The IEA forecasts solar PV and wind energy additions to more than double by 2028 compared to 2022 to reach almost 710 GW. (Photo Credit: IEA)

2023 Global RE Capacity Grew By 50% YoY To Nearly 510 GW

Solar PV & Wind To Lead 7.3 TW World’s RE Growth By 2028; China To Achieve 1.2 TW Goal In 2024

IEA's Renewables 2023 report pegs global renewable energy additions to have added up to 507 GW last year
Solar PV accounted for almost 3 quarters of this capacity that grew by 50% over 2022
China is expected to achieve its 1.2 TW solar PV and wind energy goal in 2024, 6 years ahead of schedule
Rapidly scaling up financing and deployment of renewables in most emerging and developing economies will be key to achieving 11 TW goal by 2030

Solar PV accounted for 3 quarters of 507 GW renewable energy capacity added globally in 2023, according to the International Energy Agency (IEA). It predicts solar PV and wind energy to together account for 95% of an estimated 3.7 TW capacity to come online between 2023 and 2028 under existing policies and market conditions. This will take the cumulative installed global renewables capacity to 7.3 TW by 2028.

Yet, it says, this is not enough to reach the COP28 goal of tripling renewables to 11 TW by 2030 (see Over 120 Nations For 11 TW Global RE Target By 2030).

IEA's latest report Renewables 2023 says China alone commissioned as much solar PV as the entire world did in 2022 and will achieve its 2030 national target of 1.2 TW solar and wind capacity, 6 years ahead of schedule, in 2024 itself. This is a year earlier than forecast by Global Energy Monitor (see Chinese RE Growth Progressing Fast).

Geographical growth

In 2023, low prices for solar modules due to a supply glut led to major stockpiling, with the IEA counting the European Union to have hoarded around 90 GW and the US 45 GW at the end of last year, 'close to double the installations forecast for 2024'.

Stockpiling in the EU was also a result of high PV capacity growth expectations and the possibility of import restrictions in the short term. In the US, it is due to the June 2024 deadline for the circumvention tariff moratorium. However, ROTH MKM believes as much as $10 billion worth of solar modules already imported, unliquidated and even installed in the US could be at risk for retroactive tariffs with Auxin Solar going to the court on the anti-circumvention tariffs (see Solar Companies Challenge US Govt Tariff Moratorium).

The US and EU together accounted for as much as 140 GW of solar module stockpiles in 2023, according to the IEA. (Photo Credit: IEA)

Nonetheless, the IEA believes this stockpile is likely to reduce this year as distributors target to bring down their storage costs. This is expected to pull down the demand for newer modules in 2024.

Moving forward, China will continue to the world's renewables powerhouse accounting for almost 60% of new renewable capacity expected to become operational globally by 2028, according to the IEA estimates.

"China's role is critical in reaching the global goal of tripling renewables because the country is expected to install more than half of the new capacity required globally by 2030," according to the report that cites economic attractiveness of solar PV and wind and supportive policy environment for this anticipated growth in the country.

Apart from China, the other geographies that will grow in this space will be the US, the European Union (EU), India and Brazil that will more than double their solar PV and onshore wind installations through 2028. While the EU and Brazil will grow with residential and commercial rooftop PV that will outpace large-scale plants, growth in India will be driven by an expedited auction schedule for utility-scale solar PV and onshore wind. Improved financial health of the discoms will help too.

Solar PV manufacturing

In 2023, solar PV manufacturing reached 3 times 2021 levels, on course to reach 1,100 GW at the end of 2024, outpacing current forecast for demand.

Yet, global average solar PV manufacturing utilization rate likely fell to about 60% in 2023 mainly for Chinese manufacturers, thanks to the ongoing oversupply in the industry. Competitive environment led to a module spot price drop of nearly 50% between January 2023 and December 2023. Non-Chinese manufacturers outside of China, with the comfort of various support policies and trade measures, should be able to maintain higher utilization rates, as per the report.

<em>IEA says utilization rates for Chinese manufacturers were impacted more than for producers elsewhere in 2023. Competition in the market also pulled down module prices that are likely to continue dropping throughout the forecast period. (Photo Credit: IEA)</em>

IEA says utilization rates for Chinese manufacturers were impacted more than for producers elsewhere in 2023. Competition in the market also pulled down module prices that are likely to continue dropping throughout the forecast period. (Photo Credit: IEA)

In the meantime, manufacturers focus on cost-cutting and innovation while module prices continue to drop throughout the forecast period.

China, however, will continue to hold its 80% to 95% share of global solar PV supply chains despite various markets developing domestic capacity, according to the report's estimates. Replacing imports with more expensive production in the US, India and the EU, state the analysts, will increase the cost of overall PV deployment in these markets.

The IEA lists several milestones that it says are to be achieved by 2028, including the following:

In 2024, wind and solar PV together generate more electricity than hydropower.
In 2025, renewables surpass coal to become the largest source of electricity generation.
Wind and solar PV each surpass nuclear electricity generation in 2025 and 2026, respectively.
In 2028, renewable energy sources account for over 42% of global electricity generation, with the share of wind and solar PV doubling to 25%.

Challenges

Among the challenges to reach the 11 TW goal by 2030, IEA Executive Director Fatih Birol listed scaling up financing and deployment of renewables in emerging and developing economies as the biggest one. Here, renewable energy developers have been exposed to higher interest rates since 2021 that has resulted in higher costs, hence limited expansion.

Birol explained, "For me, the most important challenge for the international community is rapidly scaling up financing and deployment of renewables in most emerging and developing economies, many of which are being left behind in the new energy economy. Success in meeting the tripling goal will hinge on this."

Higher inflation and interest rates have been contributing to the macroeconomic environment, according to the report. Delayed policy responses to these along with policy uncertainties have compounded problems for the sector.

Insufficient investment in grid infrastructure is also a major reason that's preventing faster expansion of renewables. In the future, grid bottlenecks will pose significant challenges leading to increased curtailment in many countries, the report forecasts.

Cumbersome administrative barriers and permitting procedures and social acceptance issues are the other challenges listed.

Addressing these challenges can lead to almost 21% higher growth for renewables, promises the IEA report. It will bring the world on track to meet the 11 TW target by 2030.

Even for hydrogen, IEA analysts foresee only 7% of the proposed renewable hydrogen capacity to come online by 2030, growing by 45 GW between 2023 and 2028. China, Saudi Arabia and the US account for over 75% of this capacity. They see lack of off-takers and the impact of higher prices on production costs as the main reasons for the slow pace of growth of green hydrogen.