IEA (2021), Renewables 2021, IEA, Paris https://www.iea.org/reports/renewables-2021, License: CC BY 4.0
Annual additions to global renewable electricity capacity are expected to average around 305 GW per year between 2021 and 2026 in the IEA main case forecast. This implies an acceleration of almost 60% compared to renewables’ expansion over the last five years. Continuous policy support in more than 130 countries, ambitious net zero goals announced by nations accounting for almost 90% of global GDP, and improving competitiveness of wind and solar PV are all driving this expansion. Nonetheless, despite this growing support, renewables face a range of policy uncertainties and implementation challenges, including those relating to financing, permitting, social acceptance and grid integration. Current increases in commodity prices have put upward pressure on investment costs, while the availability of raw materials and rising electricity prices in some markets pose additional challenges for wind and solar PV manufacturers in the short term. However, the impact of volatile commodity and transport prices on demand are expected to be limited, as high fossil fuel prices improve the competitiveness of wind and solar PV further.
Our accelerated case assumes that governments address policy, regulatory and implementation challenges in the next couple of years. The stabilisation and eventual decline of commodity prices to levels observed over 2015-2019 and more affordable financing from the private sector also contribute to the accelerated growth of renewable electricity in this case. Accordingly, annual renewable capacity additions are a quarter higher than in our main case, reaching over 380 GW on average over 2021-2026. However, the gap between both our main and accelerated case forecasts and the trajectory necessary to meet Net Zero by 2050 remains significant. Annual capacity growth under the IEA Net Zero Scenario during 2021-2026 needs to be 80% faster than in our accelerated case, implying that governments need to not only address policy and implementation challenges, but also to increase their ambition.
Globally, we anticipate renewable capacity to expand by over 1 800 GW, or over 60%, in our main case forecast to 2026, accounting for almost 95% of the increase in total power capacity worldwide. Overall, People’s Republic of China (hereafter ‘China’) remains the leader, accounting for 43% of global growth, followed by Europe, the United States and India. These four markets alone provide almost 80% of renewable capacity expansion worldwide. We have revised the forecast up from last year, with China alone accounting for about 60% of the revision. For China, last year’s forecast reflected the phase-out of subsidies at the end of 2020 and the resulting policy uncertainty for onshore wind and solar PV. However, China’s subsequent commitment to net zero by 2060 has led to new targets, such as 40% of all electricity consumed to be from non-fossil generation by 2030 and a capacity target of 1 200 GW wind and solar PV by the same year, all reflected in our updated forecast.
In Europe, the upward revision stems from larger auction volumes in most EU member countries to accelerate deployment towards 2030 renewable energy targets, a growing market for corporate power purchase agreements (PPAs) and the increasing attractiveness of self-consumption for distributed PV. The economic recovery plan for Europe, which will provide over EUR 800 billion (USD 940 billion) in the form of loans and grants, should partly contribute to facilitating the financing of renewables. Our main case renewable capacity growth trajectory shows that the European Union is set to overachieve the country plans for 2030 stated in current National Energy and Climate Plans (NECPs), supporting higher targets under the “Fit for 55” programme (55% emissions reduction by 2030), which is expected to be finalised in 2023 or 2024.
In the United States, favourable wind and solar PV economics, and increased ambition at the federal level drive renewables to new highs. The continuation of federal tax credits in December 2020, a growing corporate PPA market and increasing federal and state-level support for offshore wind all drive higher capacity additions in our main case forecast.
An improved policy environment and higher targets in multiple countries in Asia Pacific result in more optimistic renewable capacity growth in the region. In India the forecast is slightly revised upward, especially for solar PV, due to deployment acceleration towards the government’s ambitious renewables target of 500 GW by 2030 and additional policies introduced to improve the attractiveness of distributed PV. Higher renewable energy targets for 2030 in Japan, improved incentive schemes providing stable remuneration for solar PV developers in Korea and increased capacity targets in Viet Nam all support our higher forecast.
In Latin America, resumed competitive auctions following delays due to the Covid-19 crisis remain a key driver for utility-scale wind and solar PV development. In addition, deployment outside government policy schemes through bilateral contracts is rising in the region, especially in Brazil and Chile, leading to upward revisions for variable renewables.
