Solar power expected to surpass coal in 5 years, IEA says
Solar power is undergoing a boom as the energy crisis drives a shift to renewable energy following the war in Ukraine and is expected to surpass coal power by 2027, the International Energy Agency has forecast.
Renewable energy overall will become the largest source of global electricity generation by early 2025, the IEA said, and the world will add twice as much renewable capacity from 2022 to 2027 as in the previous five years.
Not only were countries driving “the expansion of new renewables” to achieve climate goals, but energy security and the need to “diversify” renewables supply chains away from China had become increasingly important, IEA executive director Fatih Birol said in an interview.
“There is a strong competition between the largest economies of the world to have a pole position when it comes to the next chapter of the industry sector,” he said, whether in solar, wind power, batteries or electric vehicles.
The rush to replace the oil and gas that is no longer coming from Russia, and to build domestic renewables sectors, has led to a push for industry incentives and subsidies.
The US is forging ahead with its landmark climate package, the $369bn Inflation Reduction Act, which includes incentives for solar manufacturing through $10bn allocated for tax credits for clean energy overall and $27bn set aside in a “green bank” to support clean energy projects in communities.
Between 2022 and 2027, global renewable power capacity will increase by 2,400 gigawatts, an amount equal to China’s power capacity today, the IEA estimated in its latest annual report on renewable energy. This is 30 per cent higher than the IEA had forecast a year ago.
The US and India are expected to lead diversification of the solar manufacturing supply chain, the IEA said, reducing China’s dominance. Solar investment by the two countries is expected to reach almost $25bn between 2022 and 2027, a sevenfold increase from the past five years.
China, however, will remain a “dominant player”, the IEA said, with its market share estimated at around 75 per cent in 2027 compared with 90 per cent today.
The IEA warned in June that China’s hold on the solar panel supply chain could slow the global shift to cleaner energy. The country will account for almost half of newly added renewable power in the years to 2027, helped by policies included in China’s latest five-year plan, the agency said this week.
The solar boom is expected to pick up pace in the next two years. Iberdrola, a leading European renewable energy company, planned to “more than double our global solar capacity to 10.6 gigawatts by the end of 2025”, said Xabier Viteri Solaun, director of the sustainable energy business.
Solar projects can be developed and built more quickly than other renewable sources, he added, and the company is “seeing an increase in solar capacity being added to new and existing wind farms”.
Even faster growth can occur if European countries make it easier to obtain permits for new projects, improve incentives for rooftop solar installations and offer better terms in renewable energy auctions, the IEA noted.
Despite the encouraging overall trends, the European wind industry was suffering a “major challenge”, Birol said. The combination of Chinese and US competition and soaring raw material and supply costs is creating financial stress.
Birol also repeated warnings about the replacement of fossil fuels from Russia with new oil and gas projects. Supply should come from existing fields, he said, while steps should be taken to drive down demand.
“The invasion of Ukraine by Russia should not be a justification for large scale fossil fuel investments,” he said, as these would not only put “climate targets at risk” but end up as stranded assets.
However, even with the IEA’s “accelerated” scenario — where renewable capacity grows more quickly than in the main case due to policies and other measures that are not currently in the works — the world will fall short of what is needed to limit global warming.
Temperatures have already risen by at least 1.1C since the late 1800s. Under the Paris accord, almost 200 countries agreed to cut emissions enough to keep the rise to well below 2C, and ideally 1.5C.
Renewable energy growth “would significantly narrow the gap” to the pathway, bringing the total capacity to 2,950GW by 2027, the IEA said. But this would still leave a gap of 800GW to reach net zero greenhouse gas emissions by 2050.
Where climate change meets business, markets and politics. Explore the FT’s coverage here.
Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here