Solar is set to overtake coal as the world’s leading source of power supply by early 2025, the IEA said as it announced its “largest ever upward revision” for its renewable energy forecasts.
The agency, which represents energy consumers and is now a leading advocate of green energy, said that renewable energy growth was now being turbocharged and would double over the next five years as a direct result of governments seeking to strengthen energy security during the current energy crisis.
The world is now set to add 2,400 GW of green capacity– an amount equal to the entire power capacity of China today – between 2022 and 2027, twice as much as it did in the previous five years.
The key dynamic over the past year had been that governments had implemented existing policies more quickly than had been previously expected, as well as accelerating long-delayed regulatory and market reforms. This means that the IEA has revised upwards by 76% its forecasts since its 2020 Renewables report and by 30% since 2021.
Put simply, the war in Ukraine and the wider gas price crisis has kick-started renewables expansion, and forced governments to put greater focus on renewables.
“This is a clear example of how the current energy crisis can be a historic turning point towards a cleaner and more secure energy system,” said IEA Executive Director Fatih Birol.
Largest ever revision
"This year’s forecast has been revised upwards by almost 30% from last year mainly because countries are implementing existing policies, regulatory and market reforms and new policies more quickly than expected to combat the energy crisis," added Birol.
By 2027, wind and solar will account for 20% of global power supply, double their current share.
Indeed, the IEA’s 2022 renewables report notes over the next five years, or by 2027, renewables will add 3,900 TWh of supply, saving 4bn tonnes of CO2 by replacing coal generation.
Indeed, there is set to be more growth in the next five years than in the previous 20 years, the report said, while also forecasting 76% more green growth than it did two years ago. This marks the agency’s “largest ever upward revision” for the future of wind, solar and other technologies.
Meanwhile, Birol also noted that China’s dominant grip of the global solar sector could be weakening.
“The signs are emerging of diversification in global solar PV supply chains, with the US and India set to boost investment in solar manufacturing by up to $25bn in the next 5 years. China remains the dominant player, but its global share may decrease from 90% today to 75% by 2027.”
Elsewhere in the green sector, global renewable capacity dedicated to producing hydrogen is expected to rise 100-fold in the next 5 years, becoming a new sizeable growth driver. Up to 50 GW of wind and solar capacity for hydrogen are set to be spread across China, Australia, Chile, the US and other countries, the report said.
Meanwhile, analysis by green think-tank Ember noted that decarbonising power by 2035 would save Europe between €500bn and €1 trillion, and the the savings could be larger as fossil fuel prices stay high.
More to be done
Yet despite the good news and the unexpectedly positive forecasts, Birol, as ever, warned that more needed to be done to meet net zero by 2050 and to keep within the Paris Agreement global warming target of 1.5 degrees.
The report urged countries worldwide to address key constraints and blockages in driving forward the energy transition. Supporting easier investment and permitting has the capacity to drive renewable capacity grows by a further 25% above the IEA’s currents forecast over the next five years.
However, different countries require different policies to drive forward renewables, the report warned, with what works in rich countries not always suited to emerging economies.
In advanced economies, this faster growth would require various regulatory and permitting challenges to be tackled and a more rapid penetration of renewable electricity in the heating and transport sectors.
In emerging and developing economies, it would mean addressing policy and regulatory uncertainties, weak grid infrastructure and a lack of access to affordable financing that are hampering new projects.
This accelerated growth would move the world closer to a path to reaching net zero by 2050.
Nevertheless, the positive report is welcome news for a renewables industry that is having to face the decidedly lukewarm impact of the COP27 conference in November in Egypt.
The conference in Sharm el-Sheikh failed to move forward the Glasgow targets agreed at COP26, and there is widespread concern in the green movement that the UN’s climate efforts lost momentum at the conference.
As well as a concrete commitment to Loss and Damage at COP27, the one positive takeaway from the conference was an acknowledgement that green energy was important not just for climate security, but now for energy security and wider economic and political security too.
The IEA’s report supports this trend, and is to be welcomed by the climate lobby. The clear warning from Birol that more needs to be done should serve as a wake-up call for governments and corporate interests.
Following on from the IEA report, Bloomberg Intelligence’s Global Solar Energy 2023 Outlook came out recently, with similar predictions that solar energy is likely to be the fastest growing segment of the energy sector in 2023, with demand set to soar 20-30%.
“The growth of solar follows a record 2022, during which global solar capacity additions expanded about 47%. Best-in-class peers such as Enphase or First Solar could see their sales growth exceed 30% in 2023, and amid such fast line growth, we believe profitability metrics are poised to improve based on an easing of input costs and supply chain constraints,” said Rob Barnett, Bloomberg Intelligence Senior Analyst (Clean Energy).
Global solar demand rose about 40% in 2022 with industry revenues increasing about 50%, Bloomberg said, while 2023 solar sales may top $220bn.
Bloomberg said it saw growth in solar demand surpassing 20% in 2023-25 with industrywide revenue for the companies in BI’s global solar theme basket on track to exceed $220bn in 2023.
This growth is begin driven by favourable economics. Chief among this is new solar’s levelised cost of electricity (LCOE), which Boomberg put at $40 per MWh, roughly in line with a new wind and over 50% cheaper than new coal.
Meanwhile, battery rollout may hit its stride in 2023, following successful 2021-22, with Canadian Solar, SolarEdge and Enphase expected to have delivered a cumulative 10 GWh hours of batteries in total.
In Europe, the EU’s REPowerEU programme aims to double the installed capacity of solar power to more than 320 GW by 2025, which may lift consensus sales estimates for 2023-25, Bloomber predicted.
By 2030, the EU is aiming for 600 GW of installed solar capacity, an indication that sales momentum could be maintained through the end of this decade.