May 19, 2016 By Sarah Martin
Renewable energy is growing worldwide, with a six-fold increase in non-hydro renewables over the last decade from 85 GW to 657 GW.
This growth used to be limited to developed countries, but now it is happening in significant numbers in developing countries as well. Last year’s record-high investment in renewable energy—$285.9 billion—was the first time investment in developing countries topped that in developed ones. China, India and Brazil alone accounted for more than half ($156 billion) of that investment commitment.
The shift toward cleaner energy is here. The question is, are we prepared for it?
(Note for figure: By 2012, the level of renewable capacity was already as high as the maximum potential level in 2030 that had been projected by the IEA a few years earlier.)
5 Market Trends Explain Renewables’ Growth:
- Costs improvements: The price of wind and solarpanels (photovoltaics) have dropped steeply. Between 2009 and 2014, prices for solar modules fell 75 percent. With falling prices, RE is likely to be cost competitive with conventional technologies much earlier than previously expected.
- Improved Technology and Efficiency: Technical improvements also help drive global deployment, as well as reduced costs of new technologies and decrease in material prices. For example, wind turbines are increasingly being designed for low-wind-speed environments, which allows for installation closer to areas of demand and away from areas of public and environmental controversy.
- Fossil-Fuel Price Instability: Rapid, dramatic swings in fossil-fuel prices— particularly from 2008 onwards — helped push the electricity sector to less volatile resources.
- Government and Investor Support: Since 2004, the number of countries putting in place renewable energy support mechanisms tripled from 48 to 164, and this trend is evident in both high- and low-income countries.
- New Players: About one-third of global solar PV’s capacity is owned by individuals.
(Note for Figure: Rise in countries by income group that have enacted Feed-in Tariff (FIT) policies since 2004.)
How These Trends Affect Decision Making
These trends play a role in decision making about the future of electric power, especially in countries like Brazil, China, and India, according to a new report from WRI, Prayas (Energy Group) (PEG), Regulatory Assistance Project (RAP), International Energy Initiative (IEI), and UNISON Group, The Future Electricity Grid: Key Questions and Considerations for Developing Countries. Here are three challenges that bear watching as renewable energy expands:
- Technology and Infrastructure: As the use of renewable energy increases, grid system operators need to make sure that the electric grid is compatible with and is able to interconnect intermittent sources of power, such as wind and solar. They also must link the often remote places where the energy is generated with places where the energy is needed, such as in densely populated areas. Variable weather can also be a complicating factor.
In some countries such as China, the rapid growth of wind energy has made integration with the grid difficult. In areas of the country where large amounts of wind energy have been added to the grid, variability has caused system-balancing issues. Balancing issues are often dealt with by curtailing portions of wind generation, which means that power grids do not use that power even if wind plants are capable of producing it. In 2015, around 15 percent of wind power was wasted throughout the year. Upgraded, expanded power grids are essential to ensure reliable, high-quality service.
- Institutional arrangements: Renewable energy is increasingly generated in a decentralized way—by individuals, commercial business owners and cooperatives—that challenges the traditional utility sector and centralized grid model. Institutions will need to think about required new skills, services and arrangements to keep up with these changes and stay financially viable. In India, utilities are under financial pressure as they lose their higher paying customers to renewables. In the southern state of Tamil Nadu, consumers purchasing renewables outside their utilities has resulted in utility revenue losses of about $250 million, which is 5 percent of total revenue requirement.
- Pricing: The rise in renewable energy and the complexities associated with it are creating new concerns over electricity prices. In the United States, several states have enacted net-metering policies, where utility customers who generate more renewable power than they use can sell the excess to the electrical grid, raising concerns about how much participants should be paid. Such programs can affect utility revenues and can also disproportionately affect electricity customers who aren’t generating renewable power. Properly valuing and distributing system costs and benefits among customers will become increasingly important.
How governments, energy planners, regulators and utilities respond to these trends and monitor these challenges will determine how well they build a future grid to deliver the clean, reliable and affordable power people need to thrive. The time to take action is now.