Renewable Energy Market Update

Renewable
Energy Market Update

Outlook for 2020 and 2021
INTERNATIONAL ENERGY
AGENCY
The IEA examines IEA member IEA association
the full spectrum of countries: countries:
energy issues
including oil, gas Australia Brazil
and coal supply and Austria China
demand, renewable Belgium India
energy Canada Indonesia
technologies, Czech Republic Morocco
electricity markets, Denmark Singapore
energy efficiency, Estonia South Africa
access to energy, Finland Thailand
demand side France
management and Germany
much more. Through Greece
its work, the IEA Hungary
advocates policies Ireland
that will enhance Italy
the reliability, Japan
affordability and Korea
sustainability of Luxembourg
energy in its Mexico
30 member Netherlands
countries, New Zealand
8 association Norway
countries and Poland
beyond. Portugal
Slovak Republic
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
The European
Commission also
participates in the
work of the IEA
Revised version, March
2020. Information
notice found at:
www.iea.org/corrigenda
Please note that this
publication is subject to
specific restrictions that limit
its use and distribution. The
terms and conditions are
available online at
www.iea.org/t&c/
Source: IEA. All rights

reserved.
International Energy Agency
Website: www.iea.org
Renewable energy market update May 2020
Table of content
Key findings ................................................................................................................ 3
Context ....................................................................................................................... 5
2020 and 2021 forecast overview .............................................................................. 6
Covid-19 impact on renewable energy growth .......................................................... 11
Technology summaries ............................................................................................ 20
Solar PV ........................................................................................................................... 20
Wind ................................................................................................................................ 30
Bioenergy for power ....................................................................................................... 38
Hydropower .................................................................................................................... 39
CSP and geothermal ....................................................................................................... 40
Transport biofuels ........................................................................................................... 42
Renewable heat............................................................................................................... 47
Challenges and opportunities beyond 2021 ............................................................. 51
Designing stimulus packages for a cleaner energy future ........................................ 57
IEA All rights reserved.
PAGE | 2
Key findings
 The Covid-19 crisis is hurting – but not halting – global growth in renewable
power capacity. The number of new renewable power installations worldwide
is set to fall this year as a result of the unprecedented Covid-19 crisis, marking
the first annual decline in 20 years. But, given supportive government
policies, growth is expected to resume next year as most of the delayed
projects come online.
 In 2020, the IEA forecasts net additions of renewable electricity capacity to

decline by 13% compared with 2019. The decline reflects delays in
construction activity due to supply chain disruption, lockdown measures and
social-distancing guidelines, and emerging financing challenges. This
nevertheless corresponds to a 6% increase in global installed renewable
power capacity, which surpasses the combined size of power systems in both
North America and Europe.
 In 2021, renewables are expected to show their resilience – the majority of

the delayed projects are expected to come online, leading to a rebound in
new installations. As a result, next year is forecast to reach the same level of
renewable electricity capacity additions as in 2019. Despite the rebound,
combined growth in 2020 and 2021 is almost 10% lower compared to the
previous IEA forecast published in October 2019.
 Solar PV and wind account for 86% of global renewable capacity additions
this year, but their annual expansion is forecast to decline by 17% and 12%
respectively compared to 2019. The forecast expects utility-scale PV and
wind to rebound as the majority of projects in the pipeline are already
financed and under construction. However, forecast uncertainty remains for
projects that were due to achieve financial close in 2020 and become
operational next year. Moreover, total PV additions in 2021 are expected to
fall short compared to 2019 due to slower recovery of distributed PV
applications, as individuals and small business are expected to reprioritise
investment decisions.
 The impact of Covid-19 on renewable electricity technologies with long lead

times, such as hydropower, offshore wind, CSP and geothermal, remains
limited. Hydropower capacity additions are forecast to increase both in 2020
and 2021, driven by the commissioning of two mega hydropower projects in
China and supporting the rebound of renewables next year. The forecast for
PAGE | 3
offshore wind remains unchanged as most projects are already financed and
under construction.
 The Covid-19 crisis has radically changed the global context for biofuels.
Transport biofuel production is anticipated to contract by 13% in 2020, the
first decrease in output in two decades. Gasoline demand is forecast to fall
by 9% in 2020 and diesel demand by around 6%. This, in turn, limits biofuel
consumption resulting from mandate policies. Some of the impacts from the
Covid-19 pandemic could be temporary. If a rebound in transport fuel
demand occurs in 2021, biofuel production could return to 2019 levels.
However, this would still be 5% lower than the output anticipated in our
forecast for 2021 prior to the Covid-19 crisis. Longer-term implications for
growth may arise from the suspension of new policy initiatives in some
countries due to low oil prices.
 Renewable heat consumption is also likely to decline in 2020. The industrial

sector is expected to consume less renewable heat as lower commercial,
industrial and construction activity during lockdown results in a demand
shock for most heat-intensive industries. Moreover, current low oil and gas
prices are affecting the cost-competitiveness of renewable heat fuels and
technologies: many planned investments to switch from fossil fuel heating to
renewable or electric solutions are likely to be postponed or cancelled in the
absence of stronger policies.
 At the start of this year, renewables in several markets were already facing
challenges regarding financing, policy uncertainty and grid integration.
Covid-19 is now intensifying these concerns. However, governments have the
opportunity to reverse this trend by making investment in renewables a key
part of stimulus packages designed to reinvigorate their economies. This
offers the prospect of harnessing the structural benefits that increasingly
affordable renewables can bring, including opportunities for creating jobs
and economic development, while reducing emissions and fostering
innovation.
PAGE | 4
Context
This report is a market update on the IEA’s most recent five-year renewable
energy forecast, Renewables 2019, published in October 2019. It provides an
early analysis of the drivers and challenges since last October, and covers
renewable capacity additions for all technologies and transport biofuel
production expected during 2020 and 2021. An update on renewable heat
technologies is also included; however, the analysis is qualitative due to
limited data availability. Given ongoing uncertainty, the forecasts for 2020
and 2021 will be updated in the second half of the year to reassess recent
market and policy developments.
Renewables are not immune to the Covid-19 crisis, but

they are more resilient
Renewables are not immune to the Covid-19 crisis, but are more resilient than
other fuels. The IEA’s Global Energy Review 2020 projected renewables to be
the only energy source to grow this year compared to 2019, in contrast to all
fossil fuels and nuclear.
Globally, overall demand for renewables is expected to increase due to their

use in the electricity sector. Even with end-use electricity demand falling
significantly because of lockdown measures, low operating costs and priority
access to the grid in many markets allow renewables to operate at near full
capacity, enabling renewable generation to grow. This increased production
is in part due to record-level capacity additions in 2019, a trend that was set
to continue into this year. However, supply chain disruptions, construction
delays and macroeconomic challenges increase the uncertainty about the
total amount of renewable capacity growth in 2020 and 2021.
The IEA anticipates that consumption of transport biofuel and industrial

renewable heat will be more acutely impacted by an economic downturn
than will renewable electricity. Lower transport fuel demand directly affects
the prospects for biofuels such as ethanol and biodiesel, which are mostly
consumed blended with gasoline and diesel. Renewables directly used for
heat processes mostly take the form of bioenergy for the pulp and paper,
PAGE | 5
cement, textile, food and agricultural industries, all of which are exposed to
demand shocks. Suppression of global demand has a stronger impact on
biofuels and renewable heat than it does on renewable electricity. This impact
will critically depend on the duration and stringency of lockdowns and the
pace of economic recovery.
2020 and 2021 forecast overview
Electricity markets
The IEA forecasts that additions of renewable electricity capacity will decline
by 13% in 2020 compared with 2019, the first downward trend since 2000.
This is a 20% downward revision compared to our previous forecast in which
2020 was due to be a record year for renewable power. The update reflects
both possible delays in construction activity due to supply chain disruptions,
lockdown measures and social-distancing guidelines, and emerging
financing challenges. The outlook also takes into account ongoing policy
uncertainty and market developments such as the most recent auctions and
newly financed projects before the Covid-19 outbreak.
However, the majority of these delayed projects are expected to come online
in 2021 and lead to a rebound in capacity additions. As a result, 2021 is
forecast to almost reach the level of renewable capacity additions of 2019.
Despite the rebound, the combined growth in 2020 and 2021 is almost 10%
lower compared to the previous IEA forecast.
PAGE | 6
Renewable electricity capacity additions in updated IEA forecast

250
GW
200
150
100
50
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Actual Forecast
China Europe United States India Japan Brazil Rest of the world
The United States and the People’s Republic of China (hereafter, “China”) are
both expected to see an increase in capacity additions in 2020 and 2021
compared with last year. The phase-out of subsidies in China and the expiry
of tax credits in the United States (in 2020 and 2021, respectively) are
resulting in project development rushes. However, both governments are
expected to provide some flexibility, allowing projects to be commissioned
in 2021 without losing their incentives. As a result, the forecast expects that
some wind and solar PV will be rescheduled and commissioned in 2021.
Construction delays are expected to have an immediate impact on European

utility-scale projects, as certain countries in Europe introduced some of the
strictest lockdown measures in the world. However, capacity additions are
expected to rebound in 2021. Covid-19 exacerbates existing policy
uncertainty and permitting challenges in Germany and France, while the
large pipeline of projects outside the auction scheme in Spain may see
commissioning delays. Distributed PV, which has been the backbone of
recent growth in large European PV markets, is expected to slow. Compared
to 2019 levels, it is not expected to fully recover in 2021 as small investors
reprioritise investment decisions.
In India, Covid-19 is exacerbating existing challenges concerning the financial

health of distribution companies, which play a critical role in the deployment
of both utility-scale and distributed PV. In addition, India’s strict lockdown
PAGE | 7
measures are expected to result in delays to wind and PV projects, and thus
to slower growth in installations in 2020 compared with 2019.
The economic downturn is also expected to increase existing financing and

project development challenges for developing countries in Africa,
Latin America and Eurasia, pushing some planned projects beyond 2021 and
resulting in downward forecast revisions in all three regions.
The IEA forecast expects 167 GW of renewable capacity to become

operational in 2020. Solar PV accounts for half of this renewables expansion,
but its additions decline from 109 GW in 2019 to over 90 GW in 2020. New
PV installations are expected to see a partial rebound in 2021, owing to utility-
scale projects that return to 2019 addition levels, while distributed PV is hit
more severely and does not fully recover. Onshore wind installations are also
affected by commissioning delays, although they are mostly compensated
for in 2021 as the majority of projects in the pipeline are already financed and
under construction. However, forecast uncertainty remains for projects that
were planning to achieve financial close in 2020 and become operational
next year. The commissioning of two mega hydropower projects in China in
2021 supports the overall rebound of renewables.
Renewable electricity net capacity additions growth by technology in 2020 and

2021
15
GW
10
2020 2021
0
Wind Utility-scale PV Distributed PV Hydropower
-5
-10
-15
Overall, the updated forecast revises down combined capacity growth in

2020 and 2021 by almost 10%. The drivers behind this revision vary by
PAGE | 8
technology and country (details in the technology sections). The distributed