In sub-Saharan Africa, faster commissioning of large hydropower plants to meet financing and construction deadlines, new auctions and project announcements lead to a higher forecast. In the Middle East and North Africa our forecast is slightly higher compared with last year. Although solar PV’s competitiveness drives renewables expansion in the region, the faster pace is challenged by slower electricity demand and insufficient grid infrastructure.
Additions of renewable power capacity are on track to set yet another annual record in 2021, driven by solar PV. Almost 290 gigawatts (GW) of new renewable power will be commissioned this year, which is 3% higher than 2020’s already exceptional growth.
In our main case forecast for 2021-2026, we expect annual average renewable capacity additions to reach 305 GW, 58% higher than the figure for the last five years. Despite surging commodity prices increasingly affecting solar PV investment costs, we expect the annual market to grow by 17% year-on-year to almost 160 GW in 2021 with additions reaching almost 200 GW in 2026. In the significant majority of countries worldwide, utility-scale solar PV provides the lowest cost of adding new electricity capacity, especially in the context of increasing natural gas prices.
Overall, solar PV alone accounts for almost 60% of all renewable capacity additions, with almost 1 100 GW becoming operational over the forecast period in our main case. The expansion of solar PV capacity in the next five years is expected to be almost double that of the previous five years. Utility-scale projects continue to provide over 60% of all solar PV additions worldwide. Annual additions of distributed PV are increasing thanks to policy initiatives in China, the European Union and India stimulating the deployment of commercial and residential projects.
Under the accelerated case, total growth of global solar PV capacity could be 22% higher with annual additions growing continuously, reaching almost 260 GW by 2026. The upside is largest in key markets such as China, Europe, the United States and India, but considerable growth potential remains in nascent markets such as sub-Saharan Africa and the Middle East. However, reaching the accelerated case will require the major markets to address their persistent challenges. These are the highlights:
China: Clarify the rules around the new renewable portfolio standard and green certificate scheme for utility-scale and large-scale commercial applications. Continue support for residential solar PV following the phase-out of incentives in 2021.
United States: Extend investment tax credits and the monetisation of credits through a direct-pay scheme.
India: Improve the distribution companies’ financial health, reducing delays in signing PPAs following solar PV auctions, accelerate grid expansion and improve the remuneration for distributed PV applications.
European Union: Increase auction capacity and improve participation rates in utility and large commercial-scale auctions via smoother permitting procedures when these are required for bidding. Increase support for distributed solar PV through the EU resilience and recovery fund.
Japan: Smooth the transition to the feed-in premium (FIP) scheme to build up a declining project pipeline from the former feed-in tariff (FIT).
Middle East and North Africa: Increase the frequency of auction rounds, and speed up bidder selection and contractual negotiations to accelerate utility-scale PV rollout. More rapid expansion of transmission and distribution grids allows the connection of additional solar PV capacity.
Global onshore wind additions reached almost 108 GW in 2020, driven by acceleration in China as developers rushed to complete projects before the expiry of subsidies. Our forecast expects lower onshore wind growth through the forecast period, averaging 75 GW a year. Still, this is almost 25% higher than average annual additions between 2015 and 2020. China, Europe and the United States together account for 80% of global onshore wind expansion of 451 GW during 2021-2025.
In general, the challenges of permitting, social acceptance, grid connection and integration combined to limit faster onshore wind growth. These challenges prevent developers from participating in wind-specific or technology-neutral auctions, especially when permitting and grid connection agreements are required for participation. In addition, higher steel and transport costs have seen turbine prices rise by 10-25% in several markets, increasing challenges associated with project financing and profitability. In our accelerated case, global onshore wind capacity growth is almost 30% higher, assuming that governments tackle social acceptance and expand network capacity faster and tackle grid integration challenges. In addition, the accelerated case assumes countries introduce higher auction capacity or increase auction participation as a result of smoother permitting. In this case, annual additions reach 110 GW by 2026, slightly higher than the record level achieved in 2020.
