Renewable Energy At The Crossroads – IEA

IEA has concluded that owing to “persistent policy uncertainties” renewable energy is not expanding quickly enough to allow the world to meet its climate targets . This brief post concludes that renewable energy will not expand quickly enough to meet the world’s present climate targets even if these uncertainties are removed. 


The International Energy Agency recently released its 2015 Renewable Energy Medium-Term Market Report, which contains IEA’s projections of global renewable energy growth through 2020. The full report costs 80 euros, but fortunately there’s enough information in the (free) Executive Summary, Slides and 2014 IEA Report to put a short story together.

IEA says:

1.  Increasingly affordable renewables …..

2. …. are set to dominate the growing power systems of the world

3.  Yet wavering policy commitments risk undermining investor confidence and are dampening growth

We will look at these three statements in sequence.

“Increasingly affordable renewables …..”

IEA’s 2015 report provides no specifics on renewables generation costs but the 2014 report does, with levelized cost estimates for 2013, 2014 and 2020 given in Figure 6:

The emphasis is obviously on “increasingly” rather than “affordable”. According to IEA onshore wind is the only large-scale renewable generation technology that presently comes close to being competitive with “new coal” and “new gas”, and IEA’s costs do not include the costs of maintaining the backup load-following capacity needed to cover periods when the wind doesn’t blow. Midpoint levelized costs scaled off the Figure for utility-scale solar PV ($130/MWh), CSP ($160), bioenergy ($160) and offshore wind ($190) are projected to be still at least a factor of two higher than levelized coal ($65) and gas ($70) costs in 2020.

“…. are set to dominate the growing power systems of the world”

Here I had to do a little work to estimate how dominant renewables are set to be. I began with Tables 1 and 2 of the 2014 IEA report, reproduced below for reference. These tables give the following average capacity factors for the year 2020:

  • Hydropower: installed capacity 1,360GW, generation 4,669TWh, capacity factor 39.2%
  • Non-hydro renewables: installed capacity 1,195GW, generation 2,644TWh, capacity factor 25.3%

I now take this graphic from the 2015 IEA report …

…. scale off the renewable capacity additions (hydropower = 130GW, non-hydro renewables = 580GW, as closely as I can measure them) and convert them into TWh using the above capacity factors. This adds 446TWh of hydro and 1,285TWh of non-hydro to the 2014 renewables generation totals. The 2020 total now becomes:

  • Hydropower = 3,982 + 446 = 4,428TWh
  • Non-hydro renewables = 1,432 + 1,285 = 2,717TWh
  • Total = 7,135TWh.

This number is essentially the same as the 7,173TWh that IEA projected in its 2014 report.

What fraction of 2020 total global energy consumption does 7,145TWh represent? My eyeball projection of BP’s global primary energy consumption data to 2020 gives about 63,000TWh, so about 11%. This, however, hardly qualifies as dominance.

And most of the 11% comes from hydro, which is unlikely to grow much more. If we look at only the fast-growing “new renewables” – wind, solar, biomass etc. – the percentage falls to only 4%. This isn’t remotely dominant. It’s insignificant.

Over a year ago in Renewable energy growth in perspective I showed this graphic:

Original Caption: Figure 6: Percentage of Global Energy Generated by Wind, Solar & Biomass, 1965-2013

Here is the same graphic updated through 2020 using the IEA projections:

“Yet, wavering policy commitments risk undermining investor confidence and are dampening growth”

According to IEA:

The annual deployment trend is expected to slow due to persistent policy and market integration uncertainties in some areas, notably Europe and Japan …

Translation: Renewable energy growth to date has been underpinned by generous subsidies but is slackening because Japan and a number of European countries are no longer handing them out. The only way to get growth back on track is … bring back the subsidies.

And the impact of the slackening growth?

Consequently, global growth under the Medium-Term Renewable Energy Market Report (MTRMR) main case forecast ….. falls short of what’s needed to put renewables on track to meet longer-term climate change objectives.

