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The Optimism of Failed Forecasts

18.10.2017 — 0

According to a Russian joke, when a pessimist sighs “It couldn’t be worse!”, an optimist replies joyously — “No, it could!”. So: who’s who now, can you tell the difference?

However, jokes aside, if one looks at the forecasts made by experts regarding the future of solar energy, one immediately realizes how hilariously unrealistic these have been. In fact, this is a ground for modest optimism. Just look at this chart:

**Picture credit: **http://www.visualcapitalist.com/experts-bad-forecasting-solar/

By 2023 the share of renewable energy will hit at 29% in the world’s energy consumption, according to the International Energy Agency (IEA). In fact, the Agency was compelled to adjust its own projections for the next 5 years, because alternative energy sources are developing more rapidly than expected.

According to the adjusted forecasts, in the next 5 years renewable energy will grow by 920 GW, or 43%. The drivers behind this growth are well known: primarily, it is the policies implemented by many countries in order to diversify their energy portfolios and make themselves less dependent on fossil fuels. In parallel, the falling costs of solar panels and wind power equipment makes them more accessible and thus also increasingly widespread.

Moreover, 2016 has been another record year for renewable energy: the total installed capacity increased by 165 GW, which is 6% more than the previous year’s increase. Looking at solar alone, the capacity has grown by 50%, for the first time making solar the fastest growing energy source in terms of capacity, outperforming all else, including coal.

As a result, the IEA had to increase its last year growth forecast by 12%. It also predicts that by 2020 the generation of renewable power will increase by one third and hit the level of 8’000 TW/hour, which is the equivalent of the energy consumption of China, India, and Germany, taken together. Meanwhile, natural gas is expected to have the most favourable future, with its consumption growing due to heating and industrial demand. However, the IEA predicts that, even though coal will still be the leading electric power source in 2022, its growth will slow down quite significantly, so that in 2027 renewable energy will absorb no less than 29% of global energy portfolio.

**Picture credit: **https://en.wikipedia.org/wiki/File:World_energy_consumption_2005-2035_EIA.png

The bottom line is simple: renewable energy development forecasts are increasingly unreliable sources of information. Analysts tend to underestimate the actual rates of growth and report unreasonably small figures. Researchers from the German Mercator Institute have compared the forecasts of solar energy development made by different organizations with the real growth rates of photovoltaics implementation. The results are telling.

According to their research, published in Nature, the IEA, Greenpeace, as well as the German Council for Global Change steadily underestimate the rates of solar photovoltaic installations implementation.

The researchers suggest that three factors are at play here. First, most forecasts do not take into account governmental policies to support solar energy and their long-term effects on the industry growth. Favourable tariffs, tax benefits, energy excesses compensations, direct state action to support solar power producers etc. do contribute to the development of solar around the world, and quite significantly.

Second, the technology itself is developing rapidly, so that every time the solar capacity doubles, solar modules’ price falls by 22.5% on average. Third, analysts have their own assumptions that are then built into their hypotheses and results. In particular, they keep betting on nuclear energy and other “heavy” technologies, which might result into a bias in assessing the futures of the solar.

The latter also has its own challenges, but they have less to do with the speed of its development. Rather, it is important for solar energy to achieve reasonable cost levels so that it can be implemented in developing countries at the large scale, as accumulate the critical quantity of solar installations around the world, so that solar energy will have become really widespread. Upon meeting these conditions, solar power will be able to cover for 30% to 50% of the world’s electricity demand, the researchers argue.

The very failure of the IEA’s forecast calls for a modest optimism — after all, it was changed based on reasonable grounds. For example, the solar panels market is expected to grow higher than $57 billion by 2022, and here many research teams converge. Solar panels have a bright future ahead, so that nobody questions their positive growth. What is different among the many forecasts, are the exact numbers, but also geography of the growth.

Only numbers change.

As solar is getting increasingly accessible, it penetrates new regions of the world. As for 2016, the Asian-Pacific region has been leading the world in terms of solar panels usage, powered by the demographic boom, increasing urbanization, and the falling costs of Indian and Chinese solar panels. 50% of this growth were absorbed by China and Japan, and it is expected that Asian countries will keep their leadership positions in the near future.

Other forecasts suggest that by 2022 the average cost of solar energy will fall by 27%, which means it will decrease by 4.4% annually, both in the U.S. and in the world at large. In Europe, solar energy is expected to become one of the cheapest sources of energy by 2030.

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