Renewables in Energy Supply

Figure 1.

Renewables in Energy Demand

The global energy crisis of 2021-2022 was sparked by a rapid economic rebound in the wake of the COVID-19 pandemic, which led to tighter energy supply markets starting in October 2021. ¹ The world's energy challenges were exacerbated in February 2022 following the Russian Federation's invasion of Ukraine. ² The energy crisis contributed to high inflation and eventually became a global phenomenon, even if the effects were less visible in Asia and some parts of the world. ³

Newly installed renewable power capacity accounted for 348 GW in 2022.

In response, governments have paid greater attention to the security of energy supply and have turned to renewables to counter inflation, supply disruptions and price volatility. ⁴ This is highlighted by the growth in energy-related policies such as the US Inflation Reduction Act, which includes subsidy packages aimed at boosting domestic manufacturing and deployment of renewable energy technologies, and the European Union's (EU) REPowerEU plan, which aims to bridge the gap between regional energy supply and demand through renewables. ⁵

The global energy crisis and associated challenges have prompted wide-ranging changes in the energy supply landscape. These include greater emphasis on energy security, expansion of domestic energy production and manufacturing, increased international co-operation and policy support for renewables, highlighting the need for an accelerated shift to renewables in energy supply.

Renewable Electricity is Driving the Shift in Energy Supply

The distribution of the world's total final energy supply – across heat, fuel and electricity – reveals important insights about the status of the renewable energy transition. The majority of the world's energy is supplied in the form of direct heat ⁱ , which accounted for 48.7% of the total in 2020. ⁶ (See Figure 1.) This was followed by fuel – including liquid and gaseous fuels used for transport – which represented 29% of the total. ⁷ Meanwhile, the share of electricity (including for heat and transport) in the global energy supply has increased steadily, rising from 19% in 2010 to 23% in 2020. ⁸ This shift reflects the growing reliance on electricity to meet energy needs in all end-use sectors.

Reflecting this trend, most of the progress in increasing the share of renewables in the energy supply has been achieved in the power sector, with renewable energy contributing nearly one-third (30%) of global electricity production in 2022. ⁹ (See Figure 2.)

FIGURE 2.

Share of Renewable Electricity Generation, by Energy Source, 2012 and 2022

For heat, the progress has been relatively slower, with the share of modern renewables in the heat supply increasing 2.6% in the last decade, from 8.9% in 2010 to 11.5% (excluding traditional biomass) in 2020. ¹⁰ (See Figure 3.) Modern bioenergy continued to supply most of the renewable heat, at 68%, while solar thermal supplied 6% and geothermal direct heat contributed 5% (the remaining 21% was supplied by renewable electricity). ¹¹

For fuels, biofuels represented nearly all renewable fuel and supplied 3.6% of the total fuel supply in 2020, up from 2.3% in 2010. ¹² In absolute terms, biofuel production increased 60% during the decade. ¹³ Renewable hydrogen has been hailed as a potential game-changer for decarbonising energy-intensive sectors, and in 2022 the number of electrolysis plants grew rapidly to reach around 1 gigawatt (GW) of capacity. ¹⁴ However, more than 95% of current hydrogen production is still based on fossil fuels. ¹⁵

The development of renewable energy in the power sector is the result of increased policy attention to renewable power. As of 2022, as many as 174 countries had targets for renewable power shares (including 37 countries with targets for 100% renewable electricity), 49 countries had targets for biofuels, and 46 countries had targets for renewable heat, with only 9 and 3 new targets for biofuels and renewable heat, respectively, being announced in 2022. In contrast, more than 25 new targets for renewable power shares and installed capacity were announced in 2022. ¹⁶

The Shift to Renewable Energy Supply Is Uneven Across Regions

Globally, China continued to lead in new renewable energy investments in 2022, accounting for 55% of the total. ¹⁷ Europe followed with 11%, and the United States with 10%. ¹⁸ In contrast, Africa and the Middle East combined represented only 1.6% of global investment in renewables, indicating the high concentration of this investment in just a few regions. ¹⁹

