Road to Net Zero: Global assessment of the clean energy pathway

The much-awaited United Nations Cli­mate Change Conference COP26 was held at Glasgow in November 2021. Around 120 leaders from co­untries around the globe deliberated on ad­dressing the urgent climate-related ris­ks and agreed that countries must do mu­ch more to combat this global challenge. Many nations announced their commitme­nts towards accelerating their energy transition agendas and adopting clean energy sources across all spheres of activity including power, transport, and industries to achieve net-zero emissions.

The International Energy Agency (IEA) has prepared a Net Zero Emissions by 2050 Scenario (NZE), which is a model for the global energy sector to achieve net-zero CO2 emissions by 2050. The IEA also rele­a­sed its Tracking Clean Energy Progress (TCEP) report, which assesses the status of various critical energy sectors and gives suggestions on how they can transition to net zero. This article will summarise the key findings of IEA’s TCEP re­po­rt ac­ross three sectors – renewable en­ergy with a focus on solar and wind, and energy storage.

Renewable energy

Installed capacity and generation

Renewable electricity generation rose by 7 percent in 2020, with the share of rene­wables in the global electricity generation mix reaching close to 29 percent. Wind and solar power were responsible for al­mo­st 60 percent of this increase. A key growth driver for this impressive rise in re­ne­wable energy generation was the drop in power demand across the world owing to Covid-19, along with a slowdown in economic activity. This was complemented by the impressive capacity additions in the renewable energy space in 2020, whi­ch increased by 46 percent from 2019 to 2020 despite the pandemic.

The global wind capacity additions inc­reased by an exceptional 192 percent in 2020, with 108 GW of new capacity dep­loyed. The offshore wind segment witne­s­s­ed 6 GW of capacity additions. The total energy generation from wind power rose by 12 percent in 2020 as compared to 2019. Meanwhile, solar PV installations had another landmark year with 135 GW of new capacity added in 2020, a 25 percent increase over 2019.

Key wind power markets

The wind power capacity deployment in 2020 was almost double the capacity installed in 2019. This growth can be largely attributed to two markets – the US and China – which made up 79 percent of the total new installations, driven by the need to comply with support scheme deadlines. In the offshore wind space, almost half of the new capacity additions were in China, while the remaining were in Europe.

China’s onshore wind capacity reached nearly 69 GW in 2020 given the rush to complete the projects allocated under the country’s feed-in tariff (FiT) and auction schemes by the end of the year. In the US too, there was a rush to complete projects before the expiry of the production tax cre­dit. Thus, 17 GW of onshore wind development was witnessed in the country in 2020. However, due to the lack of generous support schemes for new projects, capacity additions in both these countries are likely to decrease in the coming years.

While 8 GW of capacity was installed in Europe in 2020, the region is likely to witness accelerated growth in the coming ye­ars owing to a greater focus on climate ta­rgets. Meanwhile, India suffered a se­ve­re decline in wind capacity additions ow­ing to pa­ndemic-led construction de­la­ys, land ac­­quisition issues, and transmission constraints.

In the offshore wind space, China and Eu­rope witnessed some development. Vari­o­us new markets are emerging in this spa­ce, with projects in advanced stages of development. For instance, projects have been proposed in four different states in the US. Similarly, a 5.5 GW auction has be­en completed in Taiwan with power purchase agreements (PPAs) signed for 1 GW of projects. However, issues like grid conn­ection, high costs, and approvals and permits mi­ght delay projects in emerging markets, and thus, must be addressed in a timely manner with the right policies.

Key solar power markets

Like wind power, the expiry of support schemes in key markets – China, Vietnam, and the US-led to significant solar capacity deployments in 2020. Again, China took the lead, contributing to 75 percent of the total solar PV deployment in 2020. China installed a massive 48 GW in 2020 to complete projects before the shift in the policy regime towards lower incentives. However, even then, 40 GW of subsidy-free capacity is under development and the government’s 14th Five-Year Plan is expected to fur­­ther accelerate project deployment with its new targets and cost reductions.

In the US, 19 GW of solar power capacity was deployed in 2020. The country is likely to witness strong growth in the utility-scale solar space with high demand ex­pe­cted from residential and commercial markets through corporate PPAs. Solar PV capacity in­creased by 15 percent in Europe in 2020, with Germany (+5 GW), Spain (+3 GW), the Netherlands (+3 GW), and Poland (+2 GW) emerging as the largest markets. In South America, Brazil installed more than 3 GW in 2020 and this momentum is likely to continue owing to attractive net metering incentives.

India witnessed a slowdown in capacity additions with less than 4 GW of solar PV capacity deployment owing to delays in project completion due to supply chain, construction, and logistics disruptions. How­ever, these limitations are temporary and capacity additions are expected to in­crease in the coming years with government targets and auctions.

