The International Energy Agency (IEA) has released its Renewable Energy Market Update – Outlook for 2022 and 2023, where it shows that new renewable energy deployment is set to break the record set last year. IEA projects that global renewable energy capacity additions will rise to 320 gigawatts (GW) this year, compared to 295 added last year.
According to the IEA, the deployment of renewable energy will surpass the 2021 record despite the global supply chain challenges, construction delays and high raw material prices. IEA says the growth is motivated by governments’ willingness to take advantage of renewables’ energy security and climate benefits.
Solar PV is on course to account for 60% of global renewable power growth in 2022, followed by wind and hydropower.
In the European Union, annual additions jumped by almost 30% to 36 gigawatts in 2021, finally exceeding the bloc’s previous record of 35 gigawatts set a decade ago. IEA says the additional renewables capacity commissioned for 2022 and 2023 has the potential to significantly reduce the European Union’s dependence on Russian gas in the power sector. However, the actual contribution will depend on the success of parallel energy efficiency measures to keep the region’s energy demand in check.
“Energy market developments in recent months – especially in Europe – have proven once again the essential role of renewables in improving energy security, in addition to their well-established effectiveness at reducing emissions,” said IEA Executive Director Fatih Birol. “Cutting red tape, accelerating permitting and providing the right incentives for faster deployment of renewables are some of the most important actions governments can take to address today’s energy security and market challenges, while keeping alive the possibility of reaching our international climate goals.”
EU, China & LATAM Policy support driving renewables growth
IEA says strong policy support in China, the European Union and Latin America is driving renewables growth. However there seems to be slower than anticipated growth in the United States. The US outlook is clouded by uncertainty over new incentives for wind and solar and by trade actions against solar PV imports from China and Southeast Asia.
The IEA however cautions that in the absence of stronger policies, the amount of renewable power capacity added worldwide is expected to plateau in 2023. “Based on today’s policy settings, however, renewable power’s global growth is set to lose momentum next year,” the IEA says.
The IEA says the outlook for renewables for 2023 and beyond will depend to a large extent on whether new and stronger policies are introduced and implemented over the next six months.
The global energy body says the current growth in renewable power capacity would be even faster without the current supply chain and logistical challenges.
Increasing cost of installing renewables
The cost of installing solar PV and wind plants is expected to remain higher than pre-pandemic levels throughout 2022 and 2023 because of elevated commodity and freight prices, reversing a decade of declining costs. However, they remain competitive because prices for natural gas and other fossil fuel alternatives have risen much faster.
Global additions of solar PV capacity are on course to break new records in both this year and next, with the annual market reaching 200 GW in 2023. Solar’s growth in China and India is accelerating, driven by strong policy support for large-scale projects, which can be completed at lower costs than fossil fuel alternatives. In the European Union, rooftop solar installations by households and companies are expected to help consumers save money as electricity bills rise.
Policy uncertainties, as well as long and complex permitting regulations, are preventing much faster growth for the wind industry. Having plunged 32% in 2021 after exceptionally high installations in 2020, additions of new onshore wind capacity are expected to recover slightly this year and next.
New additions of offshore wind capacity are set to drop 40% globally in 2022 after having been buoyed last year by a huge jump in China as developers rushed to meet a subsidy deadline. But global additions are still on course to be over 80% higher this year than in 2020. Even with its slower expansion this year, China will surpass Europe at the end of 2022 to become the market with the largest total offshore wind capacity in the world.
Biofuel demand recovered in 2021 from its pandemic lows to reach more than 155 billion litres – near 2019 levels. Demand is expected to keep rising – by 5% in 2022 and 3% in 2023. However, the impacts of Russia’s invasion of Ukraine have contributed to a 20% downward revision of our previous forecast for biofuel growth in 2022. Since biofuels are blended with gasoline and diesel, much of the downward revision stems from slowing demand for transport, which has been depressed by a combination of factors including growing inflationary pressures, weaker global economic growth and Covid-related mobility restrictions in China.