Executive Summary

01 GLOBAL OVERVIEW

Despite the impacts of the COVID-19 pandemic, renewable energy set a record in new power capacity in 2020 and was the only source of electricity generation to register a net increase in total capacity. Investment in renewable power capacity rose, although slightly, for the third consecutive year, and corporations continued to break records for sourcing renewable electricity. More countries shifted towards renewables for the electrification of heat. Although production of transport biofuels declined, electric vehicle (EV) sales expanded, as did the linking of EVs and renewable power, although to a lesser extent. China was among the countries that strengthened their commitments to action on the climate crisis, setting a carbon-neutral target. The United States re-joined the Paris Agreement in early 2021.

Meanwhile, previous obstacles to progress in the renewable energy sector persisted during 2020. They include the slow increase in the share of renewables in total final energy consumption (TFEC), inadequate innovation in some sectors, the need for infrastructure development, the lack of affordability in some markets, the absence of sufficient policy and enforcement, and ongoing support for fossil fuels.

For the first time, the number of countries with renewable energy support policies did not increase from the previous year. Despite greater interest in net zero targets during 2020, these targets do not necessarily cover all greenhouse gases or sectors, nor do they necessarily lead to increased attention to renewables or to success in meeting renewable energy targets. While such targets are in place in nearly all countries, many countries were not on track to achieve their 2020 targets in multiple sectors, and many had not yet set new targets as their 2020 targets expired. In addition, investments in fossil fuels outlined in COVID-19 recovery packages worldwide were six times greater than the level of investments allocated to renewable energy.

As in past years, the highest share of renewable energy use was in the electricity sector (26% renewables); however, electrical end-uses accounted for only 17% of total final energy consumption. The transport sector, meanwhile, accounted for an estimated 32% of TFEC and had the lowest share of renewables (3.3%). The remaining thermal energy uses, which include space and water heating, space cooling, and industrial process heat, represented more than half (51%) of TFEC; of this, renewables supplied some 11%.

As of 2019, modern renewable energy (excluding the traditional use of biomass) accounted for an estimated 11.2% of TFEC, up from 8.7% a decade earlier. Despite tremendous growth in some renewable energy sectors, the share of renewables has increased only moderately each year. This is due to rising global energy demand, continuing consumption of and investment in new fossil fuels, and declining traditional use of biomass (which has led to a shift towards fossil fuels).

This slow progress points to the complementary and fundamental roles of energy conservation, energy efficiency and renewables in reducing the contribution of fossil fuels to meeting global energy needs and reducing emissions. With the concentration of carbon dioxide (CO2) in the atmosphere still rising to record levels even as emissions have fallen, it has become increasingly clear that a structural shift is needed to reach long-term climate targets.

BUILDINGS

Renewable energy meets a growing portion of final energy demand in buildings, although its share is still less than 15%.

Renewables remained the fastest growing source of energy in buildings, increasing 4.1% annually on average between 2009 and 2019. The highest growth was in electricity use, whereas heating with renewable energy rose more slowly. Modern bioenergy (such as the use of wood-based fuel in efficient stoves) still represented the largest source of renewables in the buildings sector, especially in providing heat, although its growth has been roughly stagnant..

The use of renewable electricity for heat (for example, through electric heat pumps) provided the second largest renewable energy contribution to heat demand and showed the greatest growth in recent years. Solar thermal heat, geothermal heat and district energy networks also have grown quickly, albeit starting from a smaller base. Policies to stimulate renewable energy uptake in buildings remain relatively scarce, although many options exist to improve efficiency in new and existing buildings, expand access to electricity and clean cooking, and encourage the use of renewables.

INDUSTRY

The share of renewables in industrial energy demand remains small, particularly in sectors that require high temperatures for processing.

Renewable energy accounts for only around 14.8% of total industrial energy demand and is used mainly in industries with low-temperature requirements for process heat. In heavy industries – iron and steel, cement, and chemicals – renewables accounted for less than 1% of the combined energy demand in 2018.

Bioenergy (mainly biomass) supplies around 90% of renewable heat in the industrial sector, primarily in industries where biomass waste and residues are produced on-site. Renewable electricity accounts for the second largest share (10%) of renewable industrial heat, although it represented only 1% of total industrial heat consumption in 2019. Solar thermal and geothermal technologies accounted for less than 0.05% of total final industrial energy use in 2018.

