IRENA’s Global Renewables Outlook and how Europe can lead the way

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If the coronavirus slump has knocked everything off track, IRENA’s first-ever Global Renewables Outlook is a timely reminder of what that track should look like. It can help policymakers design stimulus packages that will get us back onto it, and even accelerate the transition. IRENA’s Gayathri Prakash, Nicholas Wagner and Ricardo Gorini run through the comprehensive report’s main recommendations. Annual investment, shares and GW targets to 2030 and 2050 are given across a wide range of technologies and pathways, along with explanations as to why they matter.

Categories highlighted in the article include renewables, efficiency, primary energy, power, heavy industry, shipping, aviation, buildings renovation, electric mobility, power system flexibility, and hydrogen. A clean energy recovery plan is a historic opportunity for Europe to set an example, explain the authors who also warn of the risk of stimuli funds being wasted on “business-as-usual” investments that leave assets stranded in the long run drive to reduce emissions.

Current crises and its impacts on energy markets

The world is suffering through the COVID-19 pandemic, which has caused dramatic numbers of people to be infected, a mounting death toll, and social and economic disruption for regions, countries and communities. In particular, the crisis is having major impacts on energy markets.

Electricity consumption is decreasing due to declines in industry and service activities, and utilities are facing serious financial issues in some regions. Low oil and gas prices have cast doubt on the viability of some fossil fuel assets. Renewables are also not immune, and new projects will face delays. Governments are responding by providing emergency financial support and a big discussion is ongoing for exploring pathways for the recovery post-Covid-19. At the same time, fiscal budgets are under pressure due to reduced tax revenues.

We are witnessing now what will likely turn out to be a pivotal point in our collective future, one that could define our energy system long into the future.

Nationally determined contributions: backbone of recovery

During this crisis, the goals set out in the United Nations 2030 Agenda and the Paris Agreement can serve as a compass for investment needs in the coming years and decade. Stimulus and recovery packages should accelerate the shift to sustainable, decarbonised economies and resilient inclusive societies. Stimulus packages need to be aligned with Nationally Determined Contributions (NDCs) to be presented by the end of this year, as required under the Paris Agreement.

IRENA’s first Global Renewables Outlook: a cost-effective pathway

Now, more than ever investment decisions must align with the vision of a sustainable, low carbon climate-safe future. To help guide needed investments to create a sustainable future energy system, IRENA released its first Global Renewables Outlook: Energy Transformation 2050 (GRO) on 20th April. The Outlook highlights technological solutions to decrease emissions in line with Paris climate goals and even reach zero emissions as early as 2050. Importantly, it also outlines climate-safe investment opportunities from now till 2050 and the policy framework needed to make the energy transition possible. The investment opportunity is substantial: globally USD 130 trillion of energy sector investments are needed between now and 2050 to fully decarbonise the global energy system.

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The stimulus packages that the governments are discussing offer an opportunity to accelerate the needed transition. However, there is also a risk of emergency funds being whittled away for “business-as-usual” investments. That would both slow the necessary transition and waste resources – principally taxpayer money – by increasing the amount of stranded assets in the future. There is a widespread understanding that it is essential now during the pandemic to strive for win-win solutions.

Europe: a historic opportunity to lead

This is no more evident than in Europe, which has now a historic chance to respond to a historic crisis. It is critical that Europe’s response focuses on investments that are in line with the European Green Deal. It is likely that the climate ambition for 2030 will be raised further in the light of the carbon neutrality aim for 2050, which in turn would put Europe in line to doing its part to reducing national emissions in line with the goal of limiting planetary warming to 1.5℃ above pre-historic levels.

The GRO report shows for the first time an IRENA perspective on how this higher ambition climate goal can be met on a global level. It provides a roadmap for achieving deep decarbonisation, specifically on challenging sectors such as heavy industry, shipping and aviation. Green hydrogen from renewable power would play a particularly important role, as would energy efficiency, behavioural and structural changes.

An energy transformation scenario for Europe

The IRENA’s Transforming Energy Scenario, which is aligned with the well-below 2℃ target, shows how renewable energy will play a key role in Europe. The share of renewables in primary energy supply would increase from around 15% today to 39% by 2030 and over 70% by 2050.

Energy efficiency measures will play a key role, the final energy consumption per capita would drop by 17% in 2030 and by 33% in 2050 compared to current levels – significant reductions considering GDP also grows considerable over the period.

The renewable share in power generation will increase from around 31% today to 55% by 2030 and 86% by 2050. Electricity would become the central energy carrier, growing from about 22% of final energy consumption to 30% by 2030 and almost 50% by 2050.

The result of these changes is that the energy-related CO2 emissions would be reduced by 43% in 2030 and 82% in 2050 compared to current levels in the European Union (EU).

Source: IRENA

Reaching zero emissions as early as mid-century

While the Transforming Energy Scenario results in over an 80% drop in energy-related COemissions by 2050, Europe will need to do more to achieve climate neutrality by mid-century. A focus is primarily needed in a few sectors from where the bulk of remaining emissions are emitted, namly heavy industry, shipping and aviation. There are two general approaches to reducing emissions to zero: completely decarbonising all energy and industrial processes, so that no CO2 is emitted at all, and offsetting any remaining emissions through the use of carbon dioxide removal to achieve net-zero emissions. The optimal mix of these two approaches needs to be further explored, in particular given the uncertainties about the types of technologies and solutions that could reduce these remaining emissions.

