Global deployment of renewable energy has increased significantly over the past decade, with new records being set each year and a growing number of countries committing to expanding the use of renewables and enabling technologies. (→ See Global Overview chapter.) Much of the advancement in renewables technology development and deployment has been achieved thanks to effective government policies, and policy continues to be important to overcome economic, technical and institutional barriers.1 By the end of 2019, nearly all countries worldwide had renewable energy support policies in place, although with varying degrees of ambition.2 (→See Figure 12. Table 3 and Reference Tables R3-R12.)
Figure 12
Note: Figure does not show all policy types in use. In many cases countries have enacted additional fiscal incentives or public finance mechanisms to support renewable energy. A country is considered to have a policy (and is counted a single time) when it has at least one national or state/provincial level policy in place. Power policies include feed-in tariffs (FITs) / feed-in premiums, tendering, net metering and renewable portfolio standards. Heating and cooling policies include solar heat obligations, technology-neutral renewable heat obligations and renewable heat FITs. Transport policies include biodiesel obligations/mandates, ethanol obligations/mandates and non-blend mandates. For more information, see Table 3 in this chapter and Reference Tables R3-R12.
Source: REN21 Policy Database.See endnote 2 for this chapter.
Policy support for renewable energy can be categorised as direct policy and indirect policy. Direct policies, such as mandates or financial incentives, explicitly target the increased deployment of renewables and enabling technologies, while indirect policies support effective operating conditions and the integration of renewables and enabling technologies into energy systems and markets. Although this chapter is focused on direct policy support, it also covers supporting policy for the specific end-use sectors of heating and cooling, transport and electricityi.
Policies and targets for
renewables in power
remain more ambitious and more numerous than those for other sectors.
The suite of renewable energy policies being deployed has evolved in response to changes in technologies and markets, as well as the evolving needs and realities of different jurisdictions. In more mature markets where large shares of renewables are installed, decision makers are adapting policy to support the technical and market integration of renewables and to address the impacts of large or rising shares of variable renewable electricity (VRE), including small-scale distributed generation. (→ See Systems Integration section in this chapter.) In less mature renewable energy markets and in some developing and emerging economies, policy remains focused on increasing renewable energy capacity and generation to meet basic energy demand, promote job creation and energy security, and provide increased access to modern energy services.3 (→ See Distributed Renewables chapter.)
Policies to advance renewable energy production and use can be targeted at any and all end-use sectors, including heating and cooling (in buildings and industry), transport and electricity. Renewable energy policy can exist across all levels of governance, including international and regional; national, state and provincial; and municipal governments. In jurisdictions with regulated power systems, national and sub-national public utility commissions (also called energy commissions or energy regulators) develop policies that apply to regulated utilities. Trade policy also has an impact on the production, exchange and development of renewable energy products, as well as renewable energy demand levels within specific countries.4 (→ See Sidebar 3.)
Sidebar 3. Trade Policy, Trade Agreements and Renewables
As a key defining feature of the globalising world economy, trade has greatly shaped the production, exchange and technological development of renewable energy products. It allows for the formation of larger and more competitive markets for these technologies, leading to greater availability and lower costs. Trade creates the conditions for more-efficient producers to expand and capture economies of scale, helping to make renewable energy products more affordable.
Although trade is often referred to as occurring between countries (such as between China and the United States), it is essentially an entrepreneurial activity organised by companies. Renewable energy companies look to foreign markets and suppliers as they scale up their operations and production. Supply chain trade has grown as companies have systemised their production across multiple countries, especially for multi-component goods such as wind turbines and solar panels. Many renewable energy products are made by an international division of labour organised by supply chain trade arrangements.
Governments (national and sub-national) and the World Trade Organization (WTO) set the rules for trade, including measures that restrict or promote international trade in renewable energy goods and services. For example, WTO regulations prohibit export subsidies that distort international market competition by giving “unfair” trade advantages to subsidy-receiving exporters. Governments also can apply trade “safeguard” or “remedy” measures against alleged unfair imports, or they can apply tariffs or other protectionist measures to defend domestic producers against foreign competition. Certain rules are trade-facilitating, including technical and environmental standards that enable renewable energy products exported from one location to be accepted and used in foreign locations.
The international trade environment has become more challenging. Protectionist measures have risen from just over 600 in January 2017 to more than 1,100 by the end of 2019. Rising or high-level protectionism restrains the growth in trade in renewable energy products. Meanwhile, many trade conflicts remain unresolved. For example, China, India and the Republic of Korea all have pending disputes with the United States at the WTO regarding trade remedy measures applied to their solar photovoltaic (PV) exports. Similar conflicts have arisen related to the wind industry and to rare earth materials used to manufacture renewable energy products.
Trade in renewable energy goods and services will be limited where production and exchange are inherently localised, for example for hydropower dams and tidal barrages, whose construction entails primarily the use of locally sourced bulk materials (such as cement). Ever taller wind turbines make international trade in large components such as towers, blades and nacelle casings less economic due to the transport costs of moving heavy bulk items. Offshore wind turbines in particular are produced near their installation sites, although often by foreign-investing firms.
Meanwhile, smaller-scale, multi-component and multi-material renewable energy technology products and fuels lend themselves to international supply chain trade. Bioenergy products such as wood pellets and ethanol are traded worldwide as bulk cargo. Cross-border trade in hydro-electricity (for example, in Southeast Asia) is also well established. However, the chronic lack of global-level data on renewable energy trade impedes analysis of wider trends.
Conventional trade policy measures generally affect renewable energy trade on the demand side. For example, the raising and lowering of import tariffs affect end prices that in turn determine demand levels. Domestic-level policy measures tend to affect renewable energy trade more on the supply side – typically industrial policies aimed at strengthening the trading capacity of home producers of renewable energy products. Many governments have used “local content requirements” to develop their solar and wind energy industries, mandating that domestic and foreign-investing producers source certain percentages of their materials and components locally. Rules of origin applied in free trade agreements can have similar trade-diverting effects, especially when they set high national content ratios for products to qualify for free trade treatment.
Environmental measures have been included in free trade agreements (FTAs) since the 1970s, when renewable energy trade focused mainly on promoting hydropower in developing countries. More recently, climate change has raised renewable energy’s profile and coverage in FTAs. Of the more than 300 agreements in force as of early 2020 (up from just 15 in 1990), around 50 had measures promoting renewable energy trade and development, although many are primarily aspirational soft law clauses calling on signatory countries to deepen their co-operation on renewables.
The WTO itself has no specific agreements or rules on renewable energy or climate action, and its interaction with the United Nations Framework Convention on Climate Change on trade remains extremely limited. Furthermore, the WTO’s grip on the global trade system has weakened. In the last two decades it has been FTAs that have set new innovative measures on renewable energy trade. In 2019, for example, Costa Rica, Fiji, Iceland, New Zealand and Norway launched talks for the Agreement on Climate Change, Trade and Sustainability (ACCTS), which could prove a landmark pact not just for promoting renewable energy trade and development, but for more effectively aligning trade with climate action efforts generally.
Source: See endnote 4 for this chapter.
iThis is a change from previous editions of this chapter, which discussed only direct policy support for renewable energy. Here, discussion of policy can include both binding legislation and regulation as well as government commitments to action, such as roadmaps, action plans, programmes and non-binding targets. In general, however, binding policy is given preference in the discussion.i