The COVID-19 pandemic temporarily reduced industrial energy demand, with global bioenergy use in industry falling 4% in 2020. Measures to promote the uptake of renewables in industries received limited attention in COVID-19 stimulus packages, although some countries announced renewable hydrogen strategies or investment plans to support industrial decarbonisation. By the end of 2020, only 32 countries had at least one renewable heating and cooling policy for industry (all of them economic incentives, such as subsidies, grants, tax credits or loan schemes).

TRANSPORT

After falling initially, transport energy demand rebounded by the end of the year. Trends show rising demand and a stagnant share of renewable energy.

The COVID-19 pandemic had significant impacts on the transport sector and its use of renewable energy. Transport activity and energy demand fell sharply in the early months of 2020 but rebounded by year’s end. Longer-term trends have shown that growth in energy demand for transport has far outpaced that for other sectors.

Transport remains the sector with the lowest share of renewables, as oil and petroleum products (and 0.8% non-renewable electricity) continue to meet nearly all global transport energy needs (95.8%). Biofuels and renewable electricity met small shares of those needs (3.1% and 0.3%, respectively). Following a decade of steady growth, biofuel production decreased in 2020 due to the overall decline in transport energy demand, while electric car sales increased 41% during the year. The use of or investment in renewable hydrogen and synthetic fuels for transport increased in some regions but remained relatively minimal.

Overall, the transport sector is not on track to meet global climate targets. Many countries still lack a holistic strategy for decarbonising transport. Such a strategy could greatly decrease energy demand in the sector and thus allow for the renewable share in transport to increase.

POWER

Driven by solar photovoltaic (PV) and wind power, the renewable power sector surged in the second half of 2020 to overcome the pandemic’s impacts.

Installed renewable power capacity grew by more than 256 gigawatts (GW) during the pandemic, the largest ever increase. Continuing a trend dating back to 2012, net additions of renewable power generation capacity outpaced net installations of both fossil fuel and nuclear power capacity combined. China again led the world in renewable capacity added, accounting for nearly half of all installations in 2020 and leading the global markets for concentrating solar thermal power (CSP), hydropower, solar PV and wind power.

China added nearly 117 GW, bringing online more renewable capacity in 2020 than the entire world did in 2013 and almost doubling its additions from 2019. By the end of 2020, at least 19 countries had more than 10 GW of non-hydropower renewable capacity, up from 5 countries in 2010. Renewable energy reached a record share – an estimated 29% – of the global electricity mix. Despite these advances, renewable electricity continued to face challenges in achieving a larger share of global electricity generation, due in part to persistent investment in fossil fuel (and nuclear) power capacity.

02 POLICY LANDSCAPE

Despite the COVID-19 crisis, policy support for renewables generally remained strong throughout 2020.

By the end of 2020, nearly all countries had in place renewable energy support policies, although with varying degrees of ambition. Corporate commitments to renewable energy also increased during the year, led by market-based drivers such as action on climate change and the declining costs of renewable electricity.

While the suite of renewable energy policies implemented during the year was affected in part by the COVID-19 pandemic, it also evolved in response to increased action on climate change, falling costs of renewables, evolving network and system integration demands, and the changing needs and realities of different jurisdictions.

RENEWABLE ENERGY AND CLIMATE CHANGE POLICY

2020 was an important year for climate change policy commitments.

Although the COVID-19 crisis was the central political focus of the year, commitments to climate change mitigation stood out. Overall, 2020 was an important milestone for climate change policy, as many countries’ greenhouse gas targets for the year expired. Countries set new targets, and many committed to carbon neutrality.

While some jurisdictions enacted climate change policies that indirectly stimulate the uptake of renewable energy, a growing number adopted comprehensive policies directly linking decarbonisation with increased deployment of renewables. Policy mechanisms implemented in 2020 that can indirectly stimulate interest in renewable energy included fossil fuel bans and phase-outs, greenhouse gas emission reduction targets, and carbon pricing and emission trading systems. In addition, at least six regional, national and state/provincial governments adopted comprehensive, cross-sectoral climate policies that include direct support for renewables.

HEATING AND COOLING IN BUILDINGS

Despite the enormous potential for renewable energy in heating and cooling, policy developments in heating and cooling for buildings in 2020 remained limited, outstripped by policies aimed at electricity generation and transport.

