Renewables 2O18Analysis and Forecasts to 2O23MarketReportSeriesTogetherSecureSustainablecutive summaryAnalysis and Forecasts to 2O23MarketReportSeriesRenewables 2O18cutive summaryINTERNATIONAL ENERGY AGENCYThe IEA examines the full spectrum of energy issues including oil, gas and coal supply and demand, renewable energy technologies, electricity markets, energy efficiency, access to energy, demand side management and much more. Through its work, the IEA advocates policies that will enhance the reliability, affordability and sustainability of energy in its 30 member countries, 7 association countries and beyond.The four main areas of IEA focus are n Energy Security Promoting diversity, efficiency, flexibility and reliability for all fuels and energy sources;n Economic Development Supporting free markets to foster economic growth and eliminate energy poverty;n Environmental Awareness Analysing policy options to offset the impact of energy production and use on the environment, especially for tackling climate change and air pollution; andn Engagement Worldwide Working closely with association and partner countries, especially major emerging economies, to find solutions to shared energy and environmental concerns.IEA member countriesAustraliaAustria BelgiumCanadaCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIreland ItalyJapanKoreaLuxembourgMexicoNetherlandsNew Zealand NorwayPolandPortugalSlovak RepublicSpainSwedenSwitzerlandTurkeyUnited KingdomUnited StatesThe European Commission also participates in the work of the IEA.Please note that this publication is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at www.iea.org/t the introduction of additional competitive auctions for long-term power purchase agreements PPAs in key countries; and a growing corporate PPA market that takes advantage of wind and solar PV cost reductions. Although US renewable capacity is expected to grow 44, recent changes to the federal tax code, trade policies and energy plans have introduced downside forecast uncertainties. A doubling of India’s renewable capacity is anticipated, mostly in solar PV and onshore wind. This is similar to last year’s forecast as challenges involving grid integration and the financial health of distribution companies hamper faster growth. Renewables growth accelerates in many other regions, from Latin America to sub-Saharan Africa. A policy shift towards competitive pricing mechanisms drives renewables growth. For the first time, more than half of renewable electricity capacity is expected to be commissioned through competitive auctions, which continue to slash wind and solar PV bid prices to between USD 20 per megawatt hour MWh and USD 50/MWh. For offshore wind, the decline of almost two-thirds that is expected over the forecast period will also improve future prospects for the production of hydrogen, especially in Europe. Overall, continuous cost reductions are expected to make renewables more competitive with new coal and natural gas plants in an increasing number of countries. Renewable heat potential remains untapped, demanding greater policy attention Renewable heat consumption is higher than that of renewable electricity in absolute terms, but still represents only 10 of global heat demand. Heat accounts for the largest portion of energy end-use 52 of final energy consumption, given its use for heating buildings and water, for cooking, and for industrial processes. Modern bioenergy, which dominates renewable heat consumption, accounted for over 70 of directly used renewable heat in 2017 as well as most of the renewable heat used for district heating. CUTIVE SUMMARY RENEWABLES 2018 5 Renewable heat consumption is expected to increase 20, capturing over one-third of global heat demand growth. China, the European Union, the United States and India together account for most of renewable heat growth. China’s renewable heat consumption surpasses that of the United States, making it the largest consumer by 2023. Renewable heat shares also continue to expand steadily in member states of the European Union, supported by policies and by the decline in overall heat demand as energy efficiency rises. Modern bioenergy consumption in the industry sector is anticipated to increase 13. The use of biomass and waste fuels in the cement subsector is expected to grow almost 40. However, the potential for further expansion is considerable, as demonstrated by the EU cement industry in which bioenergy and waste meet one-quarter of energy demand in accordance with robust waste management policies. With the exception of pulp and paper, in other energy-intensive industries, bioenergy is expected to make only a minimal contribution. Renewable electricity for heat is the second-largest contributor to renewable heat growth over the forecast period, owing to two trends 1 the use of electricity to produce heat is increasing at a faster rate than total heat consumption growth; and 2 the share of renewables in the electricity sector is expanding rapidly. Electrification of industrial processes is also gaining in popularity, while the use of heat pumps in buildings is becoming more widespread. Biofuels and electric mobility emerge as complementary options in transport Biofuel production continues to increase, rising 15 to 165 billion litres L by the end of the forecast period. However, biofuels only represent less than 4 of total transport energy demand in 2023. Even though electric mobility expands rapidly, biofuels still hold an almost 90 share of total renewables in transport sector energy demand in 2023. Fuel ethanol makes up two-thirds of biofuel production growth, and biodiesel and hydrotreated vegetable oil HVO provide the remainder. Asia and Latin America dominate biofuel production growth. Half of global production growth is forecast to happen in Asian countries, mainly China, India and ASEAN,2where ample feedstocks and the desire to increase security of supply have resulted in greater policy support. Meanwhile, Brazil delivers the largest absolute increase in biofuels output of any country over the forecast period. US ethanol production is forecast to decline slightly owing to greater vehicle fleet efficiency, limited investment in new capacity, and attainment of the allowable limit for corn ethanol under the current policy scheme. 