Renewable energy is set to rival coal as the main generator of the world's electricity by 2035 as the costs of technology fall and subsidies rise, the International Energy Agency said.

Wind farms, solar parks and hydroelectric dams are forecast to become the second biggest power generator in 2015 and rise to almost a third of all generation in 2035, a level approaching that of coal, the Paris-based agency that advises 28 nations on energy policy said today in its annual outlook.

"A steady increase in hydropower and the rapid expansion of wind and solar power has cemented the position of renewables as an indispensable part of the global energy mix," the IEA said. "The rapid increase in renewable energy is underpinned by falling technology costs, rising fossil-fuel prices and carbon pricing, but mainly by continued subsidies."

Renewable energy industry groups predict wind power installations will double over the five years through 2016, with solar photovoltaic panels tripling even as solar and wind equipment manufacturers from Denmark's Vestas Wind Systems A/S to China's Suntech Power Holdings Co. struggle with declining margins and industrywide overcapacity.

The IEA projected global renewable energy subsidies to rise to $240 billion in 2035 from $88 billion in 2011. That compares with $523 billion in support paid to fossil fuels last year.

"Subsidy measures to support new renewable energy projects need to be adjusted over time as capacity increases and as the costs of renewable technologies fall, to avoid excessive burdens on governments and consumers," the agency said.

The Global Wind Energy Council predicts installed turbines will more than double to 493 gigawatts in 2016 from 2011 levels. The European Photovoltaic Industry Association is forecasting cumulative solar panel installations to triple to 208 megawatts in 2016 from just under 70 megawatts in 2011.

The projected growth in low-carbon energy will not be enough to meet the United Nations goal of limiting global warming since industrialization to 2 degrees Celsius, the agency said. Almost 80 percent of the emissions allowable by 2035 under a 2-degree scenario are already committed because of existing power plants, factories and buildings, the IEA said.

By 2017, all the allowable emissions will be locked in if no action is taken to slash carbon dioxide, the IEA said. The world could postpone that lock-in by five years to 2022 through the "rapid deployment" of energy-efficient technologies, it said. That would buy time to secure a global agreement to slash greenhouse gases, according to the agency.

Delegates from almost 200 nations agreed at UN talks in December to reach a new climate deal by 2015 that will enter force by 2020.

Investment of $11.8 trillion in existing energy-efficient technologies could be more than offset by reduced need for spending on fuel, and could help boost cumulative global economic output over that period by $18 trillion, the IEA said.

"These gains are not based on achieving any major or unexpected technological breakthroughs, but just on taking actions to remove the barriers obstructing the implementation of energy efficiency measures that are economically viable," the agency said. "Successful action to this effect would have a major impact on global energy and climate trends." (Bloomberg)