Financial incentives were the most common mechanism used to encourage renewable heating and cooling in buildings in 2020. All such policies enacted or revised during the year were in Europe.

Evidence also points to growing interest in electrification of heating and cooling, which can increase the penetration of renewables in the buildings sector if the electricity used is generated from renewable sources. In 2020, policy makers in a number of national and sub-national jurisdictions focused rising attention on policies targeting building heating and cooling electrification. Energy efficiency policies also received international attention.

INDUSTRY

Policy developments related to increasing the share of renewables in industry remained scarce in 2020, compared with policies directed at all other end-use sectors.

Although renewable energy solutions for industrial uses are available, they are not yet competitive with fossil fuels, and policy support remains critical for increasing renewables in this sector. However, such support remained rare in 2020. By year’s end, only 32 countries had some form of renewable heating and cooling policy for industry (no change from 2019), with financial incentives being the most common form of policy support.

TRANSPORT

Decision makers are focusing increasingly on expanding the use of renewables in the transport sector, with an emphasis on transport electrification.

Although biofuels continue to be a central component of road transport policy frameworks, the electrification of transport received much of the attention in 2020. Policies aimed at transport electrification are not renewable energy policies in and of themselves, but they offer the potential for greater penetration of renewable electricity in the sector, to the extent that the electricity used for charging vehicles is generated from renewable sources.

As in past years, policy makers focused most of their attention on road transport. EV policies became increasingly popular in 2020, although the vast majority of these continued to lack a direct link to renewable electricity generation. However, the number of countries with EV policies that do have a direct link to renewables increased from two to three during the year.

Rail, aviation and shipping still receive much less policy attention than road transport, even though they are the fastest growing transport sub-sectors and account for a rising share of total final energy use in transport.

POWER

As in previous years, the power (electricity generation) sector continued to receive significant renewable energy policy attention in 2020.

The power sector continued to receive the bulk of renewable energy policy attention in 2020, as in previous years. Targets were the most popular form of intervention: by the end of 2020, 137 countries had some form of renewable electricity target, compared with 166 in 2019.

Although feed-in policies remain a widely used policy mechanism for supporting renewable power, in 2020 the shift continued from feed-in policies (set administratively) to competitive remuneration through tenders and auctions. Despite the continued popularity of net metering policies, some jurisdictions began transitioning away from net metering or modified their programmes to charge customers fees for participating.

Financial incentives, while always an important policy tool, were especially important for the power sector in 2020 as a result of the COVID-19 pandemic.

SYSTEMS INTEGRATION OF VARIABLE RENEWABLE ELECTRICITY (VRE)

Many jurisdictions with relatively high shares of renewables are implementing policies designed to ensure the successful integration of VRE into the broader energy system.

The policy push for systems integration of renewables and enabling technologies, such as energy storage, focuses primarily on increasing power system flexibility and control, as well as grid resilience. Policies to advance the integration of VRE focused on market design, improving electricity transmission and distribution system infrastructure, and supporting the deployment of energy storage.

03 MARKET AND INDUSTRY TRENDS

BIOENERGY

Modern bioenergy provided 5.1% of total global final energy demand in 2019, accounting for around half of all renewable energy in final energy consumption.

Modern bioenergy provided 9.5% of the heat required in industry and agriculture in 2019, an increase of around 16% since 2009. Bioenergy also provided 5% of the heat needed for buildings, with this use up 7% over the decade.

Biofuels – mostly ethanol and biodiesel – provide around 3% of transport energy. In 2020, global biofuel production fell 5% due to the impacts of the COVID-19 pandemic on overall transport energy demand. Ethanol production declined around 8%, with an 11% drop in production in the United States, the major producer. Global biodiesel production increased slightly to meet higher blending levels in Indonesia (the world’s largest biodiesel producer) and in Brazil, as well as higher demand in the United States.

In the electricity sector, bioenergy’s contribution rose 6% in 2020, reaching 602 terawatt-hours (TWh). China remained the largest generator of bio-electricity, followed by the United States and Brazil.

The most notable industry trend was rising investment in hydrotreated vegetable oil (HVO), with a 12% increase in production in 2020. Plans were announced for many additional plants, which could more than quadruple current capacity. HVO production would then exceed that of FAME (fatty acid methyl ester) biodiesel.

