How to Triple Annual Renewable Energy Deployment and Beyond
A new approach is needed to achieve a tripling or more in annual renewable energy capacity by 2030. This analysis provides six new policy paradigms.
Step up, or step aside
Unleash bottom-up market forces
Keep calm and carry on… even in the midst of exponential growth!
Trigger RE deployment in all market segments
Harness “flexibility” everywhere… and all at once
Drive down the cost of capital: It can make or break the global energy transition
Table of contents
Analysis for the Global Renewables Congress
Commissioned by World Future Council
Toby Couture, E3 Analytics
Dr. David Jacobs, IET – International Energy Transition
November 2023
Background and introduction
Background: The need to triple annual deployment of renewables until 2030 and beyond
The path towards a climate safe future is narrowing. According to recent analysis of the International Renewable Energy Agency (IRENA, 2023) and the International Energy Agency (IEA, 2023), the energy transition has gained pace but is not yet on track to keep the global average temperature increase to below 1.5°C. Too little investment is flowing into low-carbon technologies, particularly in countries of the Global South, and too much capital is still being invested in carbon-intensive energy sources like coal, oil, and gas.
Deploying renewable energy is one of the most effective measures that governments can use to combat the climate crisis. In addition, investments in renewable energy can help keep energy prices stable and affordable, while creating abundant opportunities for jobs and green growth.
Globally, annual deployment of at least 1 000 GW of renewable electricity is needed to stay on a 1.5°C pathway (IRENA 2023). In 2022, a total of roughly 300 GW of renewables were added globally in the electricity sector. Investment in renewables is very uneven across world regions, with China accounting for more than 50%, the US and Europe around 10% and Africa and the Middle East combined representing only 1.6% of global investment in renewables (REN21 2023). Thus, at least a tripling in annual renewable energy deployment levels is needed.
Tripling the amount of renewable energy needs committed and visionary leadership: corporate leadership as well as political leadership. We have created this publication as a guide on ‘how to triple renewable energy’.
This is a clarion call to all relevant stakeholders – whether you are a CEO, a civil society leader or a Member of Parliament: it’s time to be a true leader for a just and rapid energy transition.
The renewables industry is scaling rapidly, and ready to deliver
Solar now ranks as the lowest cost electricity source in history (Carbon Brief, 2020). The global manufacturing capacity of solar PV alone is expected to reach 1000 GW by the end of 2024 (PV Magazine, 2023).
If solar PV continues along its historical rate of deployment (25-30% per year), the total solar PV capacity alone could exceed 75 000 GW by 2050 (Science, 2023), bringing unprecedented volumes of low-cost electricity to countries around the world.
To triple or more the annual levels of renewable energy deployment, all countries need to play a part. A mix of technologies will be required beyond solar, including both onshore and offshore wind, geothermal, wave and tidal power, as well as biogas, depending on the local context, and local resource availability.
Millions of renewable and clean energy experts will be required around the world to support the global transition on the ground. Training this future workforce on time is therefore critical. The renewable energy transition will deliver a wide range of social and economic benefits, including sustainable jobs, cleaner air, increased energy security, and rising prosperity.
Biogas plant
Virtual power plant
Commercial rooftop solar
Off-shore windfarm
Rooftop solar
EV charging station
Battery storage unit
Electric vehicles & heat pump
Geothermal plant
Beyond tripling: Achieving multi-terawatt levels of annual deployment
Flexibility must be increased in virtually all parts of the energy system. Increased storage capacity will be required, including thermal, mechanical, battery-based, and power-to-X (i.e., pathways for electricity conversion, storage and reconversion). Grids will need to be expanded, including expansion of the transmission and distribution networks, expansion into off-grid areas, and the establishment of smarter grid infrastructure. Electricity will need to be expanded to regions of the world currently without access, including bottom-up from solar home systems and mini-grids. Power system operators will need to improve “nowcasting” and “forecasting” capabilities to better monitor renewable electricity production and consumption in real-time.
To absorb the growing volumes of low-cost renewables, the “electrification of everything” needs to broaden, and deepen, powering a growing share of heating and cooling demand (= ca. 50% of global energy demand) as well as a growing share of transportation-related energy demand (= ca. 30% of global energy demand) (REN21, 2022; Rewiring America, 2022). As electricity comes to represent a growing share of global energy demand in the coming decades, its role as a driver of decarbonization will grow.
Expanding the traditional policy measures toolkit
In the past decades, a number of policy interventions by national or subnational legislators have proven to be crucial to scaling-up renewables. These include:
- Defining targets and RE deployment plans
- Streamlined permitting
- Guaranteed grid access rules
- Establishing key enabling policies (e.g., auctions, feed-in tariffs, net metering)
- Investment in transmission and distribution grid (as one important flexibility option)
- Policies to reduce investment risks (currency indexation, inflation indexation, etc.)
