Global additions of renewable power capacity are expected to jump by a third this year as growing policy momentum, higher fossil fuel prices and energy security concerns drive strong deployment of solar PV and wind power, according to the latest update of the Renewable Energy Market published by the International Energy Agency this morning.
The growth is set to continue next year with the world’s total renewable electricity capacity rising to 4 500 gigawatts (GW), equal to the total power output of China and the United States combined, says the IEA.
“Solar and wind are leading the rapid expansion of the new global energy economy. This year, the world is set to add a record-breaking amount of renewables to electricity systems, more than the total power capacity of Germany and Spain combined,” said IEA Executive Director Fatih Birol. “The global energy crisis has shown renewables are critical for making energy supplies not just cleaner but also more secure and affordable and governments are responding with efforts to deploy them faster. But achieving stronger growth means addressing some key challenges. Policies need to adapt to changing market conditions, and we need to upgrade and expand power grids to ensure we can take full advantage of solar and wind’s huge potential.”
While the competitiveness of wind and solar PV has improved since last year, government policies need to adapt to changing market conditions, particularly for renewable energy auctions, which were undersubscribed by a record 16% in 2022.
Moreover, policies need to focus on timely planning and investment in grids in order to securely and cost-effectively integrate high shares of variable renewables in power systems.
The largest absolute increase in generation capacity and the highest rise in clean energy global investment ever
Global renewable capacity additions are set to soar by 107 gigawatts (GW), the largest absolute increase ever, to more than 440 GW in 2023. The dynamic expansion is taking place across the world’s major markets.
About $2.8 trillion is set to be invested globally in energy in 2023, of which more than $1.7 trillion is expected to go to clean technologies (including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps ) according to the IEA’s latest World Energy Investment report published last May. The remainder, slightly more than $1 trillion, is going to coal, gas and oil.
Solar generation is set to eclipse oil production for the first time ever, IEA pointed in May.
Annual clean energy investment is expected to rise by 24% between 2021 and 2023, driven by renewables and electric vehicles, compared with a 15% rise in fossil fuel investment over the same period. But more than 90% of this increase comes from advanced economies and China, presenting a serious risk of new dividing lines in global energy if clean energy transitions don’t pick up elsewhere.
Led by solar, low-emissions electricity technologies are expected to account for almost 90% of investment in power generation. Consumers are also investing in more electrified end-uses. Global heat pump sales have seen double-digit annual growth since 2021. Electric vehicle sales are expected to leap by a third this year after already surging in 2022.
Clean energy investments have been boosted by a variety of factors in recent years, including periods of strong economic growth and volatile fossil fuel prices that raised concerns about energy security, especially following Russia’s invasion of Ukraine. Enhanced policy support through major actions like the US Inflation Reduction Act and initiatives in Europe, Japan, China and elsewhere have also played a role.
“Clean energy is moving fast , faster than many people realise. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels,” said IEA Executive Director Fatih Birol. “For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy. Five years ago, this ratio was one-to-one. One shining example is investment in solar, which is set to overtake the amount of investment going into oil production for the first time.”
China will account for almost 55% of global additions of renewable power capacity
The dynamic expansion of power generation capacity based in renewables is taking place across the world’s major markets.
Renewables are at the forefront of Europe’s response to the energy crisis, accelerating their growth there.
Multiple countries in Europe including Spain, Germany and Ireland will see wind and solar PV’s combined share of their overall annual electricity generation rise above 40% by 2024.
The forecast for renewable capacity additions in Europe has been revised upwards by 40% from before Russia’s invasion of Ukraine, which led many countries to boost solar and wind uptake to reduce their reliance on Russian natural gas. The growth is driven by high electricity prices that have made small-scale rooftop solar PV systems more financially attractive and by increased policy support in key European markets, especially in Germany, Italy and the Netherlands.
Newly installed solar PV and wind capacity is estimated to have saved EU electricity consumers EUR 100 billion during 2021-2023 by displacing more expensive fossil fuel generation. Wholesale electricity prices in Europe would have been 8% higher in 2022 without the additional renewable capacity, according to the latest update of the Renewable Energy Market.
New policy measures are also helping drive significant increases in the United States and India over the next two years.
In the United States, capacity additions will rebound this year after a difficult 2022. The US markets for wind and solar PV contracted last year due to restrictive trade measures and supply chain constraints, but annual additions for both technologies are set to increase by around 40% in 2023, with solar PV setting a new record. The current forecast is underpinned by existing tax incentives, while the Inflation Reduction Act will show its full effect after 2024, providing unprecedented certainty for renewable energy projects until 2032.
India’s renewable capacity additions are expected to increase again in 2023 and 2024, owing to faster onshore wind, hydropower and distributed solar PV deployment. However, utility-scale solar PV projects, India’s largest renewable electricity growth segment, are expected to slow briefly this year due to supply chain challenges, lower auction volumes and trade policies. While large-scale PV manufacturing is emerging in India, import tariffs are causing short-term demand and supply mismatches.
China’s contribution to global renewable capacity additions is expected to increase in 2023 and 2024, consolidating its position as the undisputed leader in global deployment. In 2022, China accounted for almost half of all new renewable power capacity worldwide. By 2024, the country’s share is set to have expanded to a record 55% of global annual renewable capacity deployment. By 2024, China will deliver almost 70% of all new offshore wind projects globally, as well as over 60% of onshore wind and 50% of solar PV projects.
Solar PV will make two-thirds of this year’s increase in renewable power capacity
Solar PV additions will account for two-thirds of this year’s increase in renewable power capacity and are expected to keep growing in 2024, says the latest update of IEA’s Renewable Energy Market report.
Wind power additions are forecast to rebound sharply in 2023 growing by almost 70% year-on-year after a difficult couple of years in which growth was slugging.
The expansion of large-scale solar PV plants is being accompanied by the growth of smaller systems. Higher electricity prices are stimulating faster growth of rooftop solar PV, which is empowering consumers to slash their energy bills.
At the same time, manufacturing capacity for all solar PV production segments is expected to more than double to 1 000 GW by 2024, led by China and increasing supply diversification in the United States, India and Europe. Based on those trends, the world will have enough solar PV manufacturing capacity in 2030 to comfortably meet the level of annual demand envisaged in the IEA’s Net Zero Emissions by 2050 Scenario.
The faster growth in wind electric power generatin capacity is mainly due to the completion of projects that had been delayed by Covid-19 restrictions in China and by supply chain issues in Europe and the United States. However, further growth in 2024 will depend on whether governments can provide greater policy support to address challenges in terms of permitting and auction design. In contrast to solar PV, wind turbine supply chains are not growing fast enough to match accelerating demand over the medium-term. This is mainly due to rising commodity prices and supply chain challenges, which are reducing the profitability of manufacturers.