World on track to miss COP28 2030 renewables target
Renewable energy capacity needs to expand by a factor of three by 2030 but current policies might only take us to 2.5 research shows
In March 2007, a large scale solar plant near Andalusia, Spain entered operation. It had over 600 large heliostats and took four years to build. Officially called the PS10 solar power plant, it is widely known as the the world’s first “commercial concentrating solar power tower”. Its scale, technology and power generation capacity were aimed at paving the way for a much wider phenomenon in renewable energy.
Although that phenomenon – a global surge in renewable power production – would take time to play out, it is now becoming a reality. After several years of limited annual additions 510 GW of renewable power was added in 2023, the fastest annual growth rate in over 20 years.
The International Energy Agency’s (IEA) annual report on global renewable energy – from where the data comes - is a bearer of hopeful news.
“The world is on course to add more renewable capacity in the next five years than has been installed since the first commercial renewable energy power plant was built more than 100 years ago”, the IEA predicts.
So much so, that by 2025 renewables could surpass coal as a share of global power generation. Predictions aside, the IEA Renewables 2023 report offers a plethora of useful insights – about the state of play in renewables deployment, what the 2030 target is and why the risk of missing it is an avoidable and costly error.
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The tripling goal
At COP28 in Dubai, the IEA had lobbied governments to commit to an ambitious short-term renewables target. The stocktake agreement, although masked in carefully crafted language around fossil fuel phase outs, includes a commitment by 198 countries to triple renewable energy capacity by 2030.
“We had 5 criteria, to say whether COP28 was a success”, said IEA executive director Fateh Birol at the report’s launch. The goal to expand renewable energy by a factor of three by the end of the decade was the first.
The value of the stocktake renewables target is hidden in its scientific necessity.
Achieving it, would take global renewable power capacity to above 11,000 GW – which is a non-negotiable criterion under the IEA’s Net Zero by 2050 scenario.
The IEA’s renewables report holds the target in high regard but warns that the way things stand – the target will be missed. Current stated policies are falling short.
Price is right
The best incentive to invest in renewables is the relative price difference. Ultimately, the impressive scale of deployments thus far has a lot to do with falling generation costs in solar and wind energy. For the deployment to accelerate on a commercial scale, the costs of renewable power production need to make a compelling case.
The IEA’s report finds evidence of the costs of renewable power falling below those of fossil fuel generation. “In 2023, an estimated 96% of newly installed, utility-scale solar PV and onshore wind capacity had lower generation costs than new coal and natural gas plants”.
Prices, however, might not be conducive for long. The IEA warns that rising interest rates also mean rising project costs for developers. At the same time, inflationary pressure on supply chains in onshore wind and solar PV are significant. Macroeconomic turbulence carriers with it, the risk of financial misfortune for many developers.
“The renewable energy industry, particularly wind, is grappling with macroeconomic challenges affecting its financial health – despite a history of financial resilience”, the IEA’s report reads
Prices are also affected by extensive green subsidy programs which target renewable energy projects. Globally, such programs are proliferating. The American Inflation Reduction Act is the largest of them all.
According to the IEA, policy signals play a vital role in shaping future demand and convincing markets to deploy capital. The IEA expects the US to add nearly 340 GW of capacity – which hinge on the IRA as a market signal
“The Inflation Reduction Act has acted as a catalyst for accelerated additions despite supply chain issues and trade concerns in the near term”, the IEA says.
In 2024, elections in the US and the UK could significantly transform the degree of support that renewables receive. Green subsidy programs, particularly in the US, are anything but bipartisan.
For the IEA’s global plan to work – renewables also need to find their way into grids in emerging markets.
China – one such market - is the strongest source of renewable deployment anywhere in the world. Over the next five years, 56% of new renewable energy capacity additions will come from China. Fuelled by Beijing’s political focus on economic competitiveness in renewables technologies, low-cost finance and an abundance of domestic supply chains with critical inputs.
“Over 2023-2028, China will deploy almost four times more renewable capacity than the European Union and five times more than the United States’, the IEA predicts.
Other emerging markets, who are also major emitters have key roles to play too. Brazil and India are cases the IEA highlights – where policymakers have taken cognizance of supply chain, project clearance and auction related issues. Supportive policy environments are propping up all across the emerging market landscape.
For the engineers of PS10, the IEA 2023 deployment numbers will signal a glimmer of hope that renewable power generation globally is set to accelerate at an unprecedented rate. Yet, they might hold on to the hope, as they await to hear what the future of policy support and political will looks like.