PV forecast is revised downwards by the largest proportion, almost 36%,
mainly in Europe, China and the United States. The forecast for utility-scale
PV remains mostly unchanged except in the United States, where larger
pipelines of utility-scale projects prior to Covid-19 underpin more optimistic
growth. For wind, the European Union, China and India are mainly responsible
for the downward forecast revision in 2020 and 2021. Forecast revisions for
hydropower, bioenergy and other renewables are not directly connected to
Covid-19. The forecast for hydropower integrates new project commissioning
dates, based on recent construction activity since our previous forecast.
Transport biofuel markets

The Covid-19 crisis has radically changed the global context for biofuels. The
widespread application of containment measures and stalling of economic
activity has strongly reduced transport fuel demand. Global gasoline demand
is forecast to fall by 9% in 2020 and diesel demand by around 6%.
This, in turn, limits biofuel consumption resulting from mandate policies that
require a set percentage of biofuels to be blended with fossil transport fuels.
We anticipate total transport biofuel production to contract by 13% in 2020,
with ethanol output contracting by 15% and a 6% reduction anticipated for
biodiesel and hydrotreated vegetable oil (HVO) output.
Annual change in biofuel production, actual 2018-19 and forecast for 2020
10
Billion litres
-5
- 10
- 15
- 20
2018 2019 2020 2018 2019 2020
Ethanol Biodiesel and HVO
PAGE | 9
Some of the impacts from the Covid-19 pandemic are likely to be temporary.
Biofuel production will follow gasoline and diesel demand upward as
governments ease confinement measures, allowing mobility and economic
activity to resume. If a rebound in transport fuel demand occurs in 2021,
biofuel production could return to 2019 levels. However, this would still be
5% lower than the output anticipated in our forecast for 2021 prior to the
Covid-19 crisis.
While disruption to construction activity on new biofuel production facilities

may delay commissioning by a matter of months, this additional capacity
should eventually come online.
Disruption to key biofuel support mechanisms may occur this year, as

reduced mobility affects the intended functioning of policies. The US
Renewable Fuel Standard (RFS) sets annual volume requirements for
renewable fuel consumption based on projected fuel demand, as opposed to
the majority of policies, which are based on achieving a given biofuel share.
Actual fuel demand in 2020 will clearly be less than projected due to the
Covid-19 crisis. Therefore, it is likely that the specific biofuel volumes required
by the RFS in 2020 will be far in excess of the levels that can be consumed
according to technical limits on the percentage of biofuel blending. Brazil’s
newly introduced flagship RenovaBio programme may need to adjust its CO2
emissions reduction targets for the year, which could have consequences for
the value of associated CBIO certificates.
In addition, 2020 is the milestone year in which EU member states need to

demonstrate compliance with the Renewable Energy Directive’s 10%
renewable energy share in transport. Given the disruption to transport fuel
demand and biofuel production, the shares that member states would have
achieved under normal circumstances could well be different due to the
impact of Covid-19. This may raise implications for compliance with the
target.
PAGE | 10
Renewable heat markets

Beyond the direct impacts on heat consumption, the Covid-19 crisis further
compromises the already slow growth of renewables in heat supply. First,
delays in renewable district heating projects and in the manufacturing, sale
and installation of renewable heating equipment may not be fully recovered
in the second half of the year. Second, current low oil and gas prices are
affecting the cost-competitiveness of renewable heat fuels and technologies.
Given the uncertain future financial situation of many companies and
households, many planned investments in switching from fossil fuel heating
to renewable or electric solutions are likely to be postponed or cancelled in
the absence of stronger policies.
Without government intervention, the crisis could have a long-lasting effect

on the construction sector, slowing down modernisation of the buildings
stock and the rate of retrofits, which play a crucial role in energy efficiency
improvements and deployment of renewable heat technologies. At the same
time, building renovation in several countries is being considered for
inclusion in economic stimulus packages due to the early opportunity it offers
for creating jobs and triggering economic recovery. This represents an
important opportunity to integrate renewable heat technologies in the
building sector, which could consequently lead to higher-than-anticipated
deployment.
Covid-19 impact on renewable energy

growth
2020 was expected to be another record year for

renewables
The previous IEA forecast, published in October 2019, announced that
renewable capacity additions were set to achieve double-digit growth in 2019
after stalling the year before. The Renewables 2019 forecast was very close
to actual performance; the 191 GW new installations actually connected to the
grid last year was a 7% increase on 2018.
PAGE | 11
Renewables growth in 2019 was dominated by solar PV, with capacity

additions breaking another record to reach 109 GW, slightly lower than the
IEA estimate of 114 GW. Due to policy changes, China’s PV additions declined
for the second year in a row to 30 GW, a sharper reduction than previously
forecast. China’s share of global PV additions declined from a record of 55%
in 2017 to less than 30% in 2019. In contrast, other markets such as the United
States, the European Union, Brazil and Viet Nam outpaced expectations for
PV additions.
Wind power saw its second-largest expansion since 2015, driven by faster
growth in China and the European Union, while hydropower additions
continued their declining trend as fewer projects came online in China.
Renewable electricity capacity additions by technology, actuals and IEA forecast in

2019
250
GW
200
150
100
50
0
2015
2016
2017
2018
2019
2019
2020
Actual Oct-19 forecast
Wind Solar PV Bioenergy Hydropower CSP Geothermal
After a strong 2019, global additions were expected to hit a record in 2020
before declining in 2021, a trend resulting from policy-driven developments
in major markets:
 In the United States, onshore wind additions were expected to peak in 2020
then start to decline as the production tax credit (PTC) begins to phase out.
 In China, the phase-out of feed-in tariffs (FITs) was expected to drive a rush
to complete wind and solar PV projects in 2020, while several large-scale
conventional and pumped hydropower projects were due to be
commissioned in 2020.
PAGE | 12
 In India, the growth of wind and solar projects needed to accelerate to

achieve the ambitious 175 GW target for 2022.
 In the European Union, multiple countries had previously awarded wind and
solar PV capacity in competitive auctions to close their gap on 2020 targets.
Prior to the start of the Covid-19 crisis, biofuel production and renewable heat
consumption were both expected to increase by around 3% in 2020. Three
factors were driving our previous five-year forecast: Brazil’s new biofuels
policy, the wider implementation of China’s ethanol blending mandates and
continued biodiesel expansion in ASEAN member countries. In the
European Union, renewable heat was set to benefit from further policy
support, 2020 marking the start of the implementation period of new 2030
renewable energy goals.
Biofuel production and renewable heat consumption, actuals, IEA estimates and
forecast in 2019
Biofuels Renewable heat
Mtoe
Billion litres
180 600
160
500
140
120 400
100
300
80
60 200
40
100
20
0 0
2017 2018 2019 2020 2017 2018 2019e 2020
Actual Oct-19 Actual Oct-19
forecast forecast
Covid-19 is expected to delay renewables deployment

Like other industries, renewables are exposed to new risks from Covid-19,
varying significantly by market sector and technology. On 5 April 2020,
global lockdown measures had reached a peak with over 4.2 billion people –
more than half of the global population – being subject to complete or partial
lockdowns. Even though countries all over the world began to gradually lift
some of these measures in early May, their impacts are still far-reaching.
Social-distancing guidelines and lockdown measures have been triggering
PAGE | 13
supply chain disruption and delays in project construction, having a direct

impact on the commissioning of renewable electricity projects, biofuel
facilities and renewable heat investments. Restrictions on business activities,
travel and border closures have sharply reduced energy demand in transport
and industry, decreasing the consumption of bioenergy and other
renewables. Emerging macroeconomic challenges may prompt cancellation
or suspension of investment decisions for both large and small-scale projects
under development. All of these factors may put projects at risk, even if they
are at an advanced stage.
Delaying projects under construction

For utility-scale electricity and transport biofuel projects under construction,
commissioning delays will depend on the length and severity of confinement
measures. These can vary by country, state or even city. By mid-May, the
world’s top growth markets in 2020 had undergone four to ten weeks of non-
essential business closure or lockdown, with some of the strictest measures
in place in certain US states, Europe and India starting mid-March.
Length of full and partial lockdown measures in top renewable growth markets
Brazil
Mexico
Australia
Turkey
United Kingdom
France
Germany
Texas, US
Oklahoma, US
California, US
India
Spain
Netherlands
Italy
Japan
Korea
China
23 January '20 February '20 March '20 April '20 15 May
Social distancing Business closure or Full lockdown
partial lockdown
Source: IEA analysis based on Olivier Lejeune (2020), Coronavirus Counter Measures,
https://github.com/OlivierLej/Coronavirus.
PAGE | 14
While these measures are intentionally strong, in most countries the energy
sector counts among the essential services. Therefore, lockdown measures
do not necessarily imply that construction activity on energy projects,
including renewables, has fully stopped. This varies by market, however, as
in some countries, access to sites was allowed under full lockdown, while in
others, work on some projects could not continue even under a partial
lockdown. For instance, India allowed the construction of renewable energy
projects to continue during its three-week full lockdown, while major
construction firms in Japan suspended works in response to the state of
emergency.
Delays due to supply chain disruptions and/or closure of construction sites

have the obvious result of reducing additional short-term capacity additions,
with the impacts most likely seen in 2020.
A second consequence is that delayed projects may run the risk of not
reaping the benefit of incentives ending in 2020. Even with site access,
almost all lockdown measures and social-distancing guidelines require
companies to follow precautionary safety measures. Limitations on the
number of workers allowed on site and/or stricter hygiene protocols
inevitably slow construction down, increasing the risk of delays. Delays in
components or construction put companies at risk of missing critical policy
deadlines in China, the United States and Europe, denying them financial
incentives they previously qualified for.
It is reasonable to assume that a majority of projects missing incentive

deadlines may be further delayed or cancelled. In order to address these
concerns, a number of countries have introduced policy changes, as
reported in the table. This positively influences the outlook, in particular for
2021.
PAGE | 15
Recent policy changes providing flexibility for delays
Impact
Country Policy change
year
Extension of the construction period for wind

Austria 2020-21
farms by 6 months
3-5-month extension of commissioning deadlines

Denmark for household wind turbines; 2-month extension 2020
for subsidy applications for biogas projects
Extension of commissioning deadlines by 2-6

France 2020-21
months
Federal network agency announced flexibility in

Germany project commissioning for previously auctioned 2020-21
projects
6-month extension for projects due to come

Greece 2020-21
online in mid-2020
30-day extension of commissioning deadlines for

India 2020-21
renewable projects after the lockdown
6-month extension of the FIT completion deadline

United Kingdom 2020
for community solar projects
Extension of PTC/ITC safe harbour provision

United States 2020-21
proposal
Covid-19 poses a risk to investments made by individuals and small to

medium-sized enterprises in renewable energy applications, such as
distributed PV, solar thermal water heaters, heat pumps and biomass boilers.
These investments run a higher risk of delay or even cancellation compared
to large-scale projects. Currently, the installation of distributed solar PV has
slowed in many countries as lockdown measures prevent personal contact
and access to houses or commercial buildings. Moreover, households and
small businesses facing financial shocks and economic uncertainty may
postpone or abandon their plans to install solar PV, solar thermal water
heaters or heat pumps on their property.
PAGE | 16
Impacts on existing assets