The offshore wind market is forecast to accelerate in 2021, with additions reaching 11 GW, almost double compared with last year. This is driven by expansion in China, as developers rush to secure expiring national subsidies. Despite China’s growth slowing through to 2026, offshore annual capacity additions reach 21 GW globally thanks to rapid expansion in new markets beyond the United Kingdom, Germany, Belgium, Denmark and the Netherlands. Large-scale projects are expected to be commissioned in France, Chinese Taipei, Korea, Viet Nam, Japan and the United States in the next five years, pushing our forecast up. Cumulative offshore capacity is forecast to more than triple by 2026, reaching almost 120 GW. The share of offshore capacity in overall annual wind additions reaches over 20% in the main case, up from 5% in 2020, breaking a record at the end of our forecast period. However, faster offshore and onshore grid expansion in the United Kingdom and the European Union, rapid cost decline and strong provincial-level policies in China, and the early-commissioning of large-scale pipeline in the United States together could push cumulative global offshore wind capacity to 134 GW in 2026 in the accelerated case.
The growth of dispatchable renewables such as hydropower, bioenergy, geothermal and CSP slows by 5% compared with expansion over 2015-2020. Relatively higher investment and generation costs compared with wind and solar PV, the lack of policy support and limited recognition of the flexibility of dispatchable renewables prevent their faster expansion.
For hydropower, annual additions are volatile according to the commissioning deadlines of large reservoir projects in China, India and Turkey. These three large markets drive our main case forecast of 153 GW over 2021-2026, which is similar to the deployment achieved in the last five years. Considering long environmental permitting and construction times, the upside for hydropower remains limited in the next five years.
Expansion of bioenergy for power capacity is expected to slow by 10% over the forecast period. China provides almost 60% of this new capacity due to waste-to-energy projects driven by growing urbanisation. Beyond China, supply chain challenges, lack of policy support and relatively high generation costs contribute to the slowdown in expansion. Despite its great resource potential, geothermal growth is limited to less than 5 GW over 2021-2026, representing only 0.2% of our forecasted renewable capacity expansion. Limited policy support to address the technology’s pre-development risks hampers investment in large-scale geothermal projects. For CSP, we expect less than 3 GW to be commissioned by 2026. Relatively high investment costs, lack of dedicated auctions and competition from solar PV and battery storage projects prevent faster expansion of CSP.
In 2021 renewable electricity generation is forecast to increase year-on-year by 6% and reach over 7 900 TWh, slightly higher than the average annual growth rate observed during 2015-2020. Conversely, the expansion rate of cumulative capacity in 2021 is faster over the same time period. This decoupling is mainly due to weather conditions in key markets affecting wind and hydropower generation. Without these conditions, renewable electricity generation would be up by almost 9% in 2021 compared with 2020.
Severe drought conditions in Brazil, the United States, China and Turkey have limited global hydropower generation. As a result, our forecast expects hydropower generation to remain stable compared with 2020, ending the annual increases seen since 2001. Wind electricity generation is expected to increase by 14%, or almost 220 TWh, worldwide in 2021; however, geographical variations due to adverse weather conditions prevent much faster annual growth. The European Union is set to see wind generation decline by 3% due to low wind conditions. This is the first annual decline in more than three decades, compared with 10% (or 30 TWh) average growth per year between 2015-2020. Strong capacity growth and normal wind conditions in Brazil, China, India and the United States make up for slowing growth in other key markets.
In our main case, renewable electricity generation is forecast to increase by almost 52% in the next five years, reaching over 11 300 TWh by 2026, two-thirds faster than the growth seen during 2015-2020. As a result, renewables are expected to account for almost 37% of global electricity generation by 2026 to become the largest source of generation. While hydropower remains the largest source of renewable generation, its share of global electricity generation declines slightly to 15.6%. Over the forecast period, non-hydro renewables are expected to account for the majority of renewable generation globally for the first time. Meanwhile, output from variable renewables (solar PV and wind) more than doubles, their share reaching almost 18% of global generation to surpass hydropower. Offshore wind sees the fastest growth in the next five years (240%) among all renewables, reaching 1.5% of total generation by 2026.