Executive Summary

01 GLOBAL OVERVIEW

Renewables experienced yet another year of record growth in power capacity, despite aftershocks from the pandemic and a rise in global commodity prices that upset renewable energy supply chains and delayed projects. The role of renewables in improving energy security and sovereignty by replacing fossil fuels became central to discussions, as energy prices increased sharply in late 2021 and as the Russian Federation's invasion of Ukraine unfolded in early 2022.

Investment in renewable power and fuels rose for the fourth consecutive year, reaching USD 366 billion, and a record increase in global electricity generation led to solar and wind power providing more than 10% of the world's electricity for the first time ever. Strong market rebounds for solar thermal and biofuels, following declines in 2020, improved the outlook for renewables in heating and transport. Strengthened political commitments and rapid growth in sales of heat pumps and electric vehicles also led to increased renewable electricity use in these sectors.

At the same time, diverse factors continued to slow the global shift to renewable-based energy systems. A rebound in worldwide energy demand, which increased an estimated 4% in 2021, was met largely with coal and natural gas and led to record carbon dioxide emissions (up 6%, adding more than 2 billion tonnes). Large sums also continued to be invested in and to subsidise fossil fuels, with the USD 5.9 trillion in subsidies spent in 2020 equivalent to roughly 7% of global gross domestic product.

Similar to past years, the highest share of renewable energy use (28%) was in the electricity sector; however, electrical end-uses accounted for only 17% of total final energy consumption (TFEC). The transport sector, meanwhile, accounted for an estimated 32% of TFEC and had the lowest share of renewables (3.7%). The remaining thermal energy uses, which include space and water heating, space cooling, and industrial process heat, represented more than half (51%) of TFEC; of this, renewables supplied 11.2%.

As of 2020, modern renewable energy accounted for an estimated 12.6% of TFEC, nearly one percentage point higher than in 2019, as the temporary reduction in energy demand during 2020 favoured higher shares of renewables, while the share of fossil fuels barely changed.

The slow progress in energy conservation, energy efficiency and renewables prevents the transition away from fossil fuels that is necessary to meet global energy demand and reduce greenhouse gas emissions. A structural shift in the energy system is increasingly urgent. An energy-efficient and renewable-based economy is a game changer for a more secure, resilient, low-cost – and sustainable – energy future.

POWER

The renewable power sector took a large step forward, driven by record expansion in solar photovoltaic (PV) and wind power.

Despite supply chain disruptions, shipping delays, and surging prices for wind and solar energy components, renewable power capacity additions grew 17% in 2021 to reach a new high of more than 314 gigawatts (GW) of added capacity. The total installed renewable power capacity grew 11% to reach around 3,146 GW, although this is far from the deployment needed to keep the world on track to reach net zero emissions by 2050.

During 2021, China became the first country to exceed 1 terawatt of installed renewable energy capacity. Its total installed capacity of renewables increased 136 GW during the year, accounting for around 43% of global additions, with China leading in all technologies except concentrating solar power (CSP). By year's end, at least 22 countries had more than 10 GW of non-hydropower renewable capacity, up from 9 countries in 2011. The share of renewables in net power additions continued to increase, reaching a record 84% of newly installed capacity.

Renewables generated 28.3% of global electricity in 2021, similar to 2020 levels (28.5%) and up from 20.4% in 2011. Despite the progress of renewables in the power sector, the surge in global energy demand was met mostly with fossil fuels.

BUILDINGS

Renewable energy represents 14.7% of final energy demand in buildings, supplied mostly by renewable electricity followed by modern bio-heat.

Energy demand in buildings has continued to increase – including the energy used to construct buildings as well as to operate them. Direct use of modern renewable energy supplies two-thirds of renewable heat in buildings, with the rest coming from indirect sources such as electricity and district heating. The use of renewable electricity to generate heat in buildings has grown 5.3% per year, with electricity's share of building heating rising from 2.0% in 2009 to 3.3% in 2019.

A significant share of global heating needs in buildings continues to be met though the traditional use of biomass in developing and emerging economies. However, this share fell from 30% in 2009 to an estimated 26% in 2020.

During 2021, government policy played an important role in growing the renewable energy use in buildings through pricing, financial support and regulatory policies. Even though policy developments indicate rising attention to the use of renewables in buildings, these measures often exist alongside incentives for fossil fuel appliances, potentially undermining the effectiveness of renewable energy policies.

