This chapter assesses the options for increasing investment in greening the energy sector by increasing the supply from renewable energy technologies.1
The
current highly carbon-intensive energy system depends on a finite supply of fossil fuels that are getting harder and more expensive to extract leading to concerns about national energy security in many countries. The challenges are compounded by the need to provide clean and efficient energy services to the 2.7 billion people without access. It is, thus, not sustainable in economic, social, and environmental terms. Furthermore, the current state of the energy sector leaves many countries exposed to large swings in oil import prices and also costs billions in public subsidies.
Greening the energy sector will require improvements in energy efficiency and a much greater supply of energy services from renewable sources, both of which will lead to reducing greenhouse gas emissions (GHG) and other types of pollution. In most instances, improvement in energy efficiency has net economic benefits. Global energy demand is still
likely to grow in order to
meet development needs, in the context of growing populations and income levels. Greening the sector also aims to end “energy poverty” for the estimated 1.4 billion people who currently lack access to electricity. Moreover, 2.7 billion people who are dependent on traditional biomass for cooking need healthier and
a. Million tons of oil equivalent. b. Compound average annual growth rate. c. World includes international marine and aviation bunkers (not included in regional totals), and some countries/ regions excluded here.
Table 1: Primary energy demand by region in the
IEA Current Policies scenario Source: IEA (2010d)
more sustainable energy sources (IEA 2010a). Modern renewables offer considerable potential for enhancing energy security at global, national and local levels. In order to secure all these benefits, enabling policies are required to ensure that the investments are made for greening the energy sector.
This chapter is structured as follows: Section 1 briefly describes features of world energy supply and the growing role of renewable sources of energy within it. Section 2 discusses the challenges and opportunities related to the
energy sector, and the potential Coal Natural gas Crude oil
Figure 1: Evolution of fossil fuel prices Source: Energy Centre the Netherlands (ECN)
contribution of renewable energy. Section 3 reviews investments in renewable energy, covering recent trends, developments in cost-competitiveness, the importance of externalities, employment effects and expected investment needs. Section 4 presents the results of green investment scenarios (from the GER modelling chapter), in which investments in renewable energy are considerably expanded, as part of an integrated strategy also addressing energy efficiency and other aspects of demand. Section 5 discusses the barriers to increasing investments in the renewable energy sector and the policies to address these. Section 6 concludes the chapter.
1. The demand issue of energy efficiency is comprehensively covered in other chapters such as those on buildings, transport and manufacturing.