Global renewable energy capacity set for another record year amid strong policy support

New renewable power capacity is expected to rise 8% to 320 gigawatts, the International Energy Agency says

Photovoltaic modules at a solar power plant in Qinghai province, China. Renewables’ growth so far this year has been much faster than initially expected, driven by strong policy support in China. BlooShow more

New capacity for generating electricity from renewable sources is set for another record in 2022, as governments around the globe seek security in renewable energy and its climate benefits, the International Energy Agency said.

Globally, new renewable power capacity rose 6 per cent in 2021 to record 295 gigawatts, shaking off the rising cost of raw material, pandemic-driven construction delays and global supply chain challenges, the Paris-based agency said in its latest Renewable Energy Market update.

This year, the IEA expects global capacity additions to rise another 8 per cent to 320 gigawatts — equal to an amount that would come close to meeting the entire electricity demand of Germany, or matching the EU's total electricity generation from natural gas.

The global energy crisis has underpinned the need to increase renewable energy capacity.

While it is necessary to speed up clean energy transitions globally, it has more immediate benefits for Europe, which is trying to cut dependence on Russian hydrocarbons to meet its energy needs, in the wake of Moscow’s military assault on Ukraine.

Wind and solar PV, in particular, have the potential to help reduce the EU's power sector dependence on Russia natural gas by 2023, the IEA said.

“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,” said Fatih Birol, the IEA's executive director.

“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.”

Oil and gas prices have been extremely volatile this year. Crude, which rose 67 per cent last year amid strong demand, has surged further this year following Russia's military offensive in Ukraine that is threatening to disrupt global energy flows.

Brent, the benchmark for more than two thirds of the world’s oil, has already climbed to a notch under $140 a barrel this year before retreating. Emirates NBD estimates Brent will average $120 a barrel for the second and third quarters.

The EU, which is heavily reliant on Russia's oil and gas to meet its energy needs, is looking to phase out Russian imports as it tightens sanctions on Moscow for its military offensive in Ukraine.

In 2021, the bloc imported 155 billion cubic metres of natural gas from Russia, which accounted for about 45 per cent of EU gas imports and close to 40 per cent of its total gas consumption, the IEA said in March.

It presented a 10-point plan to reduce EU’s reliance on Russian imports, including halting new gas supply contracts with Russia, finding alternative gas sources and accelerating the deployment of renewable energy as well as increasing power generation from bio-energy and nuclear plants, among others.

Annual additions in the EU jumped almost 30 per cent to 36 gigawatts in 2021, exceeding the bloc’s previous record of 35 gigawatts set a decade ago.

But the actual impact of renewables on EU’s energy needs in the immediate future will depend on the success of parallel energy efficiency measures to keep the region’s energy demand in check, the IEA said on Wednesday.

Renewables’ growth so far this year has been much faster than initially expected, driven by strong policy support in China, the EU and Latin America, which more than compensated for slower-than-anticipated growth in the US.

The US 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.

This year, Solar PV is forecast to account for nearly 60 per cent of the increase in global renewable capacity, with a 25 per cent rise in commissioning of 190 gigawatts of projects. Utility-scale schemes will account for almost two-thirds of overall PV expansion in 2022, driven by China and the EU.

New global onshore wind installations are expected to reach almost 80 gigawatts, while offshore wind growth is expected to decline 40 per cent globally in 2022 following the exceptional four-fold jump last year in China.

“Despite this decline, 2022 global offshore wind capacity additions will still double compared to 2020, thanks to the continuation of provincial incentives in China and the expansion in the EU,” the IEA said.

“As a result, China is expected to have the largest cumulative installed offshore wind capacity globally and surpass the EU and UK combined by the end of this year.”

The rise in prices for raw materials and freight costs that began in 2021, is here to stay in 2022.

“By March 2022, the price of PV-grade polysilicon more than quadrupled, steel increased by 50 per cent, copper rose by 70 per cent, aluminium doubled and freight costs rose almost five-fold,” the agency said.

“We estimate that the overall investment costs of new utility-scale PV and onshore wind plants are from 15 per cent to 25 per cent higher in 2022.”

Based on today’s policy settings, renewable power’s global growth is set to lose momentum next year, the IEA said.

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 per cent decline in hydropower expansion and little change in wind additions.

“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,” the IEA said.

Biofuel demand, which recovered in 2021 from its pandemic lows to reach more than 155 billion litres — near 2019 levels — is expected rise 5 per cent in 2022 and 3 per cent in 2023.