INDUSTRY AND AGRICULTURE

The share of renewables in industry and agriculture increased 4 percentage points in a decade, driven mostly by the electrification of industrial processes.

Renewables represent 16.1% of the industry and agriculture sector's total final energy consumption; half of this renewable energy is used to produce heat (mainly from modern bioenergy, followed by small amounts of geothermal and solar thermal), and the other half is renewable electricity. The electrification of industrial processes has led to growing use of renewable electricity for industrial heating, which rose 80% during the 2009-2019 decade. Renewable hydrogen demonstration and pilot projects have been deployed in hard-to-decarbonise sectors such as steel.

Direct renewable energy policies in industry remained limited in 2021 and were focused mainly on renewable heat applications. Governments have pledged to support steel and concrete decarbonisation and also have developed specific industry decarbonisation roadmaps that include the use of renewable energy and renewable hydrogen.

TRANSPORT

Transport remains the sector with the lowest share of renewable energy use, with the overwhelming contribution coming from biofuels.

Biofuels production bounced back in 2021 to surpass pre-pandemic levels for both ethanol and biodiesel. Electrification grew across nearly all transport modes through 2021. Some regions saw increased interest in hydrogen and synthetic fuels as transport fuel, with minimal investment in renewable hydrogen.

Much of the growth in electrification can be attributed to targets and policy support for electric vehicles, in addition to the rising economic competitiveness, technological advancement and model availability of these vehicles. In 2021, electric car sales totalled 6.6 million worldwide, more than doubling from 2020, while sales of other electric vehicles such as two- and three-wheelers and buses also saw significant increases.

Countries with targets for renewable energy in transport have failed to meet these targets in large part because they lack supportive policy frameworks that encourage an energy and transport transition, or because the frameworks that are in place are ineffective or not enforced.

02 POLICY LANDSCAPE

Policy support for renewables remained strong throughout 2021, particularly in the power sector.

By the end of 2021, nearly all countries worldwide had in place a renewable energy support policy, with most support continuing to occur in the power sector and fewer efforts to accelerate renewables in buildings, transport and industry. Electrification of end-uses such as heating and road transport has emerged as a focus for decision makers.

CLIMATE CHANGE POLICY

Climate change policy commitments accelerated in 2021, especially as countries announced net zero pledges and targets in the lead-up to the United Nations climate talks in Glasgow, Scotland.

Rising interest in decarbonisation is an increasingly important driver of renewable energy support policies. By the end of 2021, at least 135 countries and the European Union (EU) had in place some form of net zero target.

The most common type of fossil fuel ban enacted at the national and state/provincial level was on coal. Expanded policy support for decarbonisation of the transport sector included announcements of bans on fossil fuels for road transport.

RENEWABLE ENERGY TARGETS

Targets for renewables increased in 2021, although most continued to be implemented exclusively in the power sector.

By the end of 2021, 169 countries had in place some type of target (either economy-wide or in specific sectors) at the national and/or state or provincial level to increase the uptake of renewables. As in previous years, the greatest number of targets were in the power sector. Many targets in the transport and heating and cooling sectors expired in 2020, and only a few countries passed new ones in 2021 to replace them.

ECONOMIC DEVELOPMENT AND RECOVERY

Increasingly, renewables have been included as a core component of national economic development plans and strategies.

Concerns related to rising energy prices and the security of energy supply are increasing policy makers' interest in including renewables in economic development plans. Several countries have used post-COVID recovery plans as opportunities to support the shift to renewables and have enforced strategies to build the necessary workforce for the future and re-skill existing workers.

POWER

The number of countries with renewable power policies again increased in 2021, continuing a multi-year trend.

By year's end at least 135 countries had some form of renewable electricity target. As in prior years, auctions, tenders and other competitive pricing strategies continued to overtake administratively set pricing policies such as feed-in tariffs. For small-scale renewable generation, although no rooftop solar PV mandates for buildings exist at the national level, several states/provinces have implemented such policies (in particular for new buildings or during major house renovations).

HEATING AND COOLING IN BUILDINGS

Despite the enormous potential for renewable heating and cooling in buildings, policy developments remain scarce.

Globally, the supply of heat in buildings remains heavily dependent on fossil fuels. By the end of 2021, at least 29 countries had committed to renewable heating and cooling targets. Although this was up from only 19 targets in 2020, it too reflects the trend of numerous expired targets not being replaced. Financial incentives remained the most popular form of support to scale up renewable heating. During 2021, interest in electrification of heating gained increased attention, with several countries setting specific targets and support mechanisms for heat pump installations.