For renewable heat, Europe leads in the modern bioheat market, with a 24% share in 2020, followed by the United States with 13%. ²⁰ China accounted for 73% of the solar water heating market, followed by Türkiye, the United States, Germany and Brazil. ²¹ The solar heat market contracted more than 9% in 2022 due largely to declining sales in China; however, some European markets, especially in response to the energy crisis, experienced double-digit growth, including Italy (up 43%), France (29%), Greece (nearly 17%), Germany and Poland (both 11%). ²² China is the world's fastest-growing geothermal heat market, and other key markets are Türkiye, Iceland and Japan; together, these four countries accounted for nearly 90% of global geothermal direct use in 2022. Overall, however, global capacity additions of geothermal power were one-third lower than in 2021, with only 0.2 GW added in 2022. ²³

In the case of renewable fuels, North America supplied 44% of the global total of renewable biofuels in 2020 (latest available data), followed by Latin America and the Caribbean with 25% and Europe with 18%. ²⁴ Renewable fuel production has lagged in Asia and the Pacific (11%) and Africa (less than 1%). ²⁵ Australia is an emerging leader in renewable-based hydrogen and is set to have the largest number of renewable hydrogen plants worldwide. ²⁶

The share of renewable electricity has grown steadily in recent years. In 2022, global renewable electricity generation grew 1.1%, up from 5.5% growth in 2021. ²⁷ Latin America and the Caribbean continued to have the highest share of renewables in the electricity mix among regions, at 61% in 2022 (up from 56% in 2012) ²⁸ (See Figure 4.) Hydropower dominates the region's electricity supply, contributing 45% of total production and 73% of renewable production. ²⁹ In 2022, renewable electricity generation in Latin America and the Caribbean grew 12%. ³⁰

Oceania showed the biggest increase in the share of renewables in the electricity mix, rising from 21% in 2012 to 40% in 2022, due mostly to developments in Australia, with 13% growth in renewable electricity generation in 2022 alone. ³¹ This is attributed mostly to the growing share of solar PV and wind energy, which rose from 4.1% to 22% in the region during the decade. ³²

FIGURE 3.

Share of Renewable Heat Production, by Energy Source, 2010 and 2020

In Europe, the share of renewables in total electricity generation increased from 25% in 2012 to 36% in 2022. ³³ Wind power represented 11% of Europe's total generation in 2022 (up from 4% in 2012), and solar power represented 5% (up from 1.5% in 2012). ³⁴ The region's overall renewable electricity generation was stable, reflecting opposing growth across technologies. Generation from hydropower, heavily affected by droughts and water scarcity, was down 11.5% compared to 2021, whereas generation from solar PV grew a record 21.6%, and from power 11.2%. ³⁵

In North America, the share of renewables in the electricity mix rose from 19% in 2012 to 29% in 2022. ³⁶ During the decade, wind power's share of generation increased from 3.3% to 9.6%, and solar power's share rose from 0.11% to 4.3%. ³⁷ In 2022, renewable electricity generation in the region grew 9% up from 3% growth in 2021. ³⁸

The share of renewables in Asia's electricity mix increased 10% during 2012-2022, rising from 17% to 27%. ³⁹ This was due mainly to the increase in solar PV and wind generation, which supplied only 1.7% of Asia's electricity in 2012 but reached an 11% share in 2022. ⁴⁰ In 2022 alone, renewable electricity generation in the region grew 11%. ⁴¹

In Africa, the renewable electricity share increased 7%, from 17% in 2012 to 24% in 2022. ⁴² Hydropower's share of generation in the region rose from 16% to 19%, and solar and wind energy grew from 0.4% to 4.7% (2.7% for wind and 2% for solar). ⁴³ In 2022, renewable electricity in Africa grew 11%, compared to a 5% increase in 2021. ⁴⁴

The Middle East had continued to lag other regions, with the share of renewables in electricity generation rising from 2.4% in 2012 to 3.4% in 2021 (comprising 1.7% hydropower, 1.4% solar energy and 0.2% wind energy). ⁴⁵

FIGURE 4.

