While widely respected as one of the world’s most important sources of energy data and analysis, the IEA has consistently underestimated the actual growth of renewable energy in these reports for at least a decade.
The IEA’s flagship annual publication, the World Energy Outlook, has historically contained renewable energy growth projections that are far below estimates from other organizations, including Bloomberg New Energy Finance, Citigroup, and the International Renewable Energy Agency. In addition to the discrepancies in future scenarios, the IEA has regularly lagged behind reality in its past estimations of the rapid global rise in renewable electricity capacity. Even though the IEA has revised its renewable energy projections upwards every year, it is likely that this year’s World Energy Outlook will similarly come up short in its portrayal of the transformation of the global energy sector away from fossil fuels and towards renewables.
Despite this history of conservative estimates on the renewable energy transition—with some scenarios finding that the IEA underestimates future solar power growth by as much as 65 percent— the IEA has recently projected that renewable energy will be the largest source of new power generation globally over the next five years.
Climate Nexus Analysis
- The IEA has a history of miscalculating the rapid growth of renewable energy.
- The IEA has mistakenly forecast the steady growth of global coal consumption.
- In October 2015, the IEA predicted that in the next five years, renewables will provide most of the world’s new power capacity.
Bad Track Record
A recent report by the Energy Watch Group points to errors in IEA’s basic assumptions about the growth of the renewable energy industry. The IEA’s World Energy Outlooks assume linear growth for solar and wind power, whereas these technologies have grown exponentially in the last decades and are expected to continue this pattern of growth for decades to come. According to IEA projections, by 2030 renewable sources will provide only 14 percent of the global energy supply. However, assuming the average growth rate over the past 20 years stays the same (though it is actually predicted to accelerate), that projection would be closer to 60 percent.
Since the 1990s, successive reports have projected linear growth for renewables for the foreseeable future. But even as the IEA ticked up its growth projections every year, the actual annual growth of the industry continued to exceed the predictions (see below):
(Source: Energy Watch Group)
- The WEO 2010 report projected 180 gigawatts of installed solar photovoltaic (PV) capacity by 2024. The world achieved that level by January 2015, almost a decade earlier than IEA predicted.
- Current installed PV capacity is three times higher than WEO 2010 predicted for 2015.
- Installed wind capacity in 2010 exceeded the projections of WEO 2002 by 260 percent and WEO 2004 by 104 percent.
- In 2010, total wind energy exceeded WEO 2002 projections for 2030, twenty years ahead of schedule.
Other energy forecasters like Bloomberg New Energy Finance, Citi and independent analysts produce more likely estimates. The only forecasts that match IEA’s come from oil companies like BP, Shell, and Exxon Mobil. The IEA uses outdated assumptions about the costs of solar PV and applies cost numbers that are two to three times higher than current market prices (see below):
(Source: Terje Osmundsen)
(Source: Terje Osmundsen)
A recent Citigroup analysis predicts growth in solar worldwide could be at least 65 percent higher on average than what the IEA forecasts through 2020. Citigroup’s projection for solar PV finds an average global installation rate of 58 gigawatts per year between 2013 and 2020 (see below). By contrast, the IEA forecasts an average global installation rate of 33 to 34 gigawatts per year over the same period. According to Citigroup, reducing carbon in the world’s energy mix will involve not only creating new policies, but also innovation in financial markets. Financial innovations like energy efficiency, YieldCos and green bonds will help drive down the cost of capital for renewables, making them more competitive.
(Source: Greentech Media)
Citigroup and IEA have highly disparate projections on wind installations, as well. Citigroup estimates that wind installations between 2013 and 2020 will average 54 gigawatts per year, while IEA forecasts annual average installations of 38 to 42 gigawatts (see below).
(Source: Greentech Media)
Last year the IEA predicted that coal consumption would grow steadily in the coming years, expanding by about 2.1 percent per year for the rest of the decade. It also claimed China would account for three-fifths of the growth in demand. However, demand for coal has been shrinking, and China’s coal consumption has weakened substantially. Goldman Sachs predicts that along with the decline of demand growth, absolute demand will fall by 2019 as well.
The IEA’s 2015 Southeast Asia Energy Outlook Report predicted the dramatic expansion of coal in Southeast Asia through 2040. But leading Asian energy consumers like China, India and Japan are all decreasing coal imports, down 23 percent, 6 percent and 4 percent, respectively, during April-September 2015, compared to the same period in 2014.
Though the IEA does have special reports and working groups devoted to clean energy, there is concern that fossil fuel companies are using the annual WEO’s optimistic projections to boost demand and artificially shore up investor confidence. Fossil fuel companies have a vested interest in maintaining the status quo of steady growth in oil and coal consumption, and it appears that IEA models perpetuate that bias. The models incorrectly predict slow growth of renewables, and their consistent inaccuracy indicates that they do not factor in the rapid increase of private investment and domestic and international policy support for clean energy.
In October 2015, the IEA released the findings that showed a more optimistic view of renewable energy based on a meeting of Group of 20 energy ministers. The group forecast that clean energy will be the world’s largest source of new power generation through 2020. New installations will total 700 gigawatts, more than twice the current output of all of Japan’s power utilities. IEA Executive Director Fatih Birol said “governments must remove the question marks over renewables if these technologies are to achieve their full potential.” The IEA’s report from the meeting argued that “wavering policy commitment to decarbonization and diversification in response to such efforts can undermine investor confidence, and retroactive changes can destroy it.”
The IEA may now understand that lowball forecasting not only underestimates the actual growth of renewable energy, but it also may recognize the negative influence its projections can have on the success of new international energy policy. Though trained as an oil man, Executive Director Fatih Birol has recently described the IEA as “one of the biggest promoters of renewable energies.” In acknowledging the importance of the upcoming Paris talks on climate and energy policy, Director Birol hopes that one of the outcomes would be an agreement to impose a global price on carbon dioxide emissions. Though such a result is not guaranteed, it could open the door for greater competition of renewables and an overall level playing field across all energy markets.
Some experts suggest that the IEA should partner with the International Renewable Energy Agency (IRENA), an international think tank created specifically to analyze the development of renewable energy. IRENA’s annual “Roadmap” shows that the world can double its use of renewable energy as part of total energy consumption by 2030 at limited cost. The Roadmap also projects that as wind and solar PV continue their rapid expansion, renewables will increase from 18 to 44 percent of total generation by 2030. Though IEA’s World Energy Outlook and IRENA’s Roadmap offer vastly different pictures of the future, both are international organizations with a mandate from governments to provide policy advice on how to speed up the world’s transformation to a low-carbon, clean energy system.