Existing renewable electricity plants are mostly sheltered from both lower
electricity demand and declining prices. Many renewable electricity plants
have fixed price contracts and are granted priority access to the grid,
resulting in little or no output curtailment. Covid-19 lockdown measures have
resulted in weekly electricity demand decreasing by 10-35% across affected
regions, increasing the overall share of variable renewables to meet this
demand. A combination of low electricity demand and the additional capacity
coming online in 2019 and the first quarter of 2020, are leading to record high
shares of infeed from variable renewables in electricity demand in some
regions.
VRE share over demand in Italy, California and Germany

Italy California Germany
100 100 100
90 90 90
%
80 80 80
70 70 70
60 60 60
50 50 50
40 40 40
30 30 30
20 20 20
10 10 10
0 0 0
0
150
300
450
600
750
900
1050
1200
1350
0
150
300
450
600
750
900
1050
1200
1350
0
150
300
450
600
750
900
1050
1200
1350
hours
Lockdown start to 13/05/2020 Corresponding period in 2019
Italy, Austria and Belgium have experienced well above record-high hourly
shares of variable renewable energy (VRE) compared to last year, reaching
almost 63%, 70% and 67% instantaneous VRE penetration respectively. In
addition, Germany had a new record low net load as a result of declining
demand. Conversely, systems such as California and Texas experienced VRE
shares similar to last year. These states experienced higher hourly VRE shares
before lockdown measures, showing that in some cases variability due to
weather had stronger impacts than electricity demand reduction due to
Covid-19.
PAGE | 17
VRE share over demand in Austria, Belgium and Texas

Austria Belgium Texas
100 100 100
90 90 90
%
80 80 80
70 70 70
60 60 60
50 50 50
40 40 40
30 30 30
20 20 20
10 10 10
0 0 0
0
150
300
450
600
750
900
1050
1200
1350
0
150
300
450
600
750
900
1050
1200
1350
0
150
300
450
600
750
900
1050
1200
1350
hours
Lockdown start to 13/05/2020 Corresponding period in 2019
Despite increasing VRE shares, security of supply has not been jeopardised
during the current crisis, even in countries with very high penetration rates.
However, as we transition into summer, more challenging conditions could
arise – particularly in PV-dominated systems – when even more extreme VRE
shares may be expected. Systems could start facing a more recurrent
challenge of either decreasing conventional generation to accommodate
renewable energy or curtailing renewables.
Experience shows that balancing supply and demand during summer can be
an increasing challenge, as a growing percentage of demand is served on-
site with distributed PV, while generation from utility-scale solar PV and other
renewables also increases. This means that conventional sources are turned
off and cannot provide grid-balancing services such as frequency regulation
and voltage management. This problem might be exacerbated by lower
demand resulting from lockdown measures and consequently even higher
VRE in-feed into the system. However, these ancillary services could be
provided by solar PV and wind by implementing operational changes; some
countries are already actively doing this. Covid-19 may require system
operators to make use of balancing tools more frequently and for longer than
PAGE | 18
in past summers, as is already stated by Great Britain´s electricity system

operator (National GridESO), in their April 2020 Summer Outlook. 1
While existing renewable electricity assets have not seen much impact from
the decline in demand, transport biofuel production plants have idled or
reduced their output. In the first quarter of 2020, road transport in regions
with lockdowns in place dropped by between 40% and 80% compared with
2019 during the same period. As ethanol and biodiesel are blended with oil
products, their production in key countries fell in line with transport fuel
demand. For instance, US ethanol production declined by almost 50% in mid-
April compared to the same period in 2019. Renewable heat consumption in
industry also saw a similar trend.
Evolution of road transport and aviation activity in 2020 relative to 2019
Road transport activity Number of flights

150 150
Year-on-year % change
125 125
Europe
100 100
India
75 United States 75
50 China 50
25 World 25
0 0
January February March April January February March April
Renewable heat consumption in industry sees a similar trend, as reduced

commercial, industrial and construction activities during lockdown results in
a demand shock for most heat-intensive industries, in particular for large
bioenergy consumers such as the cement and wood industries. Although
reduced electricity demand tends to lift the share of renewables in the
electricity supply, and thereby raise the indirect contribution of electric
heating and heat pumps to renewable heat consumption, this effect remains
marginal overall.
1
National Grid ESO (2020), April 2020 Summer Outlook, https://www.nationalgrideso.com/document/167541/download.
PAGE | 19
Technology summaries
Solar PV
Having stalled in 2018, solar PV capacity additions surged again by almost
14% in 2019, reaching a record of 110 GW of newly installed capacity globally.
This is despite Chinese PV additions declining by almost a third, as annual
installations elsewhere grew by 50% last year.
Covid-19 has led to construction delays and weaker than anticipated

investment, requiring us to revise capacity addition projections down by over
15% for 2020. While the impact will be across the entire sector, Covid-19
related risks are not spread equally as distributed PV is more affected than
utility-scale projects.
Solar PV capacity additions, actual and IEA forecasts

120
GW
100 Off-grid PV
80
Residential PV
60
40 Commercial PV
20
Utility-scale PV
0
2019 2020 2021 2020 2021
Actual Oct-19 forecast May-20 forecast
Utility-scale projects are more susceptible to supply chain concerns, labour

constraints and construction delays, all leading to delays in project
commissioning. The distributed PV sector is more at risk as it relies on both
individuals and SMEs, who are more severely affected by lockdown measures
and any economic downturn resulting from Covid-19; they will be reluctant
to invest in such systems as they look to save money or reduce capital
spending. Given recent precautionary measures, such as social distancing
and lockdowns, project development challenges could last through the end
PAGE | 20
of Q3 2020. Our updated forecast expects a rebound for utility-scale projects

in 2021, but with total PV installations remaining below 2019 levels due to
much slower recovery of distributed PV applications.
All PV sectors are at risk of prolonged supply chain delays associated with
Covid-19. With China accounting for 70% of global PV module manufacturing,
the country’s factory shutdowns in February and the first two weeks of March
drastically lowered the availability of equipment. After the easing of these
shutdowns, manufacturing in China has ramped up production and the solar
PV supply chain is rapidly resuming activity, despite some lingering shipment
delays. Other major supply markets such as South East Asia saw slowdowns
in production, but for the most part maintained a similar volume of output
throughout the pandemic.
Even with any production slowdown, there remains significant manufacturing

overcapacity in the PV market. The global manufacturing capacity for cells is
150 GW, while 120 GW worth of solar PV cells were shipped in 2019 and
109 GW were installed. As a result, the market had 30 GW of unused
manufacturing capacity and 10 GW of cells stored for later use. In addition,
since 2018 manufacturers, developers and traders have built inventories,
taking advantage of low prices.
Solar PV module manufacturing and demand, 2014-19 actual and 2020 estimate
180
GW
160
140 Manufacturing
capacity
120
100
80
60
Annual
40 installations
20
0
2014 2015 2016 2017 2018 2019 2020e
IEA analysis based on Paula Mints (2020), The Solar Flare, SVP Market Research, San Francisco, CA.
PAGE | 21
Existing stocks helped most developers withstand supply chain issues and
logistical delays due to Covid-19, and thus our updated forecast reflects
limited supply chain-related delays. With the completion of additional
manufacturing facilities in China in 2020, the supply glut is expected to reach
its highest level ever globally, fostering competition and increasing
downward pressure on module prices.
The major risks for solar PV are installation and at the point of sale. For utility-
scale projects, lockdown measures are slowing construction activity,
increasing the risk of commissioning delays. These delays will reduce the
total amount of capacity installed in 2020, causing projects to slip into 2021
and resulting in a 12% rebound next year. Developers in mature markets such
as the United States, China and Europe are likely to recover rapidly from
delays after the easing of lockdown measures, as most have experience in
increasing the pace of construction. As an example, developers in China
installed over 10 GW in November and December 2019 to meet end-of-year
policy deadlines.
Before the Covid-19 breakout, developers were also financing additional

project pipelines for commissioning in 2021. These projects will be hit by the
economic downturn, especially those being built outside a regulated
environment. We expect some to be put on hold or cancelled in China,
Europe and the United States.
Distributed PV has been immediately impacted by Covid-19 measures, while

a longer-term economic downturn is likely to have a potentially devastating
impact on overall investment in the distributed sector if new and stronger
policies are not introduced. Major markets such as the United States, Europe
and Brazil have seen installations of distributed PV drop following stay-at-
home orders and face-to-face sales have understandably slowed drastically.
This results in a dip in installed capacity growth in 2020. The rapid recovery
of the distributed PV sector will depend on the pace of and the nature of any
stimulus packages.
PAGE | 22
China
China’s annual PV deployment declined for a second year in a row in 2019, by
32% to 30 GW. Developers had very tight commissioning deadlines after the
award by auction of 23 GW of utility-scale and commercial solar PV in July
2019. The first competitive auction saw tariffs decline by 15-40% compared
to previous incentives, reducing project profitability especially for
commercial and industrial projects. In contrast, residential PV projects saw
significantly higher additions in 2019 than in 2018 because they are outside
the auction scheme and still receive FITs.
Annual PV additions are expected to increase by about 20% in 2020. Utility-

scale projects should dominate this expansion, including previously
auctioned capacity that qualified for subsidies but was not commissioned in
2019. China plans to hold a PV auction for utility-scale and commercial
projects in June, but the government has decided to cut the annual subsidy
budget by over 50% compared to last year. In addition, there is a growing
project pipeline without subsidies. With increasing financing challenges due
to Covid-19, we expect slower growth in distributed PV projects, with
developers focusing on large utility-scale plants in 2020.
Deployment is forecast to remain stable in 2021. In the absence of new

subsidies beyond 2020 and with China’s electricity demand slowing, utility-
scale projects in the pipeline without subsidies may be postponed or
cancelled. An improving economic and financing environment is expected to
enable greater deployment of commercial PV projects in 2021. Overall,
China’s solar PV expansion over 2020 and 2021 is revised downward
compared to our previous forecast, mostly due to slower growth in
commercial solar PV, as investors are expected to delay or cancel some
investments due to the Covid-19 crisis.
PAGE | 23
Solar PV capacity additions, China, Europe, United States, India and Brazil, 2019
actual and IEA forecasts
45
GW
40
35
30
25
20
15
10
5
0
2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021
China Europe United States India Brazil
Utility-scale PV Commercial PV Residential PV Off-grid Oct-19 PV forecast
United States
The annual increase in solar PV capacity in the United States topped 13 GW in
2019, the second-highest recorded to date, due to the increasing economic
attractiveness of both utility-scale projects and residential PV systems.
However, annual growth is seen slowing in 2020 as the impacts of Covid-19
dampen distributed PV prospects. New installations of both residential and
commercial systems are expected to decrease as social-distancing measures
affect new customer acquisition and self-consumption becomes less
attractive amid a period of economic uncertainty. Distributed PV growth
rebounds in 2021 in the residential segment as consumers rush to take
advantage of the solar investment tax credit (ITC) before it expires at the end
of 2021. California’s new housing mandate, which started in 2020, is also
expected to bolster some growth.
In contrast, utility-scale PV growth accelerates in both 2020 and 2021

because of increasing economic attractiveness and raised renewable energy
targets across several states. Compared to our previous forecast, utility-scale
growth across 2020-21 is more optimistic due to an increase in the pipeline
of contracted projects (40 GW) at the end of 4Q 2019. 2 The surge in
development activity is driven by increased policy support in some states as
well as the increasing economic attractiveness of both corporate PPAs and
2
WoodMackenzie (March 2020), online database, accessed by subscription.
PAGE | 24
utility-led procurement to meet long-term planning needs and satisfy

