Renewable capacity is expected to increase over 8% in 2022 compared with last year, pushing through the 300 GW mark for the first time. Solar PV is forecast to account for 60% of the increase in global renewable capacity this year with the commissioning of 190 GW, a 25% gain from last year. Utility-scale projects account for almost two-thirds of overall PV expansion in 2022, mostly driven by a strong policy environment in China and the European Union driving faster deployment.

Following a 32% year-on-year decline in 2021, new global onshore wind installations are expected to slightly recover and reach almost 80 GW. Offshore wind growth worldwide is expected to decline 40% in 2022 following the exceptional four-fold jump last year in China due to the national subsidy phase-out deadline. Despite this decline, 2022 global offshore wind capacity additions will still double compared to 2020, thanks to the continuation of provincial incentives in China and the expansion in the European Union. As a result, China is expected to have the largest cumulative installed offshore wind capacity globally and surpass the European Union and United Kingdom combined by the end of this year.

Unless new and stronger policies are implemented in 2023, global renewable capacity additions are expected to remain stable compared with 2022. While solar PV is forecast to break another record in 2023, reaching almost 200 GW, and with the expansion of wind and bioenergy remaining stable, 40% lower hydropower additions due to a reduced project pipeline in China stymies capacity growth in the global renewable energy market.

China accounts for the majority of upward forecast revisions for 2022 and 2023 since our last report, despite the phase out of incentives for all renewables last year. The expansion is due to multiple government and market factors. First, the generation costs of solar PV and onshore wind are lower than coal benchmark prices in the majority of provinces. Second, the government announced 450 GW of additional large-scale onshore wind and solar PV megaprojects in the Xinjiang and Inner Mongolia provinces, known as “mega-hubs”, with 100 GW starting development at the beginning of 2022. Third, China’s Ministry of Finance confirmed the payment of outstanding renewable energy subsidies worth USD 60 billion to be paid through 2022, improving the balance sheet of developers and unlocking additional funds for new projects. Fourth, in the absence of national subsidies, provincial governments are still providing tax incentives and low-cost financing to renewable energy projects.

In the European Union, solar PV accounts for the majority of upward revisions, with faster policy implementation driving growth in Germany, the Netherlands, Poland, Italy and France. However, the European Union’s onshore wind growth was revised down due to ongoing permitting challenges slowing deployment in Germany, Poland and Italy. Brazil’s generous net metering scheme results in a distributed PV market boom, supporting upward revisions to the Latin America forecast. In India, delayed projects in 2021 leads to higher growth in 2022, with increased distributed solar PV capacity supporting the overall upward revisions.

China accounts for 45% of global renewable capacity additions in 2022-2023, with the commissioning of over 140 GW on average per year driven mostly by large-scale solar PV deployment. The expansion trend in China is fully in-line with the government’s 1 200 GW wind and solar PV target by 2030. Annual additions are expected to remain slightly higher compared with 2020-2021, when the country saw multiple deployment rushes due to incentive phase-out schedules for onshore wind and utility-scale PV in 2020, and offshore wind and residential PV in 2021. 

In the European Union, rapid implementation of previously announced ambitious policy targets and already awarded auctions, combined with continuous incentives for distributed solar PV, drive the expansion. In response to the Russian invasion of Ukraine, many European Union countries announced plans to accelerate renewables deployment aimed at reducing their dependence on Russian natural gas imports. Germany, the Netherlands and Portugal either increased their renewable energy ambitions or moved their initial targets to an earlier date. We expect that the impact of these new policies will be limited by 2023, especially for large-scale projects that require development timelines of more than 18 months. However, our forecast sees some upside on distributed PV as residential and commercial installations enable consumers to reduce their electricity bills through self-consumption.

In India, new records for renewable capacity expansion are expected to be set in 2022 and 2023 as delayed projects from previous competitive auctions are commissioned, especially for solar PV. Nonetheless, the financial health of distribution companies (DISCOMs) remains the primary challenge to renewable energy deployment in India, with potential project cancellations and protracted contract renegotiations.