- Establishing ‘change agents’, namely public-private agencies providing technical and research support for renewable energy upscaling and who oversee progress and report to governments
This “classic” policy toolkit remains important, as it continues to provide the foundation underpinning renewable energy investment and growth in many countries. However, to trigger and sustain the level of growth needed in the coming years, additional measures are needed:
Accelerating RE deployment with a new policy paradigm
A new policy paradigm is necessary to achieve a tripling or more in annual renewable energy deployment by 2030.
Step up, or step aside
Unleash bottom-up market forces
Keep calm and carry on… even in the midst of exponential growth!
Trigger RE deployment in all market segments
Harness “flexibility” everywhere… and all at once
Drive down the cost of capital: It can make or break the global energy transition
Paradigm 1: Step up, or step aside
Now that renewables are the least-cost sources of new power supply, rapid growth can be triggered by simply removing barriers. This is indeed a paradigm shift. In contrast to traditional fuels, such as oil, gas and nuclear, renewable energy does not require the same levels of government support in order to grow. Governments should therefore systematically examine their policy and regulatory environments and eliminate barriers to market development.
If state-owned utilities and other actors stand in the way, their roles can be limited by changing laws, and opening the market to a wider range of actors and players. When utilities are too powerful or are in monopoly positions, they can actively block change and prevent the emergence of a thriving renewable energy market. If policymakers and Parliamentarians find that the utility is actively blocking change, or is not changing fast enough, new policies and regulations may be needed to open the door to a wider range of actors.
Parliamentary action
Push for policies and legal amendments that open the energy market to a greater number of actors. Otherwise the pace of the energy transition comes to be set by companies and actors who have an interest in moving slowly.
Utilities should be provided with a chance to step up and substantially contribute to rapid renewable energy growth – if they prefer not to, or are unable to access the capital required to do so, then governments need to do everything in their power to unleash bottom-up market forces and unlock investment.
Paradigm 2: Unleash bottom-up market forces
While traditional utilities will continue to have a role to play, they often stand as barriers to the pace and scale of change required. Though it may be possible in certain countries and contexts to accelerate renewable energy deployment on the scale required with existing actors and utilities, it is undoubtedly faster and more effective to do so by creating a dynamic, thriving business environment, supported by a diverse ecosystem of actors and suppliers.
Supporting a thriving, competitive ecosystem of companies and business models is emerging as one of the main pillars of a successful energy transition and is increasingly critical to achieving a tripling of renewable energy capacity. Regulators and lawmakers must be empowered and supported to push through changes to the energy market.
The energy system needs to be open, and accessible to millions of individual actors and players. In many cases, this will require political leadership and cross-cooperation among different ministries and departments (energy, environment, climate, labour, economy, health, treasury etc.) new laws, and a willingness to tackle entrenched interests. Without reducing the monopoly power of large utilities, the tremendous potential of low-cost, clean, abundant renewable energy in many countries will remain untapped. Deployment will be halted – and the transition to a cleaner, more sustainable energy paradigm will be delayed.
Parliamentary action
Ensure that small and medium-sized companies can access the market. Bottom-up market forces can unlock momentum, and momentum is vital to success.
Virtual power plant operators (VPPs)
Peer-to-peer energy sharing companies
Biogas plant owned by local community
EV charging companies
Agri-PV projects owned by farmers
Energy storage facilities
Community-owned wind farms
Paradigm 3: Keep calm and carry on… even in the midst of exponential growth!
Experience shows that renewable energy technologies can grow much faster than other power generation technologies, and often faster than governments and utilities assume. In the last years, renewables frequently accounted for 70-80% of total installed capacity additions.
Some policymakers and utility stakeholders may get nervous when they are confronted with rapid market growth – especially in the electricity sector where changes were often part of a decades long process, based on top-down planning.
That’s one important reason why change agents are needed: such public-private agencies can provide valuable technical and economical expertise, and serve as a landing place for questions, and media inquiries. A further reason why change agents are needed is that the energy debate in many countries is highly insular (i.e. isolated), with many actors and decision-makers being unaware of the changes happening elsewhere in the region, or in the broader energy market. Change agents can bring vital insights and perspectives from other regions and countries, helping to enrich the domestic debate with new ideas. Furthermore, such agencies can play an important role in convening multi-stakeholder dialogues and roundtables to discuss the main energy issues of the day, bringing facts and data to the table.
Parliamentary action
Establish national change agents. Change agents can help enrich the national conversation with data and analysis; by drawing on examples from other parts of the world, they can also build confidence in the transition.
Governments and key stakeholders like electric utilities need to find new ways of planning and adapting to rapid market growth.
