World Renewable Energy Outlook

In the last century, the world's energy consumption increased 17-fold and CO₂ and harmful emission produced by fossil based resources increased at the same ratio. In contemporary world majority of the energy needs are met by the fossil based resources. However, because of being limited and having harmful environmental effects, today human beings are trying to develop more reliable, harmless and domestic energy resources. Due to the fact that renewable energy resources are harmless, domestic and inexhaustible, they gained popularity especially after the sustainable development concept.

The world energy demand has been increasing parallel to the development of economy and population increase. Therefore, in a very short period of time the fossil based resources cannot meet the total energy demand of the world. According to the IEA data, with the current demand and reserve level, the life of the fossil based resources is estimated as 50 years for oil, 56 years for natural gas (although it can rise to 230 years with the new technology and technical reserve level) and 140 years for the coal. Beside this, due to the uncertainty in the international relationship, energy supply security issue becomes as important as the reserve level. Moreover, price of the energy has been increasing steadily depending on the reserve decline and political instability in the world.

47 Apart from these problems, today the global warming effects and environmental concerns of fossil based sources are revealed more apparently. Therefore, the renewable energy resources have been increasing their importance in contemporary world. Being native, environmentally friendly and can be found almost in every country, the renewable energy can play a significant role on sustainable development, energy policy and security of energy supply in the world.

Environmental issues, such as carbon dioxide (CO2) reduction, are the main key driver of the renewable energy investment. Besides, the renewable energy investments are also supported to diversify energy supply, enhance energy security and stimulate the economies. The main investments are made on the electricity sector and then biofuels. UN launched Sustainable Energy for All Initiative and aimed to increase the share of renewable two times by 2030. The IEA has been working together with UN to define the baseline of targets and to monitor the progress. Apart from UN and IEA, EU also released the Renewable Energy Directive in 2009 and targeted to increase renewable energy share (covering the biofuels, electricity and heating) to 20 % in the final consumption in 2020.

EU forced each member to prepare an action plan and regular progress report to ensure that their targets are met. While the renewable energy could only meet less than 10 % of EU energy need in 2010, the latest report, prepared by European Commission, indicated that renewable energy can meet between the 55-75 % of final energy consumption of the Union in 2050 (EC, 2011, IEA, 2012).

The most significant increase in the usage of renewables is expected in developed countries. In OECD-European countries the share of renewables will increase from 3 % to 17 % between the 2002-2030 time periods. Since EU does not have enough energy resources and accepted some regulations, such as white paper, to prevent the environmental effects of fossil based sources, EU gives significant support to the renewables to realize its targets. Therefore, the biggest increase in the investment and use of renewable are expected from the EU countries (IEA, 2012).

Between the 2012 and 2035 years, 6.4 trillion dollars investment is required for renewables to reach the targets and nearly 94 % of this investment is needed only for power sector.

48 Distribution of the investment in power sector will be as: 2.1 trillion dollars for wind, 1.5 trillion dollars for hydro, and 1.3 trillion dollars for photovoltaic energy and rest of them for biofuels. While the OECD countries focus their investment mainly on wind and solar PV energy, the non-OECD countries concentrate their investment on hydro and wind sector (IEA, 2012: 211).

According to the IEA data, the share of renewables in the primary energy use has been increasing in all scenarios with the help of government subsidies, falling cost, high price of fossil based resources and CO2 pricing in some regions. As of 2035, half of the renewable-based supply will be provided by hydropower, nearly 1/3 from wind and 7.5 % from solar photovoltaics energy. Consumption of biofuels will increase more than three times and reach to 4.5 million barrels of oil equivalent per day over the 2010-2035 periods. In the new polies scenario of IEA, it is predicted that nearly 37 % of road transport demand of Brazil, 19 % of USA and 16 % of EU will be met by the biofuel by the year 2035.

Globally, the share of traditional biomass will decrease but protect its significance especially in developing countries. The production of heat from modern renewables continues to be dominated by bioenergy throughout the International Energy Agency’s projection period. Geothermal heat, which is another important renewables that are used mainly in housing, will grow at 7.8 % per year from 3 Mtoe in 2010 to 19 Mtoe in 2035 (IEA, 2012: 211). In table 10, the use of renewable energy by type and scenario is given.

Table 10: World Renewable Energy Use by Type and Scenario

New Policies Current Policies 450 Scenario

2010 2020 2035 2020 2035 2020 2035

Traditional biomass (Mtoe) 751 761 687 764 697 748 653 Electricity generation (TWh) 4.206 6.999 11.342 6.648 9.627 7.443 15.293

Bioenergy 331 696 1.487 668 1.212 750 2.033

Hydro 3.431 4.513 5.677 4.390 5.350 4.658 6.263

Wind 342 1.272 2.681 1.148 2.151 1.442 4.281

Geothermal 68 131 315 118 217 150 449

Solar PV 32 332 846 282 524 376 1.371

Concentrating Solar Power 2 50 278 39 141 61 815

Marine 1 5 57 3 32 6 82

Heat Demand (Mtoe) 337 447 604 429 537 461 715

Industry 207 263 324 258 308 263 345

Buildings 131 184 280 170 229 198 370

Biofuels (Mboe) 1.3 2.4 4.5 2.1 3.7 2.8 8.2

Resource: World Energy Outlook, IEA, 2012

49 The supply of renewable energy was almost 1.700 (MTEP) in 2010 and this amount met the 13 % of global primary energy demand. Although the investment of renewables is affected from global economic crisis, growth of China and nuclear accident of Japan prevented the decrease in global market. To compensate the nuclear power accidents’

effect and to lower the nuclear power share, Japan has been increasing its support to renewable energy (IEA, 2012: 213).

