Within the next three years, renewable power could surpass natural gas as the second most prevalent source of electricity generation globally, behind only coal, according to a new forecast by the International Energy Agency.

Hydropower accounts for about four-fifths of renewable generation and will continue to dominate the world's renewable portfolio into the foreseeable future, according to the IEA's "Medium-Term Renewable Energy Market Report" for 2013. But the gains made by the sector as a whole come from other sources of clean energy, particularly onshore wind.

Speaking yesterday at the release of the five-year forecast, IEA Executive Director Maria van der Hoeven said despite a dip in growth during 2012, the renewable energy sector continued to make impressive gains.

"The rapid rate of growth of renewables, at least in the electricity sector, is very much in line with that needed to stay on the trajectory associated with IEA low-carbon energy scenarios," she said.

The challenge to international climate targets, however, has been a simultaneous surge in the growth of fossil fuels. The growth in supply from North American tight oil and gas producers coupled with demand growth in developing countries means that despite technological development and international efforts, the carbon intensity of the global energy supply has barely changed over the past 20 years, van der Hoeven said.

In this context, she said, "the rapid growth of renewables continues to beat expectations and is a bright spot in an otherwise bleak assessment of global progress towards a cleaner and more diversified energy mix."

More than markets at work

While development of new renewable energy technologies continues to be driven by Organisation for Economic Co-operation and Development countries, demand is accelerating fastest in emerging markets. On its own, China is expected to account for nearly 40 percent of all expected global growth in renewables, followed by Brazil, India and South Africa.

These developments are not simply a response to government-imposed renewable energy mandates. As developing countries lay plans to meet future demand for electricity, renewables offer pollution-free, diversified supply. And in certain countries, the markets themselves have rendered renewables cost-competitive.

In Brazil, Turkey and New Zealand, wind now competes with fossil fuel power plants. In Italy, Spain and Australia, the cost of decentralized solar photovoltaic electricity has dropped below retail electricity prices.

But the entrance of new renewables to the world's electricity mix brings with it its own host of challenges, the report notes. In a number of European markets, high levels of renewables have run up against a lack of flexibility in the power grid. Smarter grids will be needed before new renewable generation can be added, a prospect involving both time and serious financial investment.

And the economic doldrums afflicting Europe have set a few countries on reverse course. Spain, the Czech Republic and Bulgaria have all reversed renewable energy programs or subsidies, actions that "totally destroy investor confidence, potentially for a long time," van der Hoeven said.

Spain had originally promised investors two decades of renewable energy subsidies but is expected to rein in its subsidies by 10 or 20 percent due to the global recession and a lackluster market for European Union carbon credits.

While a dip in growth during 2012 showed that renewable markets are vulnerable to outside conditions, the market segment continued to grow by 8 percent, the IEA report notes.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500