Governments make energy policy decisions based on information about the cost of each energy unit, its price in the market and whether these are moving up or down for each separate technology. The International Energy Agency (IEA) is a major source of that information. If the historical data on which it bases its reports is inaccurate, or out of date, its prognoses will be to, too. The risk is that governments are led astray. FORESIGHT talked to IEA deputy boss Laura Cozzi, who also heads the energy-modelling unit, about its annual forecasts.

Q: Why are IEA projections of capacity growth so underestimated for wind and solar prices?
For more than a decade we have worked with three scenarios that depict three very different possible futures depending on three things. The first is policies that play a determinant role matter a lot in determining the future of the energy system. The second is technological change, which is not delinked from the policies. The third is energy prices. Our message has been very clear for the past many years and it is that under current policies—the policies of the past decade–we were heading towards an unsustainable future. We are not doing enough, especially in these two areas: renewables and energy efficiencies. Now, what has happened over the past several years is that governments most likely (also thanks to our advice) have changed their policies and focused more on renewables and energy efficiencies. For renewables, especially renewables in the power sector, we have been extremely good at forecasting those. If you look from 2010 onwards, our projections on wind, hydro and biomass were really correct. That is partly because the policy framework for those has not changed very much, and we understand very well how cost reduction is happening. But what has taken us by surprise is solar energy. Indeed solar has done much better than what we expected. The reason is the following. A lot of governments have put a lot of attention into solar PV. Let me give you one example. Our NPS [New Policy Scenario] is really driven by what countries intend to do. So in our NPS we look (with a little help from the IEA-database, which has more than three thousand policies updated every year) at each country’s intentions by sector, by technology and so forth. I think the example of China shows very well what has happened in the solar business over the past several years. In 2008, the Chinese were setting targets in their five year plan for 2020 in terms of solar deployment. That target at the time was 1.8 GW of solar. A few years later these 1.8 GW have become 100 GW. Now they are discussing—still for 2020—an increase to 130-150 GW. In our NPS we incorporate these changes in government plans every year. Q: Critics of the IEA scenarios would accuse you of being disproportionately conservative, or driven by political interest. What would your response to them be?
I have been in this business for many years and I invite everyone to go back and look at our scenarios from ten years ago. We recommended pushing for more renewables and more energy efficiency and a reform of subsidies. We have not changed that message for the past ten years. The message has been very consistent and has always been the same. However, projections have been wrong regarding solar. Solar is picking up speed partly because we are telling policy makers that the policies they put in place years ago are falling short. We have also showed them how to improve these policies. This means that at a certain point we did say that there were mistakes in the policy trajectory, and it could be adjusted. Our recommendation has been implemented into policy-making. Q: If that is the case, could we call that a job well done?
This is my fear for the renewables community right now. If we tell our policy makers that we have done the job, they could relax and [believe] cost reductions have solved it all. We will be making a huge mistake. We have made steps in the right direction, but our analysis shows very clearly that we are not yet on track to transform our energy system in accordance with the two-degree target. More needs to be done. The cost reductions we have seen in solar are amazing but our new challenge is, as we see a higher share of renewables, the integration into the system. We will focus on this in our report coming out this November. Q: What would your recommendations be to decision makers on how they should read and treat your projections?

Always look at all the scenarios. We do not have one, we have multiple. In particular, I would stress to always look at the gap between our baseline and what should be in relation to our 2050 scenario. And always test investments and policies across the two of them. A good policy and a good investment are the ones that go within the scope of the 2050 scenario.

TEXT: Peter Bjerregaard, PHOTO: By Abengoa Solar - Abengoa Solar, CC BY 1.0