After expenditures of several trillion dollars “new renewables” (i.e. excluding hydro) still fill only 4% of global energy demand, and with the infusion of yet more $trillion they might grow to fill maybe 10% of it in a few decades’ time. The world’s climate change objectives, however, call for far more immediate and drastic action., which keeps track of these things, gives us as little as 21 years:

Scientists say it is still theoretically possible to limit warming to two degrees as long as we stick within a fixed carbon budget. So how big is the budget? It is likely that we’ll stay below two degrees as long as we emit no more than about 2,900 billion tonnes of carbon dioxide, the IPCC says. We’ve already emitted 1,900 billion tonnes, leaving a remaining budget of just 1,000 billion tonnes that we can emit between now and forever. At current rates we’ll use that quota up within 21 years. If we’re willing to accept a higher risk of breaching the two degree target then our budget would be a bit bigger. It might last 33 years at current emissions rates, instead of 21 years. If the earth is less sensitive to emissions than we thought, that would increase the budget too: we could emit more carbon and still stay below two degrees. But at current rates we would burn through that extra allowance in about a decade. Whether climate sensitivity is lower than thought or not, we don’t have many years left to significantly cut emissions.

Obviously wind, solar and other “new renewables” will not be capable of meeting present climate change objectives by themselves. If the world is to save itself from climate change another solution is needed. What might it be?

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29 Responses to Renewable Energy At The Crossroads – IEA

  1. burnsider says:

    A much harder call, I guess, but it would be really instructive to derive an indicative *price* (subsidy-free) for the ‘renewable’ alternative energy sources shown to compare with the electricity wholesale price. It doesn’t take rocket science to deduce that, if the *cost* of an energy source is twice the current wholesale price of electricity, then the price is going to be considerably higher when profit margin, depreciation of kit, etc, etc are factored in.

    I remember seeing an article a couple of years ago in the ‘Guardian’, of all places, about the cost of electricity from the proposed new Sizewell C reactors. It was noted that the agreed strike price for the electricity (in 2023) of £93/MWh (about 2x current UK price), was already comfortably exceeded by both onshore and offshore wind costs. As you say, ‘What might it be…..??’

    • The “what might it be” question was actually rhetorical, because if the world has only a few decades left to burn fossil fuels there’s nothing it can be. Not even a concerted global push to replace FF with nuclear could do it even if the will existed, which it doesn’t.

      The larger question, however, is why the world is trying to do it at all.

    • Günter Weber says:

      In the best case market price of electricity informs you about the running costs of the most expensive power plant that is needed to provide the current demand. It does not tell you anything about the ‘real’ price of production of a hypothetical new power plant.

      • jmdesp says:

        In theory, when the market price becomes larger than the price of production of a new plant, investors see there’s profit to be made from building one, and invest until the price becomes smaller.

        Reciprocally when the price is low, either the most inefficient plants become non-profitable, reducing competition, and increasing the price at the end, or demand growth ends up increasing it again, until it becomes larger than the price of production of a new plant.
        If there’s no demand growth but reduction then obviously new plants aren’t needed, and the market price may become much smaller than what would be needed to build a plant.

        Currently the market price is broken, because a lot of capacity is being built which is completely disconnected from this market logic.

  2. Ajay Gupta says:

    Warming of oceans already a given due to feedback loops according to NASA? Increasing renewable capacity also not a fossil fuel free endeavour?

  3. Willem Post says:


    The graphs should be sent to Paris for a reality check.

    Also, the cumulative build-up of capital costs should be added to the graphs, to connect the RE production, MWh, to economic sacrifices.

    That still leaves out the economic headwind of higher RETAIL electricity costs due to build-outs of the RE systems and having them as clumsy dancing partners.

    The percentages of clumsy dancing partners is increasing, while the percentage of good dancers is decreasing. Chaos is ahead.

    As you mention, the cost of generator system adequacy, grid system adequacy and storage system adequacy typically are not included in LCOE analyses; those costs are “socialized” by politicians doing “constituent service”.

    As a result, off-the-wall claims are made regarding RE being, or soon becoming, competitive with traditional energy sources.

    The reduced RE system build-outs in Europe and Japan are directly related to quarterly investments declining since 2011, which has to do with real GDP growth being near zero for about 10 years.

    With China’s growth slowing and Russia’s growth being negative, Europe’s growth likely will continue to stagnate. Keep smiling.

    BTW, the auto fill is not working. Each time I type in a comment, I have to enter email and name.

  4. A C Osborn says:

    Euan, I posted this on the previous post on “The Changing Face of UK Power Supply”, it is a study by the University Economics Professor Joachim Heimann.