demand for renewable electricity from large consumers.
However, the impact of Covid-19 on the business case of early-stage projects,

meaning those still subject to contract and yet to start construction, is a
forecast uncertainty. While the government plans to modify the rules to
qualify for support under the ITC, monetising this support may be a challenge
if less tax equity is available in a weaker economy.
Europe
Solar PV additions nearly doubled in Europe last year, reaching reached
17 GW in 2019 compared to just 10 GW installed in 2018. This is the highest
level achieved since 2012 when many countries began to remove high feed-
in tariffs for utility-scale PV. The strong growth in 2019 was driven a
combination of increasing economic attractiveness of distributed PV under
net-metering and self-consumption policies, and utility-scale projects
awarded under the new auction schemes in many countries. Almost half of
Europe’s utility-scale additions came from one auction in Spain held in 2017.
However, PV additions are set to decline in 2020 as a result of several trends:

i) exceptionally high growth in 2019; ii) uncertainty relating to policy
transitions (particularly in Germany and Spain); iii) lockdown-induced
construction delays; and iv) the economic impact of Covid-19 on the business
case of unsubsidised utility projects and distributed PV. In 2021 annual
growth is expected to rebound to 15 GW, the second-highest level since 2012,
largely due to a strong recovery in utility-scale PV as delayed project activity
resumes. Distributed PV additions increase slightly in 2021, but growth is
limited by uncertainties over the attractiveness of self-consumption during a
period of weaker economic growth. Overall, the region is forecast to add
25 GW over 2020-21, led by Spain, Germany, and France. This is 18% lower
than was expected in the October 2019 PV forecast.
PAGE | 25
Solar PV capacity additions, Spain, Germany and France, 2019 actual and IEA
forecasts
5.0
Off-grid
GW
4.5
4.0
Residential PV
3.5
3.0
2.5 Commercial
PV
2.0
1.5 Utility-scale
PV
1.0
0.5 Oct-19 PV
forecast
0.0
2019 2020 2021 2019 2020 2021 2019 2020 2021
Spain Germany France
Solar PV additions in Spain marked an all-time high of 4.5 GW in 2019, with

both utility-scale and distributed PV reaching unprecedented levels of
growth. For utility-scale projects, this uptick resulted from developers
rushing to meet the end-of-year commissioning deadline for almost 4 GW of
capacity awarded in the 2017 auction. In the absence of further auctions,
additions in 2020 are expected to fall, but growth will still be far above
historical levels. This is due to the large pipeline of corporate PPA and
merchant projects that have emerged, particularly due to favourable market
conditions in Q3 and Q4 2019. However, the impact of Covid-19 on the pace
of their development is a key forecast uncertainty.
For projects under construction, work stoppages or a decreased workforce

may push some commissioning dates into 2021. For earlier-stage projects
with merchant exposure that are still arranging financing, the uncertainty is
greater as their business case may be challenged, especially if wholesale
electricity prices continue to plummet. In light of these uncertainties, our
forecast expects modest growth in 2020 relative to the pipeline potential and
an increase in 2021 as delayed projects resume development.
In Germany annual PV additions increased by almost 40% in 2019, the fifth

consecutive year of growth. The increase was driven by the rapid expansion
of commercial PV systems, due to attractive economics under the feed-in
PAGE | 26
premium. However, the support is set to expire when cumulative capacity

reaches 52 GW, a milestone likely to be reached this year, which contributed
to the surge in activity in 2019. In late 2019 the government announced plans
to extend support beyond the cap, but the extension is contingent upon
reaching consensus on the minimum distance regulations for onshore wind,
which is still unresolved. Due to this policy uncertainty, we expect growth to
fall in 2020 and again in 2021 on the expectation of lower consumer appetite
during a weaker economic environment due to Covid-19.
Meanwhile, utility-scale additions are expected to remain stable in 2020,

driven by competitive auctions. However, some projects may be delayed due
to supply chain shortages or decreased personnel from restrictions on cross-
border workers. As such, our forecast expects a sharp increase in 2021,
reflecting the commissioning of delayed projects originally scheduled for
2020.
France installed about 0.9 GW of PV in 2019, a slight decline on 2018, in part

due to delays in commissioning utility-scale projects. Utility-scale additions
are expected to increase in 2020 and 2021 as these delayed projects are
commissioned alongside those from a new auction scheme that began in
2017. Since 2017, over 4.8 GW of ground-mounted capacity has been
awarded in the new auction scheme.
Annual growth in distributed PV is also expected to increase in 2020 and

2021, driven by a mix of competitive auctions, feed-in premiums and self-
consumption. Recent positive policy developments are also expected to
contribute to accelerated growth: (i) PV installation obligations for new
warehouses, supermarkets and parking shades; (ii) a tax reduction for large-
scale PV installations; (iii) grid connection fee exemptions for small-scale
projects; and (iv) an extension of the FIT eligibility to larger installations.
However, supply chain disruptions caused by the global Covid-19 crisis, as

well as suspension of work during lockdown and delays in permitting
procedures, are growing challenges to the realisation of this large pipeline.
In response to the crisis, the government confirmed its commitment to a
20-GW PV capacity target by 2023 and announced specific measures for
PAGE | 27
renewable energy projects in April 2020, including extending commissioning

deadlines, freezing FIT declines for small installations scheduled for Q2 2020,
and postponing scheduled auctions. In light of these uncertainties, slower
growth over 2020-21 is expected relative to our previous forecast.
India
India’s PV deployment is forecast to decrease by 23% in 2020 compared to
2019, with the largest drop anticipated in distributed PV installations.
Challenges concerning the financial health of state-owned companies
responsible for the distribution and sale of electricity (DISCOMs) persist,
hampering faster growth of renewables. The Covid-19 crisis has put additional
pressure on DISCOMs and therefore on solar PV and wind development. A
rebound is expected in 2021, with capacity additions exceeding 2019 levels.
Despite government efforts to strengthen the performance of DISCOMs, the

pending payments due to all electricity generators increased by 48% in 2019,
and almost doubled in the case of renewables generators, a trend that
continued in Q1 2020. The weak financial health of DISCOMs has already
resulted in slowing development of distributed PV, delays in signing new
PPAs with solar developers and contract renegotiations.
During the lockdown, India’s electricity demand declined by 25%, mostly in

industrial and commercial segments, which account for the majority of
DISCOMs’ revenues in most states. Initial IEA estimates indicate a possible 6%
year-on-year decline in demand in 2020, further worsening DISCOMs’ already
challenging finances. This situation has been compounded by supply chain
disruptions and the strict lockdown measures that forced many workers to
return to their hometowns. As a result, our forecast expects a slowdown in
the construction of utility-scale projects. In addition, macroeconomic
challenges may lessen the willingness of electricity consumers to invest in
distributed PV. Overall, our combined PV capacity additions in 2020 and 2021
are 19% below our previous forecast, as growing challenges hamper faster
growth.
PAGE | 28
Electricity generation and cumulated overdue payments to generators, India
Sources: Left-hand figure – https://praapti.in/ (accessed on 30 April 2020); right-hand figure – IEA (2020).
Brazil
The Brazilian PV market more than doubled in 2019 over the previous year,
driven by distributed installations. Due to a generous net metering scheme,
residential and commercial installations exceeded utility-scale installations
for the first time last year. Annual additions are projected to be lower in 2020
than in 2019, mainly because of slower growth in distributed PV as Covid-19
is expected to increase financing challenges and reduce sales. In April,
distributed PV installations were around 40% lower than the monthly
additions in the first quarter of 2020.
Government auctions, merchant projects and bilateral PPAs are driving

utility-scale growth in Brazil. Capacity driven by auctions is expected to
account for 45% of the expansion in 2020 and 2021. Merchant and corporate
PPA projects represent the remainder, and those projects that have not
already been financed are at risk of being postponed or cancelled with
declining demand, lower electricity prices and financing challenges.
2021 is expected to see both the distributed market and utility-scale sector
slightly recover, but not to 2019 levels, due to the potential macroeconomic
challenges influencing investment in the distributed PV sector and project
economics in the utility-scale sector. In addition, the government has
decided to postpone indefinitely two energy auctions in 2020, citing the
PAGE | 29
Covid-19 related demand shock. These auctions would have had an impact
on capacity growth beyond 2021.
Monthly distributed PV installations, Brazil

250
MW
200
150
100
50
Source: Geracao Distribuida [Distributed Generation], Agência Nacional de Energia Elétrica [National Electricity
Agency] (May data represented through 15 May 2020).
Wind
Global onshore wind capacity additions jumped by 20% in 2019 compared to
2018, thanks to increasing expansion in China and the European Union. 2020
was expected to be another year of acceleration in deployment. However,
the unprecedented global crisis caused by Covid-19 has pushed our onshore
wind growth forecast for 2020 down by 12% compared to 2019 additions. This
decline is mainly driven by project delays rather than cancellations, thus
leading to a recovery in 2021. Despite a rebound in 2021, combined expected
onshore wind growth in 2020 and 2021 is still lower than in our October 2019
forecast by 9%.
PAGE | 30
Wind capacity additions in 2019-21, actual and IEA forecasts

70
GW
60
Offshore wind
50
40
30
20
Onshore wind
10
0
2019 2020 2021 2020 2021
Actual Oct-19 forecast May-20 forecast
The wind energy sector has developed a globally interconnected supply

chain, with manufacturing dispersed across all continents. China, Europe, the
United States and India are major manufacturing hubs for various wind
turbine parts. The assembly of a complete wind turbine usually requires
inputs from multiple countries, seamless logistics and timely delivery.
However, recent lockdowns in major manufacturing hubs have disrupted
wind turbine supply chains.
In February, China’s wind manufacturing plants mostly paused production,

followed by shutdowns in Italy and Spain in March due to strict confinement
measures. In late March lockdown in India required wind turbine component
manufacturers to halt production. Although production is gradually restarting
in Europe, China and India, the effects of supply chain disruptions are being
felt in almost all markets, with multiple projects receiving force majeure
notices from suppliers warning developers about possible delivery delays.
In addition to equipment supply disruption, lockdown measures slowed

construction activity, as they often require workers to stay at home or
developers to implement social-distancing rules at construction sites. The
majority of onshore wind projects due to come online in 2020 and 2021 are
under construction. However, some still need to complete the necessary
permitting with multiple government institutions before financial closure.
These processes may require human interaction, which may not be as
PAGE | 31
efficient while officials work from home. While permitting processes can be
partly moved online, community outreach cannot. Social acceptance of wind
has already been a major challenge in many countries and reduced social
interaction due to Covid-19 increases the risk of onshore wind project delays.
The impact of Covid-19 on offshore deployment in 2020 and 2021 remains

