IEA: policy uncertainty to impact on pace of renewable investment

The amount of money invested in renewables could decrease in the years ahead because of policy uncertainty, the International Energy Agency (IEA) has warned in a new report.

Through to 2020, the IEA estimates that investment in new renewable power capacity will average around $230 billion (£138bn) annually, lower than the $250 billion (£150bn) invested in 2013. The slide is linked to the cost of some technologies falling and policy and market risks that are threatening deployment momentum.

For example, in the EU it noted that uncertainties remain over the precise nature of the post-2020 renewable policy framework. As a result, investors face doubts that could stop them from putting their money into renewables.

Maria van der Hoeven, IEA executive director, commented, “Renewables are a necessary part of energy security. However, just when they are becoming a cost competitive option in an increasing number of cases, policy and regulatory uncertainty is rising in some key markets.

“This stems from concerns about the costs of deploying renewables.”

She continued that governments must distinguish more clearly between “the past, present and future” as costs are falling over time and many renewables no longer need high incentive levels but a market context that assures a “reasonable and predictable return for investors”.

“This calls for a serious reflection on market design needed to achieve a more sustainable world energy mix,” Hoeven added.

Policy uncertainty has impacted on investment in renewables in the UK. In November last year, consultancy firm Ernest & Young warned that “political point scoring” could place investment in the sector at risk. This concern was reflected in the UK falling to sixth place on the company’s renewable energy Country Attractiveness Index in June.

Despite the poor outlook, the IEA report also demonstrated that clean energy sources are becoming a vital and significant part of the energy mix, with 22% of total power generation coming from renewable sources.

Photo: Mike Weston via Flickr 

Further reading:

Policy uncertainty risks required £375bn of infrastructure investment

Reform and uncertainty sees UK slip down EY renewables investment index

£4bn wind farm shelved amid investment and policy uncertainty

DECC plans to scrap solar farm subsidy will ‘undermine investment’

EY: ‘political point scoring’ leaving UK renewables sector in state of uncertainty