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Renewables become the largest source of global electricity generation by early
Renewable electricity capacity additions broke another record in 2021 and biofuels demand almost recovered to pre-Covid levels, despite the continuation of logistical challenges and increasing prices. However, the Russian Federation''s (hereafter, "Russia") invasion of Ukraine is sending shock waves through energy and agriculture markets, resulting in an unprecedented global energy crisis. In many countries, governments are trying to shelter consumers from higher energy prices, reduce dependence on Russian supplies and are proposing policies to accelerate the transition to clean energy technologies.
In exploring the most recent market and policy developments as of April 2022, our Renewable Energy Market Update forecasts new global renewable power capacity additions and biofuel demand for 2022 and 2023. It also discusses key uncertainties and policy-related implications that may affect projections for 2023 and beyond.
IEA (2022), Renewable Energy Market Update - May 2022, IEA, Paris https://, Licence: CC BY 4.0
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IEA (2022), Renewables 2022, IEA, Paris https://, Licence: CC BY 4.0
The first truly global energy crisis, triggered by Russia''s invasion of Ukraine, has sparked unprecedented momentum for renewables. Fossil fuel supply disruptions have underlined the energy security benefits of domestically generated renewable electricity, leading many countries to strengthen policies supporting renewables. Meanwhile, higher fossil fuel prices worldwide have improved the competitiveness of solar PV and wind generation against other fuels.
Solar PV''s installed power capacity is poised to surpass that of coal by 2027, becoming the largest in the world. Cumulative solar PV capacity almost triples in our forecast, growing by almost 1500 GW over the period, exceeding natural gas by 2026 and coal by 2027. Annual solar PV capacity additions increase every year for the next five years. Despite current higher investment costs due to elevated commodity prices, utility-scale solar PV is the least costly option for new electricity generation in a significant majority of countries worldwide. Distributed solar PV, such as rooftop solar on buildings, is also set for faster growth as a result of higher retail electricity prices and growing policy support to help consumers save money on their energy bills.
Global wind capacity almost doubles, with offshore projects accounting for one-fifth of the growth. Over 570 GW of new onshore wind capacity are forecast to become operational over the 2022-27 period. However, onshore wind additions will only break their annual record, set in 2020, by the end of the forecast period because of lengthy permitting procedures and lack of improvements to grid infrastructure. Offshore wind growth accelerates globally, while Europe''s share of installed offshore capacity declines from 50% in 2021 to 30% in 2027 as China''s provincial policies support faster expansion and the United States becomes a sizeable market at the end of the forecast period.
The war is expediting Europe''s clean energy transitions. The energy crisis hit the EU while it was already discussing ambitious renewables targets under the Fit for 55 package. After Russia invaded Ukraine in February 2022, energy security emerged as an additional strong motivation to accelerate renewable energy deployment. At the EU level, the European Commission''s REPowerEU plan released in May 2022 proposes ending the bloc''s reliance on Russian fossil fuels by 2027. Among other goals, the plan aims to increase the share of renewables in final energy consumption to 45% by 2030, exceeding the 40% previously under negotiation.
Europe''s renewable electricity expansion doubles over the 2022-2027 period as energy security concerns add to climate ambitions. Many European countries passed or proposed action plans to further raise their ambitions, increased policy support and addressed non-financial challenges. Our forecast for growth in the EU has been revised upward significantly (by 30%) from last year''s report, led by Germany (50% higher) and Spain (60% higher). Germany has increased renewable electricity targets, introduced higher auction volumes and improved remuneration for distributed PV while reducing permitting timelines. Spain has streamlined permitting for solar PV and wind plants, and increased grid capacity for new renewable energy projects.
Sluggish growth of renewables in the transport and heating sectors holds back higher renewable energy penetration in the EU. In our main case, renewables'' share of transport energy demand expands from 9% in 2020 to 15% in 2027, which is not in line with the EU''s aspirations for 2030. While demand for electric vehicles and biofuel expands, state and EU-level incentives to meet higher renewable shares are not in place in most cases. For heating and cooling, the annual increase in the share of renewables would need to almost quadruple from historical and forecasted growth to be on track with the REPowerEU plan targets.
