IEA: Renewable fuels are essential to energy transitions, but growth is lagging behind

On 9 October 2024, the International Energy Agency (IEA) released ‘Renewables 2024’, see the IEA Report on Renewables in 2024.

This edition of the IEA’s annual Renewables market report provides forecasts for the deployment of renewable energy technologies in electricity, transport and heat to 2030, while also exploring key challenges facing the industry and identifying barriers that are preventing faster growth. A substantial part of the report covers the expansion of renewable electricity capacity. However, the report also features a special chapter on renewable fuels. These fuels include solid biomass (excluding for traditional uses), liquid biofuels, biogases, renewable hydrogen and e-fuels used in transport, industry and buildings. The chapter forecasts their role in global energy demand by 2030 and their potential for decarbonising the industry, building, and transport sectors.

These are the key messages on renewable fuels:

• The share of renewable fuels in total energy demand remains below 6% in 2030 despite accelerating growth. Demand is poised to expand in all regions, but it is concentrated in Brazil, China, Europe, India and the United States, which collectively support two-thirds of the growth due to dedicated policies to support the uptake of several – and in some cases, all – renewable fuels. The support policies vary by fuel, sector and country, but often include a combination of mandates, GHG performance criteria and direct production and CAPEX investment incentives.
• Bioenergy leads renewable fuel growth through 2030. Bioenergy, including liquid, gaseous and solid fuels, accounts for the vast majority (95%) of renewable fuel growth over the forecast period. New demand for bioenergy expands the most in the industrial sector followed by transport and buildings, although the bioenergy type differs by sector. Modern bioenergy is less expensive than hydrogen and e-fuels, and strong policy support is already in place in many regions. For instance, more than 60 countries have liquid biofuel policies, whereas only the European Union and the United Kingdom have e-fuel requirements.
• Modern solid bioenergy will still account for most renewable fuel growth and use in 2030. Solid bioenergy is mostly used for heat, with three-quarters of the increase over the forecast period from the industrial sector, with an important role in expanding sugar and ethanol production in India (which uses biomass residues – sugar cane bagasse and straw – for heat). The remaining growth results primarily from the rollout of improved biomass cooking and heating stoves in sub-Saharan Africa, India and China. Overall, efficiency gains from modernising biomass use in developing and emerging economies allow total annual solid bioenergy consumption (for traditional and modern applications) to decline by 5% globally over the outlook period.

• Transport: Road biofuels remain dominant, but aviation and maritime consumption is accelerating. New policies for aviation and maritime biofuels spur over 30% of new demand for biofuels in the transport sector overall. Biofuels in the aviation sector are forecast to climb to near 2% of total aviation supply by 2030, up from near zero in 2023, supported by mandates in the European Union and the United Kingdom and incentives in the United States. In the maritime sector, EU legislation drives growth, bringing biofuels to nearly 0.5% of international shipping demand.

• Aviation and maritime biofuel demand will intensify competition for residue oil. By 2030, demand for residue oils – including used cooking oil, tallow, and palm oil mill effluent – climbs 70% to reach 30 Mt/yr, claiming nearly 80% of the estimated supply potential. Producers of biojet fuel, biodiesel and renewable diesel are all vying for this finite supply, as these oils can be used to produce low-carbon intensity biofuels while complying with EU and UK feedstock criteria. Rising demand is driving an expansion in trade, as importing residue oils or fuels made from them is more affordable than expanding domestic collection. This trade growth has led to increasing scrutiny to ensure that supplies are genuine. In the short term, alternative pathways offer little relief. In the medium term, however, new low-emissions feedstock pathways – such as growing crops on marginal land and intercropping  – appear more promising.
• Demand for biogases increases by 30%, led by the United States and the European Union. India and China are building infrastructure and feedstock supply chains for future acceleration. Today, electricity production is the primary use for biogas globally, but there is a growing trend to use it as a renewable fuel in the form of biomethane to decarbonise hard-to-abate sectors such as industry and transport. The main driver in the short term is biomethane use in transport, supported by policies rewarding lower carbon intensities or waste feedstocks.
• Policies are generating demand for renewable hydrogen and e-fuels use in transport. By 2030, near 40% of renewable hydrogen demand is set to be from the transport sector, driven by policies primarily in the United States, Europe and China. The remaining 60% will be used primarily for feedstock to replace existing hydrogen uses from fossil fuels in refineries and in the chemical and fertilizer industries – and for low-emissions hydrogen steel production.

• Renewable fuels require dedicated policy support to align with the IEA’s scenario for achieving net zero energy sector emissions by 2050. To align with this pathway, renewable fuel adoption must nearly double by 2030. However, under today’s market conditions, it is projected to grow by only 20%. High costs remain a major obstacle to faster deployment, and additional efforts are needed to foster innovation, strengthen supply chains and implement sustainability measures. Accelerating deployment will depend on governments enacting policies to close the cost gap with fossil fuels, promote innovation, build resilient supply chains, implement sustainability requirements and remove fossil fuel subsidies.

Renewable fuels are essential to energy transitions, but growth is lagging behind