An Analysis of the IEA World Energy Outlook Oct 2023

The International Energy Agency has published its annual World Energy Outlook, one of the most anticipated publications in the global energy sector. While the IEA has notably under-predicted the growth in wind and solar in previous iterations of the report, of late analysts have taken the explosion of investment in variable renewables more seriously. This has led the organisation to start taking the challenges of integrating renewable output more seriously. This is good news for sustainable hydropower the perfect complement to solar and wind power, thanks to its flexibility and green energy storage offer. The WEO makes the point early on that complementary technologies are needed:

“A net zero energy system cannot rely only on solar, wind power and EVs. Rapid growth in the use of these technologies needs to be complemented by larger, smarter and repurposed infrastructure networks, large quantities of low-emissions fuels, and technologies to capture CO2 and store it permanently or transform it into climate neutral fuels.”

I couldn’t agree more, Hydropower can work in concert with variable renewables such as wind and solar power to secure grid flexibility and reliability and next-generation hydro technologies have been designed to deliver ultra flexible electricity in response to rapid changes in demand. However, the report suggests hydro as primarily a seasonal and inter-seasonal resource, which does not reflect its role in providing key ancillary services such as inertia and voltage support, key to the reliability of supply, instead seeing batteries as the key shorter-term technology:

"Batteries and demand response play a critical role in meeting hourly variability, while dispatchable low-emissions capacity – fossil fuel capacity with CCUS, hydropower, biomass power, nuclear, and hydrogen and ammonia-based plants – play a critical role in smoothing variability across seasons."

Consequently, the WEO recommends policy and regulatory action to ensure these resources are encouraged:

“Market designs and regulations need to ensure that the dispatch of pumped storage, reservoir hydropower and other forms of long-term energy storage is aligned with the long-term flexibility needs of the system.”

However, while the IEA clearly sees a vital role for hydro in a decarbonised electricity sector, it is bearish on the prospects for high growth in the technology:

"Hydropower is the largest low-emissions source of electricity today, accounting for 15% of generation, but its annual output can vary widely, and high upfront capital costs and limitations on development of favourable sites constrain further growth prospects.”

Interestingly, the International Energy Agency, International Renewable Energy Agency and others also say we need 850GW+ of hydropower to keep global temperature rises below 2 degrees Celsius. Taking into account what is in the pipeline, there is a missing 300GW. This can be filled with pumped storage, modernisation and where appropriate and sustainable, conventional greenfield hydropower. While growth is forecast across the WEO scenarios, it is much less than for wind and solar, though admittedly from a higher base. In the ‘Stated Policies” scenario (STEPS), hydro generation increases by 45% from now to 2050, while in the ‘Announced Pledges’ (APS) and ‘Net Zero Emissions’ (NZE) scenarios the equivalent figures are 69% and 88%. Compared to the 1,800% growth in solar in the NZE scenario this is unspectacular, but with decision-makers’ attention being caught by the new technologies in town, the industry will have to work hard to get the market frameworks right to achieve this growth or even exceed it.

Indeed, the scale and speed of renewables deployment required over the next seven years to limit global warming to a 1.5°C pathway is unprecedented. Which is why as a member of the Global Renewables Alliance, IHA are joining the call for tripling global renewable energy capacity to at least 11,000 GW by 2030.

The lesson is clear - governments need to plan for a future of increased variable capacity which means significant investment in firm green electricity. Whilst other technologies are developing fast, only hydropower can do that at scale.

Read the World Energy Outlook

Read the World Hydropower Outlook

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