China is forecast to install almost half of new global renewable power capacity over 2022-2027, as growth accelerates in the next five years despite the phaseout of wind and solar PV subsidies. Policy guidelines and targets in China''s new 14th Five-Year Plan on renewable energy are the basis for this year''s 35% upward revision on last year''s forecast. Very ambitious new renewable energy targets, market reforms and strong provincial government support provide long-term revenue certainty for renewables. In most Chinese provinces, utility-scale renewables are cheaper than regulated coal electricity prices, driving rapid adoption. In the main forecast, China is expected to reach its 2030 target of 1 200 GW of total wind and solar PV capacity five years in advance.
In the United States, the Inflation Reduction Act is providing unprecedented long-term policy visibility for wind and solar PV projects. Passed in August 2022, the legislation extended tax credits for renewables until 2032. In addition, 37 out of 50 states have renewable portfolio standards and goals supporting expansion. By 2027, US annual wind and PV capacity additions double compared with 2021. Given that the United States now has clear long-term policy visibility, any remaining forecast uncertainties relate to supply chain constraints, trade measures, grid infrastructure inadequacy and long permitting lead times.
In India, new installations are set to double over our forecast period, led by solar PV and driven by competitive auctions implemented to achieve the government''s ambitious target of 500GW of non-fossil capacity by 2030.
Solar PV manufacturing investment in India and the United States is expected to reach almost USD 25 billion over 2022-2027, a sevenfold increase compared with the last five years. India''s Production Linked Incentives (PLI) initiative closes nearly 80% of Indian manufacturers'' investment cost gap with the lowest-cost manufacturers in China. Meanwhile, fully monetising manufacturing tax credits in the United States could bring all segments of PV manufacturing to cost parity with the lowest-cost manufacturers. In addition to manufacturing subsidies, tariffs on imported PV equipment and local-content premiums encourage project developers to purchase domestically manufactured products in both India and the United States.
One-third of new biofuels production is set to come from waste and residues by 2027. Transport greenhouse gas reduction policies in Europe and the United States are fuelling global demand for waste and residues. The United States'' Inflation Reduction Act drives a 20% increase in our biojet and renewable diesel forecast. The policy rewards lower greenhouse gas intensity fuels, driving biofuel producers to focus on waste and residues. In Europe, the existing Renewable Energy Directive and member state policies reward biofuels made from waste and residues. Most biofuel growth in Europe is also for renewable diesel and biojet. Singapore and China are also expanding renewable diesel and biojet production from waste and residues to serve the European and US markets.
Modern renewable consumption for heating purposes is expected to increase by almost one-third during 2022-2027, raising the modern use of renewables in heat from 11% to 14% by 2027. Renewable heat currently benefits from policy momentum, in particular in the European Union, in response to the energy security concerns fuelled by the current energy crisis. In both the industry and buildings sectors, the combination of rising shares of renewables in the power sector and greater reliance on electricity for heating, including through heat pumps, makes the largest contribution to renewable heat uptake. Nevertheless, renewable heat developments are insufficient to contain fossil fuel-based heat consumption.
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The annual Renewables Market Report assesses the current state of play of renewable energy, identifying the main drivers and barriers to deployment and projecting renewable energy electricity capacity and generation for the coming five years.
Renewables 2022 is the IEA''s primary analysis on the sector, based on current policies and market developments. It forecasts the deployment of renewable energy technologies in electricity, transport and heat to 2027 while also exploring key challenges to the industry and identifying barriers to faster growth.
The current global energy crisis brings both new opportunities and new challenges for renewable energy. Renewables 2022 provides analysis on the new policies introduced in response to the energy crisis. This year''s report frames current policy and market dynamics while placing the recent rise in energy prices and energy security challenges in context.
In addition to its detailed market analysis and forecasts, Renewables 2022 also examines key developments and trends for the sector, including the more ambitious renewable energy targets recently proposed by the European Union; the issue of windfall profits; the diversification of solar PV manufacturing; renewable capacity for hydrogen production; and a possible feedstock crunch in the biofuels industry and viable ways to avoid it.
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