Our key takeaway: Market forces could be the boost we need to reach net zero greenhouse gas emissions by 2050. The International Energy Agency is predicting “unprecedented momentum for renewables” over the next five years, spurred on by the Russia-Ukraine conflict and rising prices for fossil fuels. The IEA sees disruptions in fossil fuel supply chains causing governments to fast-track policies supporting renewable energy generation and infrastructure, while higher prices for fossil fuels make solar power and wind power more competitive in the market. Continued momentum on energy policies in the U.S., India, China and Europe will be an important part of the picture, but progress across all economies could ultimately help expand renewable energy capacity by almost 3,000 GW “significantly [narrowing] the gap on the amount of renewable electricity growth that is needed in a pathway to net zero emissions by 2050.”
The International Energy Agency (IEA) Renewables 2022: Analysis and forecast to 2027 (December 2022), which “forecasts the deployment of renewable energy technologies in electricity, transport and heat to 2027 while also exploring key challenges to the industry and identifying barriers to faster growth”:
- Renewables will quickly become the largest source of electricity: The IEA predicts that the energy crisis driven by conflict between Russia and Ukraine will accelerate the renewable energy transition considerably. The IEA anticipates that over the next five years, renewables will grow by almost 2,400 GW in its main forecast, “equal to the entire installed power capacity of China today. That’s an 85% acceleration from the previous five years, and almost 30% higher than what was forecast in last year’s report, making it our largest ever upward revision.” Renewables are likely to become the largest source of global electricity generation by 2025, greater than coal. What’s more, renewables are expected to account for more than 90% of total global electricity expansion between 2022-2027. Renewables are also “the only electricity generation source whose share is expected to grow, with declining shares for coal, natural gas, nuclear and oil generation.”
- Strengthened policies may help “narrow the gap to net zero by 2050”: In the IEA’s accelerated case, “global renewable capacity can expand by an additional 25% compared with the main forecast if countries address policy, regulatory, permitting and financing challenges.” It predicts that “China, the United States and India all double their renewable capacity expansion in the next five years, accounting for two-thirds of global growth.” The report acknowledges the major hurdles yet to be overcome. For example, “[m]ost advanced economies face challenges to implementation, especially related to permitting and grid infrastructure expansion. In emerging economies, policy and regulatory uncertainties still remain major barriers to faster renewable energy expansion.” Meanwhile, “in developing economies, weak grid infrastructure and a lack of access to affordable financing hamper the timely commissioning of projects in our main forecast.” However, if countries are able to effectively address these challenges renewable energy capacity could grow by almost 3,000 GW, which would “significantly narrow the gap” towards net zero by 2050.
- Expansion across multiple types of renewable energy: According to the IEA, “[e]lectricity from wind and solar PV [photovoltaic] more than doubles in the next five years, providing almost 20% of global power generation in 2027” and accounting for 80% of global renewable energy increase by 2027. Specifically, “[s]olar PV’s installed power capacity is poised to surpass that of coal by 2027, becoming the largest in the world,” and “[g]lobal wind capacity almost doubles, with offshore projects accounting for one-fifth of the growth.” The report also predicts a 100% increase of renewable capacity dedicated to producing hydrogen over the next five years. Biofuel demand is expected to increase by 22% between 2022-2027, especially from waste and residues: “[o]ne-third of new biofuels production is set to come from waste and residues by 2027. Transport greenhouse gas reduction policies in Europe and the United States are fuelling global demand for waste and residues.” The supply chain for these materials may grow tighter, but alternatives are emerging in some markets: “supply limits are prompting biodiesel, renewable diesel and biojet producers to secure conventional vegetable oils such soybean oil and rapeseed oil.”