Further, Viet­nam saw 11 GW of solar capacity ad­d­itions, much higher than what it witnessed in 2019 owing to the country’s FiT sche­me. Interestingly, the 2020 solar deployment surge was largely due to distributed solar, unlike the year 2019, which saw ma­ss­ive utility-scale solar installations. How­ever, the coming years might witness a slowdown in growth due to system integration challenges.

Policy regime and recommendations

Various policy interventions depending on technological maturity have been undertaken to promote renewable power dep­loyment. These include FiTs or premiums, renewable portfolio standards, green certificate schemes, net metering, tax reba­tes, and capital grants. Lately, au­c­tions ha­ve become a more popular way to allocate projects and discover com­petitive prices, especially in the case of solar PV and wind power.

However, the rapid development of cost-competitive solar and wind power projects across the world has created some challenges for power systems at the grid level. Thus, policy and market frameworks need to be designed to accommodate the high volumes of variable renewable energy in a reliable manner into the grid. The flexibility of power systems needs to be maintained to ensure stable grids. The IEA re­co­mmends the following policies that ensure investment in flexibility enhan­cement of power systems:

• The operation of the existing conventional power plants, especially reservoir hydropower plants, should be made more flexible.
• Demand-side management measures should be adopted.
• Energy storage including pumped hy­dro­power storage should be promoted.
• Grid infrastructure should be enhanced.

To meet the NZE by 2050 Scenario of more than 60 percent renewable energy contribution in the energy mix by 2030, the rene­wable energy capacity needs to be further expanded. In fact, renewable power generation must increase at an average annual rate of 12 percent in this decade, which is almost twice that in the past decade.

Installed capacity and growth

Battery storage installations across the world increased by 50 percent in 2020 over 2019 to reach roughly 17 GW as of the end of 2020. Roughly 5 GW of new storage ca­pacity was brought online in 2020, lar­gely dominated by utility-scale installatio­ns, which contributed two-thirds of the to­tal added capacity. China and the US, with GW-scale deployments, took the lead in the energy storage space.

Overall, $5.5 billion of investments were made in battery storage in 2020, an inc­re­a­se of almost 40 percent from 2019. The growing uptake of grid-scale batteries in renewable energy projects led to significant investments in this space. Mean­whi­le, there was a decline in investments in behind-the-meter storage used in small businesses and residences. In terms of technology, lithium-ion battery storage continues to dominate the market.

Key markets

China witnessed a doubling of capacity additions in 2020 owing to a strong de­ma­nd in grid integration of renewable energy projects. This momentum is likely to continue as China announced plans to install 30 GW of energy storage by 2025, a tenfold increase in its present capacity. Ca­pacity additions increased significantly in the US in 2020 owing to utility-scale projects, specifically two large projects in Ca­li­fornia. Further, a two-year extension was given in December 2020 to the solar in­vestment tax credit that benefits solar plus storage installations and the Better Ener­gy Storage Technology Act.

Europe, meanwhile, saw a decline in utility-scale installations and expansion in re­sidential deployments, with Germany em­erging as the leading market in behind-the-meter installations. In addition, the Na­­tional Grid Electricity System Operator in the UK launched its dynamic contain­me­nt frequency response service, which creates many opportunities for the installation of fast response battery-based en­ergy storage devices.

Other countries in the Asia Pacific also witne­ssed an increase in the uptake of energy storage devices. Korea saw a significant increase in deployments, which is not likely to continue owing to the expiry of federal subsidy schemes. Meanwhile, Japan and Australia continued to witness strong growth in behind-the-meter storage installations. In the case of Australia, utility-sca­le deployments are expected to increase in the coming years.

Global energy storage deployment is set to increase over the coming years owing to the announcement of several major po­licies and projects. Further, the rapid scale-up of solar and wind power projects will create many opportunities for the ma­ssive deployment of energy storage systems, which will help address the intermittency of solar and wind power. The formulation of regulations and creation of markets for flexibility and ancillary services will become critical to promote energy storage along with support schemes like ma­n­dates and incentives.

Conclusion

Renewable energy projects, dominated by wind and solar, will continue to increase rapidly owing to policy interventions as well as cost economics. En­ergy storage is taking center stage in the power sector with many applications ranging from consumer-led deployment to grid stability. Thus, smarter grids with a high degree of automation can help in the effective management of increasingly com­plex power systems. Further, green hydrogen needs to be massively scaled up for greater synergies and carbon emi­ssion reduction.

Overall, with power, transport, heating, and cooling sectors becoming interlinked, regulatory and market mechanisms need to be created to ensure the growth of clean technologies across the entire energy ecosystem.