G20 leaders are meeting in Hamburg at a time when the world has embarked on a major global energy transition which is gaining momentum every year. This transition, underpinned by an unprecedented growth of renewable energy, is poised to be bolstered by the drive to implement the Paris Agreement and the Sustainable Development Goals. Matching a global long-term vision for transforming the energy sector in line with these objectives is critical given that energy is responsible for two-thirds of global emissions. In this context, IRENA’s new study– developed jointly with the International Energy Agency at the request of the German G20 Presidency and titled Perspectives for the energy transition: Investment needs for a low-carbon energy system – finds that a decarbonisation of the energy sector by 2050, in line with the ‘below 2°C’ objective of the Paris Agreement, is both technically feasible and economically attractive.
The strong business case of renewables has made this possible. In recent years, with a virtuous cycle of, falling costs, rapid innovation and enabling frameworks driving deployment to unprecedented levels. Investment in renewables reached a record $348 billion in 2015. And while there was a dip in total global investment in 2016, continued cost declines mean that we are now getting more power for each dollar invested, with solar PV module costs falling by as much as 80% since 2009, and wind turbine costs by almost a third. In fact, renewables generating capacity increased by 161 gigawatts last year, making 2016 the strongest year ever for new capacity additions. In a sign of the global nature of this transformational opportunity, over half of this new capacity came from developing countries.
The momentum of renewable energy is now widely recognised by G20 countries and the positive trends for renewables are only set to continue as more and more countries raise their ambitions for boosting deployment. Earlier this year, China announced plans to invest at least $361 billion in renewable power generation by 2020. In the oil producing Gulf region, Saudi Arabia recently announced its intention to deploy 9.5 gigawatts of renewable energy capacity by 2023 and attract $50 billion of investment in renewables by 2030. Meanwhile, Russia is now moving ahead with it its largest-ever renewable energy auction of almost 2 gigawatts.
This momentum also reaches beyond national governments. In the United States, states like California and New York are committed to increase the share of renewable electricity production to 50% by the same year. And last week, 250 US majors committed to 100% renewable energy. Global corporations are increasingly considering renewable energy a sound business decision. 96 corporations have committed to using 100% renewable electricity, creating demand for around 122 terrawatt-hours of renewable energy annually - that is more than enough to power the whole of Sweden.
As the energy transition gathers pace, there is a growing recognition of the many socio-economic benefits that it can bring. IRENA’s study shows that decarbonizing the energy sector by 2050 could boost global GDP by 0.8%, equivalent to almost $19 trillion in increased economic activity. While the net additional investment needed to undertake the transition would amount to $29 trillion over the period 2015-2050, significant savings due to reduced health impacts from air pollution and climate change would exceed the costs by a factor of between two and six in 2050. Moreover, renewable energy jobs would be around 26 million by 2050 compared to 10 million today, creating much needed employment opportunities worldwide.
If we delay action, the cost will however be much higher. It is therefore imperative that we intensify our efforts to spur innovation, not only in technology but also in policy, business models and market design. Innovative solutions can help integrate higher shares of variable renewable energy in power systems. Innovative policy frameworks can attract investments, drive cost reductions, and help accelerate deployment of renewables in end-use sectors such as transport, industry and building where it is lagging.
With Perspectives for the Energy Transition we have a clear path ahead of us. The G20 countries account for 75% of total global deployment potential and 70% of total global investment potential for renewable energy between now and 2030, and therefore have a tremendous market opportunity before them. The energy transition is not just a transformation of the energy sector – it is also a sound economic policy that will lay the groundwork for sustainable growth and prosperity for generations to come. Concerted and coordinated action undertaken by G20 countries to advance renewable energy can contribute to making this vision a reality, and to bringing about our sustainable energy future.