Introduction
The International Energy Agency (IEA) released its report titled Renewables 2023—Analysis and forecast to 2028 in January 2024. The report depicts the level of growth of the renewable energy sector and emphasises on the issues that crop up in this sector. The report projects that various renewable energy technologies will be installed in transport, heat and electricity by 2028. It also pinpoints the hindrances that prevent the rapid growth of the sector. Considering the ongoing policies and development in the market, the report serves as the main analysis on the sector.
When the COP28 climate change conference was held in Dubai in 2023, it was agreed upon by over 130 national governments that the installed renewable energy capacity would be tripled by 2030 with their significant contributions. It was decided that this energy capacity would be increased up to 11,000 gigawatt (GW) by 2030. This report mentions, country-wise detailed analysis regarding their respective contribution towards the global tripling target. Besides, there is an online dashboard that maintains a comprehensive record of all appropriate data, which enables the measurement of the consumption of renewable energy through 2028.
Key Features of the Report
1. A considerable increase in renewable capacity additions in 2023 There has been an increment of around 50 per cent in the global annual renewable capacity additions, which amounts to almost 510 GW in 2023. This is regarded as the highest growth rate over the last couple of decades. The USA, Brazil, and Europe reached a record high in terms of increment in their renewable capacity. However, there was a remarkable growth in the renewable capacity of China. It was noticed that China installed as many Solar PV (Photovoltaics) in 2023 as the whole world in 2022. Besides, there was an increment of 66 per cent in wind additions every year in China. Almost three-fourths of total renewable capacity additions around the globe are of solar PV itself.
2. Global renewable capacity would not be able to match the tripling goal by 2030 It is predicted that the global renewable capacity will be up to 7,300 GW by 2028, taking into account the ongoing policies and market scenarios. With this growth trajectory, the global renewable capacity would enhance up to 2.5 times its existing level by 2030, but it would not be able to meet the tripling goal. This gap can be closed by the governments by dealing with existing issues, such as uncertainties in policies and policy responses delay; lack of investment in grid infrastructure, thereby hindering the renewables’ growth; large number of administrative barriers; procedures for permission and issues related to social acceptance; and lack of funds in developing nations. The governments also need to enforce the current policies more rapidly.
3. The requirements of different regions to reach tripling target vary greatly Every region or country has different requirements to reach the tripling target by 2030. At present, around 90 per cent of total renewable power capacity in the world is constituted by G20 countries. If current policies are implemented more quickly and widely, G20 countries would be able to triple their renewable capacity together by 2030. However, as far as other countries are concerned, new installations should be done at a rapid rate to attain the global tripling target. It is to note that certain developing countries are devoid of associated policies and renewable targets.
4. By 2028, there will be transformation of global power mix In the coming five years, more renewable capacity will be added than the capacity produced by previously installed commercial renewable power plants. Approximately, 3,700 GW of new renewable capacity will be installed by 2028 in over 130 countries using supportive policies. Besides, 95 per cent of global renewable expansion will be attributed to Solar PV and wind. As a result, the generation cost would be lower compared to that of fossil and non-fossil fuels.
It is expected that the following renewable energy milestones will be achieved by 2028:
- In 2024, more electricity will be generated by solar PV and wind together than hydropower.
- In 2025, most of electricity generation will be done using renewables and not coal.
- In 2025, nuclear electricity generation will be outdone by wind energy.
- In 2026, nuclear electricity generation will be outdone by solar PV.
- In 2028, more than 42 per cent of global electricity generation will be constituted by renewable energy sources.
5. The growth of onshore wind and solar PV would be maximum in the EU, the US, Brazil, and India In comparison with the past five years, there will be double increment in terms of solar PV and onshore wind additions by 2028 in the US, the EU, Brazil, and India. This acceleration will be due to supportive policy environments and improved financial assistance. Besides, other parts of the world, particularly North Africa and the Middle East, will also have renewable energy additions owing to policy incentives. Sub-Saharan Africa will have increased renewable capacity. Still higher performance is required in the region taking into account its electrification requirements and resource potential.
6. With surplus supply of solar PV, its prices are falling down In 2023, there was a reduction of 50 per cent in prices of solar PV modules every year. So, its manufacturing capacity will be thrice the level in 2021. By the end of 2024, the solar PV will have its global supply at 1,100 GW. Though the USA and India will have a remarkable growth in the manufacturing of PV owing to their policy support, China will continue to provide its 90–95 per cent share in global supply chains. The security of supply will be increased and local people will earn profits by manufacturing PV locally. However, the expensive production in the EU, the USA, and India will increase the cost of installing PV in these markets.
