocean energy has the potential to scale up over the long term.

Five different ocean energy technologies are under development: Tidal power: the potential energy associated with tides can be harnessed by building a barrage or other forms of construction across an estuary.

Tidal (marine) currents: the kinetic energy associated with tidal (marine) currents can be harnessed using modular systems.

Wave power: the kinetic and potential energy associated with ocean waves can be harnessed by a range of technologies under development.

Temperature gradients: the temperature gradient between the sea surface and deep water can be harnessed using different ocean thermal energy conversion (OTEC) processes.

Salinity gradients: at the mouth of rivers, where freshwater mixes with saltwater, energy associated with the salinity gradient can be harnessed using the pressure-retarded reverse

osmosis process and associated conversion technologies.

Tidal projects produce variable, but highly predictable, energy flows. Generation from wave power is variable, depending on the state of the sea.

None of these technologies is widely deployed as yet. The engineering challenges associated with efficiently intercepting energy from wave or tidal power are significant, particularly given the need to survive and operate in difficult conditions. Other issues that need to be considered include impacts on marine life, the marine environment and other marine users such as shipping, fishing industry, etc.

Tidal barrages are most advanced as they use conventional technology. However, only two large-scale systems are in operation worldwide; the 240 MW La Rance barrage in France has been generating power since 1966, while the 254 MW Sihwa barrage (South Korea) came into operation in 2011. Other smaller projects have been commissioned in China, Canada and Russia.

For other ocean technologies, design concepts are still being researched but the leading ones have now reached the point where megawatt scale installations are being demonstrated. The largest demonstration project is the 6 MW MeyGen tidal array in Scotland.

Bioenergy and biofuels Bioenergy accounts for roughly 9% of world total primary energy supply today. Over half of this relates to the traditional use of biomass in developing countries for cooking and heating, using inefficient open fires or simple cookstoves with impacts on health (e.g. due to indoor smoke pollution) and the environment.

Modern bioenergy on the other hand is an important source of renewable energy, its contribution to final energy demand across all sectors is five times higher than wind and solar PV combined, even when the traditional use of biomass is excluded. Around 13 EJ of bioenergy was consumed in 2015 to provide heat, representing around 6% of global heat consumption. In recent years, bioenergy for electricity and transport biofuels has been growing fastest, mainly due to higher levels of policy support.

Within the industry sector, bioenergy use is common in industries which produce biomass residues on site, such as the pulp and paper industry, as well as the food processing sector, where it provides low- and medium-temperature process heat. Modern bioenergy is also widely used for space and water heating, either directly in buildings or in district heating schemes. Furthermore, around 500 TWh of electricity was generated from biomass in 2016, accounting for 2% of world electricity generation.

Liquid biofuels can be used to decarbonise the transport sector, which is still more than 90% dependent on oil. In 2017, transport biofuels provided 4% of world road transport fuel demand, with the United States and Brazil the largest producers. Biofuel production is expected to rise to 159 billion litres in five years’ time.

In the long-term bioenergy has an essential role to play in a low-carbon energy system. For instance, modern bioenergy in final global energy consumption increases four-fold by 2060 in the IEA's 2°C scenario (2DS), which seeks to limit global average temperatures from rising more than 2°C by 2100 to avoid some of the worst effects of climate change. Within this scenario it plays a particularly important role in the transport sector, where it helps to decarbonise long-haul transport (aviation, marine and long-haul road freight).

Sustainability of bioenergy supply chains is an important consideration and strong governance frameworks are needed to ensure that bioenergy use provides environmental and social benefits. As such there is growing recognition that only bioenergy supplied and used in a sustainable manner can play a role in a low carbon energy future.

Definitions: Biomass: any organic matter, i.e. biological material, available on a renewable basis.

Includes feedstock derived from animals or plants, such as wood and agricultural crops, and organic waste from municipal and industrial sources.

Bioenergy: energy generated from the conversion of solid, liquid and gaseous products derived from biomass.

Traditional use of solid biomass: The traditional use of solid biomass refers to the use of solid biomass with basic technologies, such as a three-stone fire, often with no or poorly operating chimneys.

Geothermal energy Geothermal energy can provide heating, cooling and base-load power generation from high-temperature hydrothermal resources, deep aquifer systems with low and medium temperatures, and hot rock resources.

Geothermal heat is primarily used for bathing, swimming and space heating. Use in agriculture, especially for heating greenhouses, is significant in some countries. For example, in Turkey agriculture accounts for 30% of geothermal direct use. Geothermal heat uses are often small-scale and two countries (China and Turkey) account for almost 80% of global geothermal heat use.

Over the next five years, the biggest growth is expected in China, where geothermal district heating is expanding rapidly in a number of Northern cities to help tackle air pollution problems. In Europe, the use of geothermal heat in district heating is also growing, with the main markets in France, Netherlands, Germany, and Hungary.

Geothermal power plants are particularly common in countries that have high-termperature geothermal resources. In 2015, global geothermal power generation stood at an estimated 82 TWh, while the cumulative capacity reached over 13 GW. Global geothermal power capacity is expected to rise to almost 17 GW by 2021, with the biggest capacity additions expected in Indonesia, Turkey, the Philippines and Mexico.

Hydropower Hydropower is the largest source of renewable power in the world, producing around 17% of the world’s electricity. Its growth has slowed in recent years but capacity additions are expected to continue and add 135 GW by 2021.

China has driven global hydropwer growth over the last decade, with an almost tripling of hydropower generation from 2005 to 2015. The world’s largest power station, the 22.5 GW Three Gorges Dam in China, was completed in 2008. Over the next five year’s China’s role in the global market is likely to decline.

Hydropower is a mature technology, yet it continues to evolve. There has been increasing focus on the role it can play in providing system flexibility and stability, respecially where the share of variable renewables – primarily wind power and solar photovoltaic (PV) – is increasing rapidly. Reservoir hydropower plants and pump storage plants are particularly suited to providing system flexibility, while run-of-the river hydropower plants are themselves variable according to current or seasonal weather conditions.

Run-of-river hydropower plants harness energy for electricity production mainly from the available flow of the river. These plants may include short-term storage or “pondage”, allowing for some hourly or daily flexibility but they usually have substantial seasonal and yearly variations.

Reservoir hydropower plants rely on stored water in a reservoir. This provides the flexibility to generate electricity on demand and reduces dependence on the variability of inflows. Very large reservoirs can retain months or even years of average inflows and can also provide flood protection and irrigation services.

Pumped storage plants (PSPs) use water that is pumped from a lower reservoir into an upper reservoir when electricity supply exceeds demand or can be generated at low cost.

When demand exceeds instantaneous electricity generation and electricity has a high value, water is released to flow back from the upper reservoir through turbines to generate electricity. Pumped storage currently represents 99% of on-grid electricity storage.

To put these issues in perspective, the most potentially impactful policies have not yet been finalized. And despite short-term uncertainty, renewable power sources are riding some very strong tailwinds that will likely continue to promote growth in the longer term.