IEA Forecasts Global Renewable Capacity Additions to Soar by 107 GW in 2023

Global renewable capacity additions are set to soar by an unprecedented 107 GW to over 440 GW in 2023. This growth is driven by expanding policy support, concerns over energy security, and the improved competitiveness of renewable energy compared to fossil fuel alternatives, according to the International Energy Agency (IEA).

Solar capacity, including large-scale utility systems and small distributed systems, accounts for two-thirds of this year’s projected increase as policymakers in many countries, particularly in Europe, actively seek alternatives to imported fossil fuels to enhance energy security.

The focus on reducing dependence on imported fossil fuels has created a favorable environment for solar, especially for residential and commercial systems that can be rapidly installed to meet the growing demand for renewable energy.

Looking ahead to 2024, solar additions are anticipated to continue increasing, driven by declining module prices, greater uptake of distributed solar systems, and a policy push for large-scale deployment.

Wind Capacity

Following two consecutive years of decline, onshore wind capacity additions are on course to rebound by 70% in 2023 to 107 GW, a record amount. This is mainly due to the commissioning of delayed projects in China following last year’s Covid-19 restrictions. Faster expansion is also expected in Europe and the United States because supply chain challenges push project commissioning from 2022 to 2023.

On the other hand, offshore wind growth is not expected to match the record expansion it achieved two years ago due to the low volume of projects under construction outside of China.

Western wind manufacturers face challenges due to high commodity prices, permitting issues, and auction designs that do not reflect changing financing environments. Despite the energy crisis impacting the profitability of specific electricity utilities, these companies continue to play a significant role as large investors in renewables.

India’s renewable capacity additions are expected to increase again in 2023 and 2024, owing to faster onshore wind, hydropower, and distributed solar deployment. However, utility-scale solar projects, India’s largest renewable electricity growth segment, are expected to slow briefly this year due to supply chain challenges, lower auction volumes, and trade policies. While large-scale manufacturing is emerging in India, import tariffs are causing short-term demand and supply mismatches.

In March 2023, India issued a bidding calendar for implementing agencies to increase auction capacity to 50 GW annually from FY 2023-2024 onwards.

In the United States, renewable capacity additions are set to rebound in 2023 after a challenging year in 2022. The previous year, wind and solar markets contracted due to restrictive trade measures and supply chain constraints. However, both technologies are expected to experience around a 40% increase in annual additions in 2023, with solar setting a new record.

Existing tax incentives support the current forecast, while the Inflation Reduction Act will further contribute to renewable energy projects’ certainty until 2032.

The cost of electricity generation from new onshore wind and solar projects is projected to decline by 2024. Nevertheless, the costs are expected to remain 10-15% above their pre-COVID levels in most markets outside China.

Solar and onshore wind are the most cost-effective options for new electricity generation in most countries, with 30-50% lower prices than future power contracts in key markets.

Policy uncertainties and volatile prices left many renewable energy auction volumes unallocated in 2022. Government auction designs must consider recent inflation, interest rate rises, and commodity price turbulence to attract investments effectively.

Market-driven procurement, particularly through corporate power purchase agreements, is anticipated to contribute around one-fifth of solar and wind capacity expansion in 2023 and 2024. The United States leads the expansion in corporate power purchasing agreements, followed by Brazil, Australia, Spain, and Sweden.

The global manufacturing capacity of solar is projected to reach nearly 1000 GW in 2024, which would be sufficient to meet the annual demand in the IEA’s Net Zero Emissions by 2050 Scenario. In contrast, wind equipment manufacturing is expanding slower and may struggle to keep up with the demand growth through 2030. While China remains the dominant player in global solar manufacturing capacity, there have been announcements of solar manufacturing projects in the United States and India, indicating diversification of supply chains in the medium term.

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