Global use of renewable energy continues to grow strongly across all end-use sectors like power, heating, cooling and transport and is expanding to more countries each year worldwide. Thanks to continued new investments in the sector, renewable energy is forecast to become the world’s second largest source of power energy by 2015 according to the International Energy Agency’s (IEA) World Energy Outlook 2012 having implications for both consumers and businesses.
- Renewable energy is increasingly representing a larger proportion of total energy consumption in many economies globally. According to the United Nations Environment Programme’s (UNEP) Renewable Energy Policy Network for the 21st Century (REN21) 2012 report, the number of countries with renewable energy targets more than doubled between 2005 and 2012;
- Renewable energy sources accounted for an estimated 16.7% of global final energy consumption in 2010 (latest data available) according to the UNEP’s REN21 2012 report. During the year, traditional biomass accounted for 8.5% of total energy consumption globally, while modern renewables like solar, hydropower, wind, and biofuels accounted for the remaining 8.2%;
- Strong growth witnessed in the use of renewable energy can be attributed towards falling costs of renewable technologies, rising prices of fossil fuels and subsidy measures to support renewable energy projects. According to the IEA’s World Energy Outlook 2012, these subsidies amounted to US$88 billion (latest data available) globally in 2011 and will reach US$240 billion by 2035;
- Investments in renewable energy are also rising strongly. In 2011, total investment in renewable power and fuels increased by 16.8% annually to a record US$257 billion. During the year, China had the largest new investment in renewables followed closely by the USA, Germany, Italy and India;
- The growing use of renewables will have significant implications on businesses, consumers and the environment. This source of energy is clean, affordable and since it is produced domestically holds a large cost benefit by keeping energy prices low and protecting businesses and consumers from the price volatility of fossil fuels.
Global New Investments in Renewable Energy: 2006 – 2011
Source: UNEP’s Renewable Energy Policy Network for the 21st Century 2012
Note: 2011 was the latest data available.
Growing dependence on global renewable energy
A number of countries and regions are showing a rapidly growing share renewables in their energy mix where most renewable generated electricity is from hydropower:
- Globally, electricity produced by hydroelectric generation accounted for 16.8% of total electricity generated in 2012, up from 15.9% in 2007 while the share of electricity generated from fossil fuels remained relatively unchanged at 67.9% in 2012. However, electricity produced by hydroelectric generation grew by 19.8% over the 2007-2012 period, compared to the 13.3% increase witnessed in electricity produced by fossil fuels;
- Asia is emerging as the market leader in shifting towards renewable energy. Electricity produced by hydroelectric generation in the region grew by 47.1% over the 2007-2012 period and accounted for 34.1% of global electricity produced by hydroelectric generation in 2012, up from 27.8% in 2005. This was largely due to China – the world’s largest consumer of energy – actively pushing the use of renewables;
- China leads the world in total electricity generated from renewables. Although over 50.0% of its electricity was generated by fossil fuels in 2012, electricity produced by hydroelectric generation rose by 76.0% over the 2007-2012 period to reach 853 billion kWh by the end of the period – the largest level globally;
- The USA had the second largest renewable electricity generation closely followed by Brazil and Canada. Electricity produced by hydroelectric generation grew by 35.5% over the 2007-2012 period in the USA, to reach 365 billion kWh by the end of the period while generation from non-hydropower renewables like wind and solar energy are also expanding;
- Thanks to the Amazon basin, Brazil has a tremendous potential for hydroelectric power generation. Over 85.0% of Brazil’s total energy comes from renewable sources like hydropower, biomass and wind according to national statistics. Brazil is also the world’s second largest producer of ethanol behind the USA in 2012;
- The European Union (EU), particularly Germany, Italy and Spain, continue to be leaders in using non-hydro renewable technologies. According to UNEP’s REN21 2012 report, the EU accounted for 37.0% of global non-hydro renewable capacity by the end of 2011.
