The greatest scope for increasing the use of renewables in absolute terms lies in the power sector. In the New Policies Scenario, renewables‐based generation triples between 2008 and 2035 and the share of renewables in global electricity generation increases from 19% in 2008 to almost one‐third (catching up with coal).
Renewable energy sources will have to play a central role in moving the world onto a more secure, reliable and sustainable energy path. The potential is unquestionably large, but how quickly their contribution to meeting the world’s energy needs grows hinges critically on the strength of government support to make renewables cost‐competitive with other energy sources and technologies, and to stimulate technological advances. The need for government support would increase were gas prices to be lower than assumed in our analysis. The greatest scope for increasing the use of renewables in absolute terms lies in the power sector. In the New Policies Scenario, renewables‐based generation triples between 2008 and 2035 and the share of renewables in global electricity generation increases from 19% in 2008 to almost one‐third (catching up with coal). The increase comes primarily from wind and hydropower, though hydropower remains dominant over the Outlook period. Electricity produced from solar photovoltaics increases very rapidly, though its share of global generation reaches only around 2% in 2035. The share of modern renewables in heat production in industry and buildings increases from 10% to 16%. The use of biofuels grows more than four‐fold between 2008 and 2035, meeting 8% of road transport fuel demand by the end of the Outlook period (up from 3% now). Renewables are generally more capital‐intensive than fossil fuels, so the investment needed to provide the extra renewables capacity is very large: cumulative investment in renewables to produce electricity is estimated at $5.7 trillion (in year‐2009 dollars) over the period 2010‐2035. Investment needs are greatest in China, which has now emerged as a leader in wind power and photovoltaic production, as well as a major supplier of the equipment. The Middle East and North Africa region holds enormous potential for large‐scale development of solar power, but there are many market, technical and political challenges that need to be overcome. Although renewables are expected to become increasingly competitive as fossil‐fuel prices rise and renewable technologies mature, the scale of government support is set to expand as their contribution to the global energy mix increases. We estimate that government support worldwide for both electricity from renewables and for biofuels totalled $57 billion in 2009, of which $37 billion was for the former. In the New Policies Scenario, total support grows to $205 billion (in year‐2009 dollars), or 0.17% of global GDP, by 2035. Between 2010 and 2035, 63% of the support goes to renewables‐based electricity. Support per unit of generation on average worldwide drops over time, from $55 per megawatt‐hour (MWh) in 2009 to $23/MWh by 2035, as wholesale electricity prices increase and their production costs fall due to technological learning. This does not take account of the additional costs of integrating them into the network, which can be significant because the variability of some types of renewables, such as wind and solar energy. Government support for renewables can, in principle, be justified by the long‐term economic, energy‐security and environmental benefits they can bring, though attention needs to be given to the cost‐effectiveness of support mechanisms. The use of biofuels — transport fuels derived from biomass feedstock — is expected to continue to increase rapidly over the projection period, thanks to rising oil prices and government support. In the New Policies Scenario, global biofuels use increases from about 1 mb/d today to 4.4 mb/d in 2035. The United States, Brazil and the European Union are expected to remain the world’s largest producers and consumers of biofuels. Advanced biofuels, including those from ligno‐ cellulosic feedstocks, are assumed to enter the market by around 2020, mostly in OECD countries. The cost of producing biofuels today is often higher than the current cost of imported oil, so strong government incentives are usually needed to make them competitive with oil‐based fuels. Global government support in 2009 was $20 billion, the bulk of it in the United States and the European Union. Support is projected to rise to about $45 billion per year between 2010 and 2020, and about $65 billion per year between 2021 and 2035. Government support typically raises costs to the economy as a whole. But the benefits can be significant too, including reduced imports of oil and reduced CO2 emissions — if sustainable biomass is used and the fossil energy used in processing the biomass is not excessive.