Growth in renewable energy is slowing, but China still leads the pack

Growth in renewable energy is slowing, but China still leads the pack
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The verdict from the International Energy Agency is in on the medium-term renewables market, and the forecast is mixed. China, however, is still leading the global push for clean energy. 

This past week, the International Energy Agency (IEA) released its annual Medium-Term Renewable Energy Market Report (MTRMR), which forecasts market trends in renewables for the coming five years. The new 2015 report predicts an overall mixed forecast for the 2015-2020 period.

On one side of the equation, the renewable sector is yet again anticipated to comprise a majority of world energy growth between now and 2020, accounting for roughly 60% of expansion by decade’s end. Broadly, the 2015 MTRMR envisions renewables rising from 22% of global power generation in 2013 to over 26% by 2020, with around 700 gigawatts (GW) installed over the next five years.

The majority of this growth will come from two specific facets of renewable energy, with onshore wind accounting for over 33% of 2015-2020 renewables expansion, while solar PV will serve as “another third of deployment.”

In short, onshore wind and solar PV technologies will remain the areas of primary interest in terms of investing in green energy. Conversely, biofuels and renewable heat technologies will continue to present more elusive investment prospects.

Source: IEA

On the other side of the equation, the market will also continue to achieve results well below its potential, falling short of the growth required to effectively counter climate change. While renewables will indeed be the largest source of capacity growth, the IEA now predicts the rate of renewable energy growth will slow from the 2014-2015 high of 130 GW, “level[ing] off” at approximately 120 GW of additional power per year if the status quo remains.

Investment of the medium-term will also fall from the 2014 peak of USD 270 million to an annual average of roughly USD 230 million. This is in part due to decreasing technological costs, but primarily due to slowing growth.

As the world’s foremost international authority on energy, the IEA and its 2015 MTRMR are capable of influencing investment in not only renewables, but energy as a whole. Investors may be informed by the report in such a way that divestment in fossil fuels is slower than expected, and funds not invested in renewables may instead brought into the nuclear sector — possibly even a partial result of IEA forecasting itself.

The relatively clear financial risks and opportunities suggested by the IEA’s 2015 renewables report are indeed worth considering. On the surface, however, the geopolitical implications that these predicted trends might bring are less clear.

Reading between the lines on the IEA’s forecast reveals how these financial consequences might overlap with international political trends.

China Leads on Renewables

The IEA not only breaks down the medium-term growth of the renewable industry by sub-sector, but also by geography. From this analysis, two main trajectories are drawn.

Source: IEA

First, the IEA contends that renewable energy accounts for virtually all energy capacity growth for countries within the Organization of Economic Cooperation and Development (OECD), a trend expected to continue into 2020. While this is a promising development, those countries will also only account for 33% of global renewable growth within that same timeframe.

Second, the 2015 MTRMR forecasts significantly higher renewable capacity growth rates in developing countries, which comprise two-thirds  of overall growth. Foremost among the pack is China, which will boast an impressive 40% of all renewable capacity gained between 2015 and 2020.

The geopolitical significance of the contrast between developed and developing comes with regard to international influence and the capacity to lead. The United States — chief among OECD countries — has long justified sluggish renewable integration and weak environmental leadership by pointing to the widespread unwillingness of developing economies like China to follow suit. However, this argument dissolves with renewable growth being largely fuelled by Chinese demand.

In short, the stage is now set for weakened U.S. legitimacy on the world stage, especially in light of the upcoming United Nations Climate Change Conference in Paris tasked with “achiev[ing] a new international agreement on the climate.” There is now a general consensus that climate change represents one of the biggest challenges that the world will face in the coming century — and thus one of the largest opportunities for countries to gain influence internationally.

Regardless of whether Washington intends on making a case for climate leadership, China is now surprisingly well poised to demonstrate its capacity for global governance by leveraging its comparatively strong record on renewable energy — only fortified further by its upcoming cap-and-trade program.

Greater Chinese influence in one arena can lead to greater influence elsewhere, and will at least affect the West’s ability to dictate the environmental agenda in the medium-term.

About Author

Ian Armstrong

Ian Armstrong is Commissioning Editor and Senior Analyst at GRI. He also serves as the Geostrategy and Diplomacy Fellow at Young Professionals in Foreign Policy. Previously, Ian assisted in research at Temple University, the University of Pennsylvania, Scottish Parliament, and Hudson Institute's Center for Political-Military Analysis, where he has focused on non-proliferation and international energy. Ian's analysis has been featured at prominent outlets such as Huffington Post, Business Insider, Foreign Policy Association, CBS News, and RealClearEnergy.