Renewables Bulletin: Latin America and the Caribbean edition 

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Key points:

  • The Latin America and Caribbean (LAC) region is seeing progress in the shift to renewables. Over half of the annual capacity additions between 2020 and 2023 were wind and solar projects. The region now generates 19% of its electricity from these sources, surpassing the global average of 17.6%.
  • Nearly half of the 33 countries in LAC – including Brazil, Chile, Costa Rica and Colombia – have pledged to achieve net-zero emissions by 2050.
  • Compared with many other LAC countries, Venezuela has lagged behind in developing solar and wind resources to produce electricity, despite the inefficiency of its fossil fuel generation. However, this has shifted recently, with a commitment to build more renewables as a way of ensuring grid stability and reducing emissions.
  • As a region with a large amount of land classified as biodiversity hotspots, all renewable energy expansion needs to be undertaken within a safeguard framework to avoid negative environmental impacts or human rights violations.
  • The LAC region holds at least a third of the world’s lithium, copper, and silver reserves that are crucial to the energy transition. Investment over the last two decades has been concentrated in extraction, with less emphasis on developing local processing and manufacturing capacity.
  • There is a small but growing market for goods run on clean technologies: EVs account for over 6% of new passenger car sales in Latin America, an annual rise of 4 percentage points.
  • The dataset is curated to enable a country-level assessment of progress against the global effort to triple the world’s installed renewable energy capacity and double the average annual rate of energy efficiency improvements by 2030, targets at COP28.
  • Countries covered are Argentina, Bahamas, Barbados, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Jamaica, México,  Panamá, Perú, Uruguay and Venezuela.


Data you’ll find in this piece:

Fig. 1: Renewables share of LAC and global energy mix – 2025 update
Fig. 2: Renewable energy targets by 2030
Fig. 3: Installed capacity vs generation
Fig. 4: Electricity generation by fuel
Fig. 5: Wind and solar electricity generation (TWh)
Fig. 6: Map of planned and active renewable energy projects (solar, wind and bioenergy)
Fig. 7: Maps of renewable energy projects and biodiversity hotspots
Fig. 8: Energy intensity, 2017-2021
Fig. 9: Energy efficiency improvement rate
Fig. 10: Access to clean energy for cooking and deaths from household air pollution
Fig. 11: Renewable energy job creation

January 2026 update

First published in June 2025, the Latin America and Caribbean Renewables Bulletin has been updated to include the most recent data available on Venezuela. 

Just under half of the country’s capacity is hydroelectric, with most of the rest coming from fossil fuels. However, hydro supplies 78% of its electricity, with fossil fuels only providing 21.6%.

The country has lagged behind others in the region in developing wind and solar sources, but has recently started to shift towards more solar generation, partly as an attempt to improve electricity grid stability in the face of ‘chronic’ reliability issues.

While the 2023 data – the latest available from energy think tank Ember – shows wind and solar providing only 0.05 GW of capacity, by 2025 private market data reported it had risen to 18.67 GW and was expected to grow rapidly up to 2030.

Renewables development across Latin America and the Caribbean

The Latin America and Caribbean (LAC) region generated 19% of its electricity from wind and solar as of November 2025, surpassing the global average of 17.6%. Thanks to the historically large proportion of hydropower (43.7%) and the growing role of wind and solar in electricity generation, the region was responsible for only 5% of global cumulative energy-related greenhouse gas emissions as of 2023.

Fig. 1: Renewables share of LAC and global energy mix – 2025 update


The data presented here covers 15 countries from across LAC, with a wide profile of energy mixes and economic structures, ranging from fossil fuel-dependent economies to those with significant renewable energy (RE) investments. 

This selection ensures coverage of LAC’s major subregions (South, Central and North America and the Caribbean) and ecosystems, from the Amazon to the Andes to small island states. Note that, due to data limitations, only selected indicators are available for some countries.

Targets for renewable energy growth

Nearly half of the 33 countries in LAC – including Brazil, Chile, Costa Rica and Colombia – have pledged to achieve net-zero emissions by 2050. Meeting these targets will require a fourfold increase in the average annual investment in clean energy between 2026 and 2030 compared to the previous decade, according to the International Energy Agency (IEA). In the shorter term, 16 countries across the region have signed up to generate at least 80% of electricity from renewable sources by 2030, as part of the Renewables in Latin America and the Caribbean (RELAC) initiative.((The members of RELAC are: Barbados, Bolivia, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Nicaragua, Panama, Paraguay, Peru and Uruguay.)) 

However, as current policies lead to increased greenhouse gas emissions despite climate commitments requiring substantial reductions, there is a considerable implementation gap in the region. 

Specific targets for 2030 are shown in the table below. Comparing objectives is complicated by the various energy metrics used: 

  • Renewable energy (RE) is defined by the United Nations Sustainable Energy for All (SE4All) as “derived from natural processes that are replenished at a higher rate than they are consumed.” Sources include solar, wind, geothermal, hydro and biomass. 
  • Non-conventional renewable energy comprises a smaller grouping of intermittent sources, including wind, biomass, and solar, among others, used to complement other energy sources, enhancing diversification and energy security.
  • Clean energy refers to energy sources – such as solar, wind, hydropower, geothermal, and certain forms of bioenergy – that emit no greenhouse gases during operation. It can also include nuclear power. These sources are low-carbon or carbon-free alternatives to fossil fuels, but this does not mean they have zero impact on the environment.
Fig. 2: Renewable energy targets by 2030

Targeting generation growth is more impactful than capacity

While the global goal to triple renewable energy focuses on installed capacity – the maximum electricity that could theoretically be produced – what ultimately matters is generation: the actual electricity produced and delivered. Generation is what drives energy access, shapes supply, and reduces emissions. Boosting capacity is essential, but true progress depends on how effectively that capacity is turned into reliable renewable generation. 

The graph below shows capacity in gigawatts (GW) side-by-side with generation in terrawatt hours (TWh), providing a snapshot of how the selected countries are meeting their energy needs and diversifying their energy mix. The data shows the relative importance of sources like fossil fuels and hydro, with growing sources like solar and wind. It offers insights into each country’s progress towards the 2030 targets.

The graphs also reflect the availability of natural resources in each of the countries – those with fossil fuel resources have tended to rely mainly on them to provide electricity, while other countries have rich renewable resources, particularly hydro.

Fig. 3: Installed capacity and electricity generation, 2024


In the mix: Renewables growth can edge out fossil fuels

Although specific targets for increasing electricity generation capacity from renewable sources exist in LAC, ambitions related to the decarbonisation of the existing installed capacity are often limited.

The graphs below show how the energy mix generated in each country has developed over the last 10 years.

Fig. 4: Share of fuel in electricity generation, 2015-2024 (%)



Wind and solar key partners on the way to 1.5C

Although wind and solar PV currently represent a smaller share of the region’s electricity generation mix than either hydropower or fossil fuels (see above), a shift is under way: over half of the annual capacity additions between 2020 and 2023 were wind and solar projects.

Fig. 5: Wind and solar electricity generation (TWh)

LAC’s renewables boom must not endanger biodiversity

This map plots planned and active solar, wind and bioenergy projects across the region. Each dot is scaled to the capacity of the plant it represents. Click on a dot to see more details of that project’s capacity (MW) and stage of development, as well as a link to the full project page on Global Energy Monitor.

Solar PV and wind will be critical to achieve the targets in LAC, especially as the future growth potential of hydropower – which is not shown on the map – is more constrained by environmental and social concerns. 

Fig. 6: Map of planned and active RE projects (solar, wind and bioenergy)



All RE expansion needs to be undertaken within a safeguard framework to avoid negative impacts on the environment (land use impacts, ecosystem fragmentation) or human rights violations (forced relocation and lack of free, prior, informed consent) that may arise from the use of these technologies. 

The image below shows the map of planned and operational RE projects alongside a map of biodiversity hotspots across the region produced by Resource Watch, using the Critical Ecosystem Partnership Fund’s classification system. This defines a biodiversity hotspot  as an area that “contains at least 1,500 species of vascular plants found nowhere else on Earth (known as “endemic” species)” and “has lost at least 70% of its primary native vegetation.” This map only shows the land-based portion of the hotspots, and does not include offshore outer limits.

Fig. 7: Maps of renewable energy projects (solar, wind and bioenergy) and biodiversity hotspots


Energy efficiency is key to the energy transition

The global target agreed at COP28 in 2023 is to double the average rate of improvement in global energy efficiency from 2% to 4% a year by 2030. An economy’s energy intensity is the most useful proxy for tracking efficiency gains, as it shows how much energy – measured in megaJoules (MJ) – is supplied to produce one unit of economic output. The lower the number, the more efficiently energy is being used. 

The first graph below shows changes in energy intensity from 2017 to 2021, which is the most recent available for the countries with data. Scroll down to see this data translated into its energy efficiency improvement rate for the period.

Fig. 8: Energy intensity, 2017-2021



LAC has lower energy intensity than any other region in the world except the European Union. However, while other regions have made significant improvements in reducing their energy intensity, rates in LAC remained relatively stable in the 2000-2015 period.

Low energy intensity in the region doesn’t necessarily mean energy is being used efficiently. It reflects limited access to affordable energy or the household appliances and technology that would use this power.

Countries across the region have adopted varied approaches to energy efficiency planning, with a number implementing national strategies or action plans, or being in the process of doing so. The outcomes have been varied. For example, Peru and Chile have seen significant improvements in energy efficiency, while Uruguay has experienced a worsening.

Despite its significant potential, energy efficiency continues to be underexploited due to persistent technical, financial and policy-related obstacles. The indicator for LAC countries has an average annual reduction of 0.4%.

Fig. 9: Energy efficiency improvement rate

Electricity-based clean cooking is vital to health and the planet

Basic energy access remains a challenge in LAC; 3% of people are still without electricity, and 11% rely on polluting fuels for cooking. This has significant impacts on health for the population.

The Health Effects Institute attributes the global decline in deaths from household air pollution partly to expanded access to clean cooking energy, including through wider electricity coverage. 

Continuing this downward trend requires ongoing investment in expanding access to clean power. Achieving universal electricity access and decarbonising power generation in line with national expansion plans across LAC will require investments equal to approximately 0.8% of the region’s GDP each year – equivalent to USD 577.1 billion through 2030, according to the Inter-American Development Bank (IDB). 

The set of graphs below chart the level of access to electricity for cooking against household air pollution deaths in each country over the last 30 years. Electric cooking does not result in household air pollution or greenhouse gas emissions if the electricity is generated using renewable resources. 

The graphs for some countries where access to electricity for cooking has expanded over time indicate that there might be a link between using electricity for cooking and a reduction in deaths from household air pollution. However, they do not prove a direct correlation.

Fig. 10: Access to clean energy for cooking & deaths attributable to household air pollution from dirty fuels

Renewable energy is a source of job creation

The tripling of renewable energy capacity by 2030 is expected to create over 30 million new jobs globally, bringing significant socio-economic benefits. Clean energy transitions also present new employment opportunities for workers across the region. Energy sector jobs, particularly in clean energy technologies and the critical minerals sector, are expected to grow by over 15% in the LAC region by 2030.

Fig. 11: Renewable energy job creation

Resourcing the energy transition must consider socio-economic impacts 

The development of clean energy technologies –solar panels, wind turbines, batteries and storage systems, electric vehicles (EV) and various electronic devices – relies on a set of critical minerals of which LAC has significant resources.

The region holds at least a third of the world’s lithium, copper, and silver reserves. Chile has the largest lithium reserves, and Argentina has the third-largest, according to the U.S. Geological Survey. 

Rising demand for these resources as global decarbonisation efforts ramp up presents significant economic opportunities for the region, including the prospect of a structural transformation to become a clean-energy manufacturing hub. But it also presents the risk of becoming another avenue of resource extraction with little added value for the region and potentially serious socio-environmental impacts if the mineral supply chain is not managed effectively. 

Investment over the last two decades has been concentrated in extraction, with less emphasis on developing local capacity to manufacture lithium batteries or the electric vehicles they would power. There are currently two operational battery plants in the region, with another being built and five more announced. 

Driven by access to mineral resources and supportive policies for domestic clean vehicle production, Chinese automakers are preparing to begin assembling electric vehicles in Latin America starting in 2025 in Brazil. However, it is unclear to what extent this investment will support local development. Concerns have been raised over labour abuses at one facility and its final impact on job creation has been questioned. 

In terms of consumption of green transport, 2024 marked the strongest year of growth for electric vehicle adoption in Latin America, led by Mexico and Brazil. EVs accounted for over 6% of new passenger car sales in Latin America, up from the previous year’s share of 2%.



Debunking common renewable energy myths

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Key points:

  • Common myths about renewables are outdated and unsupported by evidence. Misinformation is often behind concerns that renewables are inefficient, too intermittent or too damaging to nature. This briefing helps debunk the myths by providing evidence-based facts, including:
    • Renewables are now the cheapest and fastest-growing source of electricity. Solar and wind costs have fallen dramatically since 2010 (by up to 90%), making them more affordable than fossil fuels.
    • Modern energy systems can rely on renewables. Battery storage, diversified supply, and smart grid systems can manage variable solar and wind generation. Local renewable energy generation shields countries from supply shocks in fossil fuel markets, making energy systems more resilient and secure.
    • Wind and solar energy have lower impacts on wildlife, public health and waste compared to fossil fuels. Renewables help mitigate the impacts of climate change on people and the planet.

