Renewables, including hydro, now account for over 30% of the total global installed power generation capacity and 23% of total global electricity production, according to a new report by the World Energy Council. In the past 10 years, the report adds, wind and solar PV have witnessed an explosive average annual growth of 23% and 50%, respectively, although their combined contribution to the global electricity supply is currently only 4%.

The report, titled, “Variable Renewables Integration in Electricity Systems 2016 – How to get it right,” is published by the World Energy Council in partnership with CESI S.p.A. and draws upon 32 country case studies, representing about 90% of installed wind and solar capacity worldwide.

Renewables have become big business: The report says that in 2015, a record $286 billion was invested in 154 GW of new renewables capacity (76% in wind and PV) – by far overtaking the investment in conventional generation, of which 97 GW were added.

“The success of both the development of intermittent renewables and their efficient integration in electricity systems fundamentally depends on the right market design and regulatory framework and solid regional planning to avoid bottlenecks,” commented Christoph Frei, secretary general of the World Energy Council.

“We are beyond the tipping point of grand energy transition. Implementing technically and economically sound, stable policies supported by clear carbon price signals, will enable this transition and take us a step closer to meeting the climate aspirations agreed at COP21.”

According to the report, improving technologies and cost reductions are driving down capital expenditure and operations and maintenance costs of variable renewables, such as wind and solar. The report points to the very low auction values recently seen for wind in Morocco ($28/MWh) and for solar PV in Dubai ($30/MWh). Although it says these exceptionally low values cannot generally be projected to other countries with completely different wind and sun load factors and local costs, they show a downward trend. In continental Europe, for example, wind and solar load factors are up to 50% lower and local costs considerably higher.

Alessandro Clerici, chair of the Renewable Energy Sources Integration in Electricity Systems knowledge network, said, “Appropriate technologies and policies, including regulation and market design, play a fundamental role in both development of variable renewables and their efficient integration in electricity systems. Policy solutions are complementary to effective and affordable technology solutions.

“What works in any particular country depends both on its individual circumstances and the quality of execution of policies,” continued Clerici. “A holistic and long-term approach to system design is key when planning variable renewable energy sources integration, including honest and transparent cost assessment to incentivize investment and ensure supply security and a robust energy sector regardless of a country’s resources or geographic location.”

According to the report, key recommendations to address the challenge of sustainable variable renewables integration include the following:

Policymakers must define market rules to ensure a more sustainable energy system, including clearly defined CO2 emissions regulations;

Introducing capacity markets can help ensure security of supply, as energy-only-based markets are often insufficient to guarantee reliable supply in systems with a large share of variable renewables; and

Weather forecasting methodologies need further development to achieve better accuracy and to rapidly manage the changing nature of wind and sun/variability. In the light of the growing importance of variable renewable energy sources globally, the report says industry and policymakers need to address emerging issues to ensure their continued growth.

The full report is available here.