Renewables are the largest source of energy growth, gaining share in power at an unprecedented rate
Growth of renewable power (TWh, average annual growth)
China is the largest source of growth, adding more renewable energy than the entire OECD combined
Pace of power market penetration (largest gains in market share over 25 years)
The pace at which renewables gain share in power generation over the Outlook is faster than any other energy source over a similar period
Renewable energy grows strongly, increasing its share within the power sector.
In the evolving transition (ET) scenario, renewables in power are the fastest-growing energy source (7.5% p.a.), accounting for over 50% of the increase in power generation.
The strong growth in renewable energy is enabled by the increasing competitiveness of wind and solar power. In the ET scenario, subsidies are gradually phased out by the mid-2020s, with renewable energy increasingly able to compete against other sources of energy, aided by a gradual rise in carbon prices and continued regulation supporting a shift to lower carbon energy. (We outline an alternative scenario, below, in which subsidies are maintained at around current levels until 2040.)
The expansion in renewable energy is broad-based, with China and increasingly other parts of the developing world taking over from the EU as the main engine of growth. China is the largest source of growth, adding more renewable energy than the entire OECD combined; India becomes the second largest source of growth by 2030.
The pace at which renewables gain share in power generation over the Outlook is faster than any other energy source over a similar period. The closest parallel is the rapid build-up of nuclear power in the 1970s and 1980s.
Faster technological gains and greater policy support have boosted the outlook for renewables
The outlook for renewable energy has increased substantially in the past three Energy Outlooks, particularly the prospects for solar power.
In the ET scenario, global solar power in 2035 is more than 150% higher than in the base case of the 2015 Energy Outlook. This reflects solar costs falling faster than anticipated, with solar energy now projected to be widely competitive by the mid-2020s – 10 years earlier than previously expected.
The more rapid decline is due partly to faster technological gains, but also reflects stronger policy support, which enables solar energy to move more quickly down its ‘learning curve’.
The largest increases in solar energy are in China and India, where renewable energy receives significant levels of support over the medium term.
In the ET scenario, solar costs continue to follow the learning curve, with module costs falling by around 24% with every doubling of cumulative capacity. The rate of decline of $/MWh costs slows over the Outlook, as it takes longer to double the cumulative capacity and as module costs fall as a proportion of total costs.
Some projects enjoying the best solar conditions and continued policy support will offer far lower prices than implied by this learning curve.
More sustained support for renewables leads to stronger growth
The pace at which renewable energy penetrates the global power system depends partly on the size and persistence of government support. In the ET scenario, support for renewables is largely phased out by mid 2020s. We also consider an alternative scenario in which levels of government support per unit of capacity installed persist around current levels until 2040.
In this alternative ‘renewables push’ scenario, renewables account for more than 90% of the growth in power demand over the Outlook, with the share of renewables within power reaching over 40% by 2040, compared with 25% in the ET scenario. The stronger growth in renewables crowds out coal and gas to a broadly equal extent.
This stronger policy push to renewables reduces the carbon intensity of power relative to the ET scenario, although the reduction in the carbon intensity of power is only around half of that achieved in the ‘even faster transition’ (EFT) scenario.
This smaller improvement reflects that the ‘renewables push’ policy reduces carbon intensity only by supporting renewables, which has diminishing effectiveness as renewables grow within the power sector causing the cost of balancing intermittency issues to escalate. In contrast, as well as supporting renewables, high carbon prices in the EFT scenario also encourage more coal-to-gas switching and large-scale deployment of CCUS.