The world’s renewable energy capacity is set to accelerate at a record pace in 2021, with an expected all-time record high for new installation. That’s according to the International Energy Agency’s annual Renewables Market Report, which forecasts the deployment of renewable energy technologies in electricity, transport, and heat to 2026. Overall, renewables are expected to account for almost +95% of the increase in global power capacity through 2026, despite the pandemic and surging inflation across the world.
By 2026, global renewables capacity is forecast to grow more than +60% compared to 2020 levels, surpassing 4,800 GW, the IEA projects. That equates to 1,830 GW of new additions in five years, or up to 380 GW annually. The growth of renewables is forecast to increase in all regions compared with the 2015-2020 period. China remains the global leader in the volume of capacity additions: it is expected to reach 1200 GW of total wind and solar capacity in 2026 – four years earlier than its current target of 2030. India is set to lead in terms of the rate of growth, doubling new installations compared with 2015-2020. Deployments in Europe and the United States are also on track to speed up significantly from the previous five years. These four markets together account for 80% of renewable capacity expansion worldwide, according to the IEA.
More than half of the growth to 2026 will come from solar. Dubbed the king of renewables, the technology will see +160 GW (+17%) of fresh capacity installed this year, the agency said. In the same time frame, onshore wind additions are set to be almost one-quarter higher on average than during the 2015-20 period. Total offshore wind capacity is forecast to more than triple by 2026. I’ve included details on the IEA’s biofuel projections below. The full report is available HERE.
Biofuel Overview: Despite rising prices limiting growth, global biofuel demand in 2021 is forecast to surpass 2019 levels, rebounding from last year’s huge decline caused by the pandemic. Demand for biofuels is set to grow strongly to 2026, with Asia accounting for almost 30% of new production. India is expected to rise to become the third-largest market for ethanol worldwide, behind the United States and Brazil. Over the medium term, major policy discussions in the United States, Europe, India, and China hold the promise of a more than doubling of biofuel demand growth in the accelerated case.
IEA notes that the factors influencing biofuel demand are all subject to uncertainty. For example, some governments have responded to the current high price of feedstock by relaxing or delaying biofuel blending mandates, with the effect of reducing demand. IEA estimates these actions to reduce demand by -3%, or 5 billion liters, in 2021 compared to a scenario where mandates remained unchanged or were increased as planned. By August 2021 biofuel prices had increased by between +70% and +150% across the United States, Europe, Brazil, and Indonesia, depending on the market and fuel, from average 2019 prices. For comparison, crude oil prices increased by +40% over the same time period.
As for future prospects, IEA says that the outcomes of policy discussions in the United States, Europe, India, and China will have a profound impact on biofuel prospects over the next five years. Overall biofuel demand growth could more than double to near +9% a year in the accelerated case. If implemented, policies under discussion in these countries would account for two-thirds of this growth.
Ethanol: While overall biofuel demand returns to 2019 levels this year even with slower growth, the recovery is uneven. Ethanol demand remains -4% below 2019 levels in 2021 and does not fully recover until 2023. High ethanol prices in Brazil and lower gasoline demand in the United States relative to 2019 levels are both driving lower ethanol volumes in 2021. By 2023, U.S. and European gasoline demand is forecast to have recovered from Covid-19 disruptions but remains well below 2019 levels, according to IEA projections. Increasing energy efficiency, surging electric vehicle sales, and behavior change all contribute to lower demand. Lower gasoline demand reduces ethanol volumes under current policies. However, ethanol demand recovery in Brazil and growing demand in Asia eventually offset declines in the United States and Europe in 2023.
Biodiesel and Biojet Fuel: By comparison, in 2021 biodiesel, renewable diesel, and biojet fuel expand well beyond 2019 levels, albeit from a low base for biojet. The combined demand for these fuels in 2021 is up +15%, or 7 billion litres, from 2019 levels. Renewable diesel demand in the United States and Asian biodiesel demand are responsible for the majority of this growth. Asia surpasses total European biofuel production in the forecast period thanks to strong domestic policies, growing liquid fuel demand, and export-driven production. Asian countries account for nearly one-third of new production over the forecast period. Blending targets for biodiesel in Indonesia and Malaysia and India’s ethanol policies are responsible for most of this growth. North American biofuel demand grows the most by 2026. However, 40% of this growth is demand recovery following Covid-19 declines. The United States and Brazil remain the largest centers for both biofuel demand and production.