IEA Stresses the Need for Policy Certainty if Renewable Energy Momentum is to be Maintained

The International Energy Agency (IEA) has released its third annual Medium-Term Renewable Energy Market Report. It highlights continued success for renewables, with 2013 seeing renewable power capacity expand at its fastest speed to date. In fact, the IEA estimate global renewable generation to be on a par with natural gas.

While the role of renewables in the global energy mix continued to expand in 2013, the IEA are also sounding a note of caution. The medium term outlook will see a period of transition with investment and capacity growth expected to level off through 2020.

IEA Executive Director Maria van der Hoeven had the following to say:

“Renewables are a necessary part of energy security. However, just when they are becoming a cost-competitive option in an increasing number of cases, policy and regulatory uncertainty is rising in some key markets. This stems from concerns about the costs of deploying renewables,”

In OECD countries, renewables are expected to transition to a slower but stable rate of growth. Renewable energy generation is still expected to account for nearly 80% of new power generation from 2013-20 but the report points to “limited upside potential to growth” because of “… overall sluggish demand and policy risks in key markets.”

Interesting in a UK context is the significance of final energy use for heat (FEH). Energy use for heat accounts for more than 50% of final energy consumption and around one-third of energy related carbon emissions. Final energy use of renewables for heat rose in 2013 but accounted for only 8% of world energy use for heat. The report points out that both policy support and growing competitiveness are driving growth in renewable heat but that policy frameworks are generally underdeveloped in comparison with electricity and transport sectors.

The introduction of the Domestic Renewable Heat Incentive in the UK and the continued success of the non-domestic RHI must be seen as positives in this regard. Government attitudes to “green crap” and uncertainty over their continued commitment to renewable energy however are exactly the kind of policy uncertainty that is likely to hamper stronger growth.

This is not the first analysis to point out the importance of policy certainty. In February, the UK dropped in EY’s Renewable Energy Country Attractiveness Index. The reason given?

“The UK, meanwhile, continues to be hampered by political infighting and mixed policy measures. A series of project cancellations in the offshore wind sector also helped to take it down to fifth place.”

If the government could do one thing to ensure the jobs, energy security and cleaner future offered by renewable energy growth in the UK, it should be to provide a stable policy framework that can support investment.

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