Governments should resist the temptation to over-regulate, or to clamp down on the market too suddenly. Renewable energy hotspots can be managed by providing smarter incentives to build elsewhere, or by increasing the cost (or time required) for new grid connections in hot spot areas. Hot spot areas can also introduce requirements for project owners to add storage to alleviate the grid, introduce time-varying pricing, or limit the amount of power that can be fed into to the grid during certain hours. In this way, rapid growth can be managed organically, and renewable energy deployment can occur in a more geographically distributed way.
Paradigm 4: Trigger RE deployment in all market segments
To spur rapid growth, renewable energy deployment needs to be triggered in all market segments, including small-, medium-, and large-scale renewable energy projects. To achieve this, it is not enough simply to introduce renewable energy auctions, and step back. Rapid growth requires leadership and cross-departmental, cross-party and cross-ministerial collaboration.
To trigger investment across all market segments, different policy frameworks are needed. These include, for instance:
- Auctions for utility-scale projects
- Feed-in tariffs for community-owned wind projects
- Self-consumption and surplus power tariffs for roof-top solar PV projects
- Corporate Power Purchase Agreements for a factory or data center that buys renewable energy from a wind or solar project located elsewhere on the grid
- Commercial self-consumption
Parliamentary action
For a thriving renewable energy market, ensure that all market segments from households, to SMEs and farmers, to utility-scale projects are active, and growing; if they are not, policies that are tailored to these market segments should be introduced.
Feed-in tarrifs: Onshore wind park developed by the local community and financed via a 20 year PPA based on feed-in tariffs/contracts for differences.
Auctions: Offshore wind park financed via a 20 year power purchase agreement based on government-led auction process
Self-consumption and surplus power tariffs for households
Corporate purchase agreement: factory buys renewable energy from a private solar project located elsewhere on the grid
Commercial self-consumption: Department store with large-scale roof-top solar PV system.
Paradigm 5: Harness “flexibility” everywhere… and all at once
A future dominated by renewables will blur the lines between energy suppliers and energy consumers.
In order to triple annual renewable energy capacity, several new sources of power system flexibility will need to be activated, in homes, in businesses, in government buildings, and in industrial settings. This includes increased and improved battery storage, demand-side flexibility, and other solutions.
Transmission grid infrastructure is typically designed to meet “worst case” electricity demand: the result is that for most hours of the day, the grid is significantly over-dimensioned, like a large water pipe with only a small volume of water flowing through it. A smarter, more flexible grid would help ensure that the grid is used more fully and evenly over the course of the day, increasing demand during certain hours while reducing it in others. At the same time, such flexibility can enable more electricity to be delivered by the same infrastructure (Rewiring America, 2022).
Central to achieving this is to enable a wider range of companies and actors to participate, and provide flexible demand to the system, under fair and transparent rules. In most countries in the world, these rules do not yet exist.
Parliamentary action
Push for a rapid increase in power system flexibility. This can include introducing time-varying prices that reward customer responsiveness, launching procurement programs for providers of flexibility such as virtual power plants operators and other demand aggregators, or adding policies specifically to de-risk investments in storage technologies.
Paradigm 6: Drive down the cost of capital: It can make or break the global energy transition
In most countries around the world, the high (and increasing) cost of capital is the major barrier preventing the fast uptake of renewables. The cost of capital in developing countries is 2-4 times higher than in developed countries. In fragile states, the cost differential is even greater. A high cost of capital makes the global energy transition costlier, particularly for the regions in the world with the lowest ability to pay.
The higher cost of capital in the Global South presents a fundamental challenge to international decarbonization efforts, as the need for low carbon investment is vastly larger in rapidly growing economies.
There is therefore an urgent need to bring down the cost of capital, particularly in the Global South. While initiatives like the Bridgetown Initiative (Kroll, 2023) can help narrow the spread between the cost of capital in some countries versus that in others, they cannot fully eliminate it. As a result, international support and partnerships like the Just Energy Transition Partnerships (JET-P) will continue to play a critical role in providing low-cost capital at scale.
Parliamentary action
Support measures that would help bring down the cost of capital for energy transition investments, including partnerships with higher-income countries.
Conclusion: Creating a virtuous circle of perpetual RE growth
To triple renewables and beyond, the traditional renewable energy policy toolkit is no longer sufficient. Additional measures are needed. Some elements of the toolkit remain crucial, including target setting, grid connection and expansion, as well as support policies such as auctions, and surplus power tariffs. However, it is only when combined with elements of the new regulatory paradigm discussed above, including a new strategic focus on flexibility, and concerted efforts to unleash bottom-up market forces, that the world can achieve a tripling and beyond of renewable energy deployment.
A tripling of renewable energy provides numerous co-benefits in terms of energy security, economic prosperity and public health.
By creating a virtuous circle, including by removing barriers to market growth, unleashing of bottom-up market forces, introducing policies for all market segments, harnessing flexibility, reducing the cost of capital and skilling the required workforce, policy makers can create a thriving investment environment for rapid and sustained renewable energy growth.
