Dubai — The International Renewable Energy Agency is calling for increased spending on solar, wind and other alternative energies at the expense of fossil fuels as nations pour money into stimulus efforts to revive economies hit by the coronavirus pandemic.
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Energy investments should be increased to $110 trillion to reduce emissions by 2050, with renewables at $27 trillion, or more than double current government plans and policies, Abu Dhabi-based IRENA said on Monday in its first global renewables outlook. Fossil fuel investments should be shifted to renewables and "energy efficiency" instead, while subsidies for fossil fuels should be phased out, it said.
Coronavirus, or COVID-19, has already decimated demand for traditional fuels, with oil prices plunging to a 21-year low on Monday. "We estimate that the volatility of the oil price will discourage new investment in unconventional oil and gas, and that will compromise their ability to develop," IRENA Director-General Francesco La Camera told reporters in a webinar about the report.
"Investors will look for investments that provide more resilience in the economy, so we think this will make the renewables more convenient than they were demonstrating in the last year. We are sure one of the first sectors that will start to run and provide GDP and jobs is the renewables sector."
To cut emissions to zero by 2050, investments should be $130 trillion, with hydrogen, synthetic fuels, carbon capture and renewable-based electrification part of the mix, IRENA said. The 225-page paper was requested by IRENA's members "to try and understand how to link the disaster of today with the promise of the future," Camera said.
"This is an economic crisis, different than the one of 10 years ago," the director-general said. "So we have a lot of liquidity and the main question is 1, how to make the best use of the liquidity that exists and 2, how the use of it can create a space that can empower the policies of the various governments. We are very keen to spread out the message we need to link the short-term with the medium and longterm perspective, meaning a sustainable development. What is clear is that going forward renewables will provide more jobs, more social welfare and more GDP."
The $110 trillion in spending would be up from $95 trillion projected under current energy plans, while bringing economic benefits of as much as $142 trillion by 2050 in reduced environmental and health costs while nearly quadrupling renewable energy jobs to 42 million, IRENA said. Electricity would be the central energy carrier by 2050, growing from 20% of final consumption to almost 50%.
Under IRENA's $110 trillion "transforming energy scenario" to keep the increase in global temperatures to well below 2 degrees Celsius and toward 1.5 degrees C during this century, renewables spending would be increased to $27 trillion, from $13 trillion under current plans. In its $130 trillion "deeper decarbonization perspective," renewables spending would be $38 trillion.
Fossil fuels demand in the transforming scenario would be cut by about 75% by mid-century, to 130 exajoules, roughly equivalent to the energy demand of China today, IRENA said. "Given the need to reduce emissions, fossil fuel consumption cannot stay at today's level," it said. Under the transforming scenario, the largest declines in demand would be in coal, down by 41% in 2030 and 87% in 2050. Oil would be the second worst hit, down 31% in 2030 and 70% in 2050. Natural gas would increase 3% by 2030 but it would decline 41% by 2050.
Solar PV and wind are increasingly the cheapest source of electricity in many markets, and most renewable power sources will be cost competitive within the next decade, according to IRENA. Renewable power generation is now growing faster than overall power demand, with renewable electricity generation in 2019 increasing by more than the increase in electricity demand while fossil fuel electricity generation decreased. This is the first time in decades that fossil fuel based generation declined when overall electricity generation increased, it said.
In the electrification of transportation, costs of solar PV and wind, including offshore, are dropping, allowing technologies such as batteries and electric vehicles to save, while green hydrogen is viewed as a potential game changer, IRENA said.
Today about 120 megatons of hydrogen is produced per year, but almost all of it comes from fossil fuels. IRENA noted progress in green hydrogen, produced from renewables, with the world's largest green hydrogen production plant starting in Japan earlier this year. Green hydrogen will be cheaper than fossil-fuel hydrogen in five to 15 years in some locations, with iron-making and ammonia plants possibly taking advantage of it, IRENA said. The first plant producing ammonia from green hydrogen is expected to open this year, according to IRENA.