The world’s total renewables-based power capacity will grow by 50 per cent in the next five years – and solar PV will account for 60 per cent of this increase.

That’s the headline finding of a new report released today into renewables from the International Energy Agency. The IEA says that the 50 per cent rise between now and 2014 will amount to 1200 GW – equivalent to the current total power capacity of the US.

The expected growth comes after renewable capacity additions stalled last year for the first time in almost two decades and the IEA cautions that the renewed expansion “remains well below what is needed to meet global sustainable energy targets”.

“Renewables are already the world’s second largest source of electricity, but their deployment still needs to accelerate if we are to achieve long-term climate, air quality and energy access goals,” said IEA Executive Director Dr Fatih Birol.

The report highlights the three main challenges that need to be overcome to speed up the deployment of renewables: policy and regulatory uncertainty, high investment risks and system integration of wind and solar PV.

While all forms of solar are forecast to increase in the next half-decade, it is distributed PV – the installation of solar systems on homes, commercial buildings and industrial facilities – that is particularly set to take off over the next five years.

Distributed PV accounts for almost half of the growth in the overall solar PV market through 2024 in the IEA’s forecast.

The report stresses that “contrary to conventional wisdom, commercial and industrial applications rather than residential uses dominate distributed PV growth, accounting for three-quarters of new installations over the next five years”.

The IEA states that this is because economies of scale, combined with better alignment of PV supply and electricity demand, enable more self-consumption and bigger savings on electricity bills in the commercial and industrial sectors.

However, the number of solar rooftop systems on homes is set to more than double to some 100 million by 2024, says the report, with the top markets on a per capita basis that year forecast to be Australia, Belgium, California, the Netherlands and Austria.

“As costs continue to fall, we have a growing incentive to ramp up the deployment of solar PV,” said Dr Birol. The cost of generating electricity from distributed solar PV systems is already below retail electricity prices in most countries. The IEA forecasts that these costs will decline by a further 15 to 35 per cent by 2024, making the technology more attractive and spurring adoption worldwide.”

The report warns, however, that important policy and tariff reforms are needed to ensure distributed PV’s growth is sustainable. Unmanaged growth could disrupt electricity markets by raising system costs, challenging the grid integration of renewables and reducing the revenues of network operators.

By reforming retail tariffs and adapting policies, the IEA says utilities and governments can attract investment in distributed PV while also securing enough revenues to pay for fixed network assets and ensuring that the cost burden is allocated fairly among all consumers.

“Distributed PV’s potential is breathtaking, but its development needs to be well managed to balance the different interests of PV system owners, other consumers and energy and distribution companies,” Dr Birol said. “The IEA is ready to advise governments on what is needed to take full advantage of this rapidly emerging technology without jeopardising electricity security.”

According to the report, improving economics, policy support and more effective regulation could push distributed PV’s global installed capacity above 600 GW by 2024, almost double Japan’s total power capacity today. Yet this accelerated growth is still only 6 per cent of distributed PV’s technical potential based on total available rooftop area.

Elsewhere in the renewables market, the report predicts that renewable heat is set to expand by one-fifth between now and 2024, driven by China, the European Union, India and the US.

“The heat and power sectors become increasingly interconnected as renewable electricity used for heat rises by more than 40 per cent,” said the IEA, “but overall, renewable heat potential remains vastly underexploited.” It says the share of renewables in total heat demand is forecast to remain below 12 per cent in 2024 and calls for more ambitious targets and stronger policy support.

Biofuels currently represent some 90 per cent of renewable energy in transport and the IEA forecasts that their use is set to increase by 25 per cent over the next five years. This growth is dominated by Asia, particularly China, and is driven by energy security and air pollution concerns.

Despite the rapid expansion of electric vehicles, renewable electricity only accounts for one-tenth of renewable energy consumption in transport in 2024 in the report, and the share of renewables in total transport fuel demand still remains below 5 per cent.