Solar power will become “the new king of the world’s electricity markets” because it is cheaper than coal or gas-fired power stations in most countries, the International Energy Agency has said.
Renewables will meet 80 per cent of the growth in electricity demand over the next decade, with solar accounting for the biggest driver of growth, followed by onshore and offshore wind, according to the agency.
In its annual World Energy Outlook, the IEA also issued an updated assessment of the impact of the coronavirus pandemic on energy markets. It forecast that this year there would be a 5 per cent drop in global energy demand, resulting in a 7 per cent drop in energy-related carbon dioxide emissions. There also would be an 18 per cent drop in energy investment as companies tightened their belts in response to lower prices.
The agency said that on present policies, energy demand would not return to pre-pandemic levels until 2023, or until 2025 if the virus outbreak was more prolonged. Coal demand would never recover, while oil demand would plateau within the next decade, it said.
“The longer the disruption, the more some changes that eat into oil consumption become engrained, such as working from home or avoiding air travel,” it said. “However, not all the shifts in consumer behaviour disadvantage oil. It benefits from a near-term aversion to public transport, the continued popularity of SUVs and the delayed replacement of older, inefficient vehicles.”
The pandemic has added extreme volatility to an energy market that was already changing rapidly to meet the demands of decarbonisation and in response to the plunge in prices of renewable technologies.
Fatih Birol, director of the IEA, said: “I see solar becoming the new king of the world’s electricity markets. Based on today’s policy settings, it is on track to set new records for deployment every year after 2022.
“If governments and investors step up their clean energy efforts . . . the growth of both solar and wind would be even more spectacular.”
The IEA also said that sharp cost reductions over the past decade meant that “solar PV is consistently cheaper than new coal or gas-fired power plants in most countries, and solar projects now offer some of the lowest cost electricity ever seen”.
The rise of intermittent renewables is set to increase the requirement for battery storage and for robust power networks that can handle flexibility. “Electricity grids could prove to be the weak link in the transformation of the power sector, with implications for the reliability and security of electricity supply,” the IEA warned.