The current global energy crisis has brought about a sharp increase in installations of renewable power. Total capacity growth is set to almost double worldwide in the next 5 years which will overtake coal as the largest source of electricity generation by early 2025. According to a new report published by the International Energy Agency (IEA) this growth will help keep alive the possibility of limiting global warming to 1.5 degrees Celsius.
The IEA said in the latest edition of their annual report on the sector, Renewables 2022:
“Energy security concerns caused by Russia’s invasion of Ukraine have motivated countries to increasingly turn to renewables such as solar and wind to reduce reliance on imported fossil fuels, whose prices have spiked dramatically. Global renewable power capacity is now expected to grow by 2,400 gigawatts (GW) over the 2022-2027 period, an amount equal to the entire power capacity of China today.”
After several years of slow progress, a potential turning point has been reached due to the acceleration of energy efficiency actions globally in 2022. Governments and consumers have turned more and more to efficiency measures in response to fuel supply disruptions and soaring energy prices.
The IEA’s latest market report, Energy Efficiency 2022 reveals that Global investments in energy efficiency such as building renovations, public transport and electric car infrastructure has reached USD 560 billion in 2022 which is an increase of 16% on 2021.
Initial data indicates that in 2022 the global economy used energy 2% more efficiently than it did in 2021, a rate of improvement almost four times that of the past two years, and almost double the rate of the past five years. Efficiency is one of the key areas that international efforts have been focused on in order to reach net zero emissions by 2050. If progress continues at its current rate and can be built on in the coming years, then 2022 could mark a crucial turning point for efficiency.
Countries have been motivated by energy security concerns caused by Russia’s invasion of Ukraine to increasingly turn to renewables such as solar and wind to diminish reliance on imported fossil fuels which have risen dramatically in price. The massive increase is 30% higher than the amount of growth that was forecast just a year ago which highlights how quickly governments have expedited additional policy weight behind renewables.
The report finds that renewables are set to account for over 90% of global electricity expansion over the next five years.
IEA executive director Fatih Birol said:
“Renewables were already expanding quickly, but the global energy crisis has kicked them into an extraordinary new phase of even faster growth as countries seek to capitalise on their energy security benefits. The world is set to add as much renewable power in the next 5 years as it did in the previous 20 years. 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. Renewables’ continued acceleration is critical to help keep the door open to limiting global warming to 1.5 °C.”
Because governments and businesses are looking to rapidly replace Russian gas with alternatives, the war in Ukraine has proved to be a decisive moment for renewables in Europe. The amount of renewable power capacity added in Europe in the 2022-27 period is forecast to be twice as high as in the previous five-year period, driven by both energy security concerns and climate ambitions.
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The IEA said:
“An even faster deployment of wind and solar PV could be achieved if EU member states were to rapidly implement a number of policies, including streamlining and reducing permitting timelines, improving auction designs and providing better visibility on auction schedules, as well as improving incentive schemes to support rooftop solar.”
The total renewable power growth is also being revised upwards beyond Europe. China, the United States, and India are all implementing policies and introducing regulatory and market reforms more quickly than previously planned to combat the energy crisis. It is expected that China will account for almost half of new global renewable power capacity additions over the 2022-2027 period as a result of its recent 14th Five-Year Plan.
At the same time, the US Inflation Reduction Act has provided new support and long-term visibility for the expansion of renewables in the United States.
For a significant number of countries, Utility-scale solar PV and onshore wind are the cheapest options for new electricity generation. Global solar PV capacity is set to almost triple over the 2022-2027 period, overtaking coal and becoming the largest source of power capacity in the world.
The IEA report also forecasts a steep increase in the number of installations of solar panels on residential and commercial rooftops which helps consumers reduce energy bills. Global wind capacity is set to almost double in the forecast period with off-shore projects accounting for one-fifth of the growth. Together, wind and solar will account for over 90% of the renewable power capacity that is added over the next five years.
The report sheds light on signs of diversification in global PV supply chains. New policies in the United States and India are expected to boost investment in solar manufacturing by as much as USD 25 billion over the 2022-2027 period. Though China looks set to remain the dominant player, its share in global manufacturing capacity could decrease from 90% today to 75% by 2027.
Total global biofuel demand is set to increase by 22% over the 2022-2027 period. 80% of the expected global expansion in biofuel use comes from the United States, Canada, Brazil, Indonesia, and India with all five countries having comprehensive policies to support growth.
The report also lays out an accelerated case in which renewable power capacity grows a further 25% on top of the main forecast. In advanced economies faster growth could be achieved by introducing various regulatory policies, by permitting challenges to be tackled and by a quicker integration of renewable electricity in the heating and transport sectors.
It would be a different case in emerging and developing economies where policy, regulatory uncertainties, a weak grid infrastructure and a lack of access to affordable financing would need to be addressed as these issues are hampering new projects going ahead.
Across the world, the accelerated case needs greater efforts to resolve supply chain issues, expand grids and deploy more flexibility resources to securely manage larger shares of variable renewables. The accelerated case’s faster renewables growth would move the world closer to a pathway consistent with reaching net zero emissions by 2050, which offers an even chance of limiting global warming to 1.5 °C.
