The real renewables boom is here
The global energy crisis is driving a sharp acceleration in renewable energy installations, with total capacity worldwide set to nearly double in the next five years, overtaking coal as the largest source of electricity generation down the road and helping to keep alive the possibility of limiting global warming to 1.5 °C, the IEA says in a new report.
Energy security concerns caused by Russia’s invasion of Ukraine have prompted countries to increasingly turn to renewables, such as solar and wind, to reduce dependence on imported fossil fuels, whose prices have soared dramatically.
Global renewable energy capacity is now expected to grow by 2,400 gigawatts (GW) over the period 2022-2027, an amount equivalent to China’s total power capacity today, according to Renewables 2022 , the latest edition of the IEA’s annual report on the sector.
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It will overtake coal
This massive expected increase is 30% higher than the amount of growth that was forecast just a year ago, highlighting how quickly governments have put additional political weight behind renewables.
The report finds that renewables will account for more than 90% of global electricity expansion over the next five years, overtaking coal to become the world’s largest source of electricity by early 2025.
“Renewables were already expanding rapidly, but the global energy crisis has taken them into an extraordinary new phase of even faster growth as countries seek to capitalize on their energy security benefits. The world is poised to add as much renewable energy in the next 5 years as it did in the previous 20 years,” said IEA Executive Director Fatih Birol.
“This is a clear example of how the current energy crisis can be a historic turning point towards a cleaner and more secure energy system. Continued acceleration of renewables is critical to help keep the door open to limiting global warming to 1.5 °C.”
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The war in Ukraine
The war in Ukraine is a watershed moment for renewables in Europe, where governments and companies are looking to quickly replace Russian gas with alternatives. The amount of renewable energy capacity added in Europe in 2022-27 is forecast to double from the previous five-year period, driven by a combi of energy security concerns and climate ambitions.
Even faster deployment of wind and solar PV could be achieved if EU member states quickly implemented a range of policies, including simplifying and reducing permitting timelines, improving auction designs and improving the visibility of auction schedules, as well as improving incentive schemes for rooftop solar support.
Beyond Europe, the upward revision in renewable energy growth for the next five years is also driven by China, the United States and India, which are implementing policies and introducing regulatory and market reforms faster than expected to combat the energy crisis.
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As a result of its recent 14th Five-Year Plan, China is expected to account for nearly half of new global renewable energy capacity additions during the 2022-2027 period. Meanwhile, the US Inflation Reduction Act has provided new long-term support and visibility for renewable energy expansion in the United States.
The cheapest options
Large-scale solar PV and onshore wind are the cheapest options for new electricity generation in a large majority of countries around the world.
Global solar PV capacity will nearly triple during the 2022-2027 period, overtaking coal and becoming the world’s largest source of power capacity. The report also forecasts an acceleration in residential and commercial rooftop solar panel installations, which help consumers reduce energy bills.
Global wind capacity nearly doubles over the forecast period, with offshore projects accounting for one-fifth of the growth. Together, wind and solar will account for more than 90% of the renewable energy capacity to be added over the next five years.
The report sees emerging signs of diversification in global PV supply chains, with new policies in the United States and India expected to boost investment in solar manufacturing by as much as $25 billion over the 2022-2027 period. While China remains the dominant player, its share of global manufacturing capacity could decline from 90% today to 75% by 2027.
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Biofuels
Total global demand for biofuels is expected to expand by 22 % over the period 2022-2027. The United States, Canada, Brazil, Indonesia and India account for 80% of the expected global expansion in biofuel use, and all five countries have comprehensive policies in place to support growth.
The report also presents an accelerated case where renewable energy capacity grows by an additional 25% on top of the main forecast. In advanced economies, this faster growth would require addressing a number of regulatory and permitting challenges and faster penetration of renewable electricity in the heating and transportation sectors.
For emerging and developing economies, it would mean addressing the policy and regulatory uncertainties, weak grid infrastructure, and lack of access to affordable financing that are hindering new projects.
Across the globe, the accelerating case requires efforts to resolve supply chain issues, expand grids, and deploy more flexibility resources to safely manage higher proportions of variable renewables.
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Faster growth of renewables in the accelerated case would bring the world closer to a path consistent with reaching net zero emissions by 2050, which offers an even chance of limiting global warming to 1.5°C.