GEOTHERMAL POWER AND HEAT

Geothermal electricity generation totalled around 97 TWh in 2020, while direct use of geothermal heat reached about 128 TWh (462 petajoules).

An estimated 0.1 GW of new geothermal power generating capacity came online in 2020, bringing the global total to around 14.1 GW. The year saw relatively little growth in capacity compared to recent years (attributed in part to pandemic-related disruption), with almost all new facilities located in Turkey. The United States and Japan added minor amounts of geothermal power capacity in 2020.

Direct use of geothermal energy for thermal (heat) applications is highly concentrated geographically, with only four countries – China, Turkey, Iceland and Japan – accounting for three-quarters of the energy consumed. Direct use has grown at an average rate of nearly 8% in recent years, with space heating being the primary driver. Some of the most active markets lack access to high-temperature resources and often face higher costs and greater technical challenges to accessing geothermal heat. Countries with noteworthy activity in 2020 included France, Germany and the Netherlands.

The geothermal industry was characterised by project delays and by meagre and highly concentrated market growth. The main focus continued to be on technological innovation, such as new resource recovery techniques and seismic risk mitigation, with the aim of improving the economics, lowering the development risk and strengthening prospects for expanded resource development. However, as in past years, the hopes of expanding geothermal development beyond the relatively few and concentrated centres of existing activity remained largely unmet. High costs and project risks have continued to deter investment in most places, especially in the absence of government support (such as feed-in tariffs and risk mitigation funds), although certain pockets of innovation attracted new investment from established entities in the energy industry.

HYDROPOWER

The global hydropower market grew in 2020, but China was responsible for more than half of capacity additions.

Despite a 24% increase in capacity additions, driven mainly by China, the global hydropower market did not recover in 2020 after several years of deceleration. The effects of the COVID-19 pandemic were notable, with the market slowing as construction was halted temporarily, component supply chains were disrupted, and energy demand fell. New capacity was an estimated 19.4 GW, raising the total global installed capacity to around 1,170 GW. Global hydropower generation increased 1.5% in 2020 to reach an estimated 4,370 TWh, representing around 16.8% of the world’s total electricity generation.

China added 12.6 GW of hydropower capacity in 2020, its largest addition of the previous five years, and regained the lead from Brazil in commissioning new hydropower capacity, followed by Turkey, India and Angola. Pumped storage capacity increased slightly (up 1.5 GW, or 0.9%), with projects in China and Israel, bringing total capacity to 160 GW. Several large pumped storage projects were in the pipeline, including in Australia, Greece, India, Portugal, Scotland and Turkey, in part to support growth in solar PV and wind power.

The hydropower industry continued to face challenges as well as opportunities, with both of these affected by the pandemic-induced recession. Challenges included operational and technical factors, environmental and social acceptability, a global decline in wholesale electricity prices, and adverse climate impacts on hydropower production and infrastructure. Opportunities for industry expansion included technology improvements and increased performance, the remaining untapped potential of smaller resources, synergies with VRE, and increased needs for grid flexibility.

OCEAN POWER

Ocean power represented the smallest portion of the renewable energy market, yet new targets for ocean power capacity were set during the year.

Ocean power represents the smallest portion of the renewable energy market, with most projects focused on relatively small-scale demonstration and pilot projects of less than 1 megawatt (MW). Net additions in 2020 totalled around 2 MW, with an estimated 527 MW of operating capacity at year’s end. Ocean power technologies are steadily advancing towards commercialisation, and tidal turbines continued to demonstrate their reliability. However, consistent policy and revenue support remain critical.

Development activity is concentrated primarily in Europe, and particularly off the coast of Scotland, but has increased steadily in China, the United States and Canada. The resource potential of ocean energy is enormous, but it remains largely untapped despite decades of development efforts.

The ocean power industry experienced delays of planned deployments due to COVID-19, and developers redirected their focus to device and project development. Operational tidal turbines continued to generate power reliably and to move towards commercialisation. Across the sector, financial and other support from governments, particularly in Europe and North America, continued to boost private investments in ocean power technologies, especially tidal stream and wave power devices.

