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Renewable capacity to grow sharply on lower costs: IEA

25 Oct 2016 09:02 (+01:00 GMT)
Renewable capacity to grow sharply on lower costs: IEA

London, 25 October (Argus) — The net addition of global renewable power capacity will total 825 GW in 2015-21, under the IEA's main case scenario in its Medium-Term Renewable Energy Market Report.

This figure is 13pc higher than in the equivalent scenario last year, because of sustained policy support — partly as a result of the Paris climate deal in December last year — and continued cost reductions.

The 825GW of net capacity additions would take total global installed renewable generation capacity to 2.795TW, up from 1.97TW now. Over a third of the additions would be in China, with 305GW installed by 2021, raising the country's capacity to 807GW from 502GW.

Competitive contract auctions for long-term power purchases have reduced the risk perception of renewables and lowered financing costs, the IEA said. This, combined with technology developments, has started to cut running costs dramatically for renewable energy projects.

Auction results from this year suggest that new onshore wind projects can be built for $60-80/MWh, while new solar photovoltaic projects can be contracted at $80-100/MWh. While these costs might ostensibly be lower than new coal and gas-fired power capacity in some countries, an accurate comparison of costs is more complicated than this.

"Fuller competitiveness assessments would need to quantify integration costs, as well as the value of the injected electricity to the system, according to the load profile of demand and the time and location of generation," the report said.

Further deployment of renewables out to 2021 is "largely sheltered" from lower fossil fuel prices, because of risk premiums on fossil fuel generation resulting from fuel price volatility, the possibility of tighter environmental regulations, and the risk of lower-than-planned capacity factors as a result of the merit-order effect — under which renewable generation is usually dispatched ahead of fossil fuel-fired power.