For the world economy to become more decarbonised, renewable power is a key pillar. We anticipate decent renewable power capacity growth in Europe and the US in 2024 and beyond. However, due to vulnerable supply chains, high financing costs, congested grids, and slow permitting, it's not happening fast enough.
Global renewable power deployment: fast but not fast enough
With the cost of renewable energy plummeting over the past two decades and renewable energy transitioning to a more mature market, global renewable power capacity additions have been reaching new records for 22 years in a row, according to the International Energy Agency (IEA). But the pressure is on to deploy renewable energy even faster. Different parts of the global economy, such as the transportation and industrial sectors, need renewable electricity to decarbonise their operations.
That is why, at last year’s COP28, the United Nations’ climate conference, governments agreed to triple global renewable power capacity from roughly 3,600 GW in 2022 to over 11,000 GW in 2030. Doing so can help the world reduce a third of the emissions needed to keep global warming within 1.5 degrees Celsius of increase compared to pre-industrial levels.
The IEA estimates that the world is likely to have over 4,700 GW of renewable capacity by the end of 2024, up from just over 4,100 GW in 2023. Under the currently projected policy and market conditions, global renewable capacity will have increased by 2.5 times by 2030.
This projection shows that while tripling renewable power capacity by 2030 is not completely out of reach, current policies and market conditions are not going to get us there. And when breaking down the data, one can also see that much of the growth will come from China thanks to its supply chain domination, substantially higher investment, and lower financing costs. In this article, however, we focus on two other major economies—Europe and the US—analysing the outlook for the renewables market and what is needed to roll out renewable development faster.
Europe and US: a better outlook for solar than wind
We expect a decent renewable power growth rate in the US in 2024. Specifically, the US Energy Information Administration (EIA) expects solar to be the main driver of growth in power generation this year, with its contribution to the power mix rising from 4% in 2023 to 6% in 2024. This contrasts with coal-fired power generation in America, which is forecast to drop by 9% this year because of comparatively higher costs and scheduled coal-fired power plant retirement plans. Wind power, on the other hand, has been more subject to challenges such as higher financing costs and supply chain disruptions and, therefore, will see a short-to-medium cool-down period.
Putting it together, solar and wind power in the US is expected to account for 17% of US electricity generation in 2024, up from 15% in 2023, which indicates a continuously growing renewable power market, albeit at a rather moderate rate. In the medium term, between 2023 and 2028, the US will likely add 340 GW of new renewable capacity, with solar being the main source of growth.
Europe, with a more comprehensive policy framework and a stronger need to transition away structurally from being dependent on Russian natural gas, is further along in solar and wind power deployment. According to Eurostat, in 2022, the EU already generated 15% of its electricity from wind power and 7% from solar power, together accounting for 22% of the generation mix. Solar generation grew the most between 2008 and 2022 and will remain the strongest driver for the 532 GW of anticipated renewable capacity additions between 2023 and 2028. Wind power is still expected to grow in the next few years, but the outlook for growth rates has weakened. To a lesser extent, wind power in Europe is also experiencing concerns over project financial performances and permitting complexities.
To learn more about why renewable power is a key pillar to decarbonising the world economy, you can access the full report here.