Renewable energy is fundamental to net zero, but myths still circulate

Renewable energy and energy efficiency are crucial for the transition to sustainable energy. Switching to energy from renewable sources and using energy more efficiently are two of the most fundamental steps on the path to net zero, curbing greenhouse gas emissions and helping to mitigate global warming. 

Renewables are expanding quickly around the world, mainly driven by the rapid deployment of wind and solar photovoltaic (solar PV) generation. In 2000, renewables met around 19% of global electricity demand, a share that increased to nearly 32% by 2024. This is even more impressive when you consider that global demand for electricity more than doubled from just under 15,300 TWh in 2000 to nearly 31,000 TWh in 2024. Wind and solar generation together grew from 31 TWh in 2000 to over 4,600 TWh in 2024. 

Renewables have become the least expensive source of new power generation globally. In 2023, the average cost of generating electricity from a solar PV plant, known as the levelised cost of energy (LCOE),1Calculated using the levelised cost of energy (LCOE) for solar PV vs. the weighted average LCOE of fossil fuel alternatives. LCOE is the average cost of electricity generation over the lifetime of a power plant, including the costs of building and operation. It allows a comparison of the costs of different technologies, even if they have different fuels, life spans, capacities and financial profiles.was 56% less than the average of fossil fuel-fired alternatives. The LCOE of new onshore wind projects was 67% lower. Since 2000, the rise in renewable power generation worldwide has saved the electricity sector at least USD 409 billion in fuel costs.

Despite their benefits, some common misunderstandings still circulate about renewable energies, mainly around solar and wind, often as a result of misinformation. This briefing helps to debunk them.

Common renewable energy myths

Myth: Renewable energy technologies are expensive

Compared with fossil fuels or nuclear power, many renewable technologies were developed relatively recently. As manufacturing processes and technologies have improved, the cost of most renewable electricity has plummeted and will continue to fall. The most dramatic declines in electricity costs globally between 2010 and 2023 were seen in solar PV (90%), onshore wind (70%), and offshore wind (63%).

The falling cost of building a renewable energy project means that the technologies compare very favourably with fossil fuel options. In 2023, the global average cost of building a new onshore wind project was 67% lower than the cheapest fossil fuel option, while the cost of a solar PV project was 56% lower than the average fossil fuel option. 

The fall in the cost of renewable projects is making them an increasingly attractive investment option. Investment in renewables, and the grid and storage technologies to support them, now outstrips investment in all fossil fuel technologies combined.

Generating electricity from renewables can help people save money. Solar and wind projects have driven down electricity prices in wholesale markets in some countries, especially at times of peak generation, sometimes to below zero. The International Energy Agency (IEA) estimates that consumers in the EU saved around EUR 100 billion between 2021 and 2023 as a result of new solar and wind replacing expensive fossil fuel generation following Russia’s invasion of Ukraine. These savings could have been 15% higher if renewable deployment had increased more quickly.

Both the IEA and the International Monetary Fund (IMF) say that taking early action to transition to a more sustainable energy system will be cheaper for countries in the long run. Delay will mean much more stringent and costly policies will be needed in the future to limit global temperature rise, meaning greater macroeconomic impacts, whereas shifting to renewable energy allows consumers to benefit from lower power prices. 

The rapid decline in costs also helps explain why some renewables technologies are being deployed so quickly. 450 GW of new solar capacity was installed globally in 2024, compared to 350 GW in 2023.2Zero Carbon Analytics estimations based on IEA data.

The amount of wind capacity installed between 2019 and 2023 avoids around 830 million tonnes of CO2 a year, and the solar capacity installed over the same period avoids 1.1 billion tonnes of CO2 a year – more than the annual emissions of Germany and Japan combined.

Myth: Renewables are unreliable and cannot meet power demand

Some renewable technologies, such as solar and wind, have variable output depending on weather conditions, also known as intermittency. Lack of wind or low wind speeds can reduce output from wind turbines and lack of sun can impact solar generation, but reductions or pauses in generation are manageable for power grid operators.

Renewable technologies are becoming more efficient as designs and reliability improve, improving their capacity factor—the ratio of a technology’s actual energy output to its maximum potential. The average capacity factor for solar PV rose from 14% to 16% between 2010 and 2023, while that of onshore wind rose from 27% to 36%.

The capacity factors of other renewable technologies are even more impressive. Concentrated solar power (CSP) has an average capacity factor of 55%, an 83% increase in efficiency since 2010, and for offshore wind it increased from 28% in 2010 to 41% in 2023. The capacity factor of offshore wind is comparable to conventional fossil fuel generation – higher than that of onshore wind thanks to bigger turbines and more sustained winds at sea. The IEA classifies offshore wind as a “variable baseload” technology, meaning that, while output will vary, it can be relied on to contribute to the steady background demand of a power system, known as the baseload. 

As renewable energy capacity grows and more of the grid relies on renewables, projects will increasingly need to be combined with electricity storage technologies as part of an integrated grid. Energy storage stores surplus power when demand is low and generation is high, and releases it at times of peak demand to maintain a consistent power supply. An interconnected power system allows grid operators to draw on other forms of renewable generation or from storage when one technology is producing less. A review of academic studies found that 100% renewable electricity systems backed up with energy storage are both technically and economically feasible.

Batteries are rapidly becoming cheaper and more widely deployed. The cost of lithium-ion battery cells dropped by an impressive 97% over the three decades from 1991, dramatically improving the affordability of both energy storage and electric vehicles. New storage technologies such as Long Duration Energy Storage (LDES), which can store power for anywhere from days to weeks or months, can increase reliability, particularly in isolated power systems with limited interconnectivity. Hybrid systems, with solar, wind, lithium-ion batteries and LDES, lower costs compared to standalone battery or LDES systems.

Sometimes renewable generation is stopped because the networks they are connected to have not been upgraded sufficiently to accept all of their output, rather than from a failure of the renewable source itself. This is a practice known as ‘curtailment’ or ‘constraining off’. In some areas, it is common to see wind turbines not turning and, less obviously, solar PV projects might be non-operational for this reason. The IEA estimates that around 3% of renewable output was curtailed in 2021 in ten markets with high levels of renewables, amounting to around 40 TWh – equivalent to New Zealand’s annual electricity demand.

In reality, all sources of power will be unavailable at some point. Large fossil fuel and nuclear power plants are generally offline around 7–12% of the time due to maintenance, refuelling or unexpected outages. Nuclear plants may be shut down unexpectedly for safety reasons. The Kashiwazaki-Kariwa facility in Japan, the largest nuclear power plant in the world, had to be closed in 2007 after an earthquake, and 46 of France’s 56 nuclear reactors were offline for at least a quarter of the time between 2019 and 2023. Although rare, a problem at a nuclear power station that results in a nuclear accident has long-lasting impacts that reach far beyond interrupting the power supply.

Renewables can actually help make energy systems more secure. The IMF found that Europe’s policies to reduce emissions, including installing renewables, help to ensure a secure power supply and make the system more resilient. Renewables help limit Europe’s reliance on imported energy, diversify its energy imports and reduce vulnerability to energy shocks. A package of measures to lower emissions in line with the EU’s Fit for 55 proposals, which aims to reduce emissions by at least 55% by 2030 from 1990 levels, would improve energy security by nearly 8% over the same period.

Reports point to the grid, not renewables, as the cause of the Iberian Peninsula blackout

The widespread electricity blackout that affected Spain and Portugal in April 2025 led to speculation on the role of renewables. A few days earlier, the Spanish power grid had been supplied solely by renewable power, causing some commentators to hypothesise that the high level of renewables caused the blackout.

However, official investigations into the incident by the Spanish government and the grid operator (Red Eléctrica) have concluded that the cause was a complex set of technical and planning issues in the Spanish grid. This includes unexpected oscillations in voltage and frequency, insufficient voltage control and the disconnection of mainly fossil fuel plants, meaning that they did not maintain voltage as expected. The failure to maintain voltage across the network led to a cascading failure. 

A further report into the incident by AELEC, the trade association for Spanish electricity utilities, also identified voltage control as a key issue. Both the Spanish government and AELEC have blamed Red Eléctrica for failing to keep the system under control, while Red Eléctrica has pointed to conventional power generators for not providing voltage control.

Initial reports clearly identify the grid’s inability to manage fluctuations and remain stable as the key issue, rather than the high level of renewables. As the reports state, the blackout highlights the need to update the Spanish grid by investing in grid resilience and flexibility through technologies, such as battery storage. 

Myth: Fossil fuels are more efficient than solar and wind generation

Solar and wind are more efficient than fossil fuels. They produce more usable electricity per unit of energy put in. Fossil-based thermal power plants typically convert only 30–40% of input energy into usable electricity. Renewable sources like solar and wind deliver nearly 100% efficiency, making them two to three times more efficient. It is also worth noting that the input energy for renewable power generation – light energy from the sun and kinetic energy from wind – is free.

When it comes to heating, gas boilers operate at around 85% efficiency, while heat pumps can deliver 300–400% efficiency. In transport, internal combustion engines are just 25–40% efficient, whereas electric vehicles convert 80–90% of energy into motion.

Myth: Renewables create too much waste for disposal 

As with any other energy option, renewable technologies create some waste. The issue is how much waste, and whether it can be reduced by recycling or reusing components. 

To give an idea of scale, global municipal waste is projected to reach approximately 70 billion tonnes by 2050, and coal ash – waste from burning coal, mostly in coal-fired power plants – will reach 45 billion tonnes. By contrast, even in the most pessimistic scenario, end-of-life solar panel waste is expected to total just 160 million tonnes (Figure 1). This means municipal waste and coal ash will outweigh solar PV waste several thousand times.

Figure 1

Renewable energy technologies offer strong potential for recycling. Modern recycling techniques can reclaim up to 95% of a solar panel’s materials by weight, recovering valuable components such as glass and aluminium. Steel used in wind turbines can be recovered and reused, reducing the need to extract new raw materials. Recycled steel produced using renewably powered electric arc furnaces produces 86% less greenhouse gas emissions than traditional steelmaking, and recycled steel consumes significantly less energy and water, and produces less pollution.

Improved standards for solar panels and wind turbines mean both have much longer lifespans today than they did a decade ago. Panels typically last 30 to 35 years and turbines have a lifespan of about 30 years. 

Common myths about wind energy

Myth: Wind turbines are too dangerous for wildlife, especially birds and bats

All forms of energy production have environmental impacts, including on wildlife. Renewable technologies present a relatively low risk to wildlife compared to other human activities. Any comparison of risks must take into account the threat that global warming presents to many species, which renewable energy can help mitigate. 

Estimates of the number of birds killed by wind turbines compared to other energy-related causes vary. One study showed that wind power causes fewer bird deaths than fossil fuels when assessed per unit of energy produced. Fossil fuels cause 5.2 avian fatalities per GWh, whereas wind turbines are associated with only 0.3 to 0.4 deaths per GWh.

The extraction of oil and gas disrupts biodiversity during both drilling and production, through, for example, air and groundwater pollution from leaks and spills, light and noise disturbances, and heightened human presence in undeveloped areas. A study in the US found that fracking reduced the number of birds by 15%, whereas wind farms had no significant effect on bird counts.

Nuclear power plants pose other risks to wildlife. Birds are affected by hazardous pollution at uranium mine sites and collisions with draft cooling structures. It has also been proven that bird populations decrease due to radiation after a nuclear disaster.

Figure 2

Looking more broadly, a range of US studies shows that the number of birds killed by wind turbines is a tiny fraction of those killed by cats, buildings, or cars. The American Bird Conservancy estimated in 2021 that approximately 681,000 birds are killed by wind turbines in the US each year. Other estimations indicate a range between 200,000 to 1.2 million for 2022. In comparison, buildings killed an estimated 365 to 988 million birds in the US in 2014, and domestic cats killed between 1.3 billion and 4 billion birds in 2013. 

A review by Sustainability by Numbers provides an indication of the scale of difference between wind turbine-related deaths and some other hazards in the US (Figure 2). 

The impacts of wind development on certain bat species may be more severe. If measures are not taken to reduce fatalities, the North American population of hoary bats could decline by 50% by 2028.

However, many species face much greater risks from global warming. A WWF study of 35 biodiversity-rich places around the world found that 2°C of warming would put a quarter of species at risk of local extinction, rising to 50% at 4.5°C of warming. 

Seabirds in particular are highly threatened – climate change ranks as one of the three major threats to seabirds, alongside invasive species and fishing. Limiting global warming to 1.5°C would benefit 76% of vulnerable bird species, according to the National Audubon Society.

Critically, wildlife protection organisations generally support the development of wind power as a response to the threat of climate change. The American Bird Conservancy recognises that renewables are a “critically important component” in the shift away from fossil fuels, stating that more wind turbines should be deployed but sited to avoid high-risk areas for birds. The UK’s Royal Society for the Protection of Birds (RSPB) has adopted a similar position, stating that climate change is the “greatest long-term threat to nature” and calling for a strategic approach to siting wind projects. 

How wind turbines are located and operated can help reduce their impact on wildlife. Wind turbines can be slowed or stopped at certain times to allow for bird migration or bat activity. Using ultrasound to deter bats is also effective. Bladeless wind turbines are another option – these are cylindrical, flexible structures that capture wind energy by resonating with air flow, with benefits like lower environmental impact and greater safety.