The consumption of renewable energy rises significantly from the current level in all scenarios of IEA. While the amount of renewable energy usage was 1.684 MTEP in 2010, it reaches to 3.079 MTEP in New Policies Scenario, 2.702 MTEP in Current Policies and 3.924 MTEP in 450 scenario (table 14). According to the central scenario of IEA, new policies scenario, annual growth rate of renewable energy is 3.4 % in 2010-2035 periods.

The growth rate of OECD countries is expected to be above the non-OECD countries and grows 4.7 % per year throughout the projection period of IEA (IEA, 2012: 214).

Table 11: Total Primary Demand for Renewable Energy by Region and Scenario (mtep) New Policies Current Policies 450 Scenario 1990 2010 2035 2010-2035

(%)*

2035 2010-2035 (%)*

2035 2010-2035 (%)*

OECD 277 443 1.005 3.3 861 2.7 1.393 4.7

Americas 153 199 461 3.4 402 2.9 686 5.1

Europe 98 208 423 2.9 373 2.4 533 3.8

Asia Ocenia 26 36 121 5.0 86 3.6 173 6.5

Non-OECD 847 1.241 2.073 2.1 1.840 1.6 2.500 2.8

E.Europe/Eurasia 40 47 103 3.2 84 2.3 165 5.2

Asia 497 676 1.133 2.1 955 1.4 412 3.0

Middle East 2 2 33 11.5 19 9.1 68 14.8

Africa 196 339 483 1.4 478 1.4 500 1.6

Latin America 112 177 322 2.4 305 2.2 355 2.8

World 1.124 1.684 3.079 2.4 2.702 1.9 3.925 3.4

 Annual Growth Rate Between 2010-2035

Resource: World Energy Outlook, IEA, 2012

Only one third of the renewable energy resources are used in electricity generation. It is expected that this ratio will increase in the coming years. Although the share of renewables is very small comparing with fossil based resources, the higher rate of investment and production increase is seen in renewables, especially in wind and solar energy. Since the 2000s, the electricity production from wind and solar photovoltaics has grown 27 % and 43

% per year on average respectively. The countries, such as Denmark, Spain and Germany,

50 illustrate the significant achievements in wind power. These countries provide important facilities to the producers. Hence, the usage of renewables, especially in electricity production, has been increasing significantly in OECD European countries (IEA, 2012).

The world electricity production from renewables will increase 2.7-fold between 2010-2035 years. In all scenarios of IEA, electricity production share is higher than biofuels and heat production throughout prediction period. According to the New Scenario of IEA, renewable energies will become the world’s second largest source of electricity production.

World’s installed electricity capacity of renewable energy will increase from 1.465 GW in 2011 to 3.770 GW in 2035. Yearly renewable energy capacity addition will exceed 170 GW per year by the end of the 2035. Nearly half of the world’s renewables based electricity production will come from hydropower, 1/3 from wind and 7.5 % from solar.

Both in OECD and Non-OECD countries, the share of electricity supply will reach nearly 1/3 of total generation, (33 % in OECD and 30 % in non-OECD, world average is 31 %) (IEA; 2012).

Table 12: Renewables-based electricity generation by region in the New Policies Scenario (TWh)

Renewable electricity generation Share of total generation 1990 2010 2015 2020 2025 2030 2035 2010 2035 OECD 1.339 1.960 2.493 2.963 3.444 3.936 4.436 18 % 33 % Americas 718 896 1.105 1.297 1.504 1.724 1.953 17 % 29 % Europe 472 887 1.138 1.351 1.545 1.734 1.937 24 % 44 %

Asia Oceania 149 177 250 315 396 477 546 9 % 24 %

Non-OECD 977 2.245 3.038 4.037 4.904 5.851 6.906 21 % 30 % E.Europe/Eurasia 266 309 315 347 391 446 516 18 % 22 % Asia 281 1.090 1.688 2.445 3.039 3.663 4.320 17 % 27 %

Middle East 12 18 28 46 72 119 208 2 % 12 %

Africa 57 110 141 198 275 374 495 17 % 36 %

Latin America 361 718 866 1.000 1.127 1.248 1.367 67 % 73 % World 2.316 4.206 5.531 6.999 8.348 9.786 11.342 20 % 31 % European Union 310 687 922 1.113 1.285 1.450 1.626 21 % 43 %

Resource: World Energy Outlook, IEA, 2012

Renewable energy investments contribute the world economy in several ways. First of all, they will decrease the CO2 emission 4.1 Giga tons (Gt) and help the sustainable development of the global economy by decreasing the greenhouse effects of the fossil based resources in 2035. Moreover, they can reduce the stress on water resources in many place of the world with the help of the hydro dams. Secondly, while they are reducing the

51 air and water pollution, they also maintain the energy security by diversifying the energy supply. Since they are domestic resources they help the reduction of the external dependency and protect countries from the price fluctuation of the international energy prices. These situations reinforce the countries against the price and supply shocks of crude oil. Thirdly, they lower the oil and gas imports bills of the countries and help to decrease current account deficit of the countries. Lastly, although their initial investment costs are high, their operation and fuel cost is very low. Therefore, they can help to decrease the energy cost of global economy, especially for industry sector, and accelerate the economic growth in the world.