Renewable Share of Electricity Generation, by Region, 2012 and 2022

FIGURE 5.

Renewable Power Total Installed Capacity and Annual Additions, by Technology, 2022

Solar PV and wind energy accounted for 92% of renewable power additions in 2022.

The Shift in Renewable Energy Supply is Being Led by Specific Technologies

The energy transition has focused not only on power, but also on a few specific technologies in the power sector. In 2022, solar PV and wind power represented 92% of renewable power capacity additions (70% solar and 22% wind). ⁴⁶ (See Figure 5.)

In 2022, global manufacturing of renewable energy and enabling technologies grew nearly 40%.

In total, 348 GW of renewable power capacity was added in 2022 (up 13% from the 306 GW added in 2021); however, this annual capacity addition would need to be accelerated by as much as 2.5 times to achieve the capacity growth required to achieve the International Energy Agency's (IEA) scenario for net zero emissions by 2030. ⁴⁷ (See Figure 6.) Annual capacity additions for bio-power, geothermal, ocean power and concentrated solar thermal power (CSP) would need to grow 9.7 times to be on track with the IEA net zero targets. ⁴⁸ For wind power, annual additions would need to increase 3.7 times to reach the IEA targets, particularly as additions slowed in 2022 as a result of supply chain interruption and rising material costs (down 17% compared to 2021). ⁴⁹ The wind sector especially is at critical juncture as the current new and announced manufacturing capacity falls short in meeting the IEA's net-zero scenario. ⁵⁰ Meanwhile solar PV had another record year in 2022, with additions rising 37% compared to 2021 (up 25% for utility-scale solar PV and 54% for decentralised solar PV); however, to reach the IEA target, the current rate the annual installation needs to double in 2030. ⁵¹

FIGURE 6.

Renewable Power Capacity Annual Additions by Technology, 2017-2022, and Increases Required by 2030 to Achieve the IEA's Net Zero Scenario

TABLE 1.

Top Five Countries, 2022

Renewable Energy Manufacturing is Concentrated in China

In 2022, manufacturing capacities for both renewables and enabling technologies had another year of strong growth for solar PV (up 39%), electrolysers (26%) and heat pumps (13%). ⁵² Wind energy manufacturing capacity grew by a more modest 2%. ⁵³ In response to the energy crisis and associated challenges, multiple flagship policy packages – such as the US Inflation Reduction Act, the Net-Zero Industry Act in Europe, Japan's Green Transformation programme and India's Production Linked Incentive scheme – have aimed to increase the domestic manufacturing capacity of renewable energy and enabling technologies. ⁵⁴

The manufacturing of solar PV panels remained geographically concentrated in China, which dominated with more than 80% shares across all production stages in 2022. ⁵⁵ The next largest countries with respect to manufacturing capacity were Vietnam and India, accounting for 5% and 3%, respectively, of the global capacity. ⁵⁶ In 2022, 90% of the growth in manufacturing occured in China, and out of the top 10 largest solar PV manufacturing projects announced, only one (number 10) was in India. High costs continue to be a leading barrier to more widespread solar PV manufacturing; compared to China, costs are an estimated 10% higher in India, 20% higher in the United States and 35% higher in Europe. ⁵⁷

For wind energy, western manufacturers continued to face growing competition from Chinese turbine makers, which have actively pursued sales overseas. ⁵⁸ In 2022, China accounted for over 60% of global manufacturing capacity, followed by the EU (just under 15%) and the United States (10%). ⁵⁹

Heat pump manufacturing capacity is more globally distributed. In 2022, 35% of worldwide capacity was in China, followed by 25% in the United States, and close to 20% in the EU. ⁶⁰ Similarly, electrolyser manufacturing is concentrated in China, with around 40% of electrolyser manufacturing capacity, and the EU and the United States have shares of 20% each. ⁶¹