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Renewable power to break another global record in 2022

18/5/2022

Close up of solar panels in grass field Photo: Shutterstock
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, according to the IEA’s latest renewables market analysis

Photo: Shutterstock

Renewable power is set to break another global record in 2022 despite headwinds from higher costs and supply chain bottlenecks, says the International Energy Agency (IEA) in its latest market analysis. Unprecedented growth in capacity additions is being driven mainly by solar PV in China and Europe as renewables demonstrate their energy security benefits amid market turmoil.

The world added a record 295 GW of new renewable power capacity in 2021, overcoming supply chain challenges, construction delays and high raw material prices, according to the IEA’s latest Renewable energy market update. Global capacity additions are expected to rise this year to 320 GW – equivalent to nearly the entire electricity demand of Germany or matching the European Union’s (EU) total electricity generation from natural gas. Solar PV is reported to be on course to account for 60% of global renewable power growth in 2022, followed by wind and hydropower.

 

In the EU, annual additions jumped by almost 30% to 36 GW in 2021, finally exceeding the bloc’s previous record of 35 GW set a decade ago, says the report. The additional renewables capacity commissioned for 2022 and 2023 has the potential to significantly reduce the EU’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, notes the IEA.

 

‘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. 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.’ – Fatih Birol, Executive Director, IEA

 

Renewables’ growth so far this year is much faster than initially expected, driven by strong policy support in China, the EU and Latin America. This is more than compensating for slower than anticipated growth in the US, where the outlook is clouded by uncertainty over new incentives for wind and solar and by trade actions against solar PV imports from China and south-east Asia, says the report.

 

However, the IEA warns that based on today’s policy settings, renewable power’s global growth is set to lose momentum next year. In the absence of stronger policies, the amount of renewable power capacity added worldwide is expected to plateau in 2023, as continued progress for solar is offset by a 40% decline in hydropower expansion and little change in wind additions, it says.

 

While energy markets face a wide range of uncertainties, the strengthened focus by governments on energy security and affordability – particularly in Europe – is building new momentum behind efforts to accelerate the deployment of energy efficiency solutions and renewable energy technologies. The outlook for renewables for 2023 and beyond will therefore depend to a large extent on whether new and stronger policies are introduced and implemented over the next six months, notes the report.

 

The current growth in renewable power capacity would be even faster without the current supply chain and logistical challenges. 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, says the IEA.

 

Global additions of solar PV capacity are reported to be 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 EU, 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, says the IEA. 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, suggests the report. Even with its slower expansion this year, China is forecast to surpass Europe at the end of 2022 to become the market with the largest total offshore wind capacity in the world.

 

Meanwhile, biofuel demand recovered in 2021 from its pandemic lows to reach more than 155bn litres – near 2019 levels, according to the report. Demand is forecast 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 the IEA’s 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.

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