INTRODUCTION

The year 2018 saw a relatively stable market for renewable energy technologies. Total renewable power capacity grew at a consistent pace compared to 2017, and the number of countries integrating high shares of variable renewable energy (VRE) continued to rise. Corporate sourcing of renewables more than doubled compared to 2017, and renewables have spread in significant amounts all around the world.1

Renewable energy has been established globally as a mainstream source of electricity generation for several years.2 The estimated share of renewables in global electricity generation was more than 26% by the end of 2018.3 Net capacity additions for renewable power were higher than for fossil fuels and nuclear combined for a fourth consecutive year, and renewables now make up more than one-third of global installed power capacity.4 This is due in part to stable policy initiatives and targets that send positive signals to the industry, along with decreasing costs and technological advancements.

Renewable power is increasingly cost-competitive compared to conventional fossil fuel-fired power plants. By the end of 2018, electricity generated from new wind and solar photovoltaics (PV) plants had become more economical than power from fossil fuel-fired plants in many places. (→ See Sidebar 4.) In addition, in some locations it was more cost-effective to build new wind and solar PV power plants than to continue to run existing fossil fuel power plants.5 Record-low bids in tenders for renewable power were held in many countries around the world, especially for solar PV and wind power, although this development was not necessarily positive for the industry. (→ See Market and Industry chapter.)

As in previous years, renewables saw far less growth in the heating, cooling and transport sectors than in the power sector. The uptake of modern renewable energy for heating and cooling in buildings and industrial applications progressed at a slow pace, while the use of biofuels for transport grew moderately during the year. Progress in these sectors remains constrained by a lack of strong policy support and slow developments in new technologies (such as advanced biofuels).

Renewable energy targets are in place in nearly all countries, and several jurisdictions made their existing targets more ambitious in 2018. The number of renewable energy support policies increased again during the year, mostly for renewable electricity. In the power sector, a general shift to auctions from feed-in policies and other support mechanisms continued, but feed-in policies remained widely used. The number of countries with mandates for renewable heat in buildings fell by one in 2018, while policy examples for renewable energy support in industry remained scarce. No new countries added regulatory incentives or mandates for renewable transport, although some countries that already had mandates added new ones or strengthened existing ones. Only one country (Austria) had enacted a policy directly linking renewables and electric vehicles (EVs) by year’s end.6 (→See Policy Landscape chapter.)

In developing and emerging economies, distributed renewable energy systems continued to play an important role in connecting households in remote areas to electricity services. An estimated 5% of the population in Africa and 2% of the population in Asia has access to electricity through off-grid solar PV systems.7 In 2017, the global population lacking access to electricity fell below 1 billion, with around 122 million people worldwide gaining access since the previous year.8 During the same period, around 100 million people gained access to clean cooking facilities.9 However, finance for energy access decreased in 2018 for the second year running and remains far behind the estimated amounts needed to reach universal access to electricity and clean cooking.10 (→ See Distributed Renewables chapter.)

At the sub-national level, community renewable energy projects have spread, mostly in the power sector.11 The 2018 European Union (EU) Renewable Energy Directive included a definition of “renewable energy communities” and the basis for developing national rules to support community initiatives.12 In addition, the prevalence of prosumers is growing, while attention to their legal and regulatory options for participating in local energy markets and networks grew during the year.13 Sub-national governments continued to sign on to renewable energy and energy efficiency initiatives in 2018, often setting more ambitious targets than their national counterparts.14 Additional communities, cities and regions introduced 100% renewable energy targets in 2018, and by year’s end at least 100 cities were sourcing 70% or more of their electricity from renewables.15 (→ See Feature chapter.)

The private sector is playing a key role in driving renewable energy deployment through its procurement and investment decisions. By early 2019, 175 companies had joined RE100 – committing to 100% renewable electricity targets – up from 130 companies the year before.16 These and other private sector targets have supported the expansion of corporate power purchase agreements (PPAs), which are spreading to new countries and regions but remain concentrated in the United States and Europe.17 (→ See Power section in this chapter, and Feature chapter in GSR 2018.)

Shareholder pressure and the rising competitiveness of the renewables sector have resulted in increased investment by the fossil fuel industry – including some large oil corporations – in both renewable energy projects and companies.18 An increasing number of companies that own, develop or operate fossil fuel power plants shifted away from the coal business during 2018.19 Some firms are investing more in renewable energy – although still in relatively small amounts – in order to economically and reliably meet their own energy needs, to spread their risk or to become players in the rapidly growing renewables sector.20

Global investment in renewable power and fuels in 2018 totalled USD 288.9 billion (USD 304.9 billion including hydropower plants larger than 50 megawatts, MW); this was an 11% decrease from the previous year (largely as a result of a significant fall in China) but the fifth year in a row that investment exceeded the USD 230 billion mark.21 With more or less stable growth in renewable power capacity, the decline in investment reflects to some extent the falling costs of renewables – essentially, more capacity can be installed for less money.22

Nearly all of the invest­ment was in solar PV and wind power.23 Developing and emerging economies accounted for 53% of total renewable energy investment, with China alone accounting for 32% of the total.24 (→ See Investment chapter.) Several developing countries are investing equivalent or higher amounts in renewable power and fuels than developed countries on a per gross domestic product (GDP) basis, particularly as energy demand continues to increase at a faster rate in developing markets, such as in Djibouti, Morocco and Palau.25 (→ See Top 5 Countries table.)