TRANSPORT

As in previous years, policies supporting renewables in transport were focused mainly on road transport, with rail, aviation and shipping receiving far less attention.

Although biofuel support policies have been the most common type of renewable energy policy in the transport sector for many years, the number of countries with biofuel mandates has remained unchanged for four years running. Meanwhile, policy focus has shifted towards the electrification of transport (particularly road transport), although most transport electrification policies are not linked explicitly with renewable power generation.

INDUSTRY AND AGRICULTURE

The industrial sector continued to receive far less policy attention than other end-use sectors.

Financial incentives remained the most common policy support for renewable heat in industry in 2021. Renewable hydrogen has emerged as a potential tool to support industrial decarbonisation. Although several countries announced hydrogen support policies in 2021, almost all hydrogen continues to be manufactured using fossil fuels. By the end of 2021, at least 38 countries and the EU had a hydrogen roadmap or strategy in place. Interest in using renewables in agriculture is increasing, in particular related to agrivoltaics.

03 MARKET AND INDUSTRY TRENDS

BIOENERGY

Modern bioenergy provided 5.3% of total global final energy demand in 2020, accounting for around 47% of all renewable energy in final energy consumption.

In 2020, modern bioenergy provided 14.7 exajoules (EJ) for heating, or 7.6% of global requirements; two-thirds of this was used in industry and agriculture and the rest in buildings. Industry use is concentrated in countries with large bio-based industries such as Brazil, China, the United States, and India, while use for buildings occurs mainly in Europe and North America. The use of bioenergy to fuel district heating systems has grown strongly.

Biofuels – mostly ethanol and biodiesel – provided around 3.5% of transport energy in 2020. In 2021, biofuel production levels returned to 2019 levels after falling in 2020 due to reductions in transport demand due to the COVID-19 pandemic. Nevertheless, production in 2021 was constrained by high feedstock costs. Production of ethanol, the most widely used biofuel, increased 26% between 2011 and 2021. Global biodiesel production doubled between 2011 and 2021, due mainly to higher production and use in Asia. Production of HVO (hydrotreated vegetable oil, also known as renewable diesel) rose 36% in 2021.

In the electricity sector, bioenergy's contribution rose 10% in 2021 and has increased 88% overall since 2011. China remained the largest generator of bioelectricity, with production rising by a factor of 4.5 since 2011. The next-largest producers are the United States, Brazil and Germany, although generation has not grown significantly in these three countries in recent years. In contrast, generation has increased strongly in some other Asian and European countries.

GEOTHERMAL

Geothermal electricity generation totalled around 97 terawatt-hours (TWh) in 2020, while direct use of geothermal heat reached about 128 TWh (462 petajoules, PJ).

New geothermal power generating capacity of 0.3 GW came online in 2021, bringing the global total to around 14.5 GW. This was more than double the additions in 2020 but below the five-year average of 0.5 GW since 2016. Capacity was added in Chile, Chinese Taipei, Iceland, Indonesia, New Zealand, Turkey and the United States.

The most active geothermal power markets have been Turkey and Indonesia, whereas other historically significant markets (such as the Philippines) have seen little or no capacity additions in recent years. During 2016-2021, the top 10 markets by reported capacity additions (new plant installations) were Turkey (0.9 GW added), Indonesia (0.7 GW), Kenya (0.2 GW) and the United States (0.2 GW), followed by Iceland, Chile, Japan, New Zealand, Costa Rica and Mexico (all less than 0.1 GW). The leading market, Turkey, has decelerated notably in recent years, possibly due in part to declining government support (reduced feed-in tariffs).

Worldwide, the capacity for geothermal direct use – direct extraction of geothermal energy for thermal applications – totalled an estimated 35 gigawatts-thermal (GWth) in 2021. Geothermal energy use for thermal applications grew an estimated 12.8 TWh in 2021 to total around 141 TWh (508 PJ), with China being the largest market by far. The top countries for geothermal direct use remained (in descending order) China, Turkey, Iceland and Japan.

HEAT PUMPS

In 2020, heat pumps met only around 7% of the global heating demand in residential buildings, as fossil fuel-powered heaters and water heaters still comprised around half of the heating equipment sold.

However, this trend is changing as heat pumps become more common in new buildings. Globally, air-source heat pumps continued to dominate the market in 2021, with the top regions being China, Japan, Europe and North America.