limited, causing negligible changes to the updated forecast. Offshore
projects have longer construction periods than do onshore projects. Most
projects in our forecast for 2020 and 2021 are either partially commissioned
or at an advanced stage of development, particularly in Europe, which is the
largest offshore market. China is a growing market with many projects in the
pipeline, but our forecast expects that Chinese developers will make up for
any delays. The Covid-19 crisis may impact offshore wind deployment beyond
2021, as some pre-development work such as permitting and environmental
approval is being delayed.
China
China’s wind capacity additions in 2019 reached 26 GW, 27% higher than in
2018 as developers rush to complete projects before the phase-out of
onshore wind FITs by the end of 2020. Onshore wind projects that qualified
for FITs in 2018/19 are under a very tight commissioning deadline of
31 December 2020. Covid-19 has already caused construction delays, with
additions in Q1 2020 40% lower than last year. However, construction activity
is ramping up after lockdown measures were eased at the beginning of April.
Accordingly, our forecast expects wind capacity additions to decline only
slightly in 2020 compared to last year.
We expect developers to shift some delayed projects to 2021, as the

government may provide flexibility for projects that are behind schedule. In
addition, multiple provincial wind auctions are expected to award new
capacity this year, to be operational in 2021 and 2022. However, uncertainty
remains concerning the amount of capacity that will be auctioned this year.
Outside the FIT and auction scheme, a large pipeline of projects without
subsidies has emerged over the past year. These are at higher risk of delay,
PAGE | 32
and even cancellation. Our forecast expects some projects without subsidy
to be commissioned in 2021, although financing challenges remain a key
uncertainty.
Wind capacity additions, China, Europe, United States, India and Brazil, 2019 actual
and IEA forecasts
United States
In 2019 the United States deployed 9.1 GW of wind capacity, a third higher
than in 2018. In 2020 additions are expected to outpace 2019 deployment,
driven by the first production tax credit (PTC) deadline at the end of calendar
year 2020. 2021 is also projected to be a strong year due to the next tranche
of PTC projects coming online. This growth is despite the risk of delays
related to Covid-19, as underlying market fundamentals remain strong, with
few areas of concern.
In states accounting for over 35% of projected US wind growth in 2020, such
as Texas, Oklahoma and South Dakota, wind workers are allowed to continue
construction with social-distancing guidelines. However, adhering to these
guidelines could lead to projects being delayed, as the US wind sector is on
a tight schedule to commission 10-14 GW by the end of the year. Since 2014,
60-80% of capacity added annually has come online in Q4 and, given this
schedule, any delay in the supply chain or build at any point during the year
will put projects at risk of not commissioning before the end of the year.
PAGE | 33
In response to Covid-19 delays, the US Department of the Treasury has

signalled that they may grant an extension of the PTC safe harbour provision,
allowing projects that started construction in 2016 or 2017 extra time to
complete, alleviating pressure on an already compressed construction
schedule. These risks have led to a slight revision down of installed capacity
in 2020, with some projects slipping into 2021. Even with 2019 capacity
additions being lower than our previous forecast, the longer-term outlook is
potentially strong, with the extension of the PTC to 2021.
Share of wind deployment by quarter, United States

100%
Q4
80%
Q3
60%
40% Q2
20%
Q1
0%
2014 2015 2016 2017 2018 2019
Source: American Wind Energy Association (2020), Wind Powers America First Quarter 2020 Report.
Even with the PTC extension, the lasting impact of a wider economic
recession could have a dramatic impact on the US wind market as a whole,
with the availability of capital and the use of that capital, especially tax equity,
being reduced.
In addition to the short-term impacts on current and announced projects,

Covid-19 also presents a longer-term planning challenge. For example, a
2.5 GW offshore wind auction in New York State has been postponed, which
could have a negative effect on the nascent offshore wind market in the
United States.
PAGE | 34
Europe
Net annual wind additions in Europe grew by 23% in 2019, reaching 14 GW.
Onshore wind accounted for three-quarters of the increase, led by Spain,
Sweden, France and Germany, among others. Offshore wind growth reached
its highest level to date at 3.5 GW, as large projects were connected in the
United Kingdom, Germany and Denmark. Growth in 2020 is expected to
decline as construction stoppages and supply chain disruptions slow onshore
wind development. To avoid these risks jeopardising the bankability of
projects under development, some governments have modified support
mechanisms by extending commissioning deadlines or postponing auctions.
As such, we expect some projects originally scheduled for commissioning in
2020 to shift by several months and drive a rebound in annual growth in 2021.
More than half of the wind growth in Europe over 2020-21 is expected to
occur in Germany, Sweden, Spain, the United Kingdom and the Netherlands.
In addition to the impact of lockdown measures, less growth is expected
compared to last year owing to persistent permitting challenges in Germany
and France, and increasing uncertainty over the timing of Spain’s planned
auctions. The uncertainty over the impact of Covid-19 on the demand for
corporate PPAs is also a forecast uncertainty, particularly in markets where
there may be less demand or weaker electricity prices during a period of
slower economic growth. Offshore wind growth over 2020-21 is mostly in line
with last year’s forecast, largely driven by the ending of large construction
pipelines in the United Kingdom and the Netherlands. IEA All rights reserved.
PAGE | 35
Wind capacity additions, Germany, Sweden, Spain, United Kingdom and

Netherlands, 2019-21
As predicted in our previous forecast, Germany’s onshore wind growth in

2019 plummeted to its lowest level since 1998, as the policy transition from
feed-in premiums to competitive auctions created a lull in the project
pipeline. In line with last year’s trend, growth in 2020 is expected to remain
stable and then increase in 2021 as capacity from auctions begins to be
commissioned. However, the forecast is revised down for both years due to
lower expectations that capacity awarded in previous auctions will obtain
permits and anticipation of some supply chain disruptions from Covid-19.
Permitting challenges stemming from social acceptance issues and

administrative barriers continue to prevent faster onshore wind growth in
Germany. In addition, higher rates of decommissioning are expected
compared to our previous forecast. The business case for lifetime extensions
with corporate PPAs or merchant exposure are less optimistic in a period
where demand and electricity prices could be lower post Covid-19. Offshore
deployment is forecast to slow in 2020 and 2021, as projects awarded in
earlier auctions remain in the early stages of development and will not be
operational until 2022.
The Swedish wind market achieved its highest growth to date in 2019, adding
over 1.3 GW of new capacity, driven by capacity from both green certificates
and corporate PPAs. A robust pipeline of new turbine orders indicates
continued growth in 2020 and 2021. However, supply chain disruptions
related to Covid-19 could delay projects and result in lower growth in 2020.
PAGE | 36
A strong rebound is forecast in 2021 as projects rush to complete

construction to meet PPA deadlines and to connect before the proposed end
of the current certificate scheme.
Spain’s annual wind growth surged in 2019, reaching its highest level in ten
years as developers rushed to meet the end-of-year commissioning deadlines
for 4.6 GW awarded in auctions. However, growth is expected to slow in 2020
and 2021 due to the impacts of Covid-19 on the remaining project pipeline.
Almost 2 GW remain to be commissioned and are at various stages of
development. These could experience delays from construction halts or
slowdowns to maintain safety protocols. Overall, our forecast expects lower
growth over 2020-21 compared to 2019. Our previous forecast expected that
government plans to resume competitive auctions for onshore wind would
be fulfilled in 2020, but no auction schedule has been released to date.
India
India added 2.4 GW of wind capacity in 2019. However, our forecast expects
capacity additions to slow in 2020. The increasing undersubscription of wind
tenders and the limited improvement in the financial condition of DISCOMs
is leading to a slowdown in wind deployment, while the Covid-19 crisis has
worsened these existing challenges.
In 2019 India could only allocate half of its planned wind capacity through
auctions, with undersubscription increasing to 55% from 22% in 2018. In
addition, several tenders were cancelled or postponed due to lack of interest
in auctions. Low tariff ceilings, combined with risks associated with payment
delays and contract negotiations, are bound to increase the financing costs
of wind projects. Furthermore, land acquisition and grid access challenges
remain. In addition to pre-existing challenges, the impact of the Covid-19
crisis on wind deployment in India is much more profound than in the case of
other utility-scale technologies. Lockdowns have slowed the progress of wind
plants during the main construction season. Projects that cannot be finished
before the start of the monsoon season risk further delays. As a result,
compared to our previous forecast published in October 2019, combined
capacity additions in 2021 and 2022 are down by about 50%.
PAGE | 37
Auctioned and allocated capacity in Indian wind auctions

10 100%
Allocation %
GW
9 90%
Unallocated
8 80%
7 70%
6 60%
5 50% Allocated
4 40%
3 30%
2 20%
% allocated
1 10%
0
2017 2018 2019
Source: BNEF (April 2020), 2Q 2020 Global Auction and Tender Calendar and Results.
Brazil
Brazil added almost 1 GW of wind capacity in 2019, its lowest increase since
2014. In 2020 we expect this trend to continue, with additions slowing by
another third. Supply chain disruptions and construction delays are expected
to push projects scheduled for commissioning in 2020 into 2021. In addition,
given the amount of projected capacity that has reached financial close, 2021
is forecast to have higher additions than both 2019 and 2020. However, this
will depend on the progress of projects outside the auction scheme, as Covid-
19 reduces demand for electricity and spot market prices are pushed to the
regulatory floor, which may influence the motive to develop projects without
a firm price guarantee.
Bioenergy for power

Global bioenergy capacity increased by almost 8 GW in 2019, a stable level
of deployment compared to 2018. China’s share of global bioenergy
additions, primarily driven by energy-from-waste projects, increased from a
third in 2018 to 60% last year. Japan and Turkey were the next largest markets
in terms of new additions, although one tenth of the size. China’s increased
deployment offset lower 2019 capacity additions in Brazil, India and the
European Union.
PAGE | 38
Bioenergy capacity additions are anticipated to decline in 2020. This is to an

extent related to Covid-19. Major deployment of biomass power projects is
concentrated in relatively few countries. In 2019 just ten countries accounted
for 90% of new capacity. Of these, China, Brazil, Japan and the United
Kingdom have been among those most disrupted by the crisis, with lockdown
measures stalling or slowing project construction. Consequently, capacity
additions are anticipated to be 9% lower than our previous forecast from
October 2019. However, significant disruption to biomass fuel supply chains
for existing projects (e.g. wood chips and pellets) is not anticipated, with
forestry activity ongoing and ports operational.
Reduced policy support also contributes to lower anticipated bioenergy

deployment in 2020 and 2021. While many countries have undertaken
technology-specific auctions for wind and solar PV, these are less widespread
for bioenergy. Furthermore, bioenergy deployment has fallen in countries
that have replaced FIT and certificate schemes with technology-neutral
auction frameworks due to generally higher generation costs than wind or
utility solar PV.
Policies that had previously delivered higher levels of bioenergy deployment

have now closed, or will shortly close, to new applicants in Germany, Japan
and the United Kingdom, with these countries seeing lower deployment in
2020 and 2021 than in previous years. In addition, China and India have
already achieved their stated bioenergy targets.
Hydropower
Global net additions of hydropower fell to 12.7 GW in 2019, the lowest level
recorded since 2001. This is due to the continued slowdown in China, the
country that has led global hydropower growth since 1996. Development has
slowed significantly in China since 2013, as costs have increased due to
resource availability and social acceptance issues. As a result, for the first
time since 1996, in 2019 hydropower capacity growth was not led by China,
but by Brazil, where close to 5 GW were commissioned as several large
projects came online.
PAGE | 39
Global hydropower capacity additions, 2018 and 2019 actual and IEA forecasts
35
GW
30
25
20
15
10
0
2018 2019 2020 2021
Rest of world Asia China: Other China: Bhaetan and Wudongde projects
Annual additions are expected to increase in 2020 and further in 2021 largely
due to the development of two mega projects in China: Wudongde (10 GW)
and Bhaetan (16 GW). One-third of global growth over 2020-21 (45 GW) is
expected to come from these two projects alone; therefore the timing of
turbine commissioning will have a considerable impact on global annual
growth. Turbine commissioning is likely to start in 2020, with developers
targeting completion dates of 2021 and 2022 respectively.
Outside these two projects, global growth in 2020 remains stable as

development in Asia offsets declines in Latin America, and as increases in
2021 are driven by investment in pumped storage in Switzerland and China
as well as by large hydropower plants in Canada, Turkey, and sub-Saharan
Africa. Although, annual additions over 2020-21 correspond to projects
currently under construction, some projects may be delayed due to Covid-19
lockdown measures. A number of projects in Southeast Asia have halted
construction due to a shortage of staff as a result of lockdown measures and
travel bans on cross-border workers.
CSP and geothermal

