The International Energy Agency (IEA) has published a new market update on the outlook for renewable energy in 2023 and 2024.
It said global renewable capacity additions are set to soar by 107 GW to more than 440 GW in 2023 – the largest absolute increase ever. Solar will remain the main source of global renewable capacity expansion in 2023, accounting for 65% of growth or 286 GW, with distributed generation applications accounting for almost half of the expansion.
“Lower module prices, greater distributed PV system uptake and a policy push for large-scale deployment trigger higher annual additions in all major markets including China, the European Union, the United States, and India,” said the IEA.
However, the agency said that capacity additions will decrease in Brazil from 2023 to 2024, due to Law 14.300 entering into force in early 2022, changing remuneration rates for the distributed generation market. It revised its forecast for renewable capacity additions for 2023 and 2024 upwards by 38% compared to its predictions in December 2021.
“In the European Union, residential and commercial solar PV systems account for 74% of the increase to our forecast, with the majority (82%) of the rise coming from six key markets: Germany, Spain, the Netherlands, France, Italy, and Sweden,” it added.
The two main trends driving the revised forecast are the increasingly attractive business case for self-consumption since January 2021 and the market conditions triggered by Russia’s invasion of Ukraine, according to the IEA.
The agency said that it also increased its forecast for utility-scale growth, but to a much lesser extent due to permitting challenges, unsubscribed auctions, and long development timelines. Competitive auctions are expected to remain the leading procurement method in Europe, accounting for at least 65% renewable capacity growth between 2022 and 2024.
“Almost half of this growth will be from auctions for two-way fixed contracts for difference, led by Poland, the United Kingdom, France, Italy, and Spain,” said the IEA.
Power purchase agreements (PPAs) and merchant plants are expected to account for 22% of Europe’s capacity expansion until 2024. Corporate PPAs will account for most unused projects, led by Spain, Sweden, Germany, the Netherlands, and Denmark. Some unsubsidized projects are also likely to emerge in the United Kingdom, Italy, and Poland, according to the IEA.
“While installations being developed on a fully merchant model are likely to constitute a minority, PPA projects are expected to stack revenues by combining a merchant tail,” it added.