The next six months will be crucial to shaping the outlook for renewable energy beyond 2023, warned the International Energy Agency (IEA), with green power growth set to flatline unless governments strengthen policy measures.
New renewable power capacity hit a record 295GW in 2021 and is set to beat that figure this year with 320GW installed, with 2022 seeing growth “much faster than initially expected” in some key markets, said the IEA in its latest Renewable Energy Market Update that covers wind and solar as well as other sources such as hydro and bioenergy.
That expansion – achieved despite all the challenges of pandemic-induced supply chain disruptions – is being driven by solar PV, which is expected to account for 60% of 2022’s additions at 190GW.
However, the Paris-based agency warned: “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.”
The IEA report added that while government momentum looks to be building behind extra policy backing in the wake of Russia’s invasion of Ukraine, that needs to translate into concrete action.
“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.”
Wind growth hampered
Wind power’s faster expansion is being hampered “by policy uncertainties, as well as long and complex permitting regulations [which] are preventing much faster growth”.
The IEA market outlook expects onshore wind additions to increase slightly this year and next, but offshore installations will plunge 40% in 2022 after last year’s boom in China.
However, “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”.
IEA executive director Fatih Birol said: “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.”
One key trend noted by the IEA is the reversal of the long-term cost reduction trend in wind and solar as both are hammered by inflationary pressures.
“Compared with 2020, we estimate that the overall investment costs of new utility-scale PV and onshore wind plants are from 15% to 25% higher in 2022. Surging freight costs are the biggest contributor to overall price increases for onshore wind. For solar PV, the impact is more evenly divided among elevated prices for freight, polysilicon and metals,” the IEA said.
However, “while significant in absolute terms, the increase in renewables costs have not hampered their competitiveness because prices of fossil fuels and electricity have risen at a much faster pace since the last quarter of 2021”.