For CSP (concentrated solar power), our forecast is not subject to major
revisions in most countries and any delays in the period analysed have not
been due to Covid-19. In 2019 Israel commissioned two CSP projects (230
MW), while four projects came online in China (200 MW).
PAGE | 40
China leads future global CSP growth, but this is lower than our previous
forecast for 2020-21, as planned projects are being delayed due to material
cost increases and financing challenges. Outside China, financing challenges
were the main reason for the cancellation of a CSP project in Australia. This
year, the Cerro Dominador project in Chile is expected to come online after
the salt melting process was announced as completed in April. This project
will bring 110 MW with 17.5 hours of storage in molten salts. Projects in the
United Arab Emirates are expected to come online on schedule, bringing
300 MW of capacity in 2021.
Expected CSP capacity additions, selected countries, 2020 and 2021

2.5
GW
2.0
1.5
1.0
0.5
0.0
Spain United China South Africa United Arab Israel Chile Australia
States Emirates
2018 installed 2019 additions 2020 additions 2021 additions 2021 installed capacity
capacity (Oct-19 forecast)
Note: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The
use of such data by the IEA/OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli
settlements in the West Bank under the terms of international law.
Source: IEA (2019), Renewables 2019.
In 2019 global geothermal capacity additions amounted to almost 0.8 GW,

the highest level ever recorded. Turkey, Indonesia and Kenya were by far the
largest contributors to this increase, together accounting for three-quarters
of global additions. These three countries are expected to continue leading
geothermal growth over 2020-21. However, in Turkey and various other
countries, the Covid-19 crisis is causing delays in project development due to
hold-ups in strategic decisions needed for projects to proceed, and
disruption of the global supply chain for machinery and materials. In Turkey,
unless current support mechanisms scheduled to finish at the end of the year
PAGE | 41
are extended, delayed projects originally scheduled to come online at the

end of 2020 may face financial challenges.
In Indonesia, while the commissioning of some small projects has been

postponed to 2021, so far development remains almost unaffected for the
largest projects due to come online in 2020 (i.e. 90 MW at the Rantau Dedap
plant, which we previously expected to be commissioned in 2021, and 45 MW
at the Sorik Marapi plant). Overall, our outlook for global cumulative additions
of geothermal power over 2020-21 is revised down by about 20% compared
to our October 2019 estimates.
Geothermal capacity additions, selected regions, 2019-21

0.9 0.3
GW
GW
0.8
0.25
0.7
0.6 0.2
0.5
0.15
0.4
0.3 0.1
0.2
0.05
0.1
0 0
2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021
World Indonesia Turkey Kenya Rest of the World
Geothermal for power Oct-19 geothermal for power forecast
Transport biofuels
Global transport biofuel production reached a record 162 billion litres (L) in
2019, or 2.8 million barrels per day. This represented a 7% year-on-year (y-o-y)
increase. The primary cause of growth was a surge of ethanol production in
Brazil and expansion of biodiesel production in the ASEAN region.
However, the Covid-19 crisis has radically changed the global context for
biofuels, and we anticipate production to contract by 20 billion L (13%) in
2020, returning to 2017 output levels. By comparison, prior to the start of the
Covid-19 crisis, output was anticipated to increase by a further 5 billion L
(3% y-o-y) in 2020. On the assumption that the pandemic is brought under
control, transport fuel demand could rebound in 2021 and facilitate a return
PAGE | 42
to 2019 biofuel production levels. However, this would still be 5% lower than
the output anticipated in our forecast for 2021 prior to the Covid-19 crisis
emerging.
Transport biofuel production 2017-21
180
Billion L
160 Biodiesel and

HVO
140
120
100 Ethanol
80
60
40 Forecast prior
20 to Covid-19
crisis
0
2017 2018 2019 2020 forecast 2021 forecast
Note: HVO = hydrotreated vegetable oil, also known as renewable diesel in North America.
The widespread application of containment measures saw mobility grind

almost to a halt in many countries towards the end of the first quarter of 2020,
strongly reducing transport fuel demand. This in turn limited biofuel
consumption from mandate policies that require a set percentage of biofuels
to be blended with fossil transport fuels.
Overall, global gasoline demand in 2020 is forecast to fall by 9% and diesel

demand by around 6%. Diesel is less affected as a substantial share of
consumption is for the transport of goods, which the crisis is affecting less
than personal mobility. Consequently, the Covid-19 pandemic is forecast to
impact ethanol output (15% contraction) more than biodiesel and HVO output
(6% contraction) in 2020.
The sharp reduction in crude oil prices puts further pressure on the biofuels
industry, as lower petroleum product prices drag down biofuel prices. This
compounds the effect of lower biofuel demand driving stocks higher in many
markets, which also depresses prices and compromises the profitability of
production.
PAGE | 43
The upheaval from the crisis also extends to markets integrated with biofuels
by affecting demand and prices for agricultural commodities, and the
availability of co-products (e.g. animal feeds and CO2 for beverages and
cooling). Ethanol plants in many countries have ventured into production of
much-needed hand sanitiser, although this does not compensate for lost
transport fuel demand.
Regional biofuel forecasts

The extent to which the Covid-19 crisis effects biofuels output differs by
country, depending on policy frameworks and the size of the reduction in fuel
demand caused by containment measures.
Biofuel output, selected countries and regions, 2019 and forecast for 2020
Ethanol Biodiesel and HVO
25% 25%
Year-on-year growth
Year-on-year growth
15% 15%
5% 5%
-5% -5%
-15% -15%
-25% -25%
2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020
United Brazil China India United Brazil Europe ASEAN

States States
Forecast prior to Covid-19
Note: “Europe” refers to OECD Europe.
In the United States ethanol production reached 59 billion L in 2019, a

decrease of just over 2% y-o-y. We anticipate a 19% reduction in production
in 2020, with output at its lowest level since 2009, as opposed to stable
output levels in our last forecast prior to the crisis.
The pandemic has severely affected the US ethanol industry. Output fell by
nearly 50% between the end of February and early April, as numerous plants
idled or reduced output in response to the dramatic drop in gasoline
consumption, negative operating margins and constrained storage capacity.
Blending levels remained steady at 10% of this lower volume, as higher
PAGE | 44
ethanol blends such as E15 or E85 remain a small part of the market. The near
simultaneous drop in fuel demand worldwide caused by the crisis also
affected ethanol export prospects. The Coronavirus Food Assistance
Program financial stimulus package for the agricultural sector does not
contain specific measures for biofuels.
The pandemic affects biodiesel and HVO to a lesser extent. Our forecast
expects production to remain stable at 6.5 billion L in 2020, although the
policy-driven growth anticipated prior to the Covid-19 crisis will not be
realised.
Selected impacts of Covid-19 on biofuel markets in 2020
US ethanol production 2020 Biofuel price change mid-Feb to mid-April

6
Billion litres
Ethanol Biodiesel
5 USA Europe Brazil USA Europe ASEAN
0%
Percentage price reduction
4 -5%
-10%
3
-15%
2 -20%
-25%
1
-30%
0 -35%
January February March April -40%
Note: US EIA (2020), Weekly Ethanol Plant Production; HIS Market (2020) Licht Interactive Data (subscription
service).
Brazil produced close to 36 billion L of ethanol in 2019. Output grew by 13%

year-on-year as low international sugar prices saw mills maximise ethanol
production at the expense of sweetener. Consumer demand for unblended
ethanol was also strong owing to tax incentives that supported its price
competitiveness versus gasoline.
We anticipate a 16% reduction in ethanol production to 30 billion L this year

in Brazil, the lowest level since 2017. Brazil faces dual pressure, from reduced
gasoline demand constraining consumption of ethanol blended under the
27% mandate, and low oil prices affecting the competitiveness of unblended
ethanol versus gasoline at the pump.
PAGE | 45
Our forecast assumes that low ethanol prices mean mills may direct a higher
share of sugar cane to the production of sugar than observed during the last
two years. A rescue package for the ethanol sector is under consideration,
with timely support crucial to ensure mills have enough cash flow to
undertake harvest activities.
By comparison, our forecast prior to the onset of the pandemic anticipated

that a favourable sugar cane crop, production facilities coming online and
the introduction of the RenovaBio policy would see Brazil sustain output in
2020 close to 2019’s elevated levels.
Brazil’s biodiesel output increased by 13% in 2019 to 5.9 billion L. Despite the
impacts of the Covid-19 crisis, we anticipate production will grow a further
4% in 2020 to 6.2 billion L, supported by an increase in its mandate to 12%.
In Europe, biodiesel and HVO production increased by 12% in 2019, reaching

a record 17.5 billion L. Italy provide the biggest increase in output, with new
HVO capacity coming online.
We now forecast a 13% reduction in European biodiesel and HVO production

for 2020, as opposed to the stable output we anticipated prior to the
pandemic. This is primarily due to significant reduction in diesel demand
across the continent, with several European countries among those most
affected by the pandemic. Saturated storage capacity and a faster decline in
biodiesel than feedstock prices have severely challenged production
economics. Mandate increases in many EU member states in 2020, including
major producers France, Italy, Spain and Germany, will soften the reduction
in demand to an extent.
Biodiesel from used cooking oil (UCO) plays an important role in the EU
biodiesel market, since its energy content counts double against compliance
with the EU Renewable Energy Directive. UCO supply has fallen due to the
closure of restaurants in many countries and imports from China are likely to
decline. European ethanol output is forecast to reduce 12% y-o-y to
4.3 billion L in 2020.
PAGE | 46
Biofuel production, selected markets, 2019 and 2020 (billion L)
Country/ 2019 2020

Fuel output Market observations
region forecast
Lowest output since 2009 expected