Developments not directly linked to renewables are continuing to open opportunities for increased use of renewable electricity in the end-use sectors, such as heating and transport. These include a significant increase in incentives and targets for electrification of transport and bans on fossil fuel-powered vehicles in a few jurisdictions. The cost-competitiveness of renewable electricity for heating depends strongly on local fuel and electricity prices; however, the use of heat pumps continues to grow in major markets around the world, such as in Europe.26 In addition, digitalisation and smart metering are offering more options for supply-side and demand-side management.27 (→ See Systems Integration chapter.)

Decarbonisation pathways and frameworks continued to be developed during 2018.28 For example, the EU presented its long-term climate strategy to be carbon-neutral by 2050.29 An increasing number of countries also have adopted (or are considering) plans to phase out the use of coal for power generation, or the economy-wide consumption of fossil fuels.30 Additional national and sub-national governments adopted carbon pricing policies in 2018, lending support to renewables indirectly across all sectors.31 (→ See Policy Landscape chapter.) By the end of 2018, carbon pricing initiatives covered about 13% of globalgreenhouse gas emissions.32

Several high-profile developments in 2018 had an impact on the renewable energy sector. These include:

The 24th Conference of the Parties to the United Nations (UN) Framework Convention on Climate Change, held in Poland, ended with an agreement on implementation of the Paris Agreement, although many details were left unresolved.33 Calls stressed the need for a rapid and just transition to renewable energy, and the timeline for the next Nationally Determined Contributions (NDCs) was confirmed.34

In August 2018, a school strike for the climate was held outside the Swedish parliament building in Stockholm – an event that rapidly expanded from one person in a single country to millions of students in at least 125 countries around the world.35 Termed “Fridays for Future”, the movement has spurred a growing number of students to demonstrate and call for urgent action on the climate crisis from their political leaders.

By the end of 2018, more than 1,000 institutions (ranging from cities and banks to insurance companies, pension funds and faith groups) with professionally managed investment funds amounting to nearly USD 8 trillion had committed to divesting from fossil fuels.36

The Global Climate Action Summit in the United States convened 4,000 non-state actors – including policy makers at the sub-national level, businesses, investors and civil society – and resulted in a surge of new climate commitments.37

The International Solar Alliance (ISA) was strengthened through the opening of membership to all UN member countries, in addition to increased assistance, including a commitment by France of EUR 700 million (USD 800 million) towards the ISA objective of mobilising investment of USD 1 trillion by 2030 for the deployment of solar energy.38 As part of the ISA’s Affordable Finance at Scale programme, six African countries launched the Lomé Initiative, a platform to aggregate demand for financing for large-scale solar PV projects.39

The World Bank Group announced a target of investing USD 200 billion over five years starting in 2021 to support 35 gigawatts (GW) of renewable energy and enabling infrastructure.40 However, the Bank has continued to finance fossil fuels in developing countries in the meantime, amounting to nearly USD 6 billion since 2016.41

The world is not on track to meet international climate and sustainable development goals.

While there has been much progress on renewables, energy efficiency, and access to electricity and clean cooking facilities over the past decade, the world is not on track to meet international goals, most notably limiting the average rise in global temperatures to 1.5 degrees Celsius (°C) as stipulated under the Paris Agreement.42 Released during 2018, the Intergovernmental Panel on Climate Change (IPCC) Special Report on the impacts of global warming of 1.5°C above pre-industrial levels found that just over a decade remained to keep global warming below this threshold.43 Any increase beyond that point would greatly intensify the risk of extreme climate events, such as drought, floods and very high temperatures for much of the world’s population.44

In addition, the annual review of UN Sustainable Development Goal 7 (SDG7) found that the objectives for renewables, energy efficiency and energy access set out for 2030 under SDG7 will not be achieved unless efforts are significantly scaled up.45 The High-Level Political Forum on Sustainable Development held in 2018 emphasised this point as well and underscored that greater ambition was necessary.46

In 2018, global energy demand increased an estimated 2.3%, the greatest rise in a decade.47 This was due to strong global economic growth (3.7%) and to higher heating and cooling demand in some regions.48 China, the United States and India together accounted for almost 70% of the total increase in demand.49 Due to a rise in fossil fuel consumption, global energy-related carbon dioxide (CO2) emissions grew an estimated 1.7% during the year.50

As of 2017, renewable energy accounted for an estimated 18.1% of total final energy consumption (TFEC).51 Modern renewables supplied 10.6% of TFEC, with an estimated 4.4% growth in demand compared to 2016.52 Traditional use of biomass for cooking and heating in developing countries accounted for the remaining share.53 The greatest portion of the modern renewable share was renewable thermal energy (an estimated 4.2% of TFEC), followed by hydropower (3.6%), other renewable power sources including wind power and solar PV (2%), and transport biofuels (about 1%).54 (→ See Figure 1.)

