Renewable Energy Market Update - May 2022

Renewable Energy Market Update: Outlook for 2022 and 2023

Key Highlights:

1. Global Energy Crisis and Accelerated Clean Energy Transitions:

   • The ongoing global energy crisis has heightened the urgency for clean energy transitions.
   • Pre-crisis policies are driving faster growth in renewable electricity, with wind and solar PV having the potential to significantly reduce Europe's reliance on Russian natural gas by 2023.

2. Record Capacity Additions:

   • In 2021, renewable capacity additions set another record, increasing by 6% to nearly 295 GW, despite supply chain challenges and high raw material prices.
   • Solar PV and wind costs are expected to remain elevated in 2022 and 2023 due to higher commodity and freight prices, but their competitiveness improves due to much sharper increases in natural gas and coal prices.

3. Forecast Updates:

   • Forecast additions for 2022 and 2023 have been revised upwards by 8% from December 2021, driven by strong policy support in China, the European Union, and Latin America.
   • Renewable capacity is expected to increase by 8% in 2022, reaching almost 320 GW, but growth remains stable in 2023 unless new policies are rapidly implemented.

4. Biofuel Demand:

   • Biofuel demand recovered in 2021, reaching near 2019 levels, and is expected to grow by 5% in 2022 and 3% in 2023.
   • Increasing feedstock prices and policy reactions from multiple countries slow short-term growth, leading