Argentina Biodiesel 2.5 1.8 this year; reduced export prospects
to Europe.
Rollout of higher biofuel blends
ASEAN Biodiesel 12.3 12.8 delayed in Indonesia, Malaysia and
Thailand.
Plan for nationwide 10% blends
abandoned, but supply extended to
China Ethanol 4.0 4.4
some new provinces; new capacity
coming online.
Purchase tenders not yet filled due

to low sugar cane supply; storage
India Ethanol 1.9 1.9
capacity near maximum; ethanol
prices > gasoline.
Note: China made its decision to abandon nationwide 10% ethanol blends before the emergence of Covid-19.
Renewable heat
While heat accounted for half of global final energy consumption in 2019,
modern renewable energy 3 met only 10% of global heat demand. This share
is increasing slowly, with very few new policy developments in the last two
years. The number of countries with national targets for renewable heat is
less than a third of the number with national targets for renewable electricity,
and fewer than half of those have nationwide regulatory heat policies in force.
Overall support for the uptake of renewables in the heating and cooling
sector therefore remains limited. In this context, increasing the share of
renewable heat has been challenging, and current economic impacts of
Covid-19 measures could potentially slow its growth beyond the short term.
Both the industrial sector and the buildings sector are likely to be affected,
3
In this report, “modern renewable energy” excludes the traditional uses of biomass. “Modern renewable heat” covers direct
and indirect (i.e. through district heating) final consumption of bioenergy, solar thermal and geothermal energy, as well as
renewable electricity for heat based on an estimate of the amount of electricity used for heat production and on the share of
renewables in electricity generation. For the sake of simplicity, “modern renewables” is referred to as “renewables” in the
remainder of this report.
PAGE | 47
although impacts will differ in nature, extent and timescale, and across
regions.
In industry, bioenergy accounts for the large majority of renewable heat

consumption (more than 85% in 2019), and in our October 2019 forecast was
expected to comprise more than half of the growth in renewable heat for
industry. Bioenergy is used mostly in industries that produce biomass waste
and residues, such as food and tobacco, sugar and ethanol (Brazil and India),
and most of all in the pulp and paper industry (mainly in North America,
Europe and Brazil). Thanks to the increasing use of municipal waste in China
and the European Union, the cement industry was also expected to
contribute significantly to the growth in industrial bioenergy consumption.
The Covid-19 crisis has reduced commercial and construction activity,

meaning lower demand for print paper, cement and lumber from the wood
products industry. This demand shock is likely to translate into a temporary
decline in the consumption of bioenergy from these sectors. Yet, cement
plants with waste management contracts may have to keep on processing
municipal waste since it is still being produced and requires disposal.
In other heat-intensive industries such as chemicals and petrochemicals, iron

and steel and non-ferrous metals, the global contraction in economic activity
following lockdown measures entails reduced overall heat demand. However,
renewable consumption in these sectors – essentially supplied indirectly
through electricity and district heat – remains limited. On the supply side, the
fall in electricity demand tends to lift the share of renewables in the electricity
supply, which increases the indirect contribution of electric heating and heat
pumps to renewable heat consumption, albeit the effect remains marginal.
Should a prolonged economic slowdown occur, such effects on industrial
renewable heat consumption would be felt beyond 2020.
PAGE | 48
Annual GDP growth and changes in industrial bioenergy demand, world, 1990-2019
1200 6
1000 5
800 4
600 3
PJ
400 2 %
200 1
0 0
-200 -1
-400 -2
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Change in industrial bioenergy demand Real GDP growth (right axis)
Sources: IMF (2020), World Economic Outlook, April 2020: The Great Lockdown; IEA (2020), Global Energy Review.
In buildings, direct impacts of Covid-19 measures on renewable heat

consumption are likely to remain limited in the short term. First, Covid-19
impacts have so far occurred during a period of lower demand for heat in
buildings due to the exceptionally high winter temperatures in the northern
hemisphere, where 2019/20 was the warmest winter ever recorded.
Furthermore, the timing of Covid-19 lockdown measures came towards the
end of the heating season in most northern hemisphere countries (with the
exception of China), especially in Europe and North America which are major
heat consumers. This has also contributed to limiting the effect on buildings
heat demand so far. Should lockdowns be maintained or reinstated later in
the year, the impact could be higher.
In many countries, during periods of full lockdown, reduced space and water
heating demand in the commercial sector counterbalances the slight uptick
in residential buildings. This may somewhat modify the composition of global
buildings renewable heat consumption in 2020, as renewable electricity,
used by heat pumps and electric heaters and boilers, is the largest renewable
heat source in the commercial sector globally, whereas biomass is dominant
in the residential sector.
Beyond these direct short-term impacts, the Covid-19 crisis further

compromises the already slow penetration of renewables in heat supply.
First, lockdown measures and labour restrictions may induce delays in the
PAGE | 49
manufacture, sale and installation of renewable heating equipment. This may

affect projects due to install solar thermal panels, heat pumps, biomass
stoves or boilers, and renewable district heating networks. In France, for
instance, heat pump sales during the lockdown (from mid-March to the end
of April) were 70% lower than during the same period in 2019, and annual
sales for 2020 are expected to remain almost 20% below 2019 levels.
Work on new and retrofit bioenergy CHP plants and boilers is suspended
during lockdown in many countries. The high season for district network
construction is typically summer, but site preparation and equipment supply
are required beforehand and could be subject to disruption. Depending on
lockdown duration, delays may accumulate, which would need to be partly
recovered after lockdown, putting more strain on workforce and equipment
capacity and potentially leading to longer project lead times.
Second, and perhaps more importantly, current low oil and gas prices are
affecting the cost-competitiveness of renewable heat fuels and technologies
relative to fossil options. For instance, low fossil fuel prices have made oil
boilers for residential heating more attractive in Germany in the past. Besides,
the evolution of wood pellet prices in the short term remains uncertain: on
the supply side, lower availability of sawmill residues may lead to a shift to
alternative feedstocks that could push pellet prices up, while lower industrial
demand could push prices downward.
In addition, the Covid-19 crisis is weakening the financial situation of

companies and households. As a result, planned investments in switching
from fossil fuel use to renewable or electric heating solutions may be
postponed or cancelled in the absence of stronger policies. Policy support,
however, could dampen the effect of this crisis. In China, for instance, the
“Coal to Electricity” programme may benefit from additional fiscal support,
which would help maintain heat pump demand.
Third, without strong government intervention, the uncertain global

macroeconomic impacts of the pandemic in the longer term may affect the
building construction sector for a long period of time, given that it is
particularly sensitive to the macroeconomic situation, as confirmed by the
PAGE | 50
2008 crisis. This could significantly slow down renewable heat deployment,
since building energy codes used to mandate energy efficiency standards
and renewable heat technologies often target new construction and retrofits.
Impact of fossil fuel price on new heating equipment installations, Germany, 2008-
18
120
100
80
Indexed 2008=100
60
40
20
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Market share of oil heating in new installations Residential heating oil price
Market share of biomass heating in new installations
Sources: IEA (2019) World Energy Price Database; Baulinks (2019)
Considering these elements, the IEA outlook for renewable heat consumption
over 2020 and 2021 is likely to be revised down compared to the October
2019 forecast, with the largest changes relating to industry. While our
previous projections were already not in line with global climate change
targets, recent evolutions sharpen the need for strong and ambitious policy
support to reduce non-renewable energy uses for heat, through a
combination of energy efficiency and fuel switching to renewables. With
multiple benefits for local job creation, environmental sustainability, energy
security and resilience, governments should view such policies as a critical
ingredient in their stimulus packages.
Challenges and opportunities beyond 2021

The pandemic has the potential to change the priority of government policies
and budgets, developers’ investment decisions and the availability of
financing through 2025. This casts a great deal of uncertainty on a market
that had been expanding at a rapid pace in the previous five years.
PAGE | 51
At the same time, several countries are introducing massive stimulus

programmes to respond to the current economic meltdown and support their
economies. Some of these stimulus measures may be relevant for
renewables. The IEA has been re-emphasising that governments should bear
in mind the structural benefits of increasingly competitive renewables, such
as economic development and job creation, while also reducing emissions
and fostering technology innovation.
Wind and solar costs continue to go down

There is little doubt that massive cost reductions in the last decade are one
of the main reasons behind renewables rapidly transforming the global
electricity mix. The cost of electricity from onshore wind and solar PV is
increasingly cheaper than from new and some existing fossil fuel plants. In
most countries, renewables are the cheapest way of meeting growing
demand.
Wind and solar PV developers in 2020 won auction bids at record low
contract prices, ranging from below USD 20/MWh to 50/MWh. Offshore wind
has achieved significant scale-up and cost reduction over recent years driven
by policies in Europe. This success should soon be repeated in emerging
offshore wind markets in Asia and North America, with economies of scale
further reducing costs.
The increasing share of VRE has opened a new horizon to maximise

hydropower’s contribution to flexibility and spur investment in battery
storage technologies. All these developments were mainly driven by
government policies fostering competition and new flexibility sources.
While supply disruptions may lead to local transitional price fluctuations,

there is no sign to date that the Covid-19 crisis will change these declining
cost trends. For instance, in the case of solar PV, manufacturing overcapacity
is expected to reach record levels in the coming years (see next chapter),
which will put further downward pressure on module prices.
PAGE | 52
The resilience of renewables will be tested beyond

2021 if governments policies waver in the face of
Covid-19
The continuing decrease in cost trends alone will not shelter renewables
projects from a number of challenges. The pace of economic recovery,
heightened pressure on public budgets and the financial health of the energy
sector as a whole further exacerbate already existing policy uncertainties and
financing challenges.
For renewable electricity, we can distinguish three main categories of

projects: (i) those already contracted and/or financed and under
construction; (ii) those driven by government action (e.g. auctions, FITs,
other incentives); and (iii) those mainly driven by market forces (e.g.
corporate power purchase agreements, merchant projects). Each project
category will face different challenges and opportunities, depending on two
key variables: renewables cost trends and policies in place.
Looking at the project pipeline through 2025, almost one-third of wind and
solar PV projects are already contracted and/or financed. Those have limited
risk of cancellation and thus are expected to become operational in 2020 and
2021, with some facing further delays carrying over to 2022 or beyond.
Solar PV and wind project pipeline, 2020-25
Private sector led

investments
23%
Already contracted
31%
To be implemented
under announced
government plans
46%
PAGE | 53
The role of government will remain instrumental to

renewable energy deployment
In the next five years, almost half of wind and solar PV projects in the pipeline
are tied to planned, but not finalised, government-backed auctions or other
incentives such as tax credits, rebates and FITs. The Covid-19 crisis poses
challenges to the timely implementation of previously announced
government plans. For instance, the implementation of projects under
government-backed auctions will critically depend on whether countries
maintain their planned schedule of tenders. This may be unlikely in the
context of stalling or decreasing electricity demand, and low fossil fuel
prices.
Planned renewable electricity projects with long-term contracts will be

mostly shielded from low natural gas prices. Although in the short term,
governments may delay scheduling new renewable capacity auctions and
turn to existing natural gas plants to meet new demand, in the medium and
long term the economic case of wind and solar remains strong thanks to
expected continuing cost reductions and to the long-term price predictability
over project lifetimes.
Some impacts on policies are already visible. Initial government policies to

tackle Covid-19 challenges have focused mainly on extending project-
commissioning deadlines and postponing planned auctions. France, the
United Kingdom, Greece and Germany have provided some flexibility for
developers who are not able to meet policy-related final commissioning
dates. While these measures protect deployment in 2020 and 2021, the delay
of auctions will also have an impact beyond 2021. In some countries the
postponement is indefinite, creating significant uncertainty and increasing
risk for investors and finance.
PAGE | 54
Recent policy changes affecting renewables beyond 2021
Country Policy change Impact year
Postponement of 2020 electricity auctions

