A world Sector Outlook

Over the long term, the prospects for renewable energy remain positive, marked by steady growth across all sectors. Between now and 2040, research and analysis suggest that:

  • Overall energy demand will rise by over 30 percent.
  • Renewables will grow to account for 56 percent of power capacity.
  • Developing countries will build three times the renewable capacity as developed countries.
  • Penetration of renewables will double to 46 percent of electricity output.
  • Costs for wind will decrease by 32 percent and solar by 48 percent.
  • Solar will account for over a third of global capacity additions.

Challenges for renewables include policy uncertainty, a trend toward auctions and away from FITs and green certificates in developed countries, retroactive changes in subsidies, and the need to expand electricity distribution systems and integrate renewable-based systems with existing power grids. In addition, the rapid drop in crude oil prices in 2015 and the continued low prices for natural gas in North America may have an impact on adoption rates for renewables, although no significant changes have been seen so far in policymaking or investments.

In fact, the continued growth of renewables during a period of historically low prices for oil and gas can be explained in part by the success of policies that decouple the renewable market from the fossil fuel market.

The development of more sophisticated power storage and delivery systems will become increasingly important for renewables and require high investments. As the global middle class continues to expand, energy consumption will be marked by greater peak demand periods driven by home appliances, cooling and heating systems and transportation. However, renewables such as solar and wind are variable energy sources, dependent on whether the sun shines and the wind blows.To incorporate these renewables into their traditional energy mix, utilities will need to continue their development of battery storage systems, smart metering, demand-response solutions, and other innovations that increase energy efficiency while helping to match fluctuating supply and demand.