Renewables are gaining ground worldwide

01/12/2024

Source: Energy & Management Powernews

The expansion of renewable energies continued to accelerate last year, but not enough to reliably achieve the global targets.

According to the latest report by the International Energy Agency (IEA) in Paris, renewable energy capacity increased by 14 percent to around 4,200,000 MW in 2023. Of the total capacity, 90 percent was accounted for by the twenty largest industrialized and emerging countries, the G20. This was the fastest growth recorded to date. Photovoltaic systems accounted for three quarters of the increase. However, according to IEA estimates, the current rate of growth would not be enough to triple capacity by 2030 compared to 2022.

The IEA expects renewable plants with a capacity of 3.7 million MW to be connected to the grid between 2023 and 2028, 95 percent of which will be used for wind and solar energy. Renewables will benefit from falling costs and increasing competitiveness. The global mix of electricity generation will change fundamentally by 2028. Already this year, more electricity will be generated from wind and solar energy than from hydropower. Next year, renewables will replace coal as the most important energy source for electricity generation. By 2028, more than 42 percent of electricity would be generated from renewable sources.

In 2023, the cost of generating electricity in 96 percent of the wind turbines and PV systems that were newly connected to the grid would have been lower than that of coal and gas-fired power plants, according to the IEA report. This trend will continue in the coming years. Despite the growing importance of the fluctuating supply from wind and solar, the need to have flexible and controllable power plants available is only slowly increasing in the major economic areas (EU, USA, China).

China at the forefront of expansion

The IEA sees China at the forefront of development. Almost 60 percent of the expansion in the use of renewable energies is expected to take place there by 2028: "Although national subsidies were reduced in 2020 and 2021, the expansion of wind and solar power plants has accelerated," the IEA report states. In addition to advances that have improved the economic attractiveness of these technologies, the favorable framework conditions in the People's Republic also played a role, namely long-term contracts for the purchase of electricity.

The IEA also expects strong growth in renewables in the USA, the EU, India and Brazil. The favorable political environment plays an important role in this. Onshore wind energy and photovoltaics are also benefiting from greater economic efficiency. In the EU and Brazil, private consumers in particular are seeking protection from rising energy prices with their own PV systems. In the USA, subsidies from the Inflation Reduction Act (IRA) are mainly benefiting commercial offers.

Price of PV modules down by almost 50 percent

In the opinion of the IEA, the most important reason for the dynamic development of electricity generation from wind and solar is the falling costs, particularly for solar power. The prices for PV modules have fallen by almost 50 percent in the past year. However, it is questionable whether this trend will continue.

Although production capacities have tripled compared to 2021 and, taking into account the PV module factories currently under construction, new modules with a capacity of 1.1 million MW could come onto the market next year, three times the expected demand. China remains the leading supplier with around 90 percent of the available capacity. However, in an effort to become independent of the People's Republic, major players such as the USA, the EU and India are attempting to expand their own production, which could lead to rising costs there.

Wind power plant problem child

There is concern in Paris about the manufacturers of wind turbines, who are struggling with negative margins in both the USA and the EU. Rising costs, bottlenecks in the supply of raw materials and rising interest rates are causing problems for the industry. Only in China is domestic demand and vertical integration ensuring greater resilience.

Outside of China, the IEA has revised its forecast for the expansion of wind power downwards. In Paris, 25 percent of electricity is expected to be generated from wind and solar in 2028, twice as much as today. In seven EU countries, it is expected to be more than 50 percent and in Denmark even 90 percent. This will lead to ever-increasing redispatch because the expansion of the electricity grids will not keep pace.

7 percent of the renewable energy projects planned by 2028 will be used to produce green hydrogen (45,000 MW). Three quarters of these are expected to be realized in the USA, China and Saudi Arabia. Forecasts have also been revised downwards here. Investment decisions for many projects (except in China) have been delayed because the development of an international hydrogen market is fraught with great uncertainty.

Author: Tom Weingärtner