Renewable energy market update

Renewable Energy Market Update: Outlook for 2020 and 2021

Key Findings

• Global Growth in Renewable Power Capacity: The COVID-19 crisis is causing a decline in new renewable power installations, marking the first annual decline in 20 years. However, growth is expected to resume in 2021 as delayed projects come online.
• 2020 Forecast: Net additions of renewable electricity capacity are forecast to decline by 13% compared to 2019. Despite this, global installed renewable power capacity is still expected to increase by 6%, surpassing the combined size of power systems in North America and Europe.
• 2021 Outlook: Renewables are expected to show resilience, with a rebound in new installations as most delayed projects are expected to come online. Total growth in 2020 and 2021 is projected to be almost 10% lower than the previous forecast.

Detailed Analysis

• Solar PV and Wind: These technologies account for 86% of global renewable capacity additions this year. However, their annual expansion is forecast to decline by 17% and 12%, respectively, compared to 2019. Utility-scale PV and wind are expected to rebound, but there remains forecast uncertainty for projects due to financial challenges.
• Hydropower: Hydropower capacity additions are forecast to increase both in 2020 and 2021, driven by the commissioning of two major projects in China.
• Offshore Wind: The forecast for offshore wind remains unchanged as most projects are already financed and under construction.
• Biofuels: Biofuel production is anticipated to contract by 13% in 2020, the first decrease in output in two decades. This is due to a 9% fall in gasoline demand and a 6% drop in diesel demand. While a rebound in transport fuel demand in 2021 could return biofuel production to 2019 levels, it would still be 5% lower than anticipated.
• Renewable Heat: Renewable heat consumption is likely to decline in 2020 due to reduced industrial activity during lockdowns. Current low oil and gas prices are affecting the cost-competitiveness of renewable heat solutions, leading to postponement or cancellation of planned investments.

Resilience Amid Uncertainty

• Resilience of Renewables: Renewables are more resilient than other fuels, with the IEA projecting them to be the only energy source growing this year compared to 2019.
• Impact of Lockdown Measures: Low operating costs and priority access to the grid enable renewables to maintain near full capacity despite significant drops in end-use electricity demand due to lockdowns.
• Supply Chain Disruptions: Supply chain disruptions and construction delays add to the uncertainty about total renewable capacity growth in 2020 and 2021.

Policy Opportunities

• Government Stimulus Packages: Governments have the opportunity to reverse concerns by incorporating investment in renewables into stimulus packages aimed at reviving economies.
• Structural Benefits: Increasingly affordable renewables offer opportunities for job creation, economic development, emission reduction, and innovation.

Conclusion

Renewable energy faces challenges due to the COVID-19 crisis, but its resilience is evident. Governments can play a crucial role in supporting the sector through strategic investments and policy measures.