In its report – Renewable energy market update, outlook for 2020 and 2021 – International
Energy Agency (IEA) forecasts that additions of renewable electricity capacity will decline
by 13% in 2020 compared with 2019, the first downward trend since 2000. The update
reflects both possible delays in construction activity due to supply chain disruptions,
lockdown measures and socialdistancing guidelines, and emerging financing challenges. The
outlook also takes into account ongoing policy uncertainty and market developments such as
the most recent auctions and newly financed projects before the Covid-19 outbreak.
However, the majority of these delayed projects are expected to come online in 2021 and lead
to a rebound in capacity additions. As a result, 2021 is forecast to almost reach the level of
renewable capacity additions of 2019. Despite the rebound, the combined growth in 2020 and
2021 is almost 10% lower compared to the previous IEA forecast.

The highlights of Renewable energy market update are the following:
1. The Covid-19 crisis is hurting – but not halting – global growth in renewable power
capacity. The number of new renewable power installations worldwide is set to fall
this year as a result of the unprecedented Covid-19 crisis, marking the first annual
decline in 20 years. But, given supportive government policies, growth is expected to
resume next year as most of the delayed projects come online.

2. In 2021, renewables are expected to show their resilience – the majority of the
delayed projects are expected to come online, leading to a rebound in new
installations. As a result, next year is forecast to reach the same level of renewable
electricity capacity additions as in 2019. Despite the rebound, combined growth in
2020 and 2021 is almost 10% lower compared to the previous IEA forecast published
in October 2019.

3. Solar PV and wind account for 86% of global renewable capacity additions this year,
but their annual expansion is forecast to decline by 17% and 12% respectively
compared to 2019. The forecast expects utility-scale PV and wind to rebound as the
majority of projects in the pipeline are already financed and under construction.
However, forecast uncertainty remains for projects that were due to achieve financial
close in 2020 and become operational next year.

4. The impact of Covid-19 on renewable electricity technologies with long lead times,
such as hydropower, offshore wind and geothermal, remains limited. Hydropower
capacity additions are forecast to increase both in 2020 and 2021, driven by the
commissioning of two mega hydropower projects in China and supporting the
rebound of renewables next year. The forecast for offshore wind remains unchanged
as most projects are already financed and under construction.

5. The Covid-19 crisis has radically changed the global context for biofuels. Transport
biofuel production is anticipated to contract by 13% in 2020, the first decrease in output in two decades. Gasoline demand is forecast to fall by 9% in 2020 and diesel
demand by around 6%. This, in turn, limits biofuel consumption resulting from
mandate policies. Some of the impacts from the Covid-19 pandemic could be
temporary. If a rebound in transport fuel demand occurs in 2021, biofuel production
could return to 2019 levels. However, this would still be 5% lower than the output
anticipated in our forecast for 2021 prior to the Covid-19 crisis. Longerterm
implications for growth may arise from the suspension of new policy initiatives in
some countries due to low oil prices.

6. Renewable heat consumption is also likely to decline in 2020. The industrial sector is
expected to consume less renewable heat as lower commercial, industrial and
construction activity during lockdown results in a demand shock for most heat-
intensive industries. Moreover, current low oil and gas prices are affecting the cost-
competitiveness of renewable heat fuels and technologies: many planned investments
to switch from fossil fuel heating to renewable or electric solutions are likely to be
postponed or cancelled in the absence of stronger policies.

7. At the start of this year, renewables in several markets were already facing challenges
regarding financing, policy uncertainty and grid integration. Covid-19 is now
intensifying these concerns. However, governments have the opportunity to reverse
this trend by making investment in renewables a key part of stimulus packages
designed to reinvigorate their economies. This offers the prospect of harnessing the
structural benefits that increasingly affordable renewables can bring, including
opportunities for creating jobs and economic development, while reducing emissions
and fostering innovation.

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