The push for global renewable capacity

Current situation and challenges faced

Renewable energy stands at the forefront of countries' strategies for decarbonisation. COP28 has mandated a significant increase in global renewable capacity, aiming to triple it from 3,382GW in 2022 to 11,174GW by 2030 to meet decarbonisation goals. This rise demands an almost doubling of historic compound annual growth rates (CAGRs) from 9 to 16%.

In the European Union, installed capacity surged from 151GW in the year 2000 to approximately 586GW by 2022, with an average annual growth rate of 6.4%. Onshore wind and solar energy have been pivotal, now covering 65% of total installed capacity and exhibiting a yearly growth rate of 17.6% since 2000. Additionally, offshore wind capacity is rapidly increasing.

Despite this growth, renewable energy deployment falls short. The EU, under the REPowerEU plan, has revised its initial targets outlined in the Fit for 55 strategy, now aiming for a renewable energy capacity of 1,236GW by 2030, which would constitute a 45% share of renewable energy sources (RES) in the energy mix.

To achieve this, the EU requires an additional 650GW of capacity by 2030 compared to 2022, necessitating an acceleration of the average historical yearly growth rate to 9.8%. However, current projections only anticipate 1,036GW of installed RES capacity by 2030, leaving a gap of approximately 200GW. This shortfall underscores persistent challenges in accelerating deployment, including technological barriers and regulatory complexities.

Global RES capacity targets, growth rates and projected regional splits (GW)

For instance, while solar PV deployment has surged, concerns arise regarding its impact on daytime prices. As solar PV penetration increases, merchant capture prices decline, potentially affecting profitability and hindering further deployment of this technology.

Similarly, the expansion of onshore wind projects is not ramping up as expected, as indicated by the continuous undersubscription of government support mechanisms for renewables, known as auctions, in central European countries and a significant slow-down of new installations in the Nordics. Factors contributing to these challenges include regulatory barriers, local acceptance challenges and high financing costs, which dampen investor enthusiasm.

A record-high auction volume of approximately 50GW in 2024 is a key driver for further offshore wind expansion, yet growth hinges on innovative solutions, particularly floating offshore wind technology. Offshore wind grapples with cost pressures, high financing, and uneconomic tenders, challenging project viability.

Overall, the key question remains if the industry is capable to achieve more than doubling renewable energy capacity in Europe and closing the gap in additional installation by 2030.

Looking ahead

Looking ahead, the industry must significantly accelerate the deployment of renewable energy capacity to meet regional build-up targets. Asia is expected to lead this growth, with Europe and North America also pursuing ambitious goals, particularly in expanding solar PV, onshore and offshore wind capacities. Additionally, other regions are positioned to harness their substantial renewable energy potential.

Continuous cost reductions are essential for accelerating renewable energy deployment. Utility-scale solar PV, the most cost-effective renewable energy source, is projected to have an average LCOE of 56 EUR/MWh in Europe by 2025, followed by onshore and offshore wind at 71 and 92 EUR/MWh, respectively. Further cost decreases in solar PV modules, wind turbines, balance of plant, and operations and maintenance are needed, particularly for offshore wind to be competitive without subsidies. By 2030, the LCOE for wind and PV should fall to 45-55 EUR/MWh, a reduction of 19-23%.

In line with the increasing deployment of renewable energy, flexibility options like battery storage solutions are crucial for managing the variable nature of wind and solar energy production going forward. However, investment in battery capacity is still in its early stages and needs further maturity. Increased investment and market scaling will reduce the LCOE of battery storage by 29%, which is essential for balancing the renewable-energy intermittency. These investments are necessary for transformational growth and large-scale deployment.

Installed RES capacity in EU27 countries (GW)

Given the new macroeconomic situation in Europe with high financing costs, governments need to respond by amending auction designs for offshore wind and increasing support for renewable energy investments. These measures are crucial for enabling and boosting new installations and expanding the renewable-energy capacity.

Streamlining regulatory processes is crucial to achieve more than a doubling of renewable energy capacities on a European level and a tripling worldwide by 2030. Governments should establish clear, consistent, and expedited permitting frameworks to further enforce permitting timelines and reduce delays. Simplifying interconnection standards, ensuring quicker environmental assessments, and fostering collaboration between agencies can minimise bureaucratic bottlenecks. Additionally, adopting digital platforms for permit applications and tracking can enhance transparency and efficiency.

Levelised Cost of Electricity (LCOE)¹  projections of key renewable energy technologies in European markets (EUR/MWh)

With regard to the supply chain, the EU's renewable energy sector highly depends on imports from third-party countries covering raw materials, key components, as well as manufacturing capacities. Such dependency (mainly on China) demonstrates vulnerability of renewable energy build-out in Europe. Due to current global geopolitical tensions, Europe must reduce such vulnerability and establish a resilient and cost-effective supply chain, characterised by increased manufacturing facilities across renewable technologies within the region and complimented by a diversified portfolio of supplier countries for raw materials, component, as well as manufacturing capacities.

To multiply renewable energy capacity, countries must therefore address these challenges by fostering innovation, streamlining regulations, diversifying imports and strengthening local manufacturing capacities.