The International Energy Agency (IEA) has published its analysis on the renewable energy sector for the calendar year 2020. The report Renewable Energy Market Update 2021 also offers a global forecast for 2021-22.
The report noted that renewable sources of electricity such as wind and solar grew at their fastest rate in two decades in 2020.
According to the IEA’s latest market update, the amount of renewable electricity capacity added in 2020 rose by 45% to 280 GW, the largest year-on-year increase since 1999. The capacity added is equal to the total installed capacity of a group of 10 dynamic South-East Asian economies.
One of the key factors driving this record growth was the 23% expansion of new solar photovoltaic (PV) installations to almost 135 GW in 2020, the report said.
Policy deadlines in China, the U.S., and Vietnam also spurred an unprecedented boom in renewable capacity additions in 2020. The rush to commission projects prior to policy deadlines in these countries took place in the last quarter (Q4) of 2020, especially in December, the report noted.
Developers installed almost 150 GW of new renewable capacity in Q4 of 2020 – more than double the number commissioned in Q4 of 2019, exceeding the installed capacity in the first three quarters of 2020.
IEA’s quarterly deployment estimates indicate that the slowdown in renewable capacity additions was limited to Q1 2020 alone, mainly in China, while construction activity continued strongly in the rest of the world despite continuous movement restrictions and supply chain delays due to the pandemic. The December surge in new installations also indicates that solar and wind construction supply chains could yield record numbers of projects in China, the U.S., Vietnam, and various European countries.
The study further claims that the sector is expected to gain momentum at a much faster pace in the coming years than prior to the Covid-19 pandemic.
The report also stated that the exceptionally high capacity additions would become the “new normal” in 2021 and 2022, with renewables accounting for 90% of new power capacity expansion globally.
According to the report, the exceptional level of renewable energy capacity additions is expected to be maintained, with 270 GW becoming operational in 2021 and 280 GW in 2022. This expansion exceeds the record-level annual capacity additions of 2017-2019 by over 50%, such that renewables are expected to account for 90% of total global power capacity increases in 2021 and 2022.
Although the amount of annual wind capacity additions is expected to decrease in 2021-2022 after the exceptional growth last year in China, 80 GW of annual installations are still anticipated globally, i.e., almost 35% more than in 2019, the report said.
The report also noted that the annual solar PV expansion would reach 145 GW in 2021 and 162 GW in 2022, breaking records and accounting for almost over 55% of all renewable energy expansions this year and next.
The acceleration of hydropower additions through 2022 will be driven by the commissioning of mega-scale projects in China. Meanwhile, expansion in other renewables, led by bioenergy, remains stable and represents 3% of total new renewable capacity additions.
Talking about the renewable market in India, the IEA report said that the impact of the pandemic was felt in India more than in any other country. Pandemic-related construction delays and grid connection challenges caused India’s capacity additions to decline by almost 50% from 2019 to 2020, the report elaborated. Although new records for renewable capacity expansion are expected to be set in 2021 and 2022 as delayed projects from previous competitive auctions are commissioned, the second surge in Covid-19 cases has made short-term forecast difficult. While the financial health of distribution companies remains the primary challenge to renewable energy deployment in India, the recently proposed reform of $40 billion to improve the operations of the distribution companies would offer a more positive outlook, the IEA research said.
In its Global Energy Review 2021 released last month, IEA had predicted that India’s solar PV market is expected to recover rapidly in 2021, after experiencing a significant decline in new capacity additions in 2020.
In another report, IEA had stated that India is expected to see the largest increase in energy demand globally over the next two decades and is likely to overtake European Union as the third-largest energy consumer by 2030.
Recently, India’s cumulative solar installations hit the 40 GW milestone.
Last year, IEA’s Electricity Market Report had claimed that the Covid-19 crisis would reduce global electricity demand in 2020 by 2%. Despite declining electricity demand and wholesale power price drops due to the impacts of the pandemic, governments around the world auctioned a record amount of renewable energy capacity, awarding almost 75 GW of onshore wind, offshore wind, solar PV, and bioenergy last year – 20% more than in 2019, the report added.
Auctions held in 2020 (and 2019) remain the main basis of IEA’s forecast for 2021 and 2022, in addition to feed-in tariff and net-metering policies for smaller applications. India and China together auctioned almost 55 GW of wind and PV capacity at average contract prices of $60/MWh for wind and $47/MWh for PV.
Like competitive auctions, corporate power procurement also had another record-breaking year in 2020, with a 25% year-on-year increase credited to declining costs. While the U.S. remains the world’s largest corporate PPA market, activity in Europe almost tripled, with Spain signing large contracts with multiple PV developers and Sweden contracting considerable wind projects. In the Asia Pacific region, new developments are emerging in Korea, India, and some parts of China, the report noted.
Solar PV capacity additions are expected to increase 8% to over 145 GW in 2021. IEA observed that PV has become the lowest-cost option for electricity generation in many countries, especially those with good resource availability and affordable financing. As a result, corporations are increasingly opting for bilateral contracts with large-scale solar PV plants to meet their energy demand.
The share of utility-scale applications in annual PV additions is forecast to increase from over 55% in 2020 to almost 70% in 2022.
In India, PV capacity additions more than triple in 2021 compared with 2020 as delayed large-scale utility projects become operational.
India’s installed renewable energy (including large hydro projects) capacity stood at 141.4 GW, accounting for a share of 36.94% in the overall power mix at the end of Q1 2021. The government awarded 27 GW of PV in central and state auctions in 2020, which is the primary driver of PV growth this year and the next.
Srinwanti is a copy editor at Mercom India, where she writes and edits news stories across the clean energy spectrum. Prior to Mercom, she has worked in book publishing at Macmillan Publishing House and Integra and honed her editorial and writing skills in both online and print media such as Reuters, Times Group Books, The Times of India, and Pune Mirror, covering local to international stories. More articles from Srinwanti Das.