The growth of renewable energy has hit another record year for 2021, with momentum expected to remain strong over the coming years. Despite the persistent pandemic-induced supply chain challenges, construction delays, and record-level raw material and commodity prices, renewable energy capacity additions in 2021 increased by 6% and broke another record, reaching almost 295 giawatts (GW). Globally, the 17% decline in annual wind power capacity additions in 2021 was offset by an increase in solar photovoltaic (PV) and growth in hydropower installations. The chart below shows the renewable energy output (bar height), by source, in 2019, 2020, and 2021 (colour).

 

 

By country and region, China largely maintained its market share of distribution in 2021, accounting for 46% of worldwide renewable capacity additions. Outside of China, the European Union was the second largest market in terms of increased capacity, with the region surpassing for the first time their all-time-record set in 2011. The chart below shows the renewable energy output (bar height), by country, in 2019, 2020, and 2021 (colour). Canada is included in the “Other countries” category.

 

 

The outlook for 2022 and 2023 remains constructive. Renewable capacity is expected to increase over 8% in 2022 compared with last year, pushing through the 300 GW mark for the first time. Solar PV is predicted to account for 60% of the increase in global renewable capacity this year with the ordering of 190 GW, a 25% gain from last year. Utility-scale projects account for almost two-thirds of overall PV expansion in 2022, mostly driven by a strong policy environment in China and the European Union driving faster deployment. Following a 32% year-over-year decline in 2021, new global onshore wind installations are expected to slightly recover and reach almost 80 GW. Offshore wind growth worldwide is expected to decline 40% in 2022 following the exceptional four-fold jump last year in China due to the national subsidy phase-out deadline. The chart below shows the renewable energy output from 2017 to 2023 (bar height), and the breakdown of which renewable energy sources are utilized (colour).

 

 

Higher renewable costs can slow down growth, but may not result in competitive challenges. Prices for many raw materials and freight costs have been on an increasing trend since the beginning of 2021. These cost increases for manufacturers are resulting in higher prices of wind turbines and PV modules. Compared with 2020, we estimate that the overall investment costs of new utility-scale PV and onshore wind plants are from 15% to 25% higher in 2022. Surging freight costs are the biggest contributor to overall price increases for onshore wind. For solar PV, the impact is more evenly divided among elevated prices for freight, polysilicon, and metals. The chart below shows the cost of constructing utility-scale solar PV and onshore wind renewable energy sources, compared to the cost of construction in 2015 (100).

 

 

While significant in absolute terms, the increase in renewables costs have not hampered their competitiveness because prices of fossil fuels and electricity have risen at a much faster pace since the end 2021. Globally, power prices are breaking historic records in many parts of the world.

Thank you to Joseph Wu, from RBC's Portfolio Advisory Group, for sharing research and content with me for my blog.