Renewable Energy Benefits: Measuring the Economics

(International Renewable Energy Agency) This report from the International Renewable Energy Agency (IRENA)provides the first quantification of the macroeconomic impact of doubling the global share of renewables in the energy mix by 2030. The study builds on IRENA’s previous work on the socio-economic benefits of renewable energy, as well as on REmap 2030, IRENA’s roadmap for doubling the global share of renewables.

Using a macro-econometric approach, Renewable Energy Benefits: Measuring the Economics takes into account the linkages between the energy system and the world’s economies within a single quantitative framework. The analysis compares a business-as-usual case to two cases of advanced renewable energy deployment. The study shows that the impact of a transition to 36% renewables would benefit economic growth (GDP), welfare and employment in both cases.

Doubling the share of renewables in the energy mix by 2030 would increase global GDP by up to 1.1 per cent, improve welfare by up to 3.7 per cent and support over 24 million jobs in the sector. READ MORE Download report

● The REmap Electrification case (REmapE): the global share of renewables also doubles by 2030 but greater emphasis is placed on electrification of heating and transport, requiring a greater deployment of renewables for power generation9. For instance, electric mobility is more widely adopted instead of biofuels for cars. More power generation based on renewables is needed to meet the additional electricity demand while doubling the renewable energy share.

STATUS OF EMPLOYMENT IN THE RENEWABLE ENERGY SECTOR China is the largest renewable energy employer, providing jobs for 3.4 million people (see Figure 5). Its PV industry alone employs 1.6 million people, 80% of whom work in manufacturing, accounting for nearly 70% of the world’s panel production. Brazil, the second largest employer, has almost 1 million employed, mostly in liquid biofuels, given the labour requirements of feedstock production. In the US there are more than 0.7 million jobs driven by solar, wind and bioenergy.

Employment trends vary widely across renewable energy technologies. Solar PV is the largest employer, accounting for 2.5 million jobs in 2014. This is due to increasing global production of solar panels as lower costs drive accelerated growth in installations. Moreover, distributed solar PV is more widely deployed as it offers a feasible and afordable way to improve energy access. The distribution and assembly of panels and the provision of aftersales service is easy to localise, creating jobs. Liquid biofuels is the second largest employer, accounting for nearly 1.8 million jobs worldwide despite increasing mechanisation of feedstock operations in major producing countries such as Brazil.

The analysis presented here does not account for impacts on the trade of bioenergy, which could provide opportunities for some countries, such as Russia. While most national plans include increased bioenergy use, not all countries are endowed with the resources to meet growing demand, so inter-regional and possibly global trade in both solid and liquid bioenergy will be needed. The past decade has seen positive trends in both solid biomass and biofuel production and trade and this is likely to continue.

As E3ME does not cover biofuels in detail, jobs in bioenergy production are estimated based on employment factors (jobs per GJ) derived from previous studies.

ENERGY INVESTMENTS BEYOND THE POWER SECTOR This study does not include the investments needed in end use sectors to achieve the REmap and REmapE cases, which is another disadvantage. This has some impact on the comparison of results between cases. However, this is not a major limitation in the analysis, since the capital stock in end use sectors needs to be replaced more often. The additional required investments compared to the Reference Case are thus lower than those in the power sector. Indeed, IRENA analysis (IRENA, 2015c) highlights that the power sector would require around three-quarters of the total investments needed to double the renewable energy share. In addition, the investments needed in biofuel production capacity in the REmap Case are not represented. However, these should be relatively minor in comparison to investments in the power sector in line with the 450 ppm Scenario in the IEA World Energy Investment Outlook (IEA, 2014b). In other words, the analysis in this report accounts for the majority of the investment needed, namely in the power sector.

The representation of investment in the power sector is more accurate than that in the oil and gas sectors, which is represented as a fixed proportion of output. This is another possible limitation to this analysis. It means the reduction of investment in the oil and gas sectors may be slightly undervalued in this analysis. This is because the price of fossil fuels between the analysed cases is assumed to be the same. Thus the decline in output and hence investment in these sectors is a result of reduced volume alone and not lower prices (which could be expected in a world with falling fossil fuel demand). This implies that the effects of renewable energy deployment on overall investment in the economy are overvalued because the reduction from the oil and gas sectors is not entirely captured. However, this effect would be counterbalanced with the increased investments required in end use and biofuels, so the overall conclusions of this report are unlikely to be affected.

Final use of biofuels is also included in the tool’s energy equations. The use of other renewables by final energy users (e.g. decentralised solar) is covered by the tool’s classifications but at a lower level of detail.