The International Energy Agency's Renewables 2023 Report has indicated sharp increases in global renewables capacity and suggests a completely transformed power mix by 2028, driven by policy-backed efforts to triple renewable energy capacity by 2030.
According to the report, global annual renewable capacity increased by nearly 50% in 2023, representing the fastest growth rate in the past 20 years. Much of this capacity was led by the solar PV market in China, which reportedly commissioned as much solar power as the entire world did in 2022. The country also currently accounts for nearly 60% of new renewables capacity expected to come online globally by 2028.
Despite this remarkable growth, however, the IEA explains that renewables capacity still falls behind the needed trajectories to reach 11,000 gigawatts by 2030. During COP28, countries agreed to the target of tripling renewables capacity and doubling energy efficiency every year by 2030, and the IEA suggests a number of policies governments may implement to fill the gap and meet this goal.
Addressing insufficient investment in grid infrastructure, overcoming policy uncertainties associated with the macroeconomic environment, accelerating permitting procedures, and providing financing for developing economies are all suggested pathways that may lead to nearly 21% higher renewables growth.
The report explains that spot prices for solar PV modules declined nearly 50% year-on-year in 2023, and manufacturing capacity reached three times 2021 levels. As China maintains an 80% to 95% share of global supply chains, other countries have begun strengthening their domestic production of solar panels. This is expected to increase supply security and benefit local communities but is also expected to increase the cost of overall solar PV deployment in the United States, India, and the EU.
In 2023, about 96% of newly installed, utility-scale solar and onshore wind capacity reportedly had lower generation costs than new coal and natural gas plants. This level of cost competitiveness may help work toward the COP28 goal to transition away from fossil fuel dependence.
Despite this cost competitiveness, new renewable energy projects have experienced higher base interest rates, which has especially hampered renewables development in emerging and developing economies. As inflation has increased equipment costs and high-interest rates increase financing costs of capital-intensive variable renewable technologies, policy has reportedly not kept up with this new, macroeconomic environment.
The wind industry specifically has faced challenges due to supply chain disruptions, higher costs, and slow permitting timelines.
In terms of alternative fuels, the report explains that hydrogen production has grown at a much slower rate than wind and solar projects, and biofuels are not currently on track with the net zero pathway. Strengthened policies to address supply chain challenges in the industry may allow for much faster biofuel deployment.
Finally, the renewable heat sector is expected to grow by 40% by 2028, led by more widespread adoption of heat pumps and other electric heating options. However, this growth is not on track to reduce global reliance on fossil fuel-derived heat at present, with the IEA again suggesting stronger policy action, energy efficiency improvements, and implementation of wide-scale demand-side measures.
