The International Energy Agency said today that renewables surpassed coal last year to become the largest source of installed power capacity in the world.

The IEA said it has significantly increased its five-year growth forecast for renewables thanks to strong policy support in key countries and sharp cost reductions. Renewables have surpassed coal last year to become the largest source of installed power capacity in the world. The agency now believes that over the next five years, renewables will remain the fastest-growing source of electricity generation, with their share growing to 28% in 2021 from 23% in 2015.

The latest edition of the IEA’s Medium-Term Renewable Market Report now sees renewables growing 13% more between 2015 and 2021 than it did in last year’s forecast, due mostly to stronger policy backing in the United States, China, India and Mexico. Over the forecast period, costs are expected to drop by a quarter in solar PV and 15 percent for onshore wind.

The agency said that last year marked a turning point for renewables. Renewables represented more than half the new power capacity around the world, reaching a record 153 Gigawatt (GW), 15% more than the previous year. Most of these gains were driven by record-level wind additions of 66GW and solar PV additions of 49 GW.

“We are witnessing a transformation of global power markets led by renewables and, as is the case with other fields, the center of gravity for renewable growth is moving to emerging markets,” said Dr Fatih Birol, the IEA’s executive director.

The agency said there are still grounds for caution. It said: “Policy uncertainty persists in too many countries, slowing down the pace of investments. Rapid progress in variable renewables such as wind and solar PV is also exacerbating system integration issues in a number of markets; and the cost of financing remains a barrier in many developing countries. And finally, progress in renewable growth in the heat and transport sectors remains slow and needs significantly stronger policy efforts.”

The report said policy makers must to address three important challenges to deployment to put the world on a firmer path towards ambitious climate targets, while also improving air quality in key emerging markets. It recommended:

• Addressing infrastructure challenges and market design issues to improve grid integration of renewables.
• Implementing stable and sustainable policy frameworks that give greater revenue certainty to capital-intensive renewables and reducing policy uncertainties
• Developing policy mechanisms that reduce cost of financing and lower off-taker risks especially in developing countries and emerging economies

The IEA report said making these changes would boost renewable capacity growth by almost 30% in the next five years, leading to an annual market of around 200 GW by 2020.

“I am pleased to see that last year was one of records for renewables and that our projections for growth over the next five years are more optimistic,” said Dr. Birol. “However, even these higher expectations remain modest compared with the huge untapped potential of renewables. The IEA will be working with governments around the world to maximize the deployment of renewables in coming years.”

Read the full report: Medium-Term Renewable Energy Market Report 2016

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