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Annual worldwide renewable generation capacity additions are set
to stabilize around 270-280 GW in 2021 and 2022, data released
recently by the International Energy Agency (IEA) show. About 275
GW of renewables were installed in 2020, it said, a 45% increase
compared with 2019 and the fastest rate of increase in two
decades.
That "new normal," as the intergovernmental organization calls
it, far surpasses the IEA's expectations of a year earlier, with
Europe and the US compensating for a slowdown in Chinese capacity
installations after 2020 saw record newbuild there.
Renewable generation additions are expected to account for 90%
of total global power capacity increases in both 2021 and 2022,
according to IEA forecasts.
The IEA's overall global renewables additions forecasts for 2021
and 2022 rose more than 25% compared with November 2020 (see
graph), according to its Renewable Energy Market Update
2021. The solar photovoltaic (PV) and wind project
pipeline's acceptance of Chinese provincial power prices without
extra subsidies has increased since 2020, resulting in a more
optimistic forecast for that nation, it said.
In addition, the extension of US tax credits is expected to lead
to faster short-term American onshore wind growth, and Brazil's net
metering scheme will result in a distributed PV market "boom," the
agency said.
But governments need to build on this momentum by implementing
policies that "encourage greater investment in solar and wind, in
the additional grid infrastructure they will require, and in other
key renewable technologies such as hydropower, bioenergy and
geothermal," it said. "A massive expansion of clean electricity is
essential to giving the world a chance of achieving its net-zero
goals."
Solar to lead coming growth
Solar PV newbuild is set to increase a further 8% year on year
in 2021, the IEA said, largely as a result of lower investment
costs and ongoing policy support. The IEA expects solar PV
additions to reach 145 GW in 2021 and 162 GW in 2022, for new
records and accounting for about 55% of all renewable newbuild in
2021 and 2022.
However, wind additions are expected to decline in 2021-2022
after jumping in 2020, especially in China. Still, 80 GW a year of
installations are still expected worldwide, nearly 35% more than in
2019, it said. Global wind capacity additions almost doubled in
2020 to 114 GW.
Auctions held in 2020 and 2019 are the biggest drivers in the
IEA's forecasts for 2021 and 2022, it said, although
feed-in-tariffs and net-metering policies are also
contributing.
"India and China together auctioned almost 55 GW of wind and PV
capacity at average contract prices of $60/MWh for wind and $47/MWh
for PV," it said. "For the first time, wind and PV hybrid auction
volumes were over 6 GW, mainly because India is offering new
opportunities for developers."
This helped overcome a rise in solar PV module prices between
July 2020 to April 2021 due to supply chain complications and
rising commodity prices that erased a 25% price reduction seen
between January and June 2020.
The IEA said fires in two PV-grade silicon manufacturing plants
in Xinjiang province in July 2020 almost halved China's total
silicon output and pushed silicon prices up 60% in September 2020.
Manufacturing capacity recovered somewhat, but prices at the end of
2020 were "still significantly higher" than earlier in the year, it
said.
Regional expectations
While Chinese renewable generation newbuild is set to decline
this year, capacity additions will still be at least 45% higher
than the 2017-2019 average in 2021 and 2022 despite the
uncertainty, the agency said. Growth could resume apace in 2023
though as a result of policy measures intended to help China get to
net-zero emissions by 2060, it added.
European capacity additions are forecast to increase 11% to 44
GW in 2021 and then to 49 GW in 2022, the IEA said, breaking the
region's record for additions for the first time since 2011 and
making the continent the second-largest market after China. Those
additions will be led by Germany and France.
The impact of US government policies under the Biden
administration is not yet set in stone, but shows promise, the IEA
said.
The American Jobs Plan offers a
10-year tax credit extension that would provide unprecedented
opportunities for wind and solar PV developers, spurring much
faster expansion. In that bill, as well as the newly proposed Renewable Energy Investment
Act, "direct-pay" provision for tax-credit-eligible renewables
would be provided, reducing the need for relatively expensive tax
equity.
However, the IEA notes, backing for these policy proposals has
yet to be approved by Congress and the expected impact is not
incorporated in the IEA's forecasts for 2021 and 2022. A full
assessment of the impact will be forthcoming in the autumn edition
of the report, it said.
The US is already an attractive market though, according to IHS
Markit. The IHS Markit Global Renewables Markets
Attractiveness Rankings, which tracks attractiveness for
investment for non-hydro renewables (offshore wind, onshore wind,
and solar PV), made the US the number one spot for the period
ending December 2020. The US claimed top spot on account of "sound
market fundamentals and the availability of an
attractive—though phasing down—support scheme."
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