Surge in renewables capacity could reduce EU’s dependence on Russian gas

Further growth expected in 2022 as governments seek to secure climate benefits

New capacity for generating electricity from solar, wind and other renewables increased to a record level worldwide in 2021 – and will grow further this year as governments seek to enhance energy security and secure climate benefits, according to a new global forecast.

The additional renewables capacity commissioned for 2022 and 2023 "has the potential to significantly reduce the EU's dependence on Russian gas in the power sector", the International Energy Agency (IEA) concludes in its latest renewable energy market update.

However, the actual contribution will depend on the success of parallel energy efficiency measures, the agency says in a report issued on Wednesday. It also cites concerns over “red tape” and construction delays for wind and solar projects.

From a consumer perspective, it says rooftop solar installations by households and companies are expected to help EU consumers save money as electricity bills rise across Europe.

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The world added a record 295 gigawatts (GW) of new renewable power capacity in 2021, overcoming supply chain challenges, construction delays and high raw material prices, the report says.

Global capacity additions are expected to rise this year to 320GW – "equivalent to an amount that would come close to meeting the entire electricity demand of Germany or matching the EU's total electricity generation from natural gas".

Annual additions

Solar PV is expected to account for 60 per cent of global renewable power growth in 2022, followed by wind and hydropower. In the EU, annual additions jumped by almost 30 per cent to a record 36GW in 2021. (PV, or photovoltaic, materials convert sunlight into electrical energy.)

"Energy market developments in recent months – especially in Europe – have proven once again the essential role of renewables in improving energy security, in addition to their well-established effectiveness at reducing emissions," said IEA director Fatih Birol.

“Cutting red tape, accelerating permitting and providing the right incentives for faster deployment of renewables are some of the most important actions governments can take to address today’s energy security and market challenges, while keeping alive the possibility of reaching our international climate goals,” he added.

Renewables' growth this year is much faster than initially expected, driven by strong policy support in China, the EU and Latin America, but this momentum is set to be lost next year, the IEA says. In the absence of stronger policies, the amount of renewable power capacity added worldwide is expected to plateau in 2023, as continued progress for solar is offset by a 40 per cent decline in hydropower expansion and little change in wind additions.

Freight prices

The cost of installing solar PV and wind plants is expected to remain higher than pre-pandemic levels throughout 2022 and 2023 because of elevated commodity and freight prices, reversing a decade of declining costs. However, the IEA analysis notes they remain competitive because prices for natural gas and other fossil fuel alternatives have risen much faster.

Global additions of solar PV capacity are on course to break new records this year and next, with the annual market reaching 200GW in 2023.

Policy uncertainties, as well as “long and complex permitting regulations”, are preventing much faster wind energy growth, the agency says. Having plunged 32 per cent in 2021 after exceptionally high installations in 2020, additions of new onshore wind capacity are expected to recover slightly this year and next.