Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

IEA says renewables to overtake coal generation in 2025

23 November 2020 Amena Saiyid

Renewables are on track to overtake coal in 2025 as the world's largest source of electricity generation despite the pandemic-induced hiccups in the early half of 2020, the International Energy Agency (IEA) reported 10 November.

The appetite for renewables, particularly solar, wind and hydropower, to generate power has remained unquenched in 2020 despite the pandemic-driven slump in the global energy demand of about 5%, the largest decline since the Second World War, according to IEA.

"In 2025, renewables are set to become the largest source of electricity generation worldwide, ending coal's five decades as the top power provider," IEA Executive Director Fatih Birol said 10 November. "By that time, renewables are expected to supply one-third of the world's electricity - and their total capacity will be twice the size of the entire power capacity of China today."

The United States and China in the second half of 2020 are driving record additions of global renewable power capacity, which the IEA Renewables 2020 report forecasts will increase to nearly 200 GW by the year's end primarily due to the addition of hydropower, wind and solar. Both countries, though under lockdowns during the first half of the year, reopened their businesses.

In contrast, coal generation, which currently occupies a 34% share of total electricity, is expected to cede its dominant position in 2025 to renewables. Hydropower, which under IEA's definition remains the largest renewable electricity generating source, will see its share drop below 50% for the first time in 2024. Instead, combined wind and solar sources will see a doubling of generation to at least 4,000 TWh during this period.

Equivalent to power generated in China and the EU

The IEA estimates power generation from renewables will expand almost 50% in the next five years to almost 9,745 TWh, "equivalent to the combined demand of China and the European Union."

And by 2025, the share of renewables in total electricity generation is expected to be 33%, surpassing the coal-fired generation, which will have dropped to about 23%.

The IEA's projections of renewables capacity addition of nearly 200 GW in 2020 tracks with IHS Markit's Global Power and Renewables forecasts, which estimates a net yearly addition of about 176.13 GW. Unlike the IEA though, IHS Markit does not consider hydropower to be a renewable source in its calculations. But if hydropower is factored into the IHS renewables forecasts then the net yearly capacity additions increase to 200.10 GW.

Led by China and the US, "Renewables will account for almost 90% of the increase in total power capacity worldwide in 2020 and will accelerate in 2021 to their fastest growth in the last six years," the report said.

What's more, renewables between 2020 and 2050 are expected to meet 99% of global electricity demand increase. In China and India, the IEA forecasts renewables will cover 65% of demand growth, while in developing countries renewables will replace coal generation as aging fleets retire.

Government subsidies

The IEA said renewables generation is increasing from government support either via tax credits or net zero carbon pledges or both; coal-fired power plant retirements; and the low costs of installing wind and solar power equipment.

As a result, the IEA predicts, installed renewable energy capacity is set to surpass the 23% share of natural gas in in 2023 and the 23% share of coal in 2024.

Birol and the IEA did caution that policy uncertainties such as expiring tax credits, and lack of explicit commitments, may slow the pace of renewable expansion slightly in 2022.

China is the largest carbon emitter globally, with an estimated 10 billion metric tons of carbon emissions in 2019, twice as much as the second-largest emitter, the United States. India is the third largest emitter of carbon dioxide.

The EU's green deal to reduce 55% of economywide carbon dioxide emissions has sent a strong signal not just to the rest of the world but also to the industry that it is serious about addressing climate change, said Francesco La Camera, director general of the International Renewable Energy Agency (IRENA) said in a 9 November online discussion with the IEA.

Recent net zero-carbon pledges by China, Japan and South Korea also have sent encouraging signals, according to La Camera.

While no such pledges drive the push for renewables in the US, the prospect of expiring onshore wind tax credits in 2021 was responsible for doubling renewable capacity additions in the first half of 2020 compared with the same period in 2019.

India, which also has not made any net-zero carbon pledges, nonetheless saw renewable capacity expansion slow down in 2020 not just due to Covid-19 lockdowns, but also due to poor utilities' financial health and project delays, the IEA said.

However, India is on pace to double its renewable capacity in 2021.

Herculean task

According to IHSMarkit, China is singlehandedly responsible for lowering the cost of solar photovoltaic installations. However, this Asian giant faces a "Herculean task" in decarbonizing its economy because it has to reduce coal use, which is responsible for 64% of the country's carbon emissions.

Despite the United States' lack of an explicit pledge, more than 30 states have adopted Renewable Portfolio Standards (RPS), which require utilities to purchase a certain portion of their electricity from renewable sources. The RPS standards have been the drivers of renewables expansion along with the production tax credits for wind farms, which are expected to be installed in record numbers by the year's end.

In the US, the prospect of greater penetration of renewables looks even brighter with the election of Joe Biden, who has pledged to achieve carbon neutrality for the power sector and across the economy by 2050. Biden also has promised to extend renewable power production tax credits.

Posted 23 November 2020 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

Explore

RELATED INDUSTRIES & TOPICS

Follow Us

Filter Sort