Renewable energy likely to surpass coal by ’25
NEW DELHI: Renewables are likely to be the largest source of global electricity generation by early 2025, surpassing coal, the International Energy Agency said on Tuesday, adding that the sharp acceleration in renewable energy installations, with the total capacity worldwide set to almost double in the next five years, could possibly keep the goal of limiting global warming to 1.5 degree C alive.
This jump in uptake of renewable energy globally will be mainly driven by the global energy crisis caused by Russia’s invasion of Ukraine, IEA’S ‘Renewables 2022’ report has projected.
China, the United States and India are expected to double their renewable capacity expansion in the next five years, accounting for two-thirds of global growth in renewable energy.
In India, new renewable energy installations are set to double by 2027, led by solar energy and driven by competitive auctions implemented to achieve Centre’s target of 500 GW of non-fossil energy capacity by 2030. The Ministry of Power and New & Renewable Energy has a domestic goal of installing 500 GW of renewable energy capacity by 2030. India has updated its nationally determined contribution (NDC) under the Paris Agreement on August 26 with two broad quantifiable goals — reducing emissions intensity of its Gross Domestic Product (GDP) by 45% from 2005 levels by the year 2030, and achieving about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. India also has a long-term goal of reaching net-zero emissions by 2070.
New policies in the United States and India can lead to more diversified global solar PV (photo voltaic) manufacturing, although China will continue to dominate manufacturing until 2027. China’s share in global manufacturing capacity could decrease from 90% currently, to 75% by 2027.
Solar PV manufacturing investment in India and the United States is expected to reach almost $ 25 billion over 2022-2027, a sevenfold increase compared to 2017-22, IEA projected.
India’s Production Linked Incentives (PLI) initiative bridges nearly 80% of Indian manufacturers’ investment cost gap with the lowest-cost manufacturers in China. Fully monetising manufacturing tax credits in the United States could bring all segments of PV manufacturing to cost parity with the lowest-cost manufacturers. Subsidies, tariffs on imported PV equipment and local-content premiums will encourage project developers to purchase domestically manufactured products in both India and the United States, the report said. China is forecast to install almost half of new global renewable power capacity over 2022-2027. In the United States, the Inflation Reduction Act is providing the right conditions for uptake of wind and solar PV projects because it has extended tax credits for renewables until 2032.
“Renewables were already expanding quickly, but the global energy crisis has kicked them into an extraordinary new phase of even faster growth as countries seek to capitalise on their energy security benefits. The world is set to add as much renewable power in the next 5 years as it did in the previous 20 years. This is a clear example of how the current energy crisis can be a historic turning point towards a cleaner and more secure energy system. Renewables’ continued acceleration is critical to help keep the door open to limiting global warming to 1.5 °C,” said Fatih Birol, IEA Executive Director in a statement.
“The most consequential insight from the IEA analysis relates to the shift in manufacturing capacity away from China to the US and India. As the report suggests, India’s dedicated PLI scheme for incentivizing solar panel manufacturing as well as host of initiatives for a boost in the country’s aggregate manufacturing capacity are expected to yield significant benefits for India. Goi’s intervention would be successful in harnessing the synergies between climate mitigation, economic growth and job creation,” said Vaibhav Chaturvedi, fellow, Council for Energy Environment and Water.
This year’s forecast has been revised upwards by almost 30% from last year’s IEA renewables forecast despite energy market disruption, mainly because China, Europe, the United States and India are implementing policies and market reforms more quickly than expected to combat the energy crisis. China’s 14th FiveYear Plan and market reforms, the REPOWEREU plan; the US Inflation Reduction Act (IRA); and India’s 500 GW renewable energy goal are the main policy changes fuelling growth.
For India, this year’s forecast has been revised upwards by 7% from last year owing to higherthan-expected PV capacity additions in 2022; the announcement of several ambitious domestic PV manufacturing projects; and improvement of auction rules for wind farms. “The overarching drivers of renewable energy growth are India’s targets of 500 GW of non-fossil installed capacity by 2030 and net zero emissions by 2070, ensuring longterm visibility for renewable energy developers,” the report said.
Poor financial health of India’s DISCOMS (distribution companies) continues to prevent faster renewable capacity deployment, IEA has flagged. The number of overdue payments to renewable power producers continues to grow, worth almost $ 3 billion in June – an increase of nearly 60% since January 2021. DISCOM payment delays negatively affect renewable energy developers’ profits and increase project risks; DISCOMS are also reluctant to support rooftop PV deployment in their grids because they fear losing revenue from energy sales.
“Over one-third of rooftop PV systems added in 2022 were installed in the state of Gujarat, which is home to just 5% of India’s population. High deployment in this state was achieved through net billing and subsidies, which exist in most Indian states. This indicates that effective on-the-ground implementation of policies is crucial to achieve faster distributed PV growth in India. In the accelerated case, India achieves 50% higher renewable capacity deployment over 2022-2027 than in the main case, putting the country firmly on course to meet its 2030 targets,” the report said.
Raising the capability of DISCOMS to procure more renewable energy will be crucial to achieve faster growth. These include improving the financial performance of DISCOMS and increasing penalties for noncompliance with renewable purchase obligations.