In IRENA’s Outlook, a Deeper Decarbonisation Perspective is discussed that overviews both approaches. It outlines some of the key technologies and solutions that are needed, including the key role of having a fully zero emission electricity system that is coupled with significant end-use electrification (both direct, e.g. Electric Vehicles (EVs), and indirect, e.g. green hydrogen). For the challenging sectors of heavy industry, shipping and aviation, clean energy vectors such as green hydrogen and its derivatives will play an important role. Overall, the role energy efficiency, including structural and behavioural change, is also discussed.

Key actions needed now…

In the near term there are some key areas that deserve European policy makers’ immediate attention. These are some areas that will deliver the dual promise of economic stimulus and energy transformation.

…Buildings renovation

The renovation of buildings is an opportunity to upgrade their energy performance and to substitute old fossil-based equipment with more efficient electricity-powered systems

About half of the European Union’s building stock was built before 1970, with limited energy efficiency standards and no renewable energy requirements. According to the European Commission, the current pace of buildings renovation in the EU is low, between 0.4% and 1.2% per year. Policies should aim at accelerating current renovation rates and should include the right incentives, information, and support for installing renewable technologies for heating and electricity, while maximising energy efficiency performance levels and reducing energy bills for consumers.

Smart building management systems can facilitate electrification while providing additional flexibility to the power system. According to the Transforming Energy Scenario USD 128 billion of annual investment will be needed for energy efficiency measures in the buildings sector, a significant share for buildings renovation over the next three decades.

…Electric mobility

Transition full speed towards electric mobility

To speed the transition to electric vehicles, the EU should provide clear and reliable long-term investment signals, implement supporting policies (including EV purchase incentives) and support smart charging infrastructure rollouts.

EU countries can also set ambitious standards for lowering vehicle emissions and provide exemptions on congestion charges for electric vehicles in cities. Last year’s Pentalateral Ministerial Forum discussions showed that appropriate charging price signals and closer integration of energy and transportation sector planning, especially in urban areas, is needed.

To accelerate the shift to EVs, investments to develop charging infrastructure will be crucial. According to the Transforming Energy Scenario in the EU close to USD 20 billion of annual investment will be needed over next 30 years for the EV charging infrastructure. With adequate charging infrastructure, the electrification share in the EU’s overall transport sector energy consumption (including road, rail, shipping and aviation) could increased from around 2% today to 7% by 2030 and to 32% by 2050. Such an increase would significantly reduce fossil-fuel dependence and reduce emissions to help Europe achieve its aim of net-zero emissions.

An added benefit is that smart solutions, such as smart charging of EVs, can significantly facilitate the integration of variable renewable energy (VRE) by leveraging storage capacity and the flexibility potential of the demand side.

…Wind and Solar

Wind and solar PV would lead the way in the transformation of the EU’s electricity sector.

The EU should identify and map renewable energy resources and develop a portfolio of financeable projects for the medium to long term. It should create a favourable regulatory environment to unleash market-driven investments in new renewable energy generation, while also providing incentives for energy consumers to become producers of energy, or “prosumers”. For example, the EU can promote community ownership models and innovative financing schemes.

According to the Transforming Energy Scenario, in the EU the annual capacity additions of wind and solar PV need to scale up to around 14 GW of wind and more than 20 GW of solar over the next 30 years. Those levels of capacity in the EU could be deployed with average annual investments of USD 40 billion for wind (with more than 50% used for offshore wind deployment) and USD 25 billion for solar PV over the period to 2050. Offshore wind poses a particular opportunity. For onshore wind, the planning and permitting burden could be eased to jump-start investments.

…Power system flexibility

Flexibility in power systems is a key enabler for the integration of high shares of variable renewable electricity generation.

Development of a more flexible power system is critical (with responsive supply, storage, demand response, power-to-X, electric vehicles, digital and ICT technologies, etc.). The EU should plan for grid expansions and should deploy adequate operational measures and build more interconnections among countries. On a technology level, both long-term and short-term storage will be important for adding flexibility to the EU’s power system; the amount of stationary battery storage (which excludes EVs) would need to rise to 61 GWh by 2030 and over 730 GWh by 2050. Overall, on a longer-term to 2050, investment close to USD 56 billion per year will be needed for power grids and flexibility measures.

…Hydrogen

Hydrogen can offer a solution for types of energy demand that are hard to directly electrify.

By 2050 at the global level, green hydrogen production would need to ramp up on a scale comparable to how solar PV grew over the last 20 years. According to the Transforming Energy Scenario, globally, over 50 GW of electrolyser capacity would need to be installed every year to make this vision happen. The world has only 0.3 GW installed capacity of electrolysers today.

There is significant potential to reduce emissions in heavy industry and chemicals using green hydrogen to replace fossil fuel-based feedstocks and to provide high-temperature heat. In the transport sector, hydrogen can be used in fuel cell electric vehicles (FCEVs), mostly for heavier freight transport, or to produce powerfuels for shipping or aviation. Hydrogen can be a flexibility source that will enable the deployment of more variable renewable power. Therefore, significant scale up of electrolysers will be needed to produce the amount of green hydrogen that will be needed.

Conclusion

In conclusion, the stimulus needed to combat the economic damage from the Covid-19 pandemic poses an opportunity to accelerate the transition to a more sustainable and decarbonised future. It provides a chance to reinvent the European energy system, create jobs, and put the region on a path towards a more sustainble infrastructure and capital stock. Europe needs a renewed green industrialisation push and the response to this pandemic offers an opportunity for the EU to respond accordingly and be a shining light for others to follow.

About the authors

Ricardo Gorini is the head of Renewable Energy Roadmaps (REmap) programme, IRENA

Gayathri Prakash is an Associate Programme Office, IRENA

Nicholas Wagner is a Programme Officer, IRENA