“A wow moment.” “A historic leap.” The executive director of the International Energy Agency (IEA), Fatih Birol, resorted to epic vocabulary at a press conference on Thursday to describe the current situation in which renewable energies are experiencing. It is not for less.
In the presentation of its report on 2023, the organization notes that installed capacity last year grew by 55%. It is a historical rate, which follows a trend that has been rising for 22 years, since data is available on a global scale. Specifically, about 510 gigawatts were added to the network in one year.
Likewise, the study highlights that China had the greatest growth in installed capacity by launching as much solar photovoltaic energy in 2023 as the entire world in 2022 (even though Beijing plans to eliminate some state subsidies).
At the same time, the growth of renewable capacity in Europe, the United States and Brazil also reached historical highs. And aim for more. “The deployment of solar photovoltaic and onshore wind energy through 2028 is expected to double in the United States, the European Union, India and Brazil, compared to the last five years,” the report anticipates.
More capacity will be installed in the next five years than in the previous 100 years. If this pace is maintained, renewables will become the largest source of electrical energy in the world in 2025, surpassing both coal and nuclear energy. By 2028, renewables will account for more than 42% of global electricity generation. A paradigm shift.
When examining the details of this evolution, much of this boost is due to solar energy, which has reduced its costs considerably. In five years they have plummeted more than 600% and only in 2023, 50%.
Until now the good news. The bad news is that although the capacity of renewables is skyrocketing, its pace is still insufficient to meet the goal of tripling it by 2030 signed at the last COP28 summit. Although we are not far away – since according to the IEA it will multiply by 2.5 –, there would be one last effort to achieve lower emissions as agreed. “We are not there, but we are not a million kilometers away,” Birol said.
In this buoyant context, wind energy is having a hard time getting off the ground. In this sense, there is a striking fact: wind system manufacturers in Europe and the United States have recorded negative net margins for seven consecutive quarters in the last two years. Volatile demand is causing facilities to operate below capacity. Furthermore, the sector suffers from limited access to raw materials, fluctuating raw material prices, higher interest rates and restricted access to financing, which is impacting its overall profitability.
Regarding green hydrogen, the IEA, after examining the economic viability of all the projects already announced around the world, the IEA has come to the conclusion that only 7% of them will see the light of day in 2030. A delay that is attributable to the increase in production costs, financing and a still very small market.
Hydrogen will only capture 1% of new renewable capacity throughout this decade. “To fully convince investors, ambitious project announcements will have to be followed by coherent policies that support demand,” this organization recommends.
