Renewable power capacity additions are expected to jump by a third this year as higher fossil fuel prices and energy security concerns drive strong deployment of solar PV and wind power, according to report from the International Energy Agency (IEA) released in June 2023.
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’s new Renewable Energy Market Update.
Global renewable capacity additions are set to soar by 107 gigawatts (GW), the largest absolute increase ever, to more than 440 GW in 2023. This is equivalent of more than the entire installed power capacity of Germany and Spain combined.
Solar PV capacity, including both large utility-scale and small distributed systems, accounts for two-thirds of this year’s projected increase in global renewable capacity. Smaller distributed PV applications are on track to account for half of this year’s overall deployment of solar PV – larger than the total deployment of onshore wind over the same period.
Following two consecutive years of decline, onshore wind capacity additions are on course to rebound by 70 percent in 2023 to 107 GW, an all-time record amount. This is mainly due to the commissioning of delayed projects in China following last year’s Covid-19 restrictions.
Faster expansion is also expected in Europe and the United States as a result of supply chain challenges pushing project commissioning from 2022 into 2023.
Offshore wind growth is not expected to match the record expansion it achieved two years ago due to the low volume of projects under construction outside of China. Solar PV additions will continue to increase in 2024 while challenges remain for wind expansion.
Declining module prices, greater uptake of distributed solar PV systems and a policy push for large-scale deployment are driving higher annual solar additions in all major markets – including China, the European Union, the United States and India.
Global onshore wind additions in 2024 are expected to fall by around 5 percent from 2023 levels. While China’s wind energy additions will continue to increase in 2024, they are set to be more than offset by undersubscription of auctions and pending permitting delays in Europe. The situation in Europe is expected to improve once new legislation is implemented.
Cumulative world renewable capacity is forecast to reach over 4 500 GW at the end of 2024, equal to the total power capacity of China and the United States combined. Global renewable capacity additions could reach 550 GW in 2024 in our accelerated case, almost 20 percent higher than in the main forecast. This is mainly due to a more rapid deployment of residential and commercial PV installations, assuming a faster implementation of recent policies and incentives.
EU electricity consumers are set to save an estimated EUR 100 billion during the 2021-2023 period thanks to newly installed solar PV and wind capacity.
Low-cost wind and solar PV will displace an estimated 230 terawatt-hours (TWh) of expensive fossil fuel generation over the 2021-2023 period, helping to reduce wholesale electricity prices in all European markets. Without these capacity additions, the average wholesale price of electricity in the EU in 2022 would have been 8 percent higher, hurting consumers, businesses and government budgets
Projected growth of renewable energy such as clean electricity, bioenergy boilers, heat pumps, and solar thermal and geothermal technologies could displace almost 8 bcm of EU buildings-related gas consumption annually in 2023 and more than 17 bcm in 2024.
China is poised to outpace the rest of the world in renewable capacity installations in 2023 and 2024 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 percent of global annual renewable capacity deployment.
By 2024, China will deliver almost 70 percent of all new offshore wind projects globally, as well as over 60 percent of onshore wind and 50 percent of solar PV projects.
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 percent 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 largescale PV manufacturing is emerging in India, import tariffs are causing short-term demand and supply mismatches.
Competitiveness of wind and solar PV has improved, but policies need to adapt to changing market conditions Electricity generation costs from new onshore wind and solar PV plants are projected to decline by 2024 but will likely remain 10-15 percent above their preCovid levels in most markets outside China.
Regardless, solar PV and onshore wind remain the lowest cost options for new electricity generation in most countries. Future power contracts for the end of 2023 and into 2024 in the
European Union, the United States, Japan, Australia and India indicate wholesale power prices two to three times above 2020 averages. Today, wind and solar PV plants can provide electricity at prices 30-50 percent lower than those of future power contracts in most key markets, increasing renewables’ attractiveness for investors.
Policy uncertainties and volatile prices left one-sixth of renewable energy auction volumes unallocated in 2022. Competitive renewable energy auctions resulted in the awarding of a record-breaking 100 GW of capacity. However, 20 GW remained unallocated, the highest ever level with Europe accounting for two-thirds of it.
Government auction designs need to take into account recent inflation, interest rate rises and turbulence in commodity prices – and to envisage dynamic indexation methods to attract investments. Market-driven procurement is expected to contribute to approximately onefifth of solar PV and wind capacity expansion in 2023 and 2024, driven by corporate power purchase agreements.
The United States leads expansion in corporate power purchasing agreements, followed by Brazil, Australia, Spain and Sweden.
The solar PV manufacturing sector has a positive outlook with increasing capacity additions, but potential supply gluts and declining prices may reduce company profit margins. Western wind manufacturers face challenges from high commodity prices, as well as permitting and auction designs that do not reflect changing financing environments.
Global manufacturing capacity of solar PV is projected to reach nearly 1 000 GW in 2024, sufficient to meet annual demand in the IEA’s Net Zero Emissions by 2050 Scenario.
Wind equipment manufacturing is expanding more slowly and may struggle to keep up with demand growth through 2030. While China will continue to dominate global manufacturing capacity for solar PV, announcements of solar PV manufacturing projects in the United States and India have doubled since December, indicating that supply chains are diversifying in the medium term.
Overall renewable energy capacity additions rose by almost 13 percent to nearly 340 GW in 2022. However, solar PV was the only technology that broke a deployment record last year, with net additions of nearly 220 GW – a 35 percent increase from 2021. Expansions in China and the European Union alone accounted for over 85 percent of the growth in annual PV capacity additions.
Annual PV growth rose in all major markets last year except the United States, where it shrank almost 15 percent due to supply chain challenges and rising costs. After solar PV, hydropower was the next-largest contributor to record-level renewable energy expansion globally, owing to the commissioning of multiple large projects, mostly in Asia. While global hydropower capacity additions did not break any records, they were the highest they have been since 2016 thanks to continuous expansion in China.
Annual wind capacity additions fell 21 percent from 2021 to 2022, declining for the second year in a row following record-level expansion in 2020, when developers in China were rushing to complete projects before subsidies from the central government ended that year. In 2022, Covid-related restrictions delayed the commissioning of multiple wind projects in China, resulting in a drop in annual additions.
Capacity additions in the US market declined for the second consecutive year because of policy uncertainty ahead of promulgation of the Inflation Reduction Act (IRA) and supply chain constraints leading to project delays.
In the European Union, wind capacity growth was much stronger thanks to rapid expansion in Germany with the commissioning of previously auctioned capacity, and in Spain owing to its large corporate PPA market.