SOLAR PHOTOVOLTAICS (PV)

Solar PV had another record-breaking year, adding as much as an estimated 139 GW, for an estimated total of 760 GW.

Pending policy changes drove much of the growth in the top three markets – China, the United States and Vietnam – but several other countries saw noteworthy expansion.

Favourable economics have boosted interest in distributed rooftop solar PV systems. In 2020, growth in this market share was due mainly to a rush of installations in Vietnam in advance of the expiry of the country’s feed-in tariff; however, Australia, Germany and the United States also saw significant increases as homeowners invested in home improvements during the pandemic.

South Australia achieved one of the world’s highest levels of solar penetration in 2020. The state’s power system has become the world’s first large-scale system to approach the point at which rooftop solar PV effectively eliminates demand for electricity from the grid.

The solar PV industry rode a roller coaster in 2020, driven largely by pandemic-related disruptions, as well as by accidents at polysilicon facilities in China and a shortage of solar glass. These disruptions, due in large part to heavy reliance on China as the world’s dominant producer, combined with concerns about possible forced labour in polysilicon production, led to calls in many countries for the creation of local supply chains.

Despite the multiple challenges, new actors entered the sector. Competition and price pressures continued to motivate investment to improve efficiencies, reduce costs and improve margins.

The solar PV industry has become the major driver of growth in polysilicon production and accounts for a rising share of demand for other resources and materials, such as glass and silver. In most countries, recycling panels at the end of their useful life – as a means to reclaim these resources and minimise associated environmental impacts – is only starting to gain attention.

CONCENTRATING SOLAR THERMAL POWER (CSP)

Despite declining costs, CSP capacity grew in only one country during 2020.

Global CSP capacity grew a mere 1.6% in 2020 to 6.2 GW, with a single 100 MW parabolic trough project coming online in China. This was the lowest annual market growth in over a decade, the result of increasing cost competition from solar PV, the expiry of CSP incentive programmes and a range of operational issues at existing facilities.

More than 1 GW of CSP projects was under construction in the United Arab Emirates, China, Chile and India during the year. The majority of this capacity is based on parabolic trough technology and is being built in parallel with thermal energy storage (TES). At year’s end, an estimated 21 gigawatt-hours of thermal energy storage was operating in conjunction with CSP plants across five continents. Global TES capacity, installed mainly alongside CSP, is almost double that of utility-scale battery storage.

During the 2010s, CSP costs fell nearly 50%, the largest decline for all renewable energy technologies, with the exception of solar PV. In many cases, CSP plants are being retrofitted with TES or co-located with solar PV capacity to lower costs and increase capacity values.

SOLAR THERMAL HEATING

An estimated 25.2 gigawatts-thermal (GWth ) of new solar thermal capacity was added in 2020, increasing the global total 5% to around 501 GWth .

China again led in new solar thermal installations, followed by Turkey, India, Brazil and the United States. Most large solar thermal markets were constrained by COVID-19-related challenges, and in some cases commercial clients postponed investment decisions. However, the reduction was smaller than expected due to stabilising factors such as ongoing business in the construction sector and higher demand from residential owners, many of whom spent more time at home and invested in infrastructure improvements.

The year was bright for solar district heating in China and Germany, thanks to policy support for green heating technologies. The global solar district heating market also diversified into new markets in Europe (Croatia, Kosovo and Serbia) and Asia (Mongolia). In addition, central solar hot water systems for large residential and commercial buildings sold well in China, Brazil and Turkey. By year’s end, at least 471 solar district heating or central hot water systems (at least 350 kilowatts-thermal) were operating worldwide, totalling 1.8 GWth of capacity.

Hybrid, or solar PV-thermal (PV-T), collectors became more popular in several countries. In total, 36 manufacturers worldwide reported PV-T capacity of at least 60.5 megawatts-thermal (MWth) (connected to 24 MW-electric), up sharply from 46.6 MWth in 2019.

More collector manufacturers and project developers began offering solar industrial heat (SHIP) solutions to factories worldwide. At least 74 SHIP systems, totalling 92 MWth, started operation globally in 2020, raising the number of facilities in operation 9% to around 891 SHIP plants. Although many technology suppliers reported delays in installation and construction, some megawatt-scale plants were successfully commissioned during the year, including Europe’s largest (10.5 MWth), used to heat agricultural greenhouses.