Sales of air-source heat pumps in China peaked in 2017, whereas in Japan these units have been a common offering for more than 20 years, and sales are relatively stable. US heat pump sales have risen steadily and more rapidly than other heating alternatives in the country. In Europe, heat pump sales experienced double-digit growth in 2021; the top three European markets were France, Italy, and Germany, with the latter experiencing 28% growth for the year.

Various factors, such as technological maturity and the ability to provide additional flexibility in the electricity network or heating system, have led governments to integrate heat pumps into their climate action plans as a key means for decarbonising heating in buildings. Updates of building codes and regulations together with purchase subsidies (grants, loans or tax credits) can help counterbalance the upfront costs of heat pumps, particularly during building renovations; in new buildings, meanwhile, heat pumps can be an affordable solution. In 2021 both Ireland and Germany introduced a strengthened carbon price to balance the price of electricity relative to fossil gas, while also funding grant programmes for heat pumps.

HYDROPOWER

The global hydropower market progressed in line with long-term trends in 2021, with new capacity additions of at least 26 GW, raising the total global installed hydropower capacity to around 1,197 GW.

China maintained the lead in capacity additions in 2021, followed by Canada, India, Nepal, Lao Peopleʻs Democratic Republic, Turkey, Indonesia, Norway, Zambia and Kazakhstan.

Despite these continuing additions, global generation from hydropower fell an estimated 3.5% in 2021 to 4,218 TWh. This is explained by changes in hydrological conditions, specifically the significant and sustained droughts that have affected the major producers in the Americas and many parts of Asia. Climate-induced changes in operating conditions, such as the loss of Himalayan glacial icecaps, appear to be causing long-term change in output.

Large hydropower producers that saw the most significant declines in generation in 2021 were Turkey (-28.7%), Brazil (-9.1%) and the United States (-8.8%). Other major markets that showed more modest annual contractions (but in some instances larger multi-year declines) included India (-2.2%), Canada (-1.5%) and China (-1.1%).

Global pumped storage capacity grew around 1.9% (3 GW) during the year, with most new installations in China.

OCEAN POWER

The resource potential of ocean energy is enormous but remains largely untapped, and ocean power represents the smallest portion of the renewable energy market.

Following significant delays to planned deployments, the industry rebounded in 2021 as supply chains recovered from disruptions caused by the COVID-19 pandemic. Around 4.6 megawatts (MW) of capacity was added during the year, bringing the total operating installed capacity to 524 MW. While the focus remains on small-scale (less than 1 MW) demonstration and pilot projects, the industry is progressing towards semi-permanent installations and arrays of devices.

Development activity is concentrated mainly in Europe, particularly Scotland, but policy support and deployments have increased steadily in China, the United States and Canada. Financial and other support from governments is critical for leveraging private finance and supporting commercialisation of ocean power technologies.

SOLAR PV

Solar PV maintained its record-breaking streak, adding 175 GW of new capacity in 2021 to reach a cumulative total of around 942 GW.

Global capacity additions of centralised utility-scale solar PV increased around 20%, with 100 GW of new installations, driven by the economic competitiveness of solar power and the attractiveness of power purchase agreements. Utility-scale PV accounted for the majority of new installations in the United States, India, Spain and France.

Distributed solar PV installations rose around 25%, adding 75 GW, driven by surging electricity prices that pushed entities to rely on self-consumption and to reduce their dependency on the distribution grid, where possible. Self-consumption from distributed systems played a crucial role in China, Australia, Germany and Brazil.

After many years of declines, PV module costs jumped an estimated 57% in 2021 as the cost of raw materials increased sharply. Factors contributing to rising module costs included a polysilicon shortage and a rise in the cost of shipping containers from China, the world's dominant module producer. Supply chain disruptions in 2021 highlighted the importance of domestic production of PV modules, with the United States extending its import tariff and India setting unprecedently high solar import duties.

CONCENTRATING SOLAR THERMAL POWER (CSP)

Global CSP market growth declined in 2021 despite reductions in the technology cost.

The CSP market contracted to a total cumulative capacity of 6 GW, as the launch of the 110 MW Cerro Dominador plant in Chile was offset by the decommissioning of nearly 300 MW of old CSP plants in the United States. The decline of CSP in the past decade has resulted from competition with solar PV, policy changes and project failures in the historically dominant markets of Spain and the United States.

