Electricity from renewable sources is getting cheaper and cheaper, and more and more new capacities are being introduced, but in the battle to attract investment, green energy is still losing out to traditional energy, notes REN21
At the end of 2018, nearly 11 million people were employed in the renewable energy industry worldwide. Most of the jobs (about 3.6 million) were created in the solar sector, the second place with two million employees shared by bioenergy (uses biofuels from plant or animal raw materials) and hydropower. The largest employer of all countries is China with 4 million employees, followed by Brazil with 1.1 million.
REN21 analysts write in their “State of the Global Renewable Energy Industry 2019” review, in terms of industry headcount and power plant capacity, renewable energy is now experiencing moderate, stable growth. For the whole of 2018, the total capacity of renewable energy facilities increased by 181 gigawatts, or 8%, to 2.4 thousand gigawatts. Half of the growth came from solar energy.
REN21 is a renewable energy think tank under the auspices of the United Nations Environment Program. The organization has been around for 15 years, publishing an annual report on the state of the industry. In a 2019 paper, REN21 analysts identified ten major trends in the global renewable energy market.
1. Enhancing the leadership role
For 15 years around the world, “green” energy has become the dominant, the main way to develop the industry. By the end of 2018, 26% of the world’s electricity came from renewable sources, and the growth rate of these plants exceeded those of nuclear power plants and fossil fuels for the fourth consecutive year.
2. Increase cost efficiency
Every year, “green” energy, which used to be expensive and meaningless, is becoming more and more competitive. For example, the cost of a solar battery module has fallen by 90% since 2010, making solar power plants more profitable than oil and coal in many countries around the world.
In 2018, the weighted average cost of power generation from new solar installations was $85 per 1 megawatt-hour. This is 13% less than in 2017. For fossil fuel power plants, the figure ranges from $49 to $174 per 1 MWh in different countries. This leads to the fact that in some places it is more profitable to install solar panels or wind turbines, rather than continuing to run the power plant with gas.
3. Expansion of state programs
In almost all countries (more precisely, in 162), goals and objectives for the development of renewable energy are set in one way or another at the governmental level. It’s all part of one process: cheaper “green” energy makes it more accessible, and therefore more ubiquitous, which actually requires state regulation. In 2018, the number of countries that introduced or announced their intention to introduce such rules continued to increase. But the only country so far that clearly aims to switch to 100% renewable energy is Denmark.
4. Developing countries as a new market
Distributed power systems continue to play an important role in connecting remote and poor regions with electricity. 5% of Africans and 2% of Asians rely on small off-grid solar panels as their source of electricity. Thanks to the development of these systems in 2017, 122 million people gained access to electricity for the first time, but due to lack of investment, the penetration rate of the electricity industry decreased in 2018.
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5. Regional initiatives
In addition to government programs, individual provinces in different countries themselves have become engines of “green” energy, providing regional support programs. It often happens that it is the local authorities who set themselves more ambitious goals than the country’s government. For example, in September 2018, at the San Francisco Summit, nearly 4,000 businessmen and city and county heads from around the world called on their governments to actively combat climate change. This pressure from below will only increase.
In addition, in June 2018, an interesting experiment with the transition to “green” energy was conducted in China. For more than a week, from June 20 to 28, all homes and businesses in Qinghai Province were temporarily switched to water, wind and solar power. True, it should be noted that this is a sparsely populated mountainous province with a population of 6 million, which is relatively small for China.
In total, by the end of 2018, about a hundred cities around the world depended on energy from renewable sources at 70% or more. In addition to the municipal authorities, the “initiative from below” has another dimension – the growth in the number of so-called consumers, that is, consumers – energy producers. These are businesses and individuals who rely on their own electricity sources, such as off-grid solar panels.
6. The role of the private sector
The buying and investing activities of companies make them major players in the renewable energy market. Five years ago, large corporations from around the world created RE100, a kind of club whose members are committed to making a complete transition to energy from renewable sources in the future. By the beginning of 2018, 130 companies participated in the program, by the beginning of 2019 – already 175.
On the other hand, pressure from society and shareholders is forcing even traditional energy market participants to invest in new technologies. Many power plant operators are moving away from coal, and this trend has continued into 2018.
7. Low investment
In 2018, global investments in green energy amounted to $289 billion, which is 11% less than in 2017. REN21 analysts believe that this is not due to any crisis or loss of interest, but only because the product is cheap. Every year, you can install more power windmills and batteries for less money.
The drop in investment was driven by China, which still ranks first in the world in terms of investments (in 2018 it represented 32% of all investments in the industry). In some developing countries, the ratio of this investment to GDP has reached the level of Western countries: for example, in Morocco, Djibouti and Palau.
8. The importance of indirect support factors
Many trends in politics and business that are not directly related to green energy contribute to its development. For example, these are programs for the introduction of electric cars, the ban on internal combustion engines, new technologies in the heating system. The San Francisco Summit discussed above is also one such factor, as it was originally held to discuss climate change, but its decisions ultimately have an impact on the renewable energy market.
9. Inadequate current measures
The current pace of development of the renewable energy sector is not yet sufficient for the timely fulfillment of many international agreements and commitments in the field of the environment. For example, this is the UN SDG7 program to increase energy efficiency and affordability of electricity by 2030. More effort is needed to keep up with the schedule.
10. Increasing demand for energy
In 2018, global energy demand increased by 2.3%, the most in a decade. The authors of the REN21 report name the reason for the steady growth of the global economy (at 3.7% annually), as well as hot summers and cold winters in some parts of the world, which have required additional energy costs for cooling and heating, respectively.
Growth in energy use from renewable sources is outpacing overall energy demand, albeit slightly. From 2006 to 2016, this share grew at a rate of 0.8% per year. There is an opportunity to reverse the trend, given that since 2015, the amount of new green energy has consistently exceeded the amount of new capacity of conventional sources.
Another factor that cannot be ignored is that the extractive industry, as the main competitor for green energy, is attracting many times more investment so far. In 2016-2018, investments in it amounted to $1.9 trillion. In addition, affordable prices for fossil fuels for power generation will continue to support demand for them for a long time at the expense of renewable energy development.