WIND POWER

The wind power market achieved a record-breaking 93 GW of new installations, bringing total capacity onshore and offshore to nearly 743 GW.

China and the United States led the growth in wind power with record years, driven by pending policy changes at the end of 2020 in both countries. Several other countries also reached installation records, while the rest of the world installed about the same amount as in 2019. Wind power accounted for a substantial share of electricity generation in several countries in 2020, including Denmark (over 58%), Uruguay (40.4%), Ireland (38%) and the United Kingdom (24.2%).

Nearly 6.1 GW of capacity was connected offshore for a global total of 35.3 GW. Interest in offshore wind power is increasing – including among corporations looking to sign power purchase agreements (PPAs) – due to the large scale of generation, high capacity factors, fairly uniform generation profiles and falling costs.

The wind industry continued to face perennial challenges that were exacerbated by the pandemic. Despite selling more turbines, even top manufacturers suffered losses for the year, closed factories and laid off workers as the highly competitive market, together with pandemic-related costs and delays, squeezed profit margins further.

In some markets, governments responded by extending policy deadlines, and new policy commitments helped stimulate record investments. For the first time, global capital expenditures committed to offshore wind power during the year surpassed investments in offshore oil and gas.

To diversify in key markets, turbine manufacturers and project developers continued expanding into new sectors, even as new actors – including oil majors – moved further into the wind sector. Manufacturers focused on technology innovation to continuously reduce costs and achieve an ever lower levelised cost of energy. In addition, they expanded their work with other researchers to increase wind turbine sustainability during production and at the end of useful life.

04 DISTRIBUTED RENEWABLES FOR ENERGY ACCESS (DREA)

Distributed renewables have continued to enable energy access, reaching electricity generation shares as high as 10% in some countries.

By the end of 2019, 90% of the global population had gained access to electricity, although one-third (2.6 billion people) still lack access to clean cooking, relying on mostly traditional use of biomass. Renewables-based electric power systems and clean cooking solutions have played an increasingly important role in improving energy access rates, especially in rural and remote areas where such access remains low. Stand-alone solar systems and renewables-based mini-grids are often the most cost-effective way of electrifying off-grid areas in the developing world, providing power for households and productive uses. Options that help reduce the health and environmental impacts of the traditional use of biomass include improved biomass stoves and fuels, biogas, ethanol, solar cookers and, increasingly, renewables-based electric cooking.

After several years of strong growth, the market for renewables-based energy access systems was negatively impacted by the COVID-19 pandemic. Global sales of off-grid solar systems fell 22% in 2020, with the greatest regional decline in South Asia (51%), while sales in East Africa, the largest market, dipped 10%. Despite the drop in sales, financing for off-grid solar companies increased slightly by 1%. While equity funding fell significantly, debt and grant funding increased.

Although many planned renewables-based mini-grid projects were delayed due to the pandemic, new solar mini-grids were commissioned in several countries specifically to power healthcare facilities as an emergency response to the crisis. By late 2020, new financing deals were signed for several larger mini-grid developments across Africa.

The clean cooking sector has seen less funding and private sector involvement than the electricity access sector. However, funding for the 25 largest clean cooking companies increased 68% in 2019, to USD 70 million. In 2020, several new large-scale funding initiatives were announced for clean cooking in Africa, where the clean cooking deficit remains the largest. Policy makers in several countries also have focused on clean cooking, setting new targets and developing financial support packages.

05 INVESTMENT FLOWS

Global investment in renewable energy capacity increased 2% in 2020, resisting the COVID-19-induced economic crisis.

Global new investment in renewable power and fuels (not including hydropower projects larger than 50 MW) totalled USD 303.5 billion in 2020. Developing and emerging economies surpassed developed countries in renewable energy capacity investment for the sixth year running, reaching USD 153.4 billion (a smaller margin than in previous years). Investments for the year rose 13% in developed countries and fell 7% in developing and emerging countries.

Investment in renewables continued to focus on wind and solar power, with solar representing nearly half of global renewable energy investment in 2020, at USD 148.6 billion (up 12%). Investments fell in all renewable technologies except solar power, with wind power falling 6% to USD 142.7 billion (47% of the total). The remaining technologies continued their downward trend, with investment in small hydropower falling to USD 0.9 billion, geothermal to USD 0.7 billion and biofuels to USD 0.6 billion.