BirdLife International and The American Bird Conservancy both work to ensure that wind energy’s benefits for birds outweigh its impacts. Bat Conservation International also supports renewable energy deployment in a way that minimises impacts on bats.

Myth: Offshore wind farms are too dangerous to marine life

The construction and operation of offshore wind farms can impact marine wildlife by disrupting natural habitats, creating noise and electromagnetic interference, and potentially spreading invasive species. However, these impacts are not unique to the wind industry – they are also caused by offshore oil and gas development. Plus, the oil and gas industry has caused repeated pollution incidents that have degraded habitats and killed wildlife.

Wind farm operations generate relatively low underwater noise. Noise can lead to whales becoming stranded, but this is linked to sudden bursts of noise rather than the continuous operation of turbines. A Danish study found that underwater noise from offshore wind turbines was at least 10–20 decibels lower than that of ships in the same frequency range.

The construction phase can be significantly louder. Marine species such as whales, dolphins, sea turtles and certain fish are particularly vulnerable to the elevated noise levels and tend to move away from the area. But, once established, offshore wind farms can act as artificial reefs that benefit marine life, and some species can come back in larger numbers than before. 

The UN’s Convention on the Conservation of Migratory Species of Wild Animals (CMS) recognises the importance of wind energy in addressing climate change and argues for siting decisions to take into account impacts on migratory species. Different technologies, like bubble curtains, can be used during construction to reduce noise and vibrations. 

The biggest human-caused threats to whales, porpoises and dolphins are being caught as bycatch, entanglement in fishing nets, oil spills, vessel strikes and whaling. 

Myth: Wind turbines create harmful noise pollution

Wind turbines are typically located at least 300 metres away from homes. At that distance, the sound measures around 43 decibels (dB). Sound levels fall below 40 dB beyond 400m from modern wind turbines, lower than the level of noise linked to annoyance in epidemiological studies, and decrease to 38 dB at 500m. By comparison, an air conditioner produces 50-75 dB and background noise in urban areas ranges from 40 to 45 dB. Even in quiet rural areas, background noise is 30 dB.

Although the sound produced by close wind turbines may be perceived as annoying, the Iowa Environmental Council and the Massachusetts Department of Public Health concluded that there is no link between health outcomes and proximity to wind turbines.

Figure 3

Myth: Wind turbines hurt neighbouring communities 

Whilst the announcement of a wind turbine project can impact nearby property prices in the first few years, prices have been shown to recover. A recent US study looked at the prices of houses located within 1.6 kilometres (1 mile) of a commercial turbine. It found that property values declined by 11% following the project’s announcement, but recovered after the project was built. The price difference was insignificant by the five-year mark. The impacts on houses more than 1.6 kilometres away were much smaller or non-existent.

Communities can also make big gains from wind projects. Wind power projects in the US have been shown to increase GDP, boosting the local economy and household incomes. Rural communities benefit the most, as construction and operation can create jobs and diversify work opportunities. Wind projects that are community-owned can bring even greater economic benefits.

Myth: The life cycle emissions of wind turbines are more harmful than burning fossil fuels

Life cycle assessments (LCA) evaluate a product’s environmental impacts throughout its life, from the extraction of raw materials to produce it through to disposal. They allow the impacts of different products to be compared. 

Comparing LCAs shows that renewable electricity generation technologies produce a fraction of the emissions of fossil fuel generation over the product lifecycle (Figure 4). 

Figure 4

Common myths about solar energy

Myth: Solar farms are a waste of agricultural land 

Solar farms are projected to take up a very small proportion of land area. A study projected the land use for solar farms in the EU, India, Japan and South Korea in 2050, when solar energy will account for between 25% and 80% of the electricity mix. It found that solar infrastructure would occupy between 0.5% and 5% of total land area. In comparison, agricultural land accounted for 38.8% of the EU’s land area in 2022.

In the UK, Carbon Brief estimated that existing solar farms (230 km2) and future solar farms (464 km2) combined would use roughly half the land taken up by golf courses. Solar farms make up just under 0.1% of UK land, and government net-zero plans will increase this to less than 0.3%.

In the US, the deployment of solar could lead to between 1.1% to 2.4% of croplands and 0.3% to 0.7% of natural lands being converted for solar PV infrastructure by mid-century. The US Department of Energy calculated that in a 2050 scenario where solar meets 44-45% of electricity demand, solar development would take up around 10.3 million acres (41,683 km2), equivalent to 1.17% of US farmland3Zero Carbon Analytics estimation based on USDA data for 2023 – total farmland of 878,560,000 acres.

Myth: Solar farms are too dangerous for wildlife, especially birds

Like any electricity-generating technology, solar PV will impact the environment and wildlife, although evidence is limited. Birds might collide with PV panels, and there is a theory that water birds could mistake solar farms for water and try to land on them. 

As with wind power, the number of fatalities is small compared to other threats. Mortality estimates vary widely, with studies calculating the annual average avian fatalities from solar to be 2.49 fatalities/MW, 4.5 fatalities/MW, and 9.9 fatalities/MW. 

To address this, some developers are adopting measures such as adding distinctive patterns to panels or choosing places with less bird abundance.

A study by the RSPB and the University of Cambridge found that solar farms in the UK can actually increase the number of bird species, especially if they are managed to encourage wildlife and flowering plants. In the US, the National Audubon Society and other conservation groups work with developers to ensure that climate action, conservation and community engagement go hand in hand on large-scale solar developments.

Myth: Solar panels pollute the environment with toxic materials

According to the Clean Energy Council, solar panels mainly consist of glass (77%), followed by aluminium (10%), polymers (9%), silicon (3%), and copper, silver and tin (<1%). 

The vast majority of solar cells, the part of a solar panel that converts solar energy into electricity, are made using crystalline silicon, as in the Clean Energy Council’s example. They can also contain cadmium telluride, copper indium diselenide and gallium arsenide. These chemicals are enclosed in a solid matrix in the solar cell, insoluble and non-volatile under normal conditions. Because they are stable and enclosed, there is little risk of chemicals escaping during normal use. 

Any pollution of the environment is undesirable, but the impacts of solar panels are minimal compared with the contamination caused by extracting and burning fossil fuels. One study found that soil samples close to solar PV systems showed increased levels of selenium, strontium, lithium, nickel and barium compared to areas further away, but no elements were found in high enough concentrations to endanger local ecosystems. 

Solar module waste is significantly less toxic than coal ash or oil sludge waste from fossil fuel energy generation. The amount of coal ash produced globally in a single month is equivalent to the total projected weight of PV module waste over the next 35 years. Without decarbonising and transitioning to renewable energy sources, the coal ash and oil sludge generated by fossil fuels would be 300–800 times and 2–5 times greater than the waste produced from PV modules, respectively. 

  • 1
    Calculated using the levelised cost of energy (LCOE) for solar PV vs. the weighted average LCOE of fossil fuel alternatives. LCOE is the average cost of electricity generation over the lifetime of a power plant, including the costs of building and operation. It allows a comparison of the costs of different technologies, even if they have different fuels, life spans, capacities and financial profiles.
  • 2
    Zero Carbon Analytics estimations based on IEA data.
  • 3
    Zero Carbon Analytics estimation based on USDA data for 2023 – total farmland of 878,560,000 acres.

Renewable energy in India: Manufacturing and recycling require sustained support

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Key points:

  • China dominates the manufacture of solar PV modules, while India had less than 2% of the global market in 2022 
  • India’s solar PV sector relies heavily on imports, meaning the government must balance its efforts to protect the industry from competition and enable it to compete through access to affordable inputs.
  • 70-80% of India’s wind turbines are produced domestically, and the country also has a sizeable export market, particularly to the US.
  • The need to import cobalt, nickel and lithium, as well as copper and aluminium to a lesser extent, make these critical minerals for India’s energy transition. 
  • Recycling the components of solar and wind technologies will be crucial to creating a supply chain for new manufacturing in the future.

India has high ambitions for renewable energy 

At COP26 in 2021, Prime Minister Narendra Modi announced that India would meet 50% of its energy needs from renewable sources by 2030 and that it would have 500 GW of non-fossil1This includes large-scale hydro and nuclear power as well as renewables. electricity capacity by the same date. India’s 2022 revision to its Nationally Determined Contribution commits to achieving 50% of electricity (rather than total energy) capacity from non-fossil fuel sources by 2030.2Nationally Determined Contributions (or NDCs) are statements from signatories to the Paris Agreement setting out their national efforts to reduce emissions of greenhouse gases. 

The government claims that these objectives represent the world’s largest expansion plan for renewables, and there has been a rapid growth of renewables generation in the last 10 years. However, achieving the targets will require a sustained effort – including building up its domestic manufacturing and recycling capacities to secure India’s access to renewable technologies. There is clear evidence that the targets will not be achieved: meeting the 2030 target for 500 GW of renewable electricity capacity has slipped to 2031-32 as the country struggles to drive sufficient deployment of renewables.

How much does India manufacture renewable technologies?

China dominates global manufacturing of clean energy technologies. While India has some profile in solar PV manufacturing, it does not have a significant presence in manufacturing other clean energy technologies (figure 1).

The International Energy Agency does not expect the concentration of solar PV manufacturing in China to be reduced over the next decade despite investment plans in India and the US. This is because much of China’s existing solar manufacturing capacity is not currently being used. As demand for more solar PV grows, this excess capacity is expected to enter use, diluting the impact of additional capacity elsewhere. 

Solar PV production

With 80% of the market, China currently leads global solar PV module manufacturing capacity. In comparison, India had 1.9% of the market in 2022. China also dominates PV cell production, producing 331 GW of solar cells in 2022, around 84% of total global production, while India produced 0.6% of PV modules globally.

China is also responsible for more than 95% of wafer manufacture, with 371 GW of wafers produced in 2022 and an annual production capacity of 673 GW. Indian companies plan to expand wafer production capacity up to 41 GW a year by 2025.3The Institute for Energy Economics and Financial Analysis (IEEFA) has a slightly more pessimistic assumption, and estimates that ingots/wafers and polysilicon production facilities could be added by 2026 rather than very rapid growth by 2025. However, given that manufacturing costs in India are higher than those in China, the total production capacity might not all be used as there remains significant excess capacity in China.

The excess capacity in the global solar PV market presents India with a dilemma. The government is actively encouraging new manufacturing capacity to be built through its Production-Linked Incentive (PLI) scheme.4The Production-Linked Incentive is intended to encourage manufacturing of high-efficiency solar PV modules by reducing investment costs in new manufacturing facilities through payments linked to sales of the modules. However there is no guarantee that the capacity will be used in the short term, especially if prices for Indian solar components are higher than for those produced in China. 

Currently, India’s solar PV industry is heavily dependent on imports, with around 90% of PV modules coming from China. The top three module suppliers in India are also Chinese (Jinko, LONGi and Trina), although their market share might decline as a result of the Indian government’s implementation of an approved list of models and manufacturers (ALMM) from April 2024.5The ALMM sets out which manufacturers are eligible for government subsidy and support and is limited to companies that manufacture PV modules in India. 

India has exempted imports of some solar PV components used in the manufacture of modules from Basic Customs Duty. In effect, India is performing a balancing act: trying to encourage a domestic solar PV industry while also recognising that importing some components for solar modules is necessary and will have to be as cheap as possible to enable the industry to compete with Chinese manufacturers.

Driven by the PLI, large Indian companies are considering building domestic supply chains for solar PV modules to challenge Chinese dominance. For example, Adani Solar hopes to develop a fully vertically integrated supply chain from ingots to modules, as well as building the 648-MW Fatehgarh/Kamuthi solar park.

Wind turbine production

Wind turbines are complex machines. Companies often manufacture one or more components but not necessarily the whole turbine. For example, a company might manufacture turbine blades or assemble nacelles but not be involved in gearbox or tower manufacture. Other companies might assemble components made elsewhere to produce the final turbine.

Overall, India ranks third globally for wind turbine and component production, behind China and Europe, but ahead of the US and Brazil.

India has 7% of global nacelle assembly capacity, with 13 facilities capable of producing 11.5 GW of nacelles a year. There are no offshore wind nacelle facilities in India, and none are planned. In comparison, China has 97 operating nacelle facilities, of which 20 are for offshore wind, with a further 47 planned in the offshore segment.

Around 70-80% of wind turbines deployed in India are made there, whether by domestic companies or global players with a presence in the country. At the moment, however, wind manufacturing capability in India is underutilised because of low demand in the domestic market. 

India does have a sizeable export market though, notably to the US. It was the largest wind-related exporter to the US in 2022, with an estimated value of USD 518 million. Generating sets – including nacelles and turbine blades – and hubs made up the bulk of these exports. Overall, the value of global wind exports from India outweighs the value created in the country.

How does India dispose of its renewable energy technology? 

Critical minerals

As with other energy technologies, renewable technologies are manufactured using a wide range of minerals.6Table 1 shows a selection of minerals but others are also relevant, including manganese and silicon. The degree to which individual technologies rely on these minerals varies (table 1).

Table 1: Selected mineral needs for renewable technologies

There is no universal definition of ‘critical minerals’ – the concept is instead related to an individual country’s assessment of the importance of any given mineral to its security and economic development, as well as threats to the availability of that mineral. The Indian government conducted an assessment of the importance of minerals to their economy in 2023 which categorises copper, cobalt, lithium, Rare Earth Elements and Platinum Group minerals as critical for India (table 2).

