Electricity supply from renewable energy sources will rise 40% from 2012 to 2018 as developing countries expand capacity, according to the International Energy Agency’s (IEA) latest medium-term renewable energy market report.

As the cost of generating power from wind, solar, hydro and other sources falls, renewables will account for nearly 25% of global electricity production by 2018, up from about 20% in 2011, according to the IEA's report.

Developing countries outside the Organisation for Economic Cooperation and Development (OECD) are expected to account for two-thirds of the global increase, with Africa and Asia showing some of the strongest gains.

China, with Government backing and access to cheap capital, is well ahead of other countries and is expected to increase its renewable capabilities by 750 terawatt-hours (TWh) between 2012 and 2018. The United States (150 TWh), Brazil (130), India (95) and Germany (70) are also expected to show large increases.

In terms of percentage growth, however, smaller economies are seen making the largest strides, with Morocco (25%) and South Africa (20%) leading the list.

Much will depend on Government policies and regulations to encourage renewables-growth. Uncertainty about renewable policies may hamper investment and growth in the sector, the IEA says. "Policy uncertainty is public enemy number-one," says IEA executive director Maria van der Hoeven.

Global investment in renewables fell 12% in 2012, according to the report - driven by a drop in European spending as the economic crisis lingers. In the United States, boom and bust cycles are hampering development of renewable sources, especially wind, Paolo Frankl, head of the IEA's renewable energy division, says.