Electricity Produced by Hydroelectric Generation in Selected Regions: 2007 and 2012
Source: Euromonitor International from International Energy Association (IEA)
Strong rise in renewable energy investments
- According to UNEP’s REN21’s 2012 report, in 2011, total investment in renewable power and fuels increased by 16.8% annually to a record US$257 billion. This was almost double the level of investments achieved in 2007 as costs of renewable power equipment fell during the global economic crisis of 2008-2009 and policy priorities in developed countries changed;
- A majority of new investments in renewable energy are coming from developed economies despite austerity measures implemented during the global slowdown in 2011. During the year, developed economies accounted for US$168 billion of new investments in renewable energy compared to US$89.0 billion in developing economies;
- China had the largest new investment in renewables in 2011 at US$52.0 billion, up by 17.0% over the previous year followed closely by the USA, Germany, Italy and India. Policy uncertainties in Western Europe are making China and other emerging market economies attractive destinations for clean energy investments;
- India, however, witnessed the largest increase in renewable market investments, up by 62.0% in 2011 to reach US$12.0 billion owing to a spur of investments in India’s National Solar Mission. The country holds a significant potential for developing its renewable energy supply, however, cost concerns and an underdeveloped distribution network hinder expansion.
More countries have renewable targets
At least, 118 countries set renewable energy targets by early 2012 according to UNEP’s REN21 2012 report, of which more than half were emerging and developing economies:
- In Asia, for example, the Philippines’ National Renewable Energy Programme sets specific targets for renewable energy and announced spending US$27.6 billion by 2030 with an aim to increase its renewable energy capacity to 15,300 MW by 2030. Indonesia eased restrictions on foreign investment to expand use of its potentially enormous geothermal resources within the ‘Ring of Fire’ volcanic region;
- In Latin America, Brazil’s 2010-2019 Decennial Plan for Energy Expansion includes phasing out of fossil fuel plants by 2014 in favour of biomass and wind generation power plants. In early 2013, the country also provided US$1.5 billion to boost renewable energy research. Argentina also set up the Renewable Energy Generation Program with a target of reaching 8.0% renewable energy in its energy mix by 2016;
- In the Middle East and Africa, countries like Israel, Jordan, Morocco and the UAE have all set renewable energy targets to improve energy efficiency and are providing financial support to several projects. For example, Morocco has launched an ambitious solar energy plan and aims to increase its share of renewables in its energy mix to 42.0% by 2020.
Implications for global economy
- Renewable energy is more environmentally friendly. The increasing use of renewable energy helps reduce carbon emissions in the long term and improve air and water quality globally. Between 2007 and 2012, global carbon emissions increased by 15.8% compared to the 21.9% rise during the 2000-2006 period;
- Renewable energy industries have helped create jobs at a time when unemployment rates are high, particularly in developed economies. In 2011 (latest data available), 5.0 million people were employed in renewable energy industries globally;
- It is also a cost-effective and sustainable energy source compared to fossil fuels as energy is derived from natural and available sources. This also protects businesses and consumers from price volatilities in other energy sources like crude oil and natural gas;
- Despite the benefits of renewable energy, it is difficult to generate large quantities of electricity from hydropower, wind, solar and biomass compared to fossil fuels. In addition, renewable energy relies on the weather or natural sources for its source of power which is not always reliable;
- Investing in renewable energy sources can help improve the energy security of an economy and lower energy import bills. In addition, businesses can benefit from government incentives for renewable energy like grant programmes and production tax credit (PTC) when electricity is produced from qualifying renewable energy sources.
- Renewable energy sources will become an integral part of the global energy mix in the future thanks to the expansion in hydropower as well as growth in wind and solar power. According to the IEA’s World Energy Outlook 2012, these renewable energy sources will account for almost one-third of total global electricity production by 2035;
- Subsidy measures to support investments in renewable energy projects will also rise though their burden on governments and consumers will go down over the coming years as renewable capacity increases and cost of technologies fall. By 2035, subsidies are forecast to amount to US$240 billion, up from US$88.0 billion in 2011 according to the same report;
- Emerging market economies like China, Brazil, India and Turkey and those in the Middle East and Africa like Morocco and South Africa will be at the forefront of the renewable energy landscape in the future. These economies have been setting up new renewable energy targets that will boost investments and increase energy security.
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