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Tenders key to renewables growth, says IEA

WORLDWIDE: Competitive tenders in renewable energy will drive "almost half" of new capacity between 2017-2022, according to the new medium-term forecast from the International Energy Agency (IEA).

Renewables growth in China is expected to drive expansion globally (pic: CIMC)
Renewables growth in China is expected to drive expansion globally (pic: CIMC)

In its latest Renewables 2017 report, the IEA said the expansion of auctions in more countries would "accelerate cost reduction trends".

The agency said the use of feed-in tariffs have "played an important role" in the initial deployment of renewables, but the shift to competitive tenders with long-term power purchase agreements has been "the most significant policy development over the last few years".

"This approach to remuneration has emerged as a more cost-effective policy option for capital-intensive renewables, thanks to the use of a competitive price discovery mechanism combined with volume control, thus containing total renewable support costs," the IEA said in its report.

The IEA found auction prices for onshore wind fell from $70/MWh in 2014 commission dates to below $50/MWh for projects due online in 2020.

Expansion

In its forecast period (2017-2022), the IEA predicted renewables to grow by 920GW – roughly 80% of this from solar PV and wind capacity – an increase of 43% from 2016.

Growth will be particularly concentrated in China, the IEA said, as the country battles pollution and drives to meet its targets set in the government's 13th Five Year Plan, as well as the other major economies of India and the US.

"Three countries – China, India and the United States – will account for two-thirds of global renewable expansion by 2022," the IEA said.

For the first time in a five-year period, according to the IEA, growth in Indian renewables will outpace the European Union.

By 2022, the IEA predicts renewable energy capacity, including hyrdo, to generate 8,000TWh of electricity, which is "equivalent to the total power consumption of China, India and Germany combined".

"Though coal remains the largest source of electricity generation in 2022, renewables close the generation gap with coal by half in just five years," the agency added.

Wind

As for wind capacity, the IEA predicts an additional 321GW of capacity to be added between 2017 and 2022 – roughly 8% (26GW) of which will be offshore wind capacity.

"China, the United States, the European Union and India together represent 84% of onshore wind capacity growth over the forecast period," the report stated.

In 2016, the IEA said the average investment costs for typical onshore wind projects ranged from $1,050/kW to just over $2,000/kW.

According to the report, India and China were near the bottom of this range, as local suppliers could quote competitive prices.

Germany and the US had less stable investment prices, but were sat mid-range between $1,650/kW to $1,800/kW.

In Brazil, however, investment costs increased 9.5% in 2016 compared to a year earlier due, in part, to the depreciation of the Brazilian Real.

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