In 2021, more than 1 GW of combined CSP capacity was under construction in Chile, China, the United Arab Emirates and South Africa. Most of this is based on parabolic trough technology and is being built in parallel with thermal energy storage (TES). By year's end, 23 gigawatt-hours (GWh) of TES in conjunction with CSP plants was operating across five continents, representing 40% of the global energy storage capacity outside of pumped hydropower.

SOLAR THERMAL HEATING AND COOLING

The global solar thermal market grew 3% in 2021, to 25.6 GWth, bringing the total global capacity to around 524 GWth. China again led in new installations, followed by India, Turkey, Brazil and the United States.

Annual sales of solar thermal units grew at double-digit rates in several large markets, including Brazil, France, Greece, India, Italy, Morocco, Poland, Portugal and the United States. Demand was up due to increased activities in the construction sector in many countries, additional support schemes as part of national economic recovery policies, and rising fossil fuel and electricity prices globally. Large collector manufacturers benefited more than small manufacturers from the growing market and continued to consolidate their market positions. The 20 largest flat plate collector manufacturers increased production 15%. Chinese large collector manufacturers continued to expand their portfolios into renewable heating more broadly, with half of them offering stand-alone heat pumps and solar heat pump solutions.

Industrial companies around the world are turning increasingly to a zero carbon heat supply. At least 71 solar industrial heat (SHIP) solutions, totalling 36 megawatts-thermal (MWth), started operation globally in 2021, an increase of 8% to bring the total to around 975 SHIP plants. Another 44 MWth of SHIP capacity was under construction by year's end, including the largest SHIP system in Europe (15 MWth), which will provide process heat for a whey powder factory in France.

Due to growing interest in the electrification of heating, demand for PV-thermal (PV-T) or hybrid collectors increased again in 2021. Thirty manufacturers reported sales of PV-T capacity of at least 88 MWth during the year, up 45% from 61 MWth in 2020. The largest markets for new additions were France, the Netherlands, Israel, Germany and Spain.

WIND POWER

An estimated 102 GW of wind power capacity was installed in 2021, including a record 18.7 GW offshore. China led the market, followed distantly by the United States, Brazil, Vietnam and the United Kingdom. Annual additions increased total capacity 13.5% to more than 845 GW.

While onshore additions dropped relative to 2020, as installations declined in China and the United States, offshore additions surged due largely to a dramatic policy-driven rise off the coast of China. Nearly every region of the world saw record market growth; not including China, global installations were up more than 14% in 2021. The economics of wind energy continued to be the primary driver for new capacity, combined with the need to increase energy security and to mitigate climate change.

However, the wind sector faces several challenges, including a lack of grid infrastructure and permitting issues. These were compounded in 2021 by rising costs due to pandemic-induced supply chain constraints, labour shortages, shipping backlogs and rising prices for major raw material inputs. While turbine prices continued to fall in China, average prices elsewhere rose to levels not seen since 2015, and major manufacturers reported losses. Outside of China, the industry is urging an increased focus on the system value of wind energy rather than solely on continually declining costs and prices.

Although the offshore segment accounts for a relatively small portion of global wind power capacity, it is attracting significant attention. An increasing number of governments and developers, as well as oil and gas majors and other energy providers, are turning to floating offshore turbines.

Turbine manufacturers continued to focus on technology innovation to achieve the lowest possible levelised cost of energy in response to the transition to renewable energy auctions as well as rising material costs and other pressures. The industry also is innovating to address challenges associated with scaling up production, transport and other logistical issues, and to enhance the value of wind energy while further improving its environmental and social sustainability.

04 DISTRIBUTED RENEWABLES FOR ENERGY ACCESS

By the end of 2021, 90% of the global population had access to electricity, although one-third (2.6 billion people) still lacked access to clean cooking, relying mostly on traditional use of biomass.

To improve their resilience to shocks – such as climate change, pandemics, economic fluctuations and conflict – these populations can benefit from distributed renewables for energy access (DREA). Energy access and gender equality also are strongly interlinked and are at the crossroads of the United Nations Sustainable Development Goals.

In 2021, the market for small off-grid solar devices continued to face supply issues, shortages, and price increases, although there were signs of recovery compared to 2020. An estimated 7.43 million off-grid solar lighting products were sold in 2021, of which around one-third were sold under the pay-as-you go (PAYGo) model and two-thirds as cash products. The level of electricity access that these technologies offer is still relatively low, as 83% of the sales were portable lanterns and small devices, with solar home systems representing only 17%. Despite efforts to address the poorest market segments, affordability remains a major barrier, especially in more remote rural communities with higher levels of poverty.