7. Compared to new and existing fossil fuel plants, solar PV and onshore wind are less expensive In 2023, the generation cost of around 96 per cent of newly installed solar PV and onshore wind capacity was lower than that of newly installed coal and natural gas plants. Besides, cheaper power was provided by three-fourths of new solar PV and wind systems than current fossil fuel units. During the next five years, solar PV and wind plants will be more cost-effective.
8. More challenges come up with the new macroeconomic environment In 2023, advanced economies had to bear higher base interest rates for financing the new renewable energy capacity compared to China and the global average for the first time. Since 2022, there has been a rise in the base interest rates of the central bank, i.e., from less than 1 per cent to 5 per cent. So, since 2021, renewables manufacturers have to pay higher base interest rates in developing economies. This leads to more costs, thereby hindering the growth of renewables.
9. Both industry and the governments are affected by new macroeconomic environment The equipment expenditure for onshore and offshore wind system as well as partly for solar PV (barring module costs) has been increased due to inflation. Besides, the capital-intensive variable renewable technologies have high financing costs due to higher interest rates. Further, policy takes a lot of time to adapt to the new macroeconomic environment.
10. Macroeconomic challenges are affecting the financial health of the wind energy industry The wind energy industry is adversely affected by macroeconomic challenges, leading to its considerable decline in market value. There were negative net margins for wind turbine manufacturers of Europe and North America for seven quarters consistently. This was because of economic issues, limited availability of raw materials, volatile demand and increasing interest rates. However, the wind turbine manufacturers of China had a chance of remaining comparatively stable amidst worldwide challenges due to high domestic demand.
11. Quick installation of variable renewables leads to greater infrastructure and integration challenges It is expected that wind energy system and solar PV will contribute around 25 per cent to global electricity generation in 2028, i.e., double the amount of what it is at present. The power systems across the globe will be impacted due to quick expansion in the coming five years. It is projected that annual variable renewables will reach above 50 per cent in several countries of the European Union by 2028. These countries will include Denmark wherein the electricity system will constitute approximately 90 per cent of wind and solar PV by that time.
Besides, solar PV and wind energy will be integrated with the help of interconnections of the European Union. However, there will be issues of grid bottlenecks, because rapid use of variable renewables cannot match with grid expansion.
12. There is a mismatch between ongoing hydrogen plans and implementation It is expected that there will be 45 GW of increment in renewable power capacity associated with hydrogen-rich fuel production from 2023 to 2028. This denotes merely 7 per cent of announced project capacity for the same duration. Over 75 per cent of renewable capacity for hydrogen production is constituted by Saudi Arabia, the USA, and China by 2028. The planned projects are progressing quite slowly regardless of announcing new projects and pipelines.
13. The installation should be rapid to align biofuels with a net-zero pathway According to this report, the estimation is not aligned with the tripling of biofuels demand by 2030 as represented in the IEA’s Net Zero Emissions (NZE) by 2050 Scenario. With the help of new policies and by dealing with supply chain challenges, biofuel installation can be much rapid. The growth of fuels made from waste and residues is four times higher in the accelerated case.
14. High energy prices and support policies can increase renewable heat There has been an increase of 40 per cent in modern renewable heat consumption during the outlook period, i.e., total heat consumption increased from 13 per cent to 17 per cent. As dependence on electricity is increasing for process heat, it results in these developments. This is mainly due to deploying heat pumps in non-energy-intensive industries, in buildings, etc., that are driven by renewable electricity. These trends are mainly seen in the European Union, the USA, and China because of the prohibition of fossil fuels in the buildings sector, the implementation of supportive policies, the availability of financial incentives in different markets, the approval of renewable heat obligations, etc.
Conclusion
The IEA has called on governments worldwide to significantly ramp up their efforts to expand global renewable power capacity, aiming to triple it by 2030 in order to meet the Net Zero Emission by 2050 Scenario (NZE Scenario). Achieving these ambitious targets necessitates overcoming policy uncertainties, increasing investments in grid infrastructure, streamlining administrative process, and improving financing mechanisms in emerging economies.
At the same time, this report plays an important role in analysing the significant developments in the sector, such as manufacturing of solar PV, storage of energy, capacity of renewable energy for hydrogen production, supportive policy trends that facilitate deployment, the forecast for companies manufacturing renewable energy, advantages of renewable technologies, integrating system, and forecast on biogas and biomethane.
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