2020 is expected to be a pivotal year for biofuel policies as Brazil and China introduce policy schemes anticipated to significantly boost market prospects. Brazil’s flagship RenovaBio policy is expected to strengthen the economics of biofuel production, accelerating investment in new capacity and output from existing plants. In addition, China is extending its 10 ethanol-blending mandate nationwide, resulting in a notable upward revision of the forecast. By 2020, India’s recently announced biofuels policy is also anticipated to result in higher biofuel production. However, the turning of the decade coincides with weakening EU policy support for conventional biofuels. Despite stronger policy support, advanced biofuel production remains low. Several advanced biofuel plants that use newer technologies are under construction or announced, mostly in Europe, India and the United States, where supportive policy frameworks are in place. However, without enhanced policy support, novel advanced biofuels account for only 1 of all biofuel output by 2023. Biofuel demand in the aviation 2Association of Southeast Asian Nations. CUTIVE SUMMARY 6 RENEWABLES 2018 sector is growing, mostly driven by voluntary initiatives. However, despite the availability of some technically mature fuels, production of aviation biofuels is expected to remain constrained unless production costs decrease or policy support is strengthened. Renewable electricity in transport is anticipated to expand by two-thirds. Electric cars, two- and three- wheelers, and buses lead this growth; their electricity consumption almost triples over the forecast period. However, rail still accounts for the majority of renewable consumption in 2023. Overall renewables provide almost one-third of global electrified transport demand by the end of the forecast period. Policies continue to remain critically important for the future of renewables To meet long-term climate and other sustainability goals, renewable energy development in the heat, electricity and transport sectors must accelerate. Should progress continue at the pace currently forecast, the share of renewables in final energy consumption would be roughly 18 by 2040 – significantly below the International Energy Agency IEA Sustainable Development Scenario’s benchmark of 28. Renewables expansion in the electricity sector could be 25 higher under the IEA accelerated case. Even with renewable energy technologies becoming increasingly competitive, appropriate policies and market design are critical. The accelerated case assumes that governments introduce measures to tackle policy and regulatory uncertainties as well as grid integration and financing challenges before 2020. China, the European Union, India and the United States together account for almost two-thirds of potential upside in the accelerated case. As a result, renewable capacity growth could reach 1.3 TW over 2018-23, putting the renewable electricity sector fully on track to meet long-term climate and sustainability goals. With the more favourable market and policy conditions assumed under the accelerated case, global transport biofuel output could be 25 higher than in the main case. Stronger implementation of blending mandates would boost ethanol production by over 20, with Brazil, China and the United States making the greatest contributions. Biodiesel and HVO output could climb more than 30, mainly in Brazil, India and ASEAN. Novel advanced biofuel technologies that use non-food crops, wastes and residues for feedstocks could expand by two-thirds, assuming a higher proportion of announced projects become operational. Untapped potential to increase bioenergy use in the cement subsector as well as the sugar and ethanol industry is significant. Cement production holds the largest potential as two-thirds of the bioenergy used in this industry is from waste. Robust waste management in key cement-producing countries could therefore double the share of energy demand met by bioenergy and waste to 13 by 2023. In the sugar and ethanol industry, renewable energy generation could rise significantly if all sugar cane-cultivating countries exploited the potential of high-efficiency co-generation, sugar cane straw and new energy cane varieties. Bioenergy growth in the heat, transport and electricity sectors combined could be as considerable as that of other renewables in the electricity sector. A significant proportion of this potential relies on wastes and residues that offer low lifecycle greenhouse gas GHG emissions and mitigate concerns over land-use change. In addition, using these resources can improve waste management and air quality. Robust sustainability frameworks are key to bioenergy growth. Only bioenergy that reduces lifecycle GHG emissions while avoiding unacceptable social, environmental and economic impacts has a future role in decarbonising the energy system. Robust sustainability governance and enforcement must therefore be a central pillar of any bioenergy support policy. OnlinebookshopPDFversionsat20discountwebstore.iea.orgInternationalEnergyAgencySecure SustainableTogetherWorld Energy Outlook seriesWorld Energy Investment seriesEnergy Statistics seriesEnergy Policiesof IEA CountriesseriesEnergy Technology Perspectives seriesE-mailbooksiea.orgMarket ReportSeriesOilCoalRenewableEnergyEnergyEfficiency GasGlobal Gas Security seriesEnergyPoliciesBeyond IEA CountriesseriesThis publication re?ects the views of the IEA Secretariat but does not necessarily re?ect those of individual IEA member countries. The IEA makes no representation or warranty, express or implied, in respect of the publication’s contents including its completeness or accuracy and shall not be responsible for any use of, or reliance on, the publication. Unless otherwise indicated, all material presented in figures and tables is derived from IEA data and analysis.This publication and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.IEA/OECD possible corrigenda on www.oecd.org/about/publishing/corrigenda.htmIEA PublicationsInternational Energy Agency Website www.iea.orgContact ination www.iea.org/about/contact Typeset and Printed in France by IEA - October 2018Cover design IEA; Photo credits ShutterstockTrenewables 2O18MarketReportSeriesThe electricity sector remains the brightest spot for renewables with the exponential growth of solar photovoltaics and wind in recent years, and building on the significant contribution of hydropower generation. But, electricity accounts for only a fifth of global energy consumption, and the role of renewables in the transportation and heating sectors remains critical to the energy transition.This is why Renewables 2018, the annual IEA market analysis and forecast on renewable energy, takes an in-depth look at bioenergy, the largest source of renewable energy globally. Often overlooked, the contribution of sustainable bioenergy represents a “blind spot” in the global debate about renewables. Bioenergy makes a significant contribution across the energy system, particularly in the heat and transport sectors.In addition to looking at renewable energy across the entire energy system, Renewables 2018 provides a detailed market analysis and overview of renewables in the electricity, heat and transport sectors as well as forecasts for the period between 2018 and 2023. The report also highlights policy and market improvements that can unlock further growth of renewable energy in electricity and transport biofuels, as well as underlines the untapped potential of sustainable bioenergy and other renewable sources in greening the industry and transport sectors. For the first time, Renewables 2018 also includes a chapter dedicated to answering some of the key questions raised by the latest developments in renewable energy markets.Analysis and Forecasts to 2O23