COVID-19 economic recovery packages included significant spending to stimulate further investment in renewables. Around 7% of the USD 732.5 billion total announced by 31 governments to support all types of energy was allocated directly to policies favouring the production or consumption of renewables. However, renewable energy investments outlined in recovery packages were still only around one-sixth the level of investments allocated to fossil fuels.

Energy projects represented nearly 60% of all climate finance in 2017 and 2018, averaging USD 337 billion. Climate finance flows from developed to developing countries reached USD 78.9 billion in 2018, of which USD 12.5 billion was allocated to projects targeting energy generation from renewable sources. Multilateral climate funds and multilateral development banks play an important role in providing direct support to developing countries, while climate finance instruments, such as green bonds, hit record levels for a second consecutive year, up 1.1% in 2020 to USD 269.5 billion.

The divestment movement continued its upward trend in 2020, with more than 1,300 institutional investors and institutions worth nearly USD 15 trillion committing to divesting partially or fully from fossil fuel-related assets. Investors increasingly have aligned their portfolios with the emission reduction goals of the Paris Agreement. However, investment in fossil fuel-related companies also has grown, and it is difficult to establish a direct link between divesting from fossil fuels and investing in renewables.

06 SYSTEMS INTEGRATION AND ENABLING TECHNOLOGIES

Wind and solar reached record levels in the electricity mix in 2020, while sales of heat pumps, electric vehicles and energy storage grew strongly despite the COVID-19 pandemic.

In the power sector, the installed capacity and penetration of variable renewable electricity sources – mainly solar PV and wind power – have grown rapidly in many countries. Several power systems reached record-high shares of instantaneous VRE in 2020 due to lower costs of these renewable technologies and to the effects of COVID-19 containment measures on electricity markets.

The wider digitalisation of transmission and distribution grids continued, as did growth in “behind-the-meter” systems. In addition, electricity markets were adapted during 2020 to allow for the participation of ancillary services from wind, solar and battery storage. Flexibility services were procured increasingly from VRE power plants, flexible sources of demand and virtual power plants.

Grid infrastructure constraints have become a significant bottleneck for the integration of renewables in several locations. Large transmission projects also have faced regulatory hurdles. Despite this, major projects were advanced in 2020, driven by demand for grid capacity from VRE generators.

In contrast to the power sector, shares of renewables in global transport and heating systems remained low in 2020. Integration of renewable energy into road-based transport was advanced mainly through vehicle electrification, while heat pumps offer untapped potential to enable the use of renewables in the heating and cooling sector. Along with energy storage, the enabling technologies of heat pumps and EVs support the integration of renewables and contribute to greater flexibility in power systems. Sales of all three technologies increased in 2020, despite the onset of the COVID-19 pandemic.

In 2020, heat pump uptake slowed in the Asia-Pacific region, while it continued to increase in North America and Europe. The heat pump industry was characterised by company acquisitions, techno-logical developments in refrigerants that have low global warming potential, and the emergence of new solutions integrating heat pumps with other energy devices.

While global car sales decreased in 2020, sales of electric cars (including both battery electric vehicles and plug-in hybrids) resisted the COVID-19-induced downturn with nearly 3 million units sold, up 41% from 2019. The share of electric cars in new car sales worldwide reached 4.6% in 2020, surpassing the 2019 record of 2.7%. Meanwhile, around one-third of the two- and three-wheelers sold were electric, nearly all of them in China. Notable activity in the EV industry during the year included significant reductions in battery costs and automakers’ announcements that they would shift, partially or fully, to electric production.

The global market for energy storage of all types reached 191.1 GW in 2020. Mechanical storage in the form of pumped hydropower accounted for the vast majority of this capacity, followed by roughly 14.2 GW of electro-mechanical and electro-chemical storage, and around 2.9 GW of thermal energy storage. The energy storage industry saw significant cost reductions, innovation in battery technologies and increased collaboration in the production of renewable hydrogen.

07 ENERGY EFFICIENCY, Renewables and Decarbonisation

Integrating renewable energy deployment and energy efficiency measures remains crucial for decarbonising end-use sectors and the energy system as a whole.