    It highlights that Europe has, in his words, “Completely Wasted €5.7 trillion on Renewables” with the following affects
    – “Is very expensive”
    – “Is counter-productive”
    – “Has had no effect on climate”
    – “Disturbs in the decommissioning of nuclear power”.

    So your analysis is in good company.

  5. MikeW says:

    The wind and solar power industries are energy and economic parasites that will never produce more energy than they consume without an order of magnitude increase in their efficiency and reliability. The simplest metric on when (if ever) they will reach break-even is when they are able to make money in a free market without government mandates or subsidies.

    • Ajay Gupta says:

      Solar and wind have positive EROIs. They are not net-energy losers at all. In this respect shale oil and tar sands are inferior to wind and solar. As for the bad economics, well you get what you pay for.

      • Streetcred says:

        So, how come solar and wind need massive subsidies and even then are not competitive?

        • Ajay gupta says:

          Again. That’s econ. Same reason fossil fuels get trillions in subsidies worldwide. From energy point of view, for solar you get about 7 units of energy for every one you put in. Wind is about 1:17. US oil is around 1:20 now. Shale and tar sands are worst. Ethanol is almost 1:1. All EROIs are going down over time. These ratios are technology and resource defendant (true regardless of the money you put in).

          • A C Osborn says:

            Before making stmatements like “fossil fuels get trillions in subsidies worldwide.” I suggest that you read some past posts on this forum on that subject.
            Exaggerations of that kind do not go down very well on here.

          • Ajay gupta says:

            The global fossil fuel infrastructure is a result of trillions in subsidies worldwide (not annually!) but over time. To compare the subsidies going into renewables vs FF today’s annual rates is not definitive. You can get some good subsidy data from IEA. 2013 was about 550 billion alone if that helps you, but it doesn’t help compare the fuels. I’m very familiar with site, the author, EROI, and information in here. I mean no disrespect to anyone, but the picture painted above is totally misleading. If you want to rank energy sources EROI is the ticket. I can point to several papers on EROi of various fuels if anyone is interested.

            Food for thought: my government “subsidizes” farmers to NOT produce milk. It says nothing about the process of producing milk versus corn.

          • Euan Mearns says:

            Ajay, you are not doing yourself any favours making claims like this. You attend a university in NY State. If FF had to be subsidised it would not exist and nor would any of the infrastructure you see when you fly across the USA. From an ERoEI perspective, FF have subsidised virtually everything Man has built for the last 150 years. You of all people should know that.


          • Ajay gupta says:

            I think there is a miscommunication here. I am only referring to the comment that renewables are inferior to fossil fuels because of their respective government subsidies over time. I refer to EROi as a better indication of what social potential an energy source has. My work on EROI is available in peer-reviewed journals available to anyone in this regard. I am in agreement with the piece posted at top. My comments are only in reference to using subsidies to gauge energy production value, especially versus eroi. Best would be to integrate subsidies into EROI. I would only like to add that subsidies are used to provide incentive for production, not define it.

            Dr. Mearns, can you explain the mistake I’m making? I’m here to learn.

          • Euan Mearns says:


            1) ERoEI is a physical concept measured in MJ. It cannot be adjusted for a subsidy measured in $. I know your group has used $ as a proxy for J, and I do not object to that. But you have to remember at all times that you have done this and to not confuse a proxy with reality.
            2) The subsidy paid to renewables is paid by consumers to producers. The subsidy paid to FF is paid by the producer to the consumer (normally national governments in OPEC). These are exact opposites and should never be mentioned in the same breath.
            3) If you want to conflate the opposite sides of the coin then you need to also include tax and benefits to society. You need to look at the “net subsidy”, i.e. subsidy paid less tax paid. This gets incredibly complex.


          • Euan Mearns says:

            And I forgot to say that while ERoEI is undoubtedly important, I think storage / availability is equally so. I have recently used a H bomb as an analogy. I’m pretty sure that H bombs will have gigantic ERoEI. Its just that the energy is not always available in usable form when you need it most. And then all of a sudden you can have too much at an inconvenient time.

          • Ajay gupta says:

            My complete and embarrassing mistake. That’s what I get for chiming in without paying attention to context. Thanks so much for taking the time to clear that up for me. It’s true I’m from another but similar camp though I would not have made that connection easily. So much more makes sense now in the comments section now to me. Thanks again. Sorry if I wasted anyone’s time here.

