China’s renewable electricity capacity growth is set to triple over the next five years against the previous five year, solidifying its position as a global leader. China is expected to contribute an unprecedented 56 percent to the global expansion of renewable energy.
Over the forecast period from 2023 to 2028, China is poised to deploy nearly four times more renewable capacity than the European Union and five times more than the United States, retaining its status as the second- and third-largest growth markets. This surge is attributed to the Chinese government’s ambitious Net Zero by 2060 target, supported by incentives outlined in the 14th Five-Year Plan (2021-2025) and the availability of locally manufactured equipment coupled with low-cost financing.
China’s Pivotal Role in Global Renewable Capacity Expansion
China’s significant contribution to global renewable capacity growth is underscored by its projection to account for almost 60 percent of new renewable capacity expected to be operational globally by 2028. Despite the phased-out national subsidies in 2020 and 2021, China’s deployment of onshore wind and solar PV continues to accelerate. This growth is propelled by the economic attractiveness of these technologies and supportive policy environments offering long-term contracts.
Forecasts indicate that China is set to achieve its national 2030 targets for wind and solar PV installations six years ahead of schedule. By the end of the forecast period, nearly half of China’s electricity generation is anticipated to come from renewable energy sources, IEA said.
Policy Environment and Economic Attractiveness Drive Forecast Revisions
China’s forecast has undergone a remarkable upward revision of 64 percent, attributed to an improved policy environment and the growing economic attractiveness of solar PV and wind systems. Notably, the global supply glut resulting from China’s almost doubled solar PV manufacturing capabilities has led to a nearly 50 percent reduction in local module prices throughout 2023. This price decline enhances the economic appeal of both utility-scale and distributed solar PV projects.
Despite the phaseout of subsidies, developers are accelerating the deployment of solar PV projects to meet rising power demand, as it proves more cost-effective than investing in new and existing coal- and gas-fired generation. Additionally, clarifications in China’s green certificate rules provide additional revenues for renewable energy projects, supporting a higher wind forecast.
Challenges and Downward Revisions in Wind Industry
While China’s renewable energy sector thrives, the wind industry globally faces financial challenges, with major Western manufacturers reporting losses over the past two years. The overall project development pace outside of China has been slower than expected, resulting in downward revisions in onshore wind forecasts.
Outside of China, onshore wind additions are stagnating in large markets such as India and Australia, while the ASEAN region, Africa, and the Middle East experience slow project progress and ongoing policy uncertainties. In the European Union, long permitting wait times, supply chain challenges, and higher equipment and financial costs contribute to a reduction in anticipated onshore wind deployment. The offshore wind sector sees the steepest decline, with costs rising significantly, leading to a 16 percent downward revision in this year’s forecast outside of China.
Solar PV Module Prices Decline and Global Impacts
In 2023, China commissioned as much solar PV as the entire world did in 2022, with spot prices for solar PV modules declining by almost 50 percent year-on-year. The global manufacturing capacity under construction indicates a potential threefold increase in solar PV supply compared to the current demand forecast by the end of 2024. Despite significant manufacturing expansion in the United States and India driven by policy support, China is expected to maintain its dominant share of 80-95 percent in global supply chains.
Though domestic PV manufacturing enhances supply security and brings economic benefits, replacing imports with more expensive production in the United States, India, and the European Union is anticipated to increase the overall cost of PV deployment in these markets.
Renewable Hydrogen Capacity Growth and Slow Progress
The forecast for renewable power capacity dedicated to hydrogen-based fuel production shows growth of 45 GW between 2023 and 2028, representing approximately 7 percent of the announced project capacity for the period. China, Saudi Arabia, and the United States contribute more than 75 percent to the projected capacity for hydrogen production by 2028. Despite announcements of new projects and pipelines, progress in planned projects has been slow.
EVs and Biofuels: A Powerful Combination for Reducing Oil Demand
Globally, the combination of electric vehicles (EVs) and biofuels is expected to offset 4 million barrels of oil-equivalent per day by 2028, constituting over 7 percent of the forecasted oil demand for transport. Biofuels remain the primary pathway for mitigating oil demand in the diesel and jet fuel segments. EVs outpace biofuels in the gasoline segment, particularly in the United States, Europe, and China.
In summary, China’s dominance in the global renewable energy landscape continues to shape forecasts and redefine expectations. The country’s commitment to ambitious targets, coupled with supportive policies and economic attractiveness, positions it as a key driver of renewable capacity expansion on the world stage.