Table 2: Critical minerals for renewables in India

Cobalt, nickel and lithium are not produced domestically, leaving India reliant on imports. While aluminium and copper are produced in India, there are also significant imports of both materials (around 35% and 20%, respectively), meaning that ensuring the international supply chains for these minerals becomes central to developing domestic manufacturing industries in wind and solar.

The IEA states that increasing efforts to recycle critical minerals is essential to mitigate possible supply constraints in future. End-of-life recycling of equipment built using these minerals can help reduce this reliance and therefore boost security of supply and limit vulnerability to price spikes, as well as lowering new resource use and environmental impacts of a net-zero transition.

PV panels

The need to recycle PV panels to recover critical minerals will become an increasingly pressing problem in India as panels reach the end of their operating lives (after around 30 years). The Council on Energy, Environment and Water estimates that meeting India’s PV targets will result in cumulative waste of almost 600 kilotonnes (kt) from existing and new PV capacity by 2030 and nearly 19,000 kt by 2050, a 30-fold increase.

Fig. 1: Cumulative waste from solar PV capacity installed up to 2030

Up to 95% of the materials used in PV panels can be recovered at the end of their life. Recycling solar panels is increasingly common worldwide and some European countries are recycling or reusing 100% of their PV panels waste.7France, Portugal and Spain achieved 100% recycling or reuse in 2021.

India has established a system of extended producer responsibility (EPR) for e-waste and set up recycling targets for electronic equipment with a goal of achieving 80% recycling by 2028-29. The rules apply to manufacturers, producers, refurbishers and recyclers of PV modules or panels and require them to register for an EPR certificate. One of the aims of the system is to formalise the e-waste recycling sector and reduce reliance on informal, unmonitored recyclers.

Solar panels were added to the e-waste management rules in 2022. However, the e-waste recycling targets for equipment do not apply to PV wastes.

There is some data on the number of EPR certificates granted by the Central Pollution Control Board (CPCB) and the amount of materials involved on the EPR e-waste portal. However, there is no data on the levels of recycling achieved, whether that is from PV panels or other e-wastes. 

The Ministry of Environment, Forest and Climate Change published data on e-waste recycling in February 2024. This shows a significant increase in e-waste recycling between 2016 and 2022 and also provides data per state. There is no information on whether e-waste recycling targets are being achieved, what materials are being recycled or how much PV waste was recycled.

Wind turbines

Between 80% and 94% of a wind turbine’s mass can be easily recycled. This includes steel, aluminium and copper used in the turbine’s tower, gearbox and generators. While nacelles are made of composite materials which are more challenging to recycle, it is increasingly possible to recycle them too.

There is a lack of information on wind turbine recycling in India. The key components would be steel for the towers and components in the nacelles. Recycling steel is a well-established industry in India, using about 32 million tonnes in 2022/23 for new steel production. The government is reported to be aiming to increase the use of recycled steel to 50% of steel production by 2047.

  • 1
    This includes large-scale hydro and nuclear power as well as renewables.
  • 2
    Nationally Determined Contributions (or NDCs) are statements from signatories to the Paris Agreement setting out their national efforts to reduce emissions of greenhouse gases.
  • 3
    The Institute for Energy Economics and Financial Analysis (IEEFA) has a slightly more pessimistic assumption, and estimates that ingots/wafers and polysilicon production facilities could be added by 2026 rather than very rapid growth by 2025.
  • 4
    The Production-Linked Incentive is intended to encourage manufacturing of high-efficiency solar PV modules by reducing investment costs in new manufacturing facilities through payments linked to sales of the modules.
  • 5
    The ALMM sets out which manufacturers are eligible for government subsidy and support and is limited to companies that manufacture PV modules in India.
  • 6
    Table 1 shows a selection of minerals but others are also relevant, including manganese and silicon.
  • 7
    France, Portugal and Spain achieved 100% recycling or reuse in 2021.

Oil and gas fuelling extreme weather in the US

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Key points:

  • The intensity and frequency of recent extreme weather events, including wildfires, floods and heatwaves in the US have been attributed to climate change caused by burning fossil fuels.
  • Emissions from US oil and gas operations rose roughly 42% between 2011 and 2022.
  • The oil and gas industry has spent decades lobbying to undermine climate action.
  • Consumption of fossil fuels remains high, but the adoption of electric vehicles and renewable energy is on the rise with government support.

This briefing about the ways in which oil and gas is fuelling extreme weather in the US follows our study into the attribution science connecting man-made climate change to extreme weather events and how fossil fuel companies continue to add fuel to the fire. Read the global view here.

Fossil fuels impact on weather events in the United States

Extreme weather events attributed to climate change

At least 66 attribution studies tying weather events to climate change have been made in the US including, for instance, recent rain and floods (16 studies), droughts (15 studies), storms (11 studies), heatwaves (six studies) and wildfires (six studies).  

Over 100 million people in the Southern US were under heat alerts during the unprecedented July 2023 heatwave. Without human-induced climate change, the extreme heat experienced that summer would have been nearly impossible. Climate change makes a July 2023-like heatwave in North America much more likely, occurring roughly once every 15 years, and 2°C (3.6°F) hotter than it would have been without human influence.

In August 2024, California experienced one of its largest wildfires, with over 560 homes and buildings destroyed as firefighters battled 100°F (38°C) heat. Hotter and drier conditions resulting from climate change are causing increasingly large and severe wildfires, doubling the area burned in North America since the 1980s in a wildfire season that is now two months longer. 

Climate modelling by the Union of Concerned Scientists (UCS) determined the effects of greenhouse gas emissions associated with 88 of the largest fossil fuel and cement companies on the scale of wildfires, finding that these emissions were responsible for 48% of the rise in fire-danger conditions in the region. In turn, 19.8 million acres, or 37% of the area burned by forest fires in the western US and southwestern Canada since 1986 can be tied to pollution from these companies’ products. 

Principal climate scientist at UCS, Kristina Dahl, said of the findings: “We’re hopeful that with new evidence in hand, policymakers, elected officials, and legal experts will be better equipped to truly hold fossil fuel companies accountable in public, political, and legal arenas.”

Role and responsibility of the oil and gas industry in the United States 

According to self reported data collected by the Environmental Protection Agency, US emissions from oil and gas operations rose roughly 42% between 2011 and 2022. These production-related emissions account for a tiny portion of the industry’s overall emissions, more than 90% of which come from the use of oil and gas products (called Scope 3 emissions). 

Oil and gas firms continue to expand production in the US where the government continues to give out new licences. Further expansion via the building of LNG export infrastructure on the Gulf Coast in Texas and Louisiana is a health threat to local residents as air pollution contributes to premature deaths (and increases exposure to volatile gas prices), and will lead to a significant increase in US greenhouse gas emissions.

Fig. 1: Evolution of domestic energy production in the US, 2000-2022 (TJ)
Climate damages owed by fossil fuel firms in the United States

Climate science and policy think tank Climate Analytics has made a case for fossil fuel companies to pay loss and damage. Based on the social cost of carbon (using an estimate of USD 185 per tonne), it finds that the 12 most polluting fossil fuel companies, which it calls the “dirtiest dozen,” would be responsible for around USD 15 trillion in economic damages for production between 1985 to 2018, a period in which they earned USD 21 trillion in profits. Four of these top polluters are publicly listed firms, of which two are American multinationals. 

ExxonMobil, the fourth-highest emitting company, and first among non-state-owned enterprises, is calculated to be responsible for USD 1.2 trillion in damages between 1985 and 2018, while earning profits of USD 1.2 trillion. Eighth-ranked Chevron is estimated to have caused USD 900 billion in damages and made USD 600 billion in profit.

Towards accountability

There is increasing understanding about the fossil fuel industry’s awareness of climate change. For example, its own scientists accurately predicted global warming trends in the 1970s. This early knowledge and a track record of lobbying against climate action – including government support for renewable energy and electric vehicles – has led to hearings in the US Senate and over 20 lawsuits from states and municipalities seeking damages for extreme weather events. These lawsuits claim large oil companies owe damages for concealing their own scientific knowledge about climate change and thus deceiving the public about the danger of global warming caused by their products.

Fossil fuels must be phased out to slow temperature rises

Supply of fossil fuels 

The 2023 UN Production Gap report cites US Energy Information Administration (EIA) forecasts that between 2024 and 2050 production of oil will grow to 19 million-21 million barrels per day, while gas is also projected to increase, reaching 1.2 trillion cubic metres in 2050. In 2023 crude oil production was 12.9 million barrels per day. The federal and state governments continue to subsidise fossil fuel producers through measures including tax credits, amounting to USD 4 billion in 2021.
Climate Action Tracker gives the United States an overall rating of Insufficient, the middle of its five rankings. The rating is based on its lack of climate finance and policies (including its voluntary emissions reductions submitted as part of the UN Climate Change negotiations) that would limit temperature increase in line with climate science.

Fig. 2: Evolution of total energy supply in the US, 2000-2022 (TJ)
Reducing demand for fossil fuels

In the last decade, changes in administrations have seen drastically divergent levels of commitment to reducing greenhouse gas emissions. While Presidents Obama and Biden supported the inclusion of the US in the Paris Agreement, President Trump withdrew the country in 2020. Despite the swings in the political cycle, the US has seen a growing use of renewable energy and electric vehicles. 

However, the consumption of energy is still primarily fossil fuels. In 2023, 38% of primary energy consumption was from petroleum, 36% from natural gas and 9% from coal.

Although emissions from electricity generation fell between 1990 and 2023 (due to a reduction in coal-fired power stations) they have remained relatively flat in the transport and industrial sectors. 

Energy

The US has the second-largest installed capacity of solar and wind energy in the world. This rise has relied on tax credits since the 1990s that were continued in the Inflation Reduction Act.

Solar capacity has increased from 594 MW in 2000 to 139,205 MW in 2023 (for comparison, in China solar capacity grew from 33 MW to 610,111 MW during the same time). Meanwhile, wind energy capacity increased from 2,377 MW in 2000 to 147,978 MW in 2023 (China’s wind capacity grew from 341 MW to 441,895 MW).

Fig. 3: Solar and wind installed capacity, 2000-2014 (MW)

Transport

Stricter auto emissions standards and tax credits through the Inflation Reduction Act have led to a rise in the purchase of electric vehicles. Sales of battery electric vehicles rose from 100,000 in 2013 to 3.5 million in 2023. Over the same period sales increased from 0 to 16.1 million in China. 

Report: Indonesia’s just energy transition partnership

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The Indonesia Just Energy Transition Partnership (I-JETP) is a landmark climate finance agreement reached between Indonesia and a group of advanced economies. Central to the deal, struck at the G20 summit in Bali in 2022, is a commitment to mobilise USD 20 billion in international public and private funding. These funds could act as an important first step for Indonesia’s long-term Just Energy Transition program, which is set to require more than USD 200 billion over the next 10 to 15 years. 

This new report explores whether – and how – the I-JETP can successfully mobilise the funding needed for a just energy transition in Indonesia.

Download the report
Download the press release
Launch webinar

Join us for a webinar to mark the launch of the report, where Philippe Benoit, report author and Research Director at Global Infrastructure Analytics and Sustainability 2050, will present key insights from his research. This will be followed by an expert panel discussion with Bhima Yudhistira, Executive Director of Center of Economics and Law Studies (CELIOS); Berliana Yusuf, Senior Analyst at Climate Policy Initiative; and Martha Maulidia, Energy Policy Researcher at International Institute for Sustainable Development (IISD). The panel will be moderated by Prilia Kartika Apsari, Researcher at the Indonesian Center for Environmental Law (ICEL). There will be 30 minutes for Q&A.

Simultaneous interpretation into Bahasa Indonesia will be provided during the webinar. 

When: 19th September 2023, 15:00-16:30 Jakarta / 10:00-11:30 Brussels / 04:00-05:30 New York.
Registration: Scan the QR code below, or register here.

Author: Philippe Benoit, Research Director, Global Infrastructure Analytics and Sustainability 2050 ([email protected])

Research contribution: Andri Prasetiyo, Asia Regional Researcher, Zero Carbon Analytics ([email protected])

Offshore wind in Japan: The untapped potential

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Key points:

  • Japan has enormous offshore wind resources. Its total technical potential for offshore wind generation is over 9,000 TWh/year, more than nine times its projected electricity demand in 2050.
  • Japan is particularly rich in potential for offshore wind generation. It is therefore ideally placed to be at the forefront of a rapidly expanding global industry, particularly if it can develop a floating offshore wind industry
  • Offshore wind costs are falling rapidly. By 2030 it is expected to cost less to build than new nuclear power or coal with carbon capture and storage (CCS)
  • Expanding the use of offshore wind would reduce dependency on imported fossil fuels. A 1 GW offshore wind farm could replace the 0.8 billion cubic meters of gas which would be needed to generate the same amount of electricity. In 2022, this 1GW wind farm would have avoided USD 928 million in imported gas costs, and the 30 GW target for 2030 would have avoided USD 27.8 billion.

The current state of offshore wind in Japan

In 2022, there was 91 MW of offshore wind in Japan, 5 MW of which was floating offshore wind. These small scale demonstration projects are expected to deliver valuable technical lessons for the offshore wind industry in Japan. This capacity increased in February 2023 when the country’s first large-scale offshore wind project (140MW) began commercial operation at Noshiro Port in Akita Prefecture.

