Record year for renewable capacity additions ahead despite headwinds: IEA

Global additions of renewable power capacity are expected to increase by over 8% in 2022 versus last year, pushing through the 300 GW mark for the first time despite rising costs and supply chain bottlenecks, the International Energy Agency said May 11.

Additions are expected to total 320 GW this year, topping last year's record 295 GW, the IEA said in its latest Renewable Energy Market Update.

"Unprecedented growth in capacity additions is mainly driven by solar PV in China and Europe as renewables demonstrate their energy security benefits amid market turmoil," the IEA said.

Stronger-than-expected growth in China, the EU and Latin America this year would more than offset slower growth in the US and Japan, the report showed.

"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 Southeast Asia," it said.

Loss of momentum

The report warned, however, that global green energy growth could 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," it said.

Meanwhile the cost of installing solar PV and wind farms was expected to remain higher than pre-pandemic levels through 2022 and 2023 because of soaring commodity and freight prices, reversing a decade of declining costs.

"However, they remain competitive because prices for natural gas and other fossil fuel alternatives have risen much faster," the IEA said.

Solar boom, wind challenged

Global additions of solar PV capacity were on course to break new records both this year and next, with the annual market reaching 200 GW in 2023.

Solar's growth in China and India was accelerating, driven by strong policy support for large-scale projects, the report said.

Policy uncertainties twinned with long, complex permitting regulations were preventing faster growth for the wind industry.

Having plunged 32% in 2021 after high installations in 2020, additions of onshore wind were expected to recover slightly this year to around 80 GW.

New additions of offshore wind were set to drop 40% globally in 2022 having been buoyed last year by a jump in China as developers rushed to meet a subsidy deadline.

"But global additions are still on course to be over 80% higher this year than in 2020," the IEA noted.

Russian impact

Biofuel demand recovered in 2021 from its pandemic lows to reach more than 155 billion liters -- near 2019 levels.

Demand was expected to keep rising -- by 5% in 2022 and 3% in 2023, "however the impacts of Russia's invasion of Ukraine have contributed to a 20% downward revision of our previous forecast for biofuel growth in 2022," the agency said.

Since biofuels were blended with gasoline and diesel, much of the downward revision stemmed from slowing demand for transport, depressed by growing inflationary pressure, weaker global economic growth and COVID-related mobility restrictions in China, it said.

Under a reference scenario, S&P Global Commodity Insights forecasts global renewable electricity supply to rise 27% from 3,828 TWh in 2022 to 4,864 TWh in 2025, and then by a further 57% to 7,651 TWh in 2030.