Figure 1

Source: Based on OECD/IEA and IEA SHC. See endnote 54 for this chapter.

The overall share of renewable energy (both modern renewables and traditional biomass) in TFEC has increased only gradually, averaging 0.8% annually between 2006 and 2016.55 This modest rise is due to a negligible change in the traditional use of biomass coupled with overall growth in global energy demand since 2006 (annual average increase of 1.5%).56 Despite strong demand growth in modern renewables, especially renewable electricity, these two factors have slowed gains in the combined share of renewable energy in TFEC.57 (→ See Figure 2.)

Figure 2

Source: Based on OECD/IEA. See endnote 57 for this chapter.

In the power sector, renewables are increasingly preferred for new electricity generation. Around 181 GW of renewable power capacity was added in 2018 – setting a new record just above that of the previous year.58 Overall, renewable energy now accounts for around one-third of total installed power generation capacity worldwide.59 Nearly two-thirds (64%) of net installations in 2018 were from renewable sources of energy, marking the fourth consecutive year that net additions of renewable power were above 50%.60 (→ See Figure 3.)

Figure 3

As of the end of 2016, heating and cooling accounted for around 51% of final energy use, transport for 32%, and final electricity demand (excluding the purposes of heating, cooling or transport) for around 17%.61 (→ See Figure 4.) Modern renewable heat supplied around 10% of heating and cooling demand and has not grown significantly. While renewable electricity demand increased 25% between 2013 and 2017, modern renewable heat demand grew just under 5% during this period (around the same rate as global energy demand).62 In transport, consumption of biofuels (principally ethanol and biodiesel) increased around 18% between 2013 and 2017, although starting from a small base.63

Figure 4

Source: Based on OECD/IEA. See endnote 61 for this chapter.

Given the growing share of renewables in power generation, the electrification of heating and transport can provide an opportunity to further expand the use of renewable energy in these sectors, as well as to facilitate the integration of growing shares of VRE.64 Sector integration – the linking of the power, heating and cooling, and transport sectors – continued to gain policy maker attention during the year, although initiatives to directly support it remain limited.65 (→ See Systems Integration chapter.)

Many countries continued to invest in and develop new coal-fired power plants in 2018, despite the cost-competitiveness of renewable energy in many cases and other multiple benefits, such as improved public health through reduced pollution, increased reliability and resilience, and job creation.66 (→ See Sidebar 1 in this chapter.) The majority of coal-fired generation capacity – whether existing, new, under construction or planned – is located in Asia.67 Building new coal-fired power plants, with average lifetimes of approximately 40-50 years, can both lock in carbon-intensive generation and lock out renewable power.68 Asia also has seen the majority of new nuclear power plants in recent years. The number of new grid-connected nuclear plants tripled in 2018, with 80% of these located in China, and construction starts for new nuclear plants increased 50% during the year.69

Fossil fuel subsidies are double the support for renewable energy.

Global consumption of oil and natural gas rose in 2018, with natural gas growing at its fastest rate since 2010 (4.6%) due to increased demand and coal substitution.70 The United States was the main driver of higher global natural gas demand, which was used primarily in power generation and in buildings, due largely to more extreme temperatures during the year.71 Meanwhile, global oil demand rose 1.3% despite higher prices than in 2017, with the United States responsible for the largest growth because of expanding petrochemical demand as well as a rise in industrial production and demand for trucking.72 China was in second place, but the country’s growth in oil demand slowed as China transitions to less oil-intensive development and to reduced vehicle use to improve urban air quality.73

Between the adoption of the Paris Agreement in 2016 and the end of 2018, cumulative bank finance for fossil fuels amounted to USD 1.9 trillion.74 Global subsidies for fossil fuel consumption reached an estimated USD 300 billion in 2017, an 11% increase from the USD 270 billion the year before, and about double the estimated support for renewable power generation.75 In addition, one estimate places the true cost of fossil fuels at upwards of USD 5.2 trillion.76 While at least 40 countries have undertaken some level of fossil fuel subsidy reform since 2015, fossil fuel subsidies remained in place in at least 115 countries in 2017, with at least 73 countries providing subsidies of more than USD 100 million each.77 (→ See Figure 5.)

Figure 5

Source: Based on IMF. See endnote 77 for this chapter.

Whether supported by subsidies or not, low fossil fuel prices encourage further demand for fossil fuels and challenge renewable energy markets, especially in the heating and transport sectors.78 Additionally, the coal industry and major oil and gas companies spend upwards of USD 200 million each year lobbying to delay, control or block policies aimed at addressing climate change and on advertisements to influence public opinion.79

The following sections discuss key developments and trends in renewable energy in 2018 by sector in order of contribution to TFEC.