  6. roberthargraves says:

    Perhaps “levelized” cost of energy is a difficult concept for the public to accept. “Levelized” implies all the adjustments like seasonality factors and purchasing power parity and cost of living adjustments that make people (including me) suspicious of numbers produced by advocates for one or another energy scenarios.

    Things like net present value, interest rate, and payments are mathematical concepts that are expressed without “adjustments” in indisputable Excel formulas. I’ve presented to people just the capital costs of energy sources, ignoring fuel and operating costs, to show lower bounds on costs per kWh of energy produced.

    The Excel PMT formula is
    CapCost/kWh =PMT(rate, revenue-generating-periods, cost)
    =PMT(0.08 / 365/24, years * 365*24 * capacity-factor, $/kWh)
    because you only get return on capital during those times that the power plant is producing power.

    I chose 8% as an unsubsidized cost of capital an investor might seek; you can try another. Then I looked up actual total, unsubsidized project costs for some power plant projects.

    Deepwater Wind ($290 million / 30 MW, 20 year life, 40% capacity factor)
    = $0.28 / kWh

    Ivanpah Solar ($2.2 billion / 392 MW, 20 year life, 30% capacity factor)
    = $0.18 / kWh

    Georgia AP1000 ($16 billion / 2.2 GW, 40 year life, 90% capacity factor)
    = $0.08 / kWh

    ThorCon ($2 billion / 1 GW, 40 year life, 90% capacity factor)
    = $0.02/ kWh

    {ThorCon is a liquid fuel nuclear power plant project I am working on.}

    My point is that such capital-cost-recovery numbers are mathematical, indisputable lower bounds on the cost per kWh to produce renewable (and nuclear) energy.

    • gweberbv says:


      what happens to wind and solar installations after 20 years?

      In particular take offshore wind, where the most expensive part is to build the installation in the ocean and connect it to the grid. If this is done, you should be able to keep the machine running for decades (with regulary exchange of some less costly parts of course).

      • Streetcred says:

        They last for more than 20 years? That’ll be the day hell freezes over.

      • jmdesp says:

        I know several solar installation that have provisioned a budget to fully remove everything and return the land to grass as soon as subsidizes as planned to end after 20 years.

        In the case of offshore wind, first the component that will need to be replaced aren’t that cheap, including the electrical conversion components and the turbine, that also must be installed at a 100 meter above sea, the equipment for that is really expensive, but also most of what potentially could be used on long term is immersed in sea water, this does not bode well for their lifespan. Nothing immersed in sea water lasts a very long time (Boat’s keel is cleaned and fully repainted at regular intervals to preserve it).

  7. PhilH says:

    I think the IEA in its Fig 6 reproduced above is being overly pessimistic. Under the first round of CfDs, for projects starting in about 2018, the cost of utility PV in high-latitude, notoriously cloudy, high-cost-of-money UK (well they’re probably all in England) was £80 = $120 /MWh, which is already in the lower half of the 2020 projection for a range of countries, almost all better suited.

    Strangely, the lowest bounds of costs for commercial-scale PV are slightly lower than for utility-scale PV, which I find curious – possibly to do with the cost of money?

    Interestingly it also doesn’t include nuclear for comparison.

    • I don’t think you can legitimately include subsidies when estimating solar LCOEs. It’s a cost that has to be borne by someone. You also can’t ignore grid integration costs, which begin to skyrocket at higher levels of grid penetration.

      Utility-scale PV might be more expensive than residential and commercial because of land acquisition, site prep costs etc. Residential and commercial operators usually just bolt the panels to the roof or the wall of whatever building they happen to occupy.

      • Günter Weber says:


        the cost for grid integration depends on the grid and on the fleet of other power plants connected to it. So it can be between zero and ‘huge’. In regions where air conditioning during hot summer days is an important factor of demand, the grid integration costs of solar/PV could even be negative.
        So, you cannot assign a single number to the typical grid integration costs of PV. But what you can tell is the costs for building a PV installation and to connect it to the grid. It is currently around 10 eurocent per kWh in Germany. Or something like 1000 euro per installed kW.

        • roberthargraves says:

          The very pharase “cost of integration” is word-smithing designed to divert focus on the issues of intermittency and reliability. of solar and wind power. It improperly implies that there is some way to put the pieces together, like integrating a Boeing 777 airliner in a production line.

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