Solar PV has been the fastest growing mini-grid technology, incorporated into 55% of mini-grids and totalling around 365 MW of installed capacity as of 2019. Although national utilities own many mini-grids, private developers also have entered the space. These small companies face challenges in scaling their operational and financial capacity and mobilising equity. Large-scale portfolio approaches, which can attract global risk-mitigation facilities and unlock private equity, are increasing in scope.

A challenge for the productive appliance sector is the price competition with poorly manufactured, less-efficient products, many of which are being sold in sub-Saharan Africa. Only a few countries in the developing world have adopted minimum energy performance standards for appliances.

Clean cooking sales have been hampered by disruptions in supply chains and demand related to the COVID-19 pandemic. Non-biomass units accounted for a record 42% of the clean cookstoves purchased in 2020. Smart devices were a key breakthrough for making business models viable, with the emergence of PAYGo in the clean cooking sector and opportunities for broader uptake of carbon finance to fund stove programmes. Financing for clean cooking is shifting increasingly from grants to corporate equity. Most of the capital raised is concentrated in the top seven companies. These funds primarily financed liquefied petroleum gas (LPG) stoves (26%), followed by biomass (25%) and biogas systems (19%).

05 INVESTMENT FLOWS

Renewable energy investment reached a record high in 2021 despite impacts from the COVID-19 pandemic.

Global new investment in renewable power and fuels (not including hydropower projects larger than 50 MW) reached an estimated USD 366 billion in 2021, a record high. Solar PV and wind power continued to dominate new investment, with solar PV accounting for 56% of the total and wind power for 40%. China continued to represent the largest share of global investment, at 37%, followed by Europe (22%), Asia-Oceania (excluding China and India; 16%) and the United States (13%). Investment in new renewable energy projects showed remarkable resilience despite impacts from the pandemic.

Renewable power installations continued to attract far more investment than did fossil fuel or nuclear generating plants. Maintaining the shares of the past few years, investment in new renewable power capacity accounted for 69% of the total investment committed to new power generating capacity in 2021. The divestment trend continued in 2021 with more than 1,400 institutional investors and institutions worth more than USD 39 trillion in assets committing to partially or fully divesting from fossil fuels.

Although funds divested from fossil fuel companies are not necessarily re-invested in companies associated with renewables, changes in broader financing frameworks are increasingly relevant for renewable energy. Sustainable finance taxonomies may be relevant for: 1) companies producing or manufacturing renewable energy technologies, and 2) the owners or operators of renewable energy assets (such as a utility that operates a wind farm as part of its broader portfolio). Such stakeholders would be eligible for the technological screening of the taxonomy and thereby be pre-screened for interested investors. The number of sustainable finance taxonomies in use or under development has increased rapidly since the Paris Agreement was signed in 2015.

A majority (57%) of climate change mitigation finance was invested in renewables in 2019/2020, dominated by solar PV and onshore wind energy. The Paris Agreement highlights the need to make finance flows consistent with the goal of limiting global temperature rise to 1.5 degrees Celsius. Achieving this goal would require significant growth in the overall investment in renewables compared to the last decade.

06 RENEWABLE-BASED ENERGY SYSTEMS

For millennia, renewables derived from the sun, water and wind provided the backbone of energy supply for much of the human population, a reality that was overturned by the rapid rise of coal, oil and natural gas in the 19th and 20th centuries.

More recently, renewable energy has started to dominate again in certain parts of the world, particularly for electricity use, supported by rapid declines in the costs of wind and solar power.

The share of variable renewable energy sources (wind and solar) in the global electricity mix exceeded 10% for the first time in 2021. In Denmark, the annual share of wind and solar surpassed 50%, while in Ireland, Spain and Uruguay it was above 30%.

So far, no examples exist of fully renewable-based energy systems that span the electricity, heating and cooling, and transport sectors; however, the technological, infrastructural and operational foundations of such systems are now being laid. The rise of increasingly cost-effective energy storage combined with greater demand-side flexibility and the expansion of transmission infrastructure is making it possible for regions with widely differing resource endowments to transition to fully renewable-based power systems.

