IEA releases mid-term forecast for biofuels, renewable energy

The International Energy Agency has released its third annual Medium-Term Renewable Energy Market Report, which includes forecasts for global biofuel and renewable energy growth. Within the report, the authors predict that the expansion of renewable energy will slow over the next five years unless policy uncertainty is diminished.

In the power sector, the report indicates the use of renewables grew strongly last year, reaching almost 22 percent of global generation. Global renewable generation is expected to increase by 45 percent, making up nearly 26 percent of global electricity generation by 2020. However, biofuels for transport and renewable energy use for heating and cooling are expected to face slower growth and persistent policy challenges.

“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,” said IEA Executive Director Maria van der Hoeven.

“Governments must distinguish more clearly between the past, present and future, as costs are falling over time,” she added. “Many renewables no longer need high incentive levels. Rather, given their capital-intensive nature, renewables require a market context that assures a reasonable and predictable return for investors. This calls for a serious reflection on market design needed to achieve a more sustainable world energy mix.”

Overall, global renewable electricity generation is expected to reach 7,310 TWh in 2020, representing an annual growth rate of more than 5.4 percent. When compared to the MTRMR 2013 estimates, the IEA notes that the outlook for bioenergy and several other technologies is less optimistic. For that reason the renewable generation forecast for 2018 is 180 TWh lower than in last year’s outlook. In particular, an executive summary of the report points to a slower growth for bioenergy in China. Moving forward bioenergy capacity is expected to expand steadily in Brazil. It is also expected to increase in India and other parts of Asia.

Global bioenergy capacity is expected to increase from 88 GW in 2013 to 133 GW in 2020. By 2020, the report predicts there will be 2,555 GW of renewable energy capacity globally. In addition to the 88 GW of bioenergy capacity, this includes 1,360 GW of hydropower capacity, 630 GW of wind capacity, 403 GW of solar PV, 11 GW of solar thermal, 16 GW of geothermal and 1 GW of ocean.

For the first time, the report includes a renewable power investment outlook. Through 2020, the report predicts investment in renewable power capacity will average more than $230 billion annually. This is slightly below the $250 billion invested last year.

An executive summary of the report notes that global biofuels production increased by almost 7 percent last year, reaching more than 115 billion liters (30.38 billion gallons). This is 3 billion liters higher than predicted in the IEA’s MTRMR 2013. When adjusted for energy content, biofuel output accounted for 3.5 percent of global oil demand for road transport in 2013, up from 3.4 percent in 2012 and 2 percent in 2007. Production is expected to reach 139 billion liters in 2020. According to the report, the forecast has been revised down since last year’s outlook, with 2018 production forecast to be 2 billion liters lower than in MTRMR 2013. Ethanol production is expected to reach 104 billion liters in 2020. The forecast for biodiesel has actually been increased slightly, with 2020 production expected at 33 billion liters. Advanced biofuel capacity is expected to reach 4 billion liters by 2020, with developments expected to limited primarily to the U.S. and EU.

The summary also indicates that the policy support for increased biofuel production is waning in the key markets of the U.S., EU and Brazil. It is, however, expanding in newer non-OECD markets, such as Southeast Asia.

“In the United States, the design shortcomings of previous biofuel mandates have become manifest, leading to policy reviews that have introduced uncertainty in the market,” said the authors in the executive summary. “In Brazil, the ethanol industry’s economic situation is worsening, partly due to inflation-targeted gasoline price regulations that undermine ethanol economics. In the European Union, ongoing controversy about the sustainability of biofuels has led to a proposed cap on conventional biofuel use that is leaving the industry in limbo until a final decision on the proposal is taken. At the same time, policy support is burgeoning in non-OECD countries, notably oil-importing economies in Southeast Asia and Africa that subsidise fuel consumption, where rising domestic biofuel production promises a valuable option to lowering fuel import bills.”

Regarding energy use for heat, the summary notes that global final energy use of renewable sources for heat, excluding traditional biomass, increase by more than 2 percent last year, reaching 14.5 exajoules (EJ), and accounting for 8 percent of world energy use for heat. According to the report, world final energy use for heat accounts for more than half of final energy consumption, and three-fourths for that is met with fossil fuels.

Additional information on the report is available on the IEA website. A copy of the executive summary of the report can be downloaded here.