While this is a low level of deployment compared with some other countries, the government has increased its commitment to the technology and increased targets for awarding contracts for offshore wind energy to 10 GW by 2030 and 45 GW by 2040. The aim is to construct 1 GW a year between now and 2030. However, reaching the 2030 target will be challenging given that offshore wind projects can take several years to develop and construct – the IEA expects that only 0.5GW of new capacity is likely to be commissioned between 2022 and 2027 in total, meaning that the additional 9.5GW will have to be delivered in the three years between 2027 and 2030. 

Japan is currently running a tender for contracts to lease the rights to generate electricity from offshore wind. 1Tenders (or auctions) are competitive bidding processes for fixed-price contracts for a plant’s output.  Developers submit bids for the price they would like to receive for output, and the lowest priced bids are awarded contracts. The auction covers four sites that are expected to deliver 1.8 GW of new offshore wind capacity. Bids for contracts are due by the end of June 2023, and the results of the auction are expected from the end of 2023 to April 2024.

The potential for offshore wind

Japan has considerable wind resources offshore, particularly in the north of the country (see Fig. 1), with most of the potential in deeper waters further offshore. The Global Wind Energy Council (GWEC) estimates there is potential for around 128 GW capacity for fixed bottom projects in shallow waters, and 424 GW for floating offshore wind in deeper waters.  

Fig. 1: Mean wind power density in Japan 2Mean wind power density is a measure of the wind resource. It is presented as the mean annual power per metre of the operating turbine (W/m2). The higher the density, the better the wind resource. This figure shows mean wind power density at a turbine height of 100 metres.
Source: Global Wind Atlas

Given this large resource, the IEA estimates that Japan’s total technical potential for offshore wind generation is over 9,000 TWh/year.3Technical potential is the achievable energy production of a given technology in the context of topographic, environmental and land use constraints. It does not take into account the costs of production or market issues such as investor confidence or policy and regulatory issues. This is more than nine times its projected electricity demand in 2050 (922 TWh/yr). Offshore wind farms in shallow water could generate around 40 TWh/year of this, with the rest coming from wind farms sited further offshore, including floating offshore wind installations (see Box 1).

Box 1: What is floating offshore wind?

Floating offshore wind uses floating foundations for the base of turbines, unlike the more traditional fixed base turbines. There are three main types: spar-buoys, semi-submersible/barge and tension leg platforms. There are also variants of these three approaches.

They are being developed for use in deeper water (60-2,000 metres) where it would be too expensive to build traditional fixed-bottom turbines. The designs build on expertise developed in the offshore oil and gas sectors.

There are a number of small demonstration projects already in place or in development, including in Scotland (Hywind and Kincardine), Portugal, Norway and France, as well as Japan (Nagasaki-Goto and Kitakyushu). The industry is using the experience of building and operating these projects to bring down costs, establish supply chains and move towards mass production of components. GWEC expects the technology to be fully commercialised by around 2030.

Because the projects are sited further offshore, they can make use of stronger, more consistent winds, meaning that they can operate more efficiently. They can also reduce public opposition to new projects. Projects also require less material resources than more conventional fixed-bottom turbines, and installation causes less environmental disruption  to install.

The floating offshore wind industry is considered to be in its pre-commercial phase, and ready to scale up with commercial-scale, cost-effective projects ready for installation as early as 2025.

Japan is reportedly considering extending offshore wind construction beyond its territorial waters (22 km from the coast) into its Exclusive Economic Zone (EEZ) (around 370 km from the coast). This approach will allow Japan to access more of its offshore wind resources, particularly if it implements floating offshore wind turbines. Developing offshore wind farms in EEZs has already taken place in Europe and has allowed the Netherlands, the UK and Belgium to access more sites for their offshore wind farms.

Offshore wind plants operate more efficiently than onshore wind plants. This reliability means the IEA classifies offshore wind as a ‘variable baseload’ technology that can contribute to the security and reliability of electricity systems.4Baseload is the minimum amount of constant power required over a period of time. Offshore wind projects in Japan currently have a capacity factor (the ratio of the actual electricity generated to the theoretical maximum amount that the plant could generate) of 35%-45%, and the IEA expects this to increase by an additional 5% by 2040 as a result of taller turbines with larger rotors. A capacity factor of 40% compares favourably with the current performance of Japan’s nuclear reactor fleet (around 15.5%), though it is less than coal (64%) and gas (47%). 

Siting turbines further offshore is also projected to lead to significant additional improvements in capacity factors as a result of higher, more constant wind speeds. Sea surface winds at around 10 km offshore are 25% higher than winds onshore.

The costs and benefits of offshore wind

Fixed-bottom offshore wind is increasingly seen as a mature technology that competes with new fossil fuel generation thanks to established supply chains and very rapid reductions in the cost of building and operating projects. The global weighted Levelised Cost of Energy (LCOE) fell 60% from USD 0.188/kWh to USD 0.075/kWh between 2010 and 2021 and is expected to fall further, with prices ranging from 0.10/kWh and USD 0.050/kWh by 2024.5The Levelised Cost of Energy (LCOE) is the cost of electricity generation over the lifetime of a power plant. It is based on a calculation of the current value of the costs of building and operating a power plant over its lifetime. It allows a comparison of the costs of different technologies even if they have different fuel costs, life spans, capacities and financial profiles.  This makes new offshore wind plants competitive with fossil fuel generation (Figure 2).

Fig. 2: Global weighted average LCOEs from newly commissioned, utility-scale renewable power generation technologies, 2010-2021
Source: IRENA
Note: This data is for the year of commissioning. The thick lines are the global weighted average LCOE value derived from the individual plants commissioned in each year. The LCOE is calculated with project-specific installed costs and capacity factors, while the other assumptions are detailed in Annex I of the IRENA report. The single band represents the fossil fuel-fired power generation cost range, while the bands for each technology and year represent the 5th and 95th percentile bands for renewable projects.

Prices for materials and freight transport have been increasing since the start of 2021 as a result of Covid impacts and increased demand. This has had a knock on impact on the costs of building new renewable projects, including offshore wind and other electricity generation projects. Despite this, the IEA finds that the increase in these costs do not negatively impact the competitiveness of wind and solar because fossil fuel and electricity prices have risen at a much higher rate. 

In Japan, the government aims to reduce the price of electricity from fixed-bottom offshore wind to around USD 0.06 – 0.07/kWh (YEN 8 – 9/kWh) by 2030-35, which compares well with current prices in other countries.

Much of this price reduction is expected to come from the reduced costs of building new offshore wind farms through economies of scale and learning effects. The IEA expects the costs of new offshore wind farms in Japan to fall rapidly by 2030 and even more by 2050 (see Fig. 3) as the country establishes supply chains and gains more experience of the technology. By 2030, it is expected to cost less to build than new nuclear power or coal with carbon capture and storage (CCS) and by 2050 to have comparable costs to  coal and gas with CCS. The costs of operating and maintaining offshore wind farms also show impressive reductions thanks to a high rate of learning leading to improved performance.

Fig. 3: Capital and O&M costs for selected electricity generation technologies in Japan (Stated Policies Scenario)
Source: IEA World Energy Outlook 2022, Tables for Scenario Projections

Similarly, a survey of industry experts found that the LCOE for fixed-bottom offshore wind is expected to fall by 35% from 2019 levels by 2035, and floating offshore wind to fall by 17%, largely as a result of improved performance and larger turbines leading to economies of scale. These cost reductions are expected to continue up to 2050 (see Fig. 4). A further survey of mid range forecasts for the LCOE of offshore wind in 2050 put it at around half of today’s cost (USD 40-60/MWh).6Beiter, P. Cooperman, A. et al (2021). Wind power costs driven by innovation and experience with further reductions on the horizon, WIREs Energy and Environment, 10:e398, doi 10.1002/wene.398.

Fig. 4 : Levelised cost of energy survey estimates for onshore and offshore wind 2019 – 2050
Source: Beiter et al (2022).

Understanding the value of renewable energy projects also involves considering other factors. Generating electricity from domestic renewable sources reduces dependency on importing fossil fuels in an increasingly volatile global market. Japan relies on gas for about 34% of its electricity generation, and coal for around 31%. IRENA estimates that in 2022, Japan saved over USD 1 billion from displacing fossil fuel generation with renewable sources of energy added to the system in 2021 alone.

Offshore wind therefore has an important role in reducing import dependency and exposure to high fossil fuel prices. The IEA estimates that a 1 GW offshore wind farm could replace the 0.8 billion cubic meters of gas needed to generate the same amount of electricity. In 2018, the 1 GW wind farm would have reduced import fuel bills by over USD 300 million. If this is updated to 2022 prices, the 1GW wind farm would have avoided USD 928 million in imported gas costs, and the 30 GW target for 2030 would have avoided USD 27.8 billion.7This assumes that gas cost USD 34/MMBtu, which was the average LNG price in Asia in 2022.

A recent study in the US projected that Japan could reduce its reliance on fossil fuels and instead generate 70% of its electricity from renewable sources by 2035.8The remaining 30% of electricity generation is projected to come from nuclear power (20%) and gas-fired generation (10%).  Coal would be phased out by 2035 and no new fossil fuel plants would be built. This could be delivered without compromising grid security if it is complemented by increased storage capacity and improved electricity transmission infrastructure. Despite the need for investment to deliver this, the study found that average wholesale electricity costs could be 6% lower in 2035 than in 2020 because imports of fossil fuels could be reduced by 85%, and CO2 emissions for the electricity sector could decline by 92% in the same time period. While solar power is likely to make up most of the new generation in the 2020s, offshore wind is expected to dominate in the 2030s (see Fig. 5).

Fig. 5: Average annual renewable capacity additions (GW/yr) (Clean Energy Scenario)
Source: Lawrence Berkeley National Laboratory

In addition to reduced import dependency, renewable power projects are quick to build compared with both fossil fuel power stations and new nuclear power stations. Average construction times for offshore wind farms have fallen from two years in 2010-2015 to around 18 months in 2020. This is due to a combination of experience and improved supply chains, particularly the availability of installation vessels, ensuring that new offshore wind capacity can be delivered more rapidly than conventional generation.

Offshore wind in a global context

The global technical potential for offshore wind is enormous – the IEA believes that it could produce more than 420,000 TWh/year, 11 times projected global electricity demand in 2040. GWEC estimates that 80% of this potential is in water that is more than 60 metres deep, and as a result the global market for floating offshore wind will expand as countries with established industries look for new areas to develop further offshore. The floating offshore wind sector is undergoing rapid growth in Europe, with the US and Asian countries expecting to make significant contributions in the medium term (see Fig. 6). 

Fig. 6: Projected floating wind installations worldwide 2021 – 2031 (MW)
Source: GWEC Global Offshore wind report 2022
Note: CAGR = Compound annual growth rate

Consultancy firm McKinsey expects that the majority of long term growth for offshore wind will be delivered by the Asia Pacific region. The region has deep seas and can be subject to extreme meteorological conditions, meaning that turbines need to be optimised for these conditions. This in turn presents commercial opportunities for countries and companies that are able to develop fixed-bottom and floating offshore wind turbines that can operate efficiently in these conditions. 

The US government has recently set out comprehensive plans to drive the development of a domestic offshore wind industry to deliver decarbonisation as well as take advantage of global demand for the technology. Establishing expertise in floating offshore wind is a major focus of this initiative (see Box 2). Japan’s impressive offshore wind resource also makes it well suited to developing global leadership in the floating offshore wind sector.

Box 2: Building a floating offshore wind industry in the US 

The US has a huge technical potential for offshore wind. A recent government report identified 1.5 TW for fixed-bottom projects and 2.8 TW from floating offshore wind.  Together they could supply three times the annual electricity consumption in the US.

The US government has recently announced plans to deliver a rapid expansion of its offshore wind industry. It currently has 42 MW of offshore wind in operation, but plans to achieve 30 GW by 2030 and 110GW by 2050.  

Floating offshore wind is a key focus of this target, with the aim of making the US a global frontrunner in the technology.  The Floating Offshore Wind Shot initiative focused on delivering 15 GW of floating offshore wind by 2035 and reducing the cost USD 45/MWh by 2035, a 70% reduction.

Achieving the 2030 target will mean that secure supply chains have to be established quickly to deliver the components, vessels, port facilities and workforce needed. This in turn will require significant investment to ensure the skills and infrastructure are in place.  Without this investment, it is likely that delivering the 2030 target will be delayed. The government estimates that achieving this target will support 77,000 US jobs.

How the potential for offshore wind in Japan can be realised

Despite its huge potential, offshore wind is relatively undeveloped in Japan compared to other countries.  

Fixed-bottom offshore wind is now seen globally as an established technology, with secure supply chains and dominant industrial players. Floating offshore wind is still developing and therefore presents significant commercial opportunities for countries at the forefront of development. Japan’s offshore wind resource means it is ideally placed to take advantage of these opportunities.

Japan already has policy commitments to developing offshore wind technology and supply chains. The Vision for Offshore Wind set out targets of 10 GW by 2030 and 30-45 GW by 2040. These, however, are short-term targets, and will not necessarily give confidence to investors needing to recoup investments they make in establishing supply chain infrastructure or constructing offshore wind farms. The government should, therefore, develop long-term targets for both floating and fixed-bottom offshore wind as well as ensuring that carbon pricing is effective at encouraging investment in low-carbon technologies.

The country’s slow development of offshore wind to date is due to a number of factors, including perceptions of high technology risks and challenges related to permitting processes. In particular, the IEA identifies the length of the environmental permitting process and grid connection process as important barriers to faster deployment of wind. 