In addition, a growing number of jurisdictions are harnessing their renewable electricity sources to support the expansion of renewables to other sectors of energy use. Communication-enabled heating and cooling technologies such as heat pumps, thermal storage technologies and air conditioners are helping to enable higher shares of renewables in the heating and cooling sector, while renewably powered transport is enabled by the rise of electric vehicles, which can be charged with 100% renewable electricity.

07 RENEWABLES IN CITIES

City governments used a broad range of targets, policies and actions to show local commitment to renewables.

By the end of 2021, around 1,500 cities had renewable energy targets and/or policies. City governments also have taken action that indirectly supports the shift to renewables, such as setting net zero targets and targets for electrifying heating, cooling and transport.

Many challenges remain for cities to take climate and energy action, including the degree to which national governments grant their city counterparts regulatory power and access to financial markets; market rules and energy regulations set at higher levels of government; and a lack of institutional and human capacity and awareness of how cities can contribute to the energy transition. Some local governments have collaborated with their national governments to realise renewable energy projects, whereas others have initiated and/or supported legal barriers against climate and energy action.

DRIVERS FOR RENEWABLES IN CITIES

City governments are motivated to seek solutions that meet local energy demand while fostering healthy, resilient and liveable communities.

With the COVID-19 pandemic entering its second year in 2021, efforts to ensure public health and well-being while supporting local economic recovery and resilience were top urban priorities. Another priority in cities has been reducing local air pollution (and carbon emissions) from the burning of fossil fuels in road transport, buildings and industry. In the face of rising energy costs, municipal agendas also have been exploring how to use renewables to keep costs manageable.

CITY ENERGY AND CLIMATE TARGETS

City governments have given direct support to renewables deployment and investment by setting specific renewable energy targets, either for municipal operations or to shift city-wide energy use.

By year's end, more than 920 cities in 73 countries had set a renewable energy target in at least one sector (power, heating and cooling, or transport). Targets to shift to renewables in buildings are the most prevalent. In line with global trends, most city-level renewable transport targets focus on electric vehicles with around 100 cities having such targets in place.

The global momentum towards emission reduction targets in cities further accelerated in 2021, with more than 1,100 city governments having announced targets for net zero emissions. However, only a few city governments have anchored their net zero pledges in policy documents or developed plans with specific actions towards net zero, including the deployment of renewables.

FINANCING RENEWABLES

City governments have used a variety of mechanisms to finance renewable energy projects.

Options include using their own capital and/or assets to develop projects; raising funds through bonds, development finance and bank loans; and leveraging funds provided by higher levels of government. The available solutions depend on the context, including existing rules and regulations, ownership rights for infrastructure, the availability of capital, the ability of municipalities to collect fiscal revenue and borrow money, and the potential to mobilise private sector partners. Due to the spectrum of actors involved, tracking renewable energy finance in cities remains difficult.

BUILDINGS

Municipal policies aimed at decarbonising the building stock vary depending on whether they apply to buildings under municipal control or to residential, commercial and industrial buildings.

City governments have used their building assets to install stand-alone renewable energy systems, where most focus has been on solar PV. In cases where city governments have insufficient space to install renewables, or face other constraints, they have signed agreements to buy the electricity from off-site projects, mostly via power purchase agreements.

To encourage wider decarbonisation of buildings through renewable power and/or heating, city governments have expanded their policy portfolios. Typically, regulatory mechanisms such as building codes that mandate on-site generation of renewables for electricity and/or heating apply only to new buildings, although some cities also require this during retrofits and renovations. For existing buildings, financial and fiscal incentives such as grants, rebates and tax credits often are used to encourage renewables. In addition, a total of 59 cities in 13 countries had either passed or proposed a ban or restricted the use of natural gas, oil or coal for space and water heating and for cooking.

TRANSPORT

City governments have undertaken efforts to decarbonise urban transport, in addition to reducing personal motorised transport by expanding walking and biking infrastructure and public transport systems.

Most efforts have focused on the electrification of municipal service fleets and public buses as well as the expansion of metro and light rail systems. Many cities have continued to use biofuels in transport, with some tapping into urban waste and wastewater resources as inputs for biofuel production.

Some municipal governments have provided fiscal and financial support for the purchase of biofuel or electric vehicles, in some cases targeted at taxi fleets and delivery companies. The most widespread policy support is measures that enable broader transport decarbonisation, such as low-emission zones, bans and restrictions, improving access to charging infrastructure and preferential parking. By the end of 2021, 270 cities had established low-emission zones and 20 had passed bans and restrictions on certain (fossil) fuels or vehicle types.