Last week, the International Energy Agency stated that the capacity to produce renewable energy globally would increase by more than 70% in the next five years. The agency believes that this will mainly be driven by energy security concerns as more countries turn to the use of renewable sources of energy such as wind and solar in an effort to decrease their reliance on fossil fuels.
According to the agency’s forecast, renewable energy will overtake coal to become the biggest source of electricity globally by 2025. The International Energy Agency expects that during this period, capacity will reach 5640 GW, which represents an increase of 2400 GW. This increase is significantly higher than the growth the agency predicted a year ago, as higher prices of electricity and fuel make renewables even more attractive to consumers as well as investors.
Faith Birol, the agency’s executive director, stated that while the use of renewable energy was increasing, the current worldwide energy crisis had pushed the sector into even faster growth.
This comes after Russia’s invasion of Ukraine affected the energy supply chain and forced countries in Europe that relied primarily on gas from Russia, such as Germany, to look for alternatives as quickly as possible. Birol added that the global energy crisis would be a turning point toward the use of cleaner energy.
Other countries, such as India, China and the United States, are also adopting market reforms and policies to introduce renewables at a faster pace than previously planned. The International Energy Agency also predicted that China could, in the next five years, make up about one-half of new renewable power capacity additions globally.
On a global scale, the agency stated that the increase in the use of these cleaner energies would also make it easier to meet the 1.5o C global warming target to limit climate change. The target was adopted during COP 21 and set under the 2015 Paris Agreement, which entered into force in 2016.
The report also visualized a scenario where the increasing use of renewable energies would exceed the forecast by 25%, which would make it even easier for the global target to be reached. It theorized that developed nations could help make this possible by using more renewables in transport and heating, and streamlining processes to grant permits.
Developing nations could also address weak grid infrastructures and policy uncertainties while also introducing affordable financing to ease the adoption of renewable energies. In the meantime, fossil fuel producers such as Alliance Resource Partners L.P. (NASDAQ: ARLP) will continue to enjoy a stable market for coal and other fuels.
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