Development and permitting processes

Slow or complicated permitting processes can delay project development, or even discourage companies from participating in the market at all. Permits can involve all stages of project development, from initial site investigation to construction, and can be expensive and complex to navigate, especially if they involve multiple government departments. In particular, the Environmental Impact Assessment process in Japan has been seen as both costly and lengthy. 

The government is seeking to streamline the development process for developing sites by providing a centralised service for wind resource measurements, seabed and community surveys and environmental impact assessments. It has also introduced some measures to mitigate project challenges, such as designating areas of the sea for development, and improving community engagement processes. The IEA recognises that these measures may have a positive impact on development of new projects after 2027, but the measures do not apply to those projects already in development.

Grid connections

Successful deployment of offshore wind relies on developing onshore grid capacity to accommodate the output. A failure to upgrade or expand the onshore network could mean that a significant amount of offshore wind potential is not used.

Historically, Japan had a very fragmented electricity network, with 10 General Electric Utilities owning and operating the distribution and transmission networks. In addition, there are two separate grids operating with different technical standards.9The East region grid operates at 50 Hertz, while the West region grid operates at 60 Hertz. This means that connecting the two grids is expensive and complicated. This meant that strategically planning for grid upgrades, interconnections and expansion to include more renewables generation was problematic due to the number of different interests involved.  

Strategic planning is particularly important to ensure efficient investment in the new networks necessary to transmit the power from offshore to where it is needed. It can also save consumers money – a recent report by the economic consultants Brattle found that a proactive approach to transmission grid planning in the US could result in at least USD 20 billion in transmission-related cost savings, as well as reducing the number of transmission cable installations needed, thereby enhancing grid reliability and resilience and delivering savings for consumers. A similar study by the UK’s National Grid ESO also found that adopting an integrated approach from 2025 could potentially save consumers around USD 7.2 billion in capital and operating costs up to 2050, as well as delivering other benefits. 

Some action to enable a strategic approach to network development has taken place. The Organization for Cross-regional Coordination of Transmission Operators (OCCTO) was established in 2015 to manage cross-regional interconnections, develop a network code for transmission and distribution and plan the development of the transmission network, as well as a range of other duties. However, if Japan is to achieve a rapid transition to a clean energy system with a thriving offshore wind industry, more needs to be done to change policies, regulations, markets and the use of land.

  • 1
    Tenders (or auctions) are competitive bidding processes for fixed-price contracts for a plant’s output.  Developers submit bids for the price they would like to receive for output, and the lowest priced bids are awarded contracts.
  • 2
    Mean wind power density is a measure of the wind resource. It is presented as the mean annual power per metre of the operating turbine (W/m2). The higher the density, the better the wind resource. This figure shows mean wind power density at a turbine height of 100 metres.
  • 3
    Technical potential is the achievable energy production of a given technology in the context of topographic, environmental and land use constraints. It does not take into account the costs of production or market issues such as investor confidence or policy and regulatory issues.
  • 4
    Baseload is the minimum amount of constant power required over a period of time.
  • 5
    The Levelised Cost of Energy (LCOE) is the cost of electricity generation over the lifetime of a power plant. It is based on a calculation of the current value of the costs of building and operating a power plant over its lifetime. It allows a comparison of the costs of different technologies even if they have different fuel costs, life spans, capacities and financial profiles.
  • 6
    Beiter, P. Cooperman, A. et al (2021). Wind power costs driven by innovation and experience with further reductions on the horizon, WIREs Energy and Environment, 10:e398, doi 10.1002/wene.398.
  • 7
    This assumes that gas cost USD 34/MMBtu, which was the average LNG price in Asia in 2022.
  • 8
    The remaining 30% of electricity generation is projected to come from nuclear power (20%) and gas-fired generation (10%).  Coal would be phased out by 2035 and no new fossil fuel plants would be built.
  • 9
    The East region grid operates at 50 Hertz, while the West region grid operates at 60 Hertz. This means that connecting the two grids is expensive and complicated.

Bangladesh’s reliance on LNG increases heat stress, finance and energy risks

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Key points:

  • Bangladesh has increased reliance on LNG since starting imports in 2018, relying on the fuel for 22% of the country’s gas demand. Since then, Bangladesh has failed to meet its targets for increasing renewable generation, which now accounts for just 2% of the country’s electricity.
  • This reliance on imported LNG means the impacts of the current energy crisis have been acute, with widespread power cuts hitting both industrial production and the availability of air conditioning during hot weather.
  • The energy crisis is set to continue, with LNG prices forecast to remain high throughout 2023 and up to the late 2020s, with similar consequences. 
  • The global LNG industry is accelerating climate change, to which Bangladesh is highly vulnerable. 
  • Heat stress from fossil fuel expansion will have severe impacts on human health, labour productivity, income and overall economic growth of the country. 
  • Extreme weather and rising sea levels are already affecting the country and, by 2050, there could be nearly 20 million internally-displaced climate migrants.
  • Bangladesh has the potential for major expansion of renewable generation, but is not on track to increase capacity in the near-term. To provide cheaper, cleaner, more reliable power, the government of Bangladesh and international finance should prioritise scaling up renewable power.

LNG has boomed while renewables have stagnated 

Bangladesh has traditionally relied on gas as its main source of electricity generation, supplied from domestic extraction since the early 1960s. Gas made up 59% of Bangladesh’s energy supply in 2020 and fuels more than two-thirds of electricity generation. However, the country’s reserves of gas are declining, while electricity demand is increasing – in 2022, the government estimated that domestic gas supplies would last for less than 11 years.

In 2016, the government set out a plan to address this shortfall, laying out a vision for a huge growth in imports of liquified natural gas (LNG). The plan set a target of starting LNG imports in 2019 at a level that would meet 17% of the country’s gas demand, rising to 40% in 2023, 50% in 2028 and 70% in 2041.

The first stage of this vision was largely achieved, with the country signing two long-term contracts to import gas from Qatar, with LNG imports starting in the 2018/19 financial year and nearly doubling in 2020/21. In 2021, Bangladesh also started buying LNG from the spot market – where gas is bought for immediate delivery and prices are far more volatile than those bought under long-term contracts. By 2022, LNG imports accounted for 22% of the country’s total gas demand.

While the government achieved ambitious targets for increasing LNG, it was nowhere near as successful in meeting its targets for renewables. In 2008, the government set a target of meeting 10% of electricity demand with renewable sources by 2020, with similar targets included in the 2016 power plan. By 2022, renewables generated just 2% of Bangladesh’s electricity, according to analysis by the Centre for Policy Dialogue, making up just 3.75% of installed capacity.

Reliance on LNG left Bangladesh exposed to the energy crisis

The country’s increased reliance on imported LNG, combined with very low domestic renewable generation, has left Bangladesh highly vulnerable to global energy supply shocks. This risk became a reality in 2021 and 2022, when global LNG prices increased dramatically, first as Russia reduced gas exports to Europe and again following Russia’s invasion of Ukraine. 

In the year running up to the invasion, Asian LNG prices rose by 390% before rising a further 48% in the five months after the invasion – reaching a peak more than ten times higher than prices in the same month in 2020. The benchmark price for LNG averaged USD 34 per million metric British Thermal Units (MMBtu) in 2022, compared to USD 15/MMBtu in 2021. 

As well as facing significantly higher prices for LNG imports, Bangladesh also saw reductions in the LNG supplied through its long term contracts from Qatar, according to analysis by the Centre for Policy Development.

Faced with such high prices, Bangladesh stopped making spot market purchases of LNG in July 2022. As a result, the country faced widespread power cuts in the second half of the year. In mid-July, 20% of the country’s electricity demand was not met due to gas shortages, with the country cutting power on 85 of the 92 days up to the end of October, according to analysis by Reuters. At its worst point in October, blackouts affected 75%-80% of Bangladesh, leaving 130 million people without power, as a third of the country’s gas power units faced a gas supply shortage. The electricity that could be supplied also came at a huge cost – electricity generation costs rose by 47% from financial year 2020-21 to 2022.

The impacts of this on Bangladesh have been significant. Industrial production, including the garment sector, fell by a reported 25%-50%, placing further pressure on the country’s balance of payments. 

Up to a quarter of the country’s power demand comes from air conditioning, so cutting off power supplies left people – particularly older people, disabled people and children – at greater risk of heat stress, with temperatures in places exceeding 40°C. 

Bangladesh’s energy crisis is set to continue

Asian LNG importers such as Bangladesh are currently experiencing a reprieve from the record high prices of 2022, with regional prices currently lower than all of 2022 and on a par with mid-2021. In February, the country re-started purchases on the spot market with a purchase from TotalEnergies at USD 19.78/MMBtu, with the country aiming to keep purchases below USD 20/MMBtu this year.

But this drop in prices is not forecast to last. After a steep drop in 2022, Asian gas demand is expected to rise by around 3% in 2022 due to the lifting of China’s zero-Covid policy, which, combined with Europe’s increased demand for LNG, will put upward pressure on prices:

Fig. 1: Historic and forecast Asian LNG prices
Source: International Monetary Fund, S&P Global, Reuters

Global LNG prices are set to remain high at least until 2025 or 2026, when new LNG supplies are set to come onto the market. Bangladesh is reported to be looking for new long term LNG supply contracts, however there is very limited availability and competition from European buyers prepared to pay high prices. Until then, maintaining or growing Bangladesh’s recent levels of LNG imports will have to rely on expensive and highly volatile spot markets.

The impacts of such high prices on Bangladesh look set to continue. In January 2023, the government increased gas prices to commercial users by between 14% and 179% (household prices were left unchanged). This presents a significant challenge for the garment sector, which makes up more than 80% of the country’s export earnings. Producers must either pass on higher production costs to international buyers or face falling sales and profits. Power sector subsidies reached BDT 297 billion (USD 2.74 billion) in the financial year 2021-22, and are likely to rise further in 2023. It is highly likely that Bangladesh will experience further blackouts due to a shortage of LNG, with knock-on impacts on the availability of air conditioning during heatwaves and the productivity of the economy.

Despite the outlook for LNG prices, Bangladesh is planning to double its LNG import capacity with a more than 150% increase proposed, according to Global Energy Monitor (GEM). LNG imports are forecast to rise by more than 350% between 2020 and 2030, according to analysis by the Centre for Policy Development. This increase goes hand in hand with an expansion of gas power installation. The country has 11.5 GW of gas power currently installed, another 2.3 GW under construction and further 33.3 GW proposed, according to GEM.

LNG investment: Finance and stranded asset risks

Asia is expected to witness a surge in gas infrastructure investments, with the total investment in proposed projects reaching USD 379 billion. Bangladesh has one of the most extensive expansion plans, with USD 16.5 billion of investment in new gas infrastructure. This investment includes the construction of LNG terminals, pipelines and new power plants.

Table 1: Bangladesh planned investment for fossil gas infrastructure
Source: Global Energy Monitor, 2021

The reliance on gas for energy development raises concerns about the country’s large and unsustainable debt burden. Building additional gas infrastructure for the power sector, often under the guise of a ‘bridging fuel’, entails high financial risks to a developing country, particularly as the levelized costs of electricity from renewable energy are lower than for gas and will continue to fall. As the competitiveness of renewable energy prices persists, Bangladesh’s pivot toward gas will result in a poor investment and wasting valuable capital. For example, Bangladesh is reportedly currently facing a hefty debt bill of USD 2 billion every year from the power sector’s mega projects, specifically fossil fuel development. Amidst the global transition towards clean energy, gas infrastructure could potentially become stranded assets, posing a significant financial risk to Bangladesh, leading to broader and more severe socio-economic problems.

LNG expansion is accelerating climate change

While the lack of power increases the health risks from heatwaves in Bangladesh, increasing the use of LNG is also accelerating climate change, which will make extreme weather events in the country more severe and frequent.

Natural gas is the fastest growing source of CO2 emissions from fossil fuels, responsible for more than half the increase in the last five years. Worldwide, a 173% increase in LNG export capacity is in development, an expansion that puts the Paris Agreement climate goals at serious risk. The Intergovernmental Panel on Climate Change (IPCC) has found that emissions from existing and planned unabated fossil fuel infrastructure would push the world past 1.5°C of warming, unless they are phased out early.

The extraction and transportation of gas emits methane, a powerful greenhouse gas that is responsible for around a quarter of the 1.1oC of warming the world has already experienced since pre-industrial times. Transporting gas as LNG is also emissions intensive due to the energy required to super-cool the gas. In the US alone, the seven LNG terminals currently operating have the equivalent emissions to almost nine coal power stations. 

If all LNG terminals globally had the same emissions intensity as those in the US, together they would have the same emissions as 46 coal power stations, with emissions greater than Malaysia’s and the Philippines’ coal fleets combined. An analysis of multiple studies of US LNG shipped to Europe found that “emissions from the extraction, transport, liquefaction, and re-gasification of LNG can be almost equal to the emissions produced from the actual burning of the gas, effectively doubling the climate impact of each unit of energy created from gas transported overseas.

Increasing impacts of climate change

Bangladesh is widely recognised as being one of the most vulnerable countries to the impacts of climate change, largely due its natural geography on a low-lying delta with a high risk of cyclones, extreme rainfall, flooding and droughts, combined with high population density. Fifty-six per cent of the population – more than 90 million people – live in areas with a high exposure to climate change, compared to a global average of 14%. Thirty-three per cent of the population – more than 53 million people – face very high exposure to climate change, compared to just 6% globally.

