The world of renewable energy is booming, with global power generation capacity expected to more than double by 2030, as highlighted in the latest medium-term outlook by the International Energy Agency (IEA). This impressive growth is primarily fueled by the rapid rise of solar PV technology, even as we navigate challenges like supply chain issues, grid integration problems, financial obstacles and shifting policy environments.
IEA’s report: Renewables 2025
According to Renewables 2025, which is the IEA’s main annual report on the renewable energy sector, it's expected that global renewable power capacity will grow by a whopping 4,600 gigawatts (GW) by 2030. That is same as the total power generation capacity of China, the European Union and Japan combined.
The latest report has revised downward its outlook for global renewable capacity growth compared to last year. This adjustment is primarily due to some policy shifts in both the United States and China.
In the US, the early phase-out of federal tax incentives, along with other regulatory changes, has led us to lower the firm's growth expectations for renewables by nearly 50 per cent compared to last year's predictions.
Meanwhile, in China, the transition from fixed tariffs to auction systems is affecting project economics, which has also contributed to a reduced forecast for renewable growth in that market. China will continue to hold over 90 per cent of the market share in crucial production areas through 2030.
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Solar PV & other renewable energy
Solar PV is set to play a significant role in the global growth of renewable power capacity, expected to account for nearly 80 per cent of it over the next five years. Falling costs and smoother permitting processes drive this surge. The global supply chains for solar PV and the rare earth materials used in wind turbines are still heavily concentrated in China, which raises ongoing concerns about supply security.
Hydro, bioenergy and geothermal energy, with geothermal installations on track to hit record highs in major markets like the United States, Japan, Indonesia, and various emerging economies.
Concurrently, the increasing challenges of integrating into the grid are sparking a renewed interest in pumped-storage hydropower, which is anticipated to grow almost 80 per cent faster in the next five years compared to the last period. Hydropower will keep playing a vital role in supporting electricity systems and ensuring the firm have the operational flexibility it needs.
Wind energy, while facing some short-term hurdles, is anticipated to see significant growth as supply issues get resolved and projects move forward, especially in regions like China, Europe and India.
Onshore wind capacity is deemed to increase by 45 per cent, reaching 732 GW globally by 2030. Although supply chain constraints and lengthy permitting remain challenges, new government policies in both advanced and developing markets are helping to mitigate these barriers.
Outlook for offshore wind is projected to be 25 per cent lower than what was forecasted last year. This shift is mainly due to changes in policies in key markets, supply chain issues and rising project costs.
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Emerging economies
In various emerging markets throughout Asia, the Middle East and Africa, the push for renewable energy is gaining momentum with improved cost competitiveness and stronger policy frameworks. Many governments are rolling out new auction programs and raising their targets. India is on track to become the world’s second-largest market for renewable capacity growth, right behind China and is making significant strides toward its ambitious goals for 2030.
Company confidence
At the corporate level, there's a strong sense of confidence in the renewable energy sector. Most of the leading developers are either sticking to or even ramping up their deployment targets for 2030 compared to last year, which really highlights the industry's resilience and long-term optimism.
Corporate power purchase agreements, utility contracts and merchant plants are crucial for growth, together accounting for 30 per cent of the global renewable capacity expansion projected by 2030, essentially doubling their share from last year's estimates.
The challenges still persists
The rapid rise of variable renewable energy sources is putting a lot of strain on the current electricity systems. There has been an increased number of curtailment and negative pricing across various markets, which highlights the pressing need for investment towards the current grids, storage solutions and flexible generation options.
A significant challenge is the transport sector, where the share of renewable energy is forecasted to jump from 4 per cent today to 6 per cent by 2030. The rise will take place with the surge of renewable electricity use for electric vehicles in China and Europe, along with the expansion of biofuels in Brazil, Indonesia, India and other important markets. Globally, the contribution of renewables to heating for buildings and industries is anticipated to climb from 14 per cent to 18 per cent during the same timeframe.
Revising the forecast
The IEA has trimmed its medium-term forecast for global renewable capacity by 248 GW, which is about a 5 per cent decrease from what was projected in October 2024. Even with this adjustment, the overall growth trend looks promising, mainly because of policy and regulatory shifts in major markets, especially in the US and China, which are influencing this revision.
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The forecast for renewable energy growth in the US has been slashed by almost 50 per cent for all technologies, with geothermal as an exception. This adjustment is due to the early phase-out of investment and production tax credits, new restrictions on foreign entities that are affecting supply chains and an executive order that has put a stop to offshore wind leasing while also limiting solar and wind projects on federal lands.
China, which is at the forefront of renewable energy deployment, has seen its forecast reduced by 5 per cent, translating to a loss of 129 GW, due to recent policy changes. The transition from long-term fixed contracts based on provincial coal prices to competitive auctions and contracts for difference is helping to align renewable energy with the dynamics of the wholesale market. While this shift promotes long-term market integration and more sustainable pricing, it does temporarily impact investor profits, leading to a short-term slowdown.
India is making waves in the renewable energy sector, with its forecast getting a nearly 10 per cent boost. This surge is largely because of the recorded auction capacity set for 2024 and a resurgence in onshore wind energy. Additionally, new incentives for rooftop solar and smoother permitting processes for pumped-storage hydropower are enabling the investors with a reason to feel optimistic. The IEA predicts that India will soon outpace the European Union, becoming the world’s second-largest renewable market after China, all while pushing forward with innovative hybrid projects that blend solar, wind and battery storage.
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