Renewable energy and energy efficiency have long been known to provide multiple benefits to society, such as lowering energy costs, improving air quality and public health, and boosting jobs and economic growth. Increasingly, renewables and efficiency are viewed as crucial to reduce carbon emissions. Energy production and use account for more than two-thirds of global greenhouse gas emissions. Together, renewables and energy efficiency have made significant contributions to limiting the rise in CO2 emissions.

Trends in carbon intensity – measured as energy-based CO2 emissions per unit of gross domestic product (GDP) – help to better understand the full impact of both energy efficiency and renewables on the transition to more efficient and cleaner energy production and use. Unlike overall emissions, the carbon intensity of GDP reflects technical or structural improvements in various sectors.

Between 2013 and 2018, global energy-related CO2 emissions grew 1.9%, to nearly 38 gigatonnes. The increase occurred during a period of economic growth – global GDP grew 23% during the five-year period – but was slowed by improvements in the overall carbon intensity of GDP. These improvements were due in part to increased renewable electricity production and, to a greater extent, to improved energy efficiency; this occurred despite an overall decline in energy efficiency improvements that began in 2015 and that was reinforced by the COVID-19 crisis and low energy prices.

Some measures that apply to end-use sectors – such as building energy codes and the deployment of distributed renewables, heat pumps, and technologies for electrification – impact carbon intensity as they can have both an energy efficiency and a renewable energy component. Other energy efficiency measures can play a role in each sector, including digitalisation in the buildings and industry sectors, and vehicle fuels and emission standards in the transport sector. In 2020, the COVID-19 pandemic impacted the energy efficiency of all end-use sectors.

08 FEATURE: BUSINESS DEMAND FOR RENEWABLES

Businesses are increasing their uptake of renewable energy across power, heating and cooling, and transport needs. Company membership in business coalitions promoting renewable energy procurement surged across all sectors.

Several factors incentivise business demand for renewables. Government policy continues to play a key role, but company-level factors also are becoming prominent. Environmental and ethical considerations encourage companies to adopt renewable energy as part of their broader sustainability or emission reduction goals. Renewables also are increasingly associated with lower costs and a variety of risk mitigation opportunities, thereby driving business demand. Surging membership in coalitions, such as RE100 and EV100, that promote business demand for renewables is also driving corporate uptake.

Businesses source their electricity from renewables in multiple ways, including by generating it themselves (either on- or off-site); procuring it from utilities through direct billing; purchasing environmental attribute certificates from energy suppliers; and signing long-term power purchase agreements with producers. Despite a challenging business year, the new renewable energy capacity that businesses sourced through PPAs increased 18% in 2020, across nearly all regions. North America accounted for the majority of the new capacity procured, and Amazon was the leading corporate power purchaser. Policies to enable cross-border PPAs were under development in Europe. In the Asia-Pacific region, ongoing challenges to corporate sourcing included regulatory and market barriers and limited or no availability of corporate sourcing mechanisms.

Corporations meet their needs for low-temperature thermal energy through renewables-based electrification, renewable gases, procurement of renewable district heat, and the direct use of geothermal heat, solar thermal heat and modern bioenergy. By the end of 2020, nearly 900 solar thermal systems were supplying industrial process heat, with new projects concentrated in China, Mexico and Germany. In most cases, corporations produce and consume on-site the energy they need for heating and cooling, rather than sourcing it from elsewhere.

Corporations in energy-intensive industrial sectors – such as iron and steel, cement, and chemicals production – use smaller shares of renewables to meet their energy needs. Still, interest in renewable energy procurement in these sectors has grown, and business coalitions emerged on both the demand and supply sides in 2020.

Businesses source renewable energy for their transport needs mainly from biofuels, renewables-based electricity, and renewable hydrogen across the road, rail, maritime and aviation sectors. Electrification of fleet vehicles has become increasingly popular, especially among companies operating in the more than 300 zero-emission zones in cities worldwide. However, the COVID-19 pandemic contributed to a 20% drop in sales and investment in hydrogen-powered transport in 2020, as the demand for hydrogen fuel cell buses fell.

Declining costs have made biofuels an increasingly viable option for corporate procurement in maritime shipping, although their use in this sector is marginal. Interest in renewable hydrogen and ammonia also increased in the maritime transport sector. In 2020, several aviation companies committed to sourcing more-sustainable aviation fuels, while others showed interest in developing electric and hydrogen aircraft.