A new report by the International Energy Agency (“IEA”) considers the acceleration of renewable energy technologies expected over the next 4 years and the anticipated regional developments with electricity, transport, heat and biogas. Below is a summary of the electricity chapter of the report.
Growth challenges
The report forecasts that renewable energy sources are predicted to account for over 42% of global electricity generation by 2028 with solar PV and wind contributing 25% of this. However, the challenges of policy uncertainty and administrative barriers, inadequate grid infrastructure investment and planning coupled with insufficient finance for developing economies, are identified as inhibiting the growth of renewables.
According to the report, higher interest rates have increased the costs of renewable development in emerging economies since 2021, while advanced economies experienced the same for the first time in 2023. Inflation on equipment costs largely impacting wind projects, interest rates impacting financing costs and the lack of policy support has resulted in some power purchase contracts and wind projects being cancelled. Auctions have also being undersubscribed or have received no bids. To mitigate this, the report recommendations include indexing contract prices to indicators such as commodity prices, interest and inflation.
Policies and market drivers
The report predicts that 87% of renewable capacity growth is expected due to government policies which promote investments in renewable energy generation, through auctions, fixed tariffs, tax credits and utility-owned projects. Market-driven deployment is expected to contribute to the remaining 13%, with corporate power purchase agreements, merchant and green certificate schemes.
The chapter also assesses the wind and solar PV manufacturing capacity, with oversupply in the PV industry resulting in a competitive market that is focusing on efficient solar cell technology innovation, while the wind industry is expected to align with demand in the manufacture and supply of turbine components. Improvements are however expected in the long-term, supported by policies targeting increased growth.
The full citation of the report is: IEA (2024), Renewables 2023, IEA, Paris https://www.iea.org/reports/renewables-2023, License: CC BY 4.0
Sustainable Capabilities 