In the United States, annual capacity additions are expected to slow over 2022 and 2023. Wind and solar PV sectors face two key challenges to achieve faster growth in the short term. First, the lack of long-term visibility on future incentive schemes has reduced the project pipeline for onshore wind developments and the PTCs phased down from the initial rate of USD 19/MWh for projects beginning construction in in 2016 to USD 10/MWh for construction starting in 2019, reducing economic attractiveness. While subsequent extensions of the PTC in 2020 and 2021 have been at higher rates, those years fall outside of our forecast period given development timelines. Second, potential solar PV trade measures against Southeast Asian countries, in addition to China, are reducing the availability of solar modules in the short term and leading to higher prices, which were already inflated due to elevated commodity prices. Current production of modules in the United States can only meet less than 20% of last year’s annual demand and there are limited manufacturers outside of Viet Nam, Indonesia, Cambodia, Malaysia and China that can provide PV products to the US market. 

While smaller in absolute terms, significant growth occurs and accelerates in other world regions, notably Latin America, the Middle East and North Africa. In Brazil, we expect renewable capacity additions to break another record in 2022 due to the generous net metering scheme supporting distributed solar PV expansion. However, net metering incentives begin to phase down in 2023, resulting in slightly lower capacity additions in 2023.

The varying commissioning deadlines of competitive auctions and bilateral contracts in ASEAN can lead to fluctuating utility-scale wind and PV capacity expansion. Viet Nam’s policy boom and bust cycles have led to significantly lower capacity additions compared with 2020. Following the solar PV boom in 2020 and onshore wind in 2021, Viet Nam’s renewable capacity additions are forecast to decline from 17 GW over 2020-2021 to just 6 GW for 2022-2023.

In the Middle East and Africa, the push for solar PV drives annual capacity additions. Falling system costs, good resource potential, favourable financing conditions and economies of scale make solar PV projects in the Middle East economically attractive. In sub-Saharan Africa, government guarantees or backing from development banks for utility-scale solar PV, wind and hydropower projects are fuelling growth. 

The Russian invasion of Ukraine has added new urgency to accelerate clean energy transitions in order to reduce the dependency of imported fossil fuels from Russia, with deployment of more renewables now a strategic imperative for many countries, especially in the European Union. Indeed, since Renewables 2021 was published last December, the global energy crisis has moved the goal posts for the deployment of solar, wind and other renewable energy sources, and we have updated our forecasts in this new report in response. Many European Union countries have announced plans to advance development of renewables, with wind and solar PV holding the greatest potential to reduce the European Union’s power sector dependence on Russia by 2023.

The high fossil fuel price environment has improved the cost competitiveness of renewable electricity technologies against coal and natural gas-fuelled power plants. Meanwhile, residential and commercial solar PV applications are helping consumers reduce their electricity bills. However, despite their potential, an acceleration in new renewables capacity is highly dependent upon a stable policy environment providing long-term revenue certainty and faster permitting.

In our forecast, government-led competitive wind and solar PV auctions in 2019 and 2020 remain a key driver for renewables expansion through 2023. Auction volumes slightly declined in 2021 due to lower awarded capacity in China and India while they increased in the European Union and Latin America.

However, geopolitical and macroeconomic challenges increase uncertainties over renewable electricity forecasts beyond 2023. Higher wind and solar PV investment costs due to elevated commodity prices in the wake of Russia’s invasion and permitting delays resulted in the lowest first-quarter auction volumes globally in 2022 since 2016. In addition, volatility in electricity markets due to sharply higher gas prices has complicated contract negotiations for corporate power purchase agreements (PPA), especially in the European Union, while rising interest rates are compounding challenges for renewable developers. 

While some of these difficulties will likely remain in the coming months and into next year, causing looming market uncertainties, the new focus on energy security – in particular in the European Union – is also triggering an unprecedented policy momentum towards accelerating energy efficiency and renewables. Ultimately, the forecast of renewable markets for 2023 and beyond will depend on whether new and stronger policies will be introduced and implemented in the next six months.