Brazil 2023-25
indefinitely
Delay of auctions from June 2020 to December

Chile 2024-26
2020.
Postponement of subsidy-free project application

China 2022-23
from February 2020 to April 2020
France Delay of some solar PV auctions by 6 months 2021-22
Germany Delay in the selection of bidders in previous auctions 2022-23
Portugal Delay of 700 MW solar PV auction 2022
New market-driven projects may face stronger

challenges
With the declining cost of renewables, corporates have increasingly signed
power purchase contracts directly with wind and solar projects outside the
main government policy schemes to meet their private decarbonisation goals
and also to hedge against future price volatility. Developers of wind and solar
projects entering these agreements have accepted additional risk from
shorter contracts and greater exposure to wholesale electricity prices. While
project development tied to private agreements accounts for about a quarter
of projects in the pipeline, lower electricity demand, plummeting power
prices and a weaker financing environment may lead to such projects being
reconsidered.
At the same time, the hedging value of renewables to both electricity price
volatility and climate liabilities remains intact. Most renewables for electricity
generation, especially wind and solar PV, have high investment costs but low
operating and maintenance costs. Once operational, renewables projects
with long-term power purchase contracts can provide stable revenues to
investors while sheltering buyers from future electricity and fuel price
volatility. The willingness of corporates to continue procuring renewables in
a low fossil fuel price environment will also strongly depend on the ambition
PAGE | 55
of their own climate change mitigation policies and on carbon pricing

regimes implemented by governments.
Covid-19 has the potential for long-lasting impacts on

biofuels markets
In the case of the EU policy framework for biofuels, the Renewable Energy
Directive dictates that member states may increase the contribution of
conventional (crop-based) biofuels to renewable energy in transport by no
more than one percentage point over levels achieved in 2020. As such, any
Covid-19 market disruption this year that alters the share of conventional
biofuels consumed would affect the maximum permitted share in member
states well beyond 2020.
A sustained period of low oil prices heightens the possibility of policy makers
delaying or abandoning increases in biofuel policy support. This has already
been evident in the ASEAN region, where governments have paused action
to bring higher biofuel blends to market as low oil prices compromise the
budget available for biofuel support measures. In Indonesia and Thailand,
revenues for the funds used to support biofuels have reduced at the same
time that low oil prices have increased the cost of biofuel subsidy. Low oil
prices also test the willingness of fuel suppliers to blend biofuels in markets
without strong enforcement of blending mandates.
Brazil, India and Indonesia, among other countries, have long-term ambitions
to increase the contribution of biofuels in transport. Scaling up production to
meet such ambitions will require the delivery of new production capacity,
which in turn is dependent on the financial health of the industry to invest in
new plants. The impact of an extended period of low biofuel demand and
prices in 2020, and possibly beyond, could undermine the ability of the
industry to deliver increased production capacity. This is particularly relevant
to India and Brazil, as concurrent low sugar and ethanol prices negatively
affect producer balance sheets. In Brazil the situation is already precarious,
with numerous producers in a fragile economic condition.
PAGE | 56
Conversely, the significant impact of the Covid-19 crisis on aviation opens the
door to the scale-up of aviation biofuel use through the inclusion of
environmental conditions in bailout packages. This is demonstrated by the
2% sustainable aviation fuel requirement proposed in a rescue package for
the Air France-KLM group.
Designing stimulus packages for a cleaner

energy future
Policy makers need to put clean energy at the centre

of recovery efforts to secure a structural downward
trend in carbon emissions
Global energy-related CO2 emissions are expected to reduce by 8% in 2020,
the largest contraction since the World War II. But that will not be anything to
celebrate. What matters is putting emissions into structural decline. While
renewable electricity should show stronger resilience compared to other
fuels, new capacity growth is also expected to slow in 2020, after record
deployment last year. Putting emissions into a structural decline needed
renewables to grow much faster across all sectors even before the Covid-19
crisis. To regain and exceed the growth rates seen in the years before the
pandemic, policy makers need to put clean energy – including renewables
and energy efficiency – at the centre of recovery efforts.
Reflecting a rapidly changing public health crisis, initial government rescue

packages have focused on sustaining livelihoods and minimising economic
damage through immediate relief for individuals, families and businesses. In
the current and next phases of easing lockdown restrictions, stimulus
packages may focus on global economic recovery. Experience shows that the
economic recovery after the last financial crisis resulted in significant growth
in CO2 emissions: in 2010 global CO2 emissions saw the largest increase ever
recorded – four times the drop in emissions the year before. To mitigate the
increase in CO2 emissions in the recovery from the current crisis,
governments should put clean energy transitions at the heart of their stimulus
packages.
PAGE | 57
Governments should consider three main policy strategies:
1) Ensuring policy predictability and reassuring investors about their energy

and climate commitments by confirming ambitious targets and objectives,
including providing visibility on forthcoming capacities to be auctioned in the
power sector. This is key to enabling industry and businesses to plan in
advance and establish smooth project pipelines.
2) Reducing administrative barriers to renewable project development and

corporate sourcing of renewable energy by streamlining permitting and other
administrative procedures.
3) Including renewables in stimulus packages. The priority should be on those

sectors and project categories that offer early opportunities for job creation
and economic recovery, take stock of the lessons of the past, and can lead to
structural benefits in the form of highly efficient and resilient energy systems
with lower associated GHG emissions. Expanding the scope of and budget
for existing support schemes that have already worked offers an avenue to
delivering quicker results. Priority areas for action could include:
Introducing specific financing measures and cost-effective incentives for

renewable projects in upcoming stimulus packages by using proven support
mechanisms, such as auctions, tax incentives that reduce investment risk in
large-scale projects (e.g. solar or wind), and other targeted support schemes
for small-scale projects.
Focusing on the labour-intensive building sector with specific additional

measures, including specific economic incentives, building renovation plans
and/or upgrading programmes for public buildings, which can support
consumer and SME investment in the highly vulnerable distributed solar PV
and renewable heat sectors. These incentives can also be combined easily
with energy efficiency programmes.
Aligning short-term policy actions with new medium- and long-term visions
for emission reductions, including investment in power network
infrastructure and flexibility resources, enabling more rapid, secure and
economically efficient deployment and integration of variable renewables.
PAGE | 58
Fostering investment and job creation in smart, digital and resilient energy
infrastructure, connecting renewables with efficient services and mobility
solutions.
While a detailed description of policy options for including renewables in

post-Covid-19 economic stimulus packages is beyond the scope of this
report, it will be the subject of a separate IEA article.
PAGE | 59
Acknowledgements
This study was prepared by the Renewable Energy Division in the Directorate
of Energy Markets and Security. It was designed and directed by Heymi
Bahar, Senior Analyst.
The report benefited from analysis, drafting and input from multiple
colleagues.The lead authors of the report were, Yasmina Abdelilah, Heymi
Bahar, Trevor Criswell, Piotr Bojek, Francois Briens and Pharoah Le Feuvre.
Grecia Rodríguez Jiménez was responsible for data management and
contributed to drafting. The report also benefited from analysis, data and
input from Chenlu Cheng, Andrea Dertinger, Hideki Kamitatara.
Paolo Frankl, Head of the Renewable Energy Division, provided strategic

guidance and extensive input to this work. Valuable comments, feedback and
guidance were provided by other senior management and numerous other
colleagues within the IEA, in particular, Keisuke Sadamori, Laura Cozzi, Laszlo
Varro, Michael Waldron, Lucila Sarazola Arboleya
Thanks go to the IEA Communication and Digitalisation Office for their help
in producing the report and website materials, particularly to Jad Mouawad,
Jethro Mullen, Merve Erdem, Astrid Dumond, Jon Custer, Christopher Gully,
Julie Puech, Rob Stone and Therese Walsh.
Justin French-Brooks carried editorial responsibility.

PAGE | 60
Revised version, June 2020. Information notice found at:
www.iea.org/corrections/
This publication reﬂects the views of the IEA Secretariat but does not necessarily reﬂect those of individual IEA member
countries. The IEA makes no representation or warranty, express or implied, in respect of the publication’s contents
(including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication.
Unless otherwise indicated, all material presented in figures and tables is derived from IEA data and analysis.
This publication and any map included herein are without prejudice to the status of or sovereignty over any territory,
to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
IEA. All rights reserved.

IEA Publications
International Energy Agency
Website: www.iea.org
Contact information: www.iea.org/about/contact
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What does the IEA examine?

What does the IEA examine?

What policies does the IEA advocate for?

What policies does the IEA advocate for?

Renewable

Energy Market Update

Source: IEA. All rights

IEA All rights reserved.

 In 2020, the IEA forecasts net additions of renewable electricity capacity to

 In 2021, renewables are expected to show their resilience – the majority of

 The impact of Covid-19 on renewable electricity technologies with long lead

 Renewable heat consumption is also likely to decline in 2020. The industrial

Renewables are not immune to the Covid-19 crisis, but

Globally, overall demand for renewables is expected to increase due to their

The IEA anticipates that consumption of transport biofuel and industrial

2020 and 2021 forecast overview

Renewable electricity capacity additions in updated IEA forecast

Construction delays are expected to have an immediate impact on European

In India, Covid-19 is exacerbating existing challenges concerning the financial

The economic downturn is also expected to increase existing financing and

The IEA forecast expects 167 GW of renewable capacity to become

Renewable electricity net capacity additions growth by technology in 2020 and

Overall, the updated forecast revises down combined capacity growth in

technology and country (details in the technology sections). The distributed

Transport biofuel markets

While disruption to construction activity on new biofuel production facilities

Disruption to key biofuel support mechanisms may occur this year, as

In addition, 2020 is the milestone year in which EU member states need to

Renewable heat markets

Without government intervention, the crisis could have a long-lasting effect

Covid-19 impact on renewable energy

2020 was expected to be another record year for

Renewables growth in 2019 was dominated by solar PV, with capacity

Renewable electricity capacity additions by technology, actuals and IEA forecast in

Actual Oct-19 forecast

Wind Solar PV Bioenergy Hydropower CSP Geothermal

 In India, the growth of wind and solar projects needed to accelerate to

Covid-19 is expected to delay renewables deployment

supply chain disruption and delays in project construction, having a direct

Delaying projects under construction

Delays due to supply chain disruptions and/or closure of construction sites

It is reasonable to assume that a majority of projects missing incentive

Recent policy changes providing flexibility for delays

Extension of the construction period for wind

3-5-month extension of commissioning deadlines

Extension of commissioning deadlines by 2-6

Federal network agency announced flexibility in

6-month extension for projects due to come

30-day extension of commissioning deadlines for

6-month extension of the FIT completion deadline

Extension of PTC/ITC safe harbour provision

Covid-19 poses a risk to investments made by individuals and small to

Impacts on existing assets

VRE share over demand in Italy, California and Germany

VRE share over demand in Austria, Belgium and Texas

in past summers, as is already stated by Great Britain´s electricity system

Evolution of road transport and aviation activity in 2020 relative to 2019

Road transport activity Number of flights

Renewable heat consumption in industry sees a similar trend, as reduced