These risks are not just a future possibility, but are already impacting Bangladesh. Between 2000 and 2019, the country experienced 185 extreme weather events due to climate change. Tropical cyclones are estimated to cost Bangladesh USD 1 billion annually, and around 20 million people are already having their health affected from saltwater-polluted drinking water linked to sea level rise. In 2022 alone, over 7.1 million Bangladeshis were displaced by climate change, according to the World Health Organisation.

Fig. 2: Proportion of population exposed to climate risks
Source: USAID

These impacts are set to get worse as the climate warms. The IPCC has found that wind speeds and rain rates of tropical cyclones will increase as global temperatures rise. By 2050, Bangladesh could have up to 19.9 million internal climate migrants, according to the World Bank, almost half the projected internal climate migrants for the whole of South East Asia. By 2100, one third of the population of Bangladesh could be at risk of displacement. 

The extent of these impacts will be determined by the speed at which the world can reduce greenhouse gas emissions – the science is clear that an immediate and rapid reduction in the use of gas is required to avert the worst impacts of climate change.

Impacts of heat stress due to fossil fuel and LNG expansion in Bangladesh and around the world

Bangladesh is predicted to experience more frequent and severe heatwaves, which have been shown to increase mortality rates by as much as 31.3% for every 1°C increase in the universal thermal climate index. 

Heat stress can exacerbate respiratory problems, such as asthma and chronic obstructive pulmonary disease (COPD), which are already common in Bangladesh due to air pollution. These can result in reduced productivity, increased absenteeism and long-term health issues.

Vulnerability to heat-related diseases is exceptionally high among people over 65, who often have underlying medical conditions. Children are also vulnerable to heat events, due to their susceptibility to vector-borne diseases, as are individuals with low literacy levels who may not be fully aware of the dangers of extreme heat events.

Vulnerable communities are also more likely to experience economic impacts from heat stress, such as lost wages from illness or decreased productivity. Low-income households may also struggle to pay for cooling, or live in housing without adequate ventilation or insulation, increasing the risk of heat stress and heat-related illness.

Psychological impacts of heat

Recent research has highlighted the impact of climate change on mental health in Bangladesh, revealing a link between elevated temperatures and mental health-related morbidity and mortality. A Lancet Countdown report projected deadly heat problems for densely populated areas, such as Dhaka and Chattogram, where the urban heat island effect exacerbates the vulnerability of residents. 

Vulnerability to mental health impacts is particularly acute for older populations, women, individuals with physical disabilities or illnesses, and households experiencing economic shocks. 

Heat impacting productivity at work

The warming planet will increase the health and well-being risks associated with working in hot and humid conditions. This is especially true for low and middle-income tropical countries like Bangladesh, where a significant proportion of the population are manual workers in agriculture and construction. Workers exposed to heat stress are at risk of a range of health impacts, including dehydration, heat exhaustion, heat stroke and other heat-related illnesses. 

Extreme heat exposure is also affecting working hours, resulting in a significant loss of labour. The International Labour Organization (ILO) has identified Bangladesh as one of the South Asian countries that faces a high risk of lost working hours due to heat stress, especially in the agricultural sector. At present temperatures, the country loses 254 hours of labour per person annually due to heat exposure. This figure increases significantly to 573 hours of labour loss per person annually if the temperature rises by 2°C.  

Workers are less able to perform physical tasks in high temperatures and humidity, leading to decreased output, increased downtime and reduced economic efficiency, which in turn can reduce income and economic growth. Additionally, the costs of providing medical care and preventative measures to reduce heat stress can be significant. 

Fig. 3: Heat exposure and working hours lost
Source: Parsons, L. A., Shindell, D., Tigchelaar, M., Zhang, Y., & Spector, J. T. (2021).
Table 2: Working hours lost to heat stress, by sector and country, southern Asia, 1995 and 2030 (projections)
Source: ILO, Working on a Warmer Planet (2019)

According to the ILO, heat stress caused more than 5% of GDP loss in Thailand, Cambodia, and Bangladesh in 1995. By 2030, heat stress could have a similar impact on GDP in Thailand, Cambodia, India and Pakistan. Bangladesh is projected to lose around 4.9% of its GDP to heat stress by 2030 – a potential loss of USD 95.75 billion. The significant impact of these losses on the country’s population and economy underscores the urgency of implementing measures to mitigate the effects of extreme heat on working conditions and productivity.

Renewable energy offers a better alternative

In contrast to the huge growth in LNG import capacity and gas power generation, the pipeline for renewable energy projects in Bangladesh is very limited. In its 2021 climate submission to the UN Framework Convention on Climate Change (UNFCCC), Bangladesh aimed to increase renewable energy capacity by just 0.9 GW by 2030 and only 4.1 GW if the country receives international financial support. This would lead to renewables generating just 4% of the country’s electricity by 2030. In the same submission, Bangladesh proposed increasing gas capacity by 5.6 GW with international financial support, reaching a total capacity over three times higher than that for renewables.

Fig. 4: Proposed gas and renewable capacity by 2030
Source: Bangladesh 2021 Nationally Determined Contribution submission to the UNFCCC

Unless significant policy changes are introduced, the growth in renewables in Bangladesh is set to be very limited. According to the National Solar Energy Roadmap, under a business-as-usual scenario, the country would only have 2.4 GW of solar power installed by 2030 and 6 GW by 2041, with solar making up the majority of the country’s renewable generation.

Despite the limited pipeline for new projects, Bangladesh has the potential to greatly increase the deployment of renewable energy. In 2021, the government launched the Mujib Climate Prosperity Plan (MCPP), setting out a vision of how the climate-vulnerable country could become resilient and prosperous through adapting to and mitigating climate change. The MCPP laid out different scenarios for the potential deployment of renewable energy. In the most ambitious, the country would reach a 30% share of renewable energy by 2030, with a capacity of 16GW, rising to 40% in 2040 with a capacity of 40GW. The Sustainable and Renewable Energy Development Authority (Sreda) has also reportedly proposed a target of generating 5 GW from wind power by 2030, up from virtually none today.

Renewable energy represents a far better alternative to gas to meet Bangladesh’s growing electricity demand. Renewable energy is cheaper than gas – in late 2022, the Institute for Energy Economics and Financial Analysis (IEEFA) estimated that the cost of energy from rooftop solar and utility scale solar are BDT 5.5 and BDT 7.6, well below the current average electricity generation cost of BDT 10. Worldwide, new solar is estimated to be between 11% and 40% cheaper than the cost of new gas plants. Renewable energy is also more reliable than bidding for LNG supplies in a volatile and competitive international market, where buyers in richer regions like Europe can outbid Bangladesh. 

Despite these advantages of renewable energy, the country is well off course to meet the ambitious targets in the MCPP. If the country had followed the most ambitious pathway in the MCPP for solar power deployment, Bangladesh could have reduced the volume of its spot market LNG imports by 25% between 2022 and 2024 compared to the current trajectory, saving USD 2.7 billion, according to analysis by Ember.

Fig. 5: Solar power projection and Bangladesh’s spot LNG purchases
Source: Ember

Bangladesh has now set a target of achieving 40% renewable energy by 2041, but is not currently on course to grow its share of renewable energy in the near future. Expanding LNG imports and gas power generation is set to come at a significant cost to Bangladesh, and is far from guaranteed to be able to supply reliable power to the country. The costs of these projects would be better spent supporting an immediate and rapid increase in the deployment of solar and wind power, to provide cheap reliable power to the country. International donors and financial institutions should also dramatically increase the level of financing available for renewable energy projects – between 2000 and 2020, renewables only received 17% of the USD 10.9 billion in public finance for electricity generation in Bangladesh.

In March 2023, the government of Bangladesh is expected to publish its Integrated Energy and Power Master Plan, updating the 2016 power sector plan. This review gives Bangladesh the opportunity to learn the lessons of the ongoing global gas price crisis, revise down the planned expansion of gas power and LNG imports and instead focus on rapidly scaling up wind and solar power.

Risks & rewards of Just Energy Transition Partnerships

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Key Points

  • Just Energy Transition Partnerships (JETPs) are a pioneering approach that could ensure effective financing for a just transition in global south countries, potentially offering a template for future country-level financing deals
  • The South African JETP investment plan is due to be agreed before COP27 and will be seen as a crucial test of commitments made at COP26. India, Indonesia, Senegal and Vietnam are also developing their own JETPs with G7 countries, with pilot projects also announced for Egypt, Ivory Coast, Kenya and Morocco
  • The JETP process for South Africa has lacked transparency and adequate civil society engagement, limiting its effectiveness 
  • To be effective, donors must prioritise grants and concessional financing in JETP deals to fund the most critical elements of a just transition, such as support and retraining for workers
  • All JETP countries are seeking to expand fossil gas extraction and power, raising the question of whether donor countries may break the commitments made to end international fossil fuel finance at COP26.

What is a Just Energy Transition Partnership?

At COP26, a “historic international partnership” was agreed to support a just transition to a low carbon economy in South Africa. This Just Energy Transition Partnership (JETP) saw France, Germany, the UK, US, and EU (the International Partners Group, or IPG) commit to providing USD 8.5 billion over three to five years to support South Africa’s national climate plan. The finance could be provided as grants, concessional loans (with interest rates lower than would be available from commercial banks), through private finance, guarantees or technical support.

The JETP aims to phase out coal and rapidly accelerate the deployment of renewables in South Africa’s heavily coal-dependent electricity system. This would enable the country to reduce its emissions, consistent with keeping global warming below 2°C. A key focus of the agreement is supporting a just transition that protects vulnerable workers and communities – especially coal miners, women and youth – affected by the move away from coal. The partnership also aims to support private sector investment, including through changes to government policy in South Africa.

This agreement has been described as a potential “new model for climate progress,” a bespoke multilateral agreement developed by and for a single country with greater focus on ensuring a just transition. Even before the implementation plan for the South Africa JETP had been agreed, the model was replicated – in June 2022, the G7 announced it was “working towards” further JETPs with India, Indonesia, Senegal and Vietnam. Pilot projects to develop JETPs for Egypt, Ivory Coast, Kenya and Morocco were also announced at the EU-AU summit in February 2022. While the model has been quickly replicated for other countries, serious questions remain about the transparency, consultation and financing model of the South Africa deal.

An investment plan for South Africa’s JETP has been approved by the South African cabinet and is due to be publicly released during COP27. This implementation plan will play a pivotal role in shaping the financing of the energy transition in South Africa. It could also be seen as a crucial test of this new partnership model and a key milestone in demonstrating progress on delivering on funding commitments ahead of COP27.

The positive impacts JETPs could deliver

Bespoke country-level approach

JETPs could fill a key gap in international climate finance, between broad global-level funder commitments that lack detail and accountability and project-specific financing that does not provide a comprehensive approach to the energy transition. Instead, JETPs are country-led and bespoke – South Africa’s lead climate negotiator described the USD 8.5 billion package as “groundbreaking” because it was “co-created” by South Africa and donor countries, rather than imposed by wealthy nations. 

Linked to this, JETPs are designed to incorporate national policy reforms alongside project financing. These policy reforms should be aimed at removing barriers to the investment and scaling up of clean energy technologies, for example through energy market or domestic subsidy reforms.

Ensuring the energy transition is just

The energy transition has significant social impacts – most acutely on workers and communities that rely on high-emitting industries that need to be phased out. The transition also offers huge opportunities, with investments in renewable energy and infrastructure creating new jobs and economic growth. Significant government and international financing, alongside the right policies, are needed to mitigate the negative impacts of phasing out high emitting industries and ensuring those communities benefit from the shift to clean energy.

A replicable model for the early closure of coal power plants

Ensuring a rapid phaseout of coal-fired power generation is essential to limiting warming to 1.5°C, with richer nations needing to end coal use by 2030 and a global end to coal power by 2040. Coal plants have an average lifetime of 46 years but to align with a 1.5°C goal, plants need to reduce their operational lifetime to an average of 15 years. The early closure of these power plants can come with significant financial costs as the high upfront costs are usually paid off over the life of the project. This is particularly acute in the global south where coal fleets are comparatively young and shorter lifespans would further reduce earnings and increase losses.

Proposals for how to finance the early retirement of coal power plants have developed significantly in recent years, including the possibility of running plants for a shorter period with a lower cost of capital, or buying out existing power-purchasing agreements. JETPs could provide a fully-developed model for financing an accelerated coal phaseout that could be replicated across coal-power dependent countries in the global south.

In parallel with the JETPs, the Asian Development Bank is developing an Energy Transition Mechanism (ETM) for the early retirement of coal power plants. The ETM is currently developing pilots for combining public and private finance to retire or repurpose between five and seven coal-fired power plants in Indonesia, the Philippines and Vietnam.

Deliver on rich countries’ climate finance commitments

Climate finance has become a key sticking point in international climate negotiations, with the failure of rich countries to deliver on the USD 100 billion commitment made in Paris a major block to progress at COP26. While pledges of funding have increased, governments in the global south are also keen to see those pledges delivered and flowing to projects and programmes that urgently need funding. Effective delivery of JETPs could show that donor countries are serious about meeting their funding commitments, building trust in the multilateral process.

G7 countries are not the only potential donors for energy infrastructure projects in the global south, with Russia and China also providing project financing. If the G7 countries want to maintain their position and influence as a provider of finance to global south countries, they must deliver on finance, and do it in a way that genuinely meets the needs of the recipient countries.

The challenges JETPs need to overcome

Lack of transparency & civil society engagement

Of the proposed JETPs, South Africa’s is the most advanced, yet very limited information about the deal has been released publicly. While the South African government has conducted a countrywide consultation on the just transition, the consultations on the JETP itself have, so far, only involved the South African government, the IPG and development finance institutions. Apart from two events at COP26 in Glasgow, there has been no formal civil society consultation on the proposed partnership.

After the initial announcement at COP26, there was no public communication regarding the partnership for six months, until an update was released by the South African government and the IPG. 

The South African government has been working on a proposed investment plan – the core of what the JETP will fund. A draft of the plan was reportedly sent to the IPG in early October, and was approved by the South African cabinet in mid-October. Unusually, public consultation on the investment plan is only due to take place after it has been agreed by both the IPG and the South African government, limiting the scope for meaningful input. 

From the donors’ side, the IPG has sent financial offers to the South African government for evaluation – however these offers remain confidential. Again, the lack of transparency on the sources and types of funding proposed by the donors severely limits public scrutiny over the financing of the deal.

This lack of transparency and consultation is a key concern, as consultation and engagement with civil society, communities and trade unions should be a cornerstone of a just transition.

Providing the right kind of finance

A core element of the JETP model is the use of blended finance, where public finance from governments is used to leverage further new private sector investment. This model has been proposed for over a decade and pitched as a way not only of ensuring greater value for money for donor governments and their taxpayers, but creating a greater role for the private sector in the traditionally government-focused world of development finance. However, real leverage rates – the ratio of public finance to private finance – are low. On average, for every USD 1 development banks have invested in low income countries, private finance has mobilised just 37 cents.

Part of the challenge with blended finance has been that public funding has come in the form of loans through development banks that have a mandate to deliver a return on their investment. This means that public finance can end up funding commercially-viable projects, rather than being used to take on greater risk or fund activities that don’t generate a return. In other words, the funding does not end up where it is needed most.

This will be a particular challenge for JETPs, as the financing covers a broad spectrum of needs with varying rates of return. These range from renewable energy generation to the costs of supporting communities and workers that need financial support. In order to be successful, public finance should be targeted at zero and low-return needs, which means the majority of the public finance should be provided as grants, guarantees or on highly concessional terms.

Adapted from Making Climate Capital work: Unlocking $8.5bn for South Africa’s Just Energy Transition by the Blended Finance Taskforce and the Centre for Sustainability Transitions at Stellenbosch University

Recipient countries have publicly stated that they are not interested in taking on more debt at near-market rates. As South Africa’s environment minister has said: “We would have no interest in borrowing money that isn’t cheaper, what would be the point?”

While the details of the financing for South Africa’s JETP remain confidential, early signs are not promising – in the case of funding currently being negotiated by France, reports suggest only a small portion would be in the form of grants, which would only cover research studies. Similarly, in early October the German government announced it had pledged EUR 320 million for the JETP, with EUR 270 million in low interest loans and only EUR 50 million in grants. 
A leaked draft of the financing plan for South Africa indicated that just 2.7% of the total USD 8.5 billion would be provided as grants, with 43% provided as commercial loans or guarantees. These figures were disputed by South Africa’s lead official on climate finance, who stated that: “The numbers cited do not reflect the current status of the financing package, details of which will be provided once the plan is released to the public.”

Financing fossil gas

Multiple studies have shown that to limit warming to 1.5°C, no further fossil fuel infrastructure can be built. Yet all five JETP countries have plans to significantly increase the use of fossil gas in power generation and Senegal is set to become a major new gas producer. The five countries alone make up 19% of gas power plant capacity currently under development in the world.

In many of the countries, these gas expansion plans are closely linked to the JETPs:

During COP26, 39 countries committed to end new direct international public finance for the unabated fossil fuel energy sector by the end of 2022 – with Japan the final G7 to join the commitment in May this year. However, this commitment contained an exemption to allow fossil fuel funding in limited and clearly-defined circumstances that are “consistent with a 1.5°C warming limit”. The commitment was further weakened at the G7 summit in June in the wake of the global energy crisis driven by Russia’s invasion of Ukraine. The group’s communique acknowledged that: “Investment in this sector is necessary in response to the current crisis… In these exceptional circumstances, publicly supported investment in the gas sector can be appropriate as a temporary response.” 

In this context, the JETPs serve as a crucial test of whether the G7 countries will keep to their COP26 commitment to end international fossil fuel financing.

False solutions

There are significant risks that JETP deals could finance ‘false solutions’ to the energy transition, either wasting scarce resources on unviable technologies or, worse still, financing technologies that actively harm the environment:

  • Hydrogen exports – Expanding green hydrogen production and use is a core component of South Africa’s ambitions for its JETP, and both South Africa and Senegal have plans to become hydrogen exporters. While green hydrogen can reduce emissions in applications that are hard to electrify, like heavy industry, shipping hydrogen internationally is likely to be prohibitively expensive and inefficient.

What does the IEA Net Zero Scenario say?

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Key points

  • The IEA is ambitious on renewables and EV uptake for the first time, projecting a huge build out of wind and solar energy by 2030. The Net Zero Scenario says clean energy technologies dominate in the future, displacing fossil fuel use substantially.  
  • Shrinking fossil fuel demand means no new oil and gas fields beyond those that are approved in 2021. Oil demand peaks in 2019, and declines 275% from 2020 to 2050. Over 60% of LNG and piped-gas demand is wiped out by 2050. Some producing oil and gas fields close prematurely in the 2030s. Only low-cost producers and producers able to transform their operational models survive low oil and gas prices, but their revenues shrink massively.
  • Over half of coal demand is destroyed by 2030, registering a 90% decline by 2050. There is no need for new coal mines or unabated coal power plants beyond 2021. All subcritical coal plants need to be phased-out by 2030.  
  • The IEA projects a slower gas phase-out in this decade. Although gas demand destruction accelerates in the 2030s, half of remaining gas is used to produce hydrogen with CCUS in 2050. 
  • The IEA puts too much faith in building up hydrogen, bioenergy, NETs and CCUS to achieve net zero by 2050, despite the uncertainty over commercial viability of these technologies. The IEA also carves a critical role for oil and gas expertise in captured CO2 and low-carbon fuels.  

Clean energy soars:

  • The scenario sees a massive expansion of solar and wind in the 2020s. Solar and wind annual additions quadruple in this decade, reaching 630 GW and 390 GW by 2030, respectively. Solar is the king of the energy sector by 2050, responsible for 20% of total energy supply. Between now and 2050, solar PV capacity increases twentyfold, and wind elevenfold. Solar and wind dominate the global electricity generation in 2050, together responsible for almost 70%. 
  • Electric vehicle (EV) sales ramp up rapidly from 5% of global car sales today to 60% in 2030. The IEA recommends all governments end all new internal combustion (ICE) vehicles that run on gasoline or diesel by 2035. From this date onwards, all new cars should be either electrified or hydrogen-powered. Annual battery production surges from 160GWh today to 6600GWh in 2030, equivalent to adding 20 gigafactories every year until 2030. EV public charging infrastructure goes up from one million stations today to 40 million 2030, requiring a USD 90 billion investment by 2030. 

A shrinking role for fossil fuels:

  • There is no need for investing in new oil and gas fields, says the scenario. As fossil fuels decline from 80% of total energy supply today to 20% in 2050, investments in new oil and gas fields as well as LNG terminals, beyond current commitments, is unnecessary. This means only a small number of low-cost oil and gas producers would be able to survive, but their revenues would shrink by 75% from 2030 onwards.
  • Oil demand peaked in 2019. Oil demand never goes back to previous levels, shrinking 20% from 90 mb/d in 2020 to 72 mb/d in 2030. By 2050, oil use is 24 mb/d, registering a 275% decline over a 30-year period. Oil prices would fall to USD 25/bbl in 2050, making it hard to justify new investments, even for low-cost producers. If all investments in producing oil fields stop now, oil output would decline by 8% annually. But the IEA’s Net Zero Scenario calls for continued investments in producing oil fields, registering a 4.5% annual decline in oil output until 2050. 
  • The IEA sees a slow gas phase-out. Gas demand declines by 55% from 3,900 bcm in 2020 to 1,750 bcm in 2050. LNG and piped gas volumes would fall by 60% and 65% respectively from now to 2050. But gas use only declines by 5% to 3700 bcm in 2030, much slower than the UN Production Gap report says. After 2030, some of the existing gas fields may be closed prematurely or shut-in temporarily, risking stranded assets. By 2050, half of remaining gas use is dedicated to hydrogen production with CCUS (see section below). 
  • No investments are needed in new coal mines or expanding existing mines, and no new unabated coal plants should be approved. Coal demand falls by 90% in the next thirty years. Coal is responsible for only 1% of total energy demand in 2050. By 2030, over half of coal use is destroyed. In coal power development, the IEA identifies several milestones to reach net-zero: Starting immediately, governments should stop approval of new unabated coal power plants and phase out all (870 GW) subcritical coal-fired power plants by 2030. Coal use in power generation sharply decreases – unabated coal-fired generation is cut by 70% in 2030 – and would be partly replaced by solid biomass to allow existing assets to continue operating. In 2050, CCUS is applied to around 80% of coal produced.

The IEA NZ transition depends in the medium term on technologies that have yet to be proven at scale – Hydrogen, CCUS and NETs. However, deployment of CCUS, NETs and biomass is in the low range of other 1.5oC scenarios. 

  • Almost 50% of the emissions reductions needed between 2030 and 2050 depend on technologies that are not commercially viable yet.
  • The IEA envisages a 3,900% increase in how much carbon we capture between 2020 and 2030, or 18,900% from 2020 to 2050. The new report expects the amount of carbon we capture each year to grow from 40 million tonnes in 2020 to 1.6 billion tonnes in 2030, increasing to 7.6 billion tonnes in 2050. This means:
    • A large role for carbon capture utilisation and storage (CCUS). By 2050, of the total carbon captured, the IEA sees about 5.2 billion tonnes of carbon being captured via CCUS each year. In real terms, this means installing CCUS facilities on 10 heavy industry plants each month from 2030 onwards. However the report is more conservative on CCUS than relevant IPCC scenarios.
    • Negative emission technologies (NETs) are needed. By 2050, the remaining 2.4 billion tonnes of carbon is captured by so-called negative emissions technologies. Of this, direct air capture (DAC) soaks up about one billion tonnes and bioenergy carbon capture and storage (BECCS) about 1.4 billion tonnes. NETs should theoretically lead to an overall subtraction of carbon from the atmosphere, and are used in the IEA scenario to ‘offset’ residual emissions. The amount of negative emissions is relatively small compared to IPCC and other 1.5oC scenarios.
  • By 2050, hydrogen grows by over 500%, with a third produced from gas with CCUS. Hydrogen production grows from less than 90 million tonnes (Mt) in 2020, to more than 200 Mt by 2030, to 530 Mt by 2050. In 2030, about half of the hydrogen is sourced from coal and natural gas with CCUS. By 2050, the amount of hydrogen produced through renewables grows to 60%, still leaving a significant role for gas in hydrogen production. The IEA acknowledges that rolling out the electrolysis capacity to make ‘green’ hydrogen is a significant challenge, as there is a lack of manufacturing capacity. 
  • The IEA advocates for scaling up infrastructure investments to carry hydrogen and captured CO2 emissions. It says that annual investments for CO2 pipelines and hydrogen-enabling infrastructure have to ramp up from USD 1 billion today to USD 40 billion in 2030. This means repurposing existing gas pipelines and ships to transport hydrogen and captured CO2, which the report highlights are well matched with the oil and gas industry’s experience and skills. 
  • CCUS, in particular, is the achilles heel of the Net Zero Scenario. Hydrogen, bioenergy and continued use of fossil fuels for power sector and heavy industries all hinge on the successful and dramatic scaling up of CCUS. The IEA admits that CCUS deployment is “very uncertain for economic, political and technical reasons”. It calculates that failure to develop CCUS for fossil fuel would mean the transition would need to lean more heavily on wind, solar and electrolyser capacity to achieve the same level of emission reductions, requiring USD 15 trillion of additional investment.

Bioenergy: 

  • Bioenergy use increases by ~60% between 2020 and 2050. To address the concerns about land use, the IEA advocates shifting toward using “advanced bioenergy feedstocks”, including waste streams, short-rotation woody crops and feedstocks that do not require the use of arable land. Bioenergy is not a renewable source as it still drives land use change and greenhouse gas emissions, unless attached to CCUS.
  • Bioenergy use rises 3% a year on average to 100 EJ in 2050, meeting almost 20% of total energy needs. Most comes from solid biomass, followed by liquid biofuels and biogases. Solid bioenergy replaces coal in the power, industry and building sectors, reaching 60 EJ in 2050.
  • The total land area dedicated to bioenergy production increases from 330 million hectares (Mha) in 2020 to 410 Mha in 2050. In 2050, around 270 Mha is forest, representing 25% of the total area of global managed forests (or ~5% of total forest area).
  • Is it possible to deliver net-zero by 2050 without expanding land use for bioenergy? Yes, but it would require a combination of wind, solar, hydrogen and synthetic methane. However, the IEA believes this would make the energy transition significantly more expensive. The additional wind, solar, battery and electrolyser capacity, together with the electricity networks and storage needed to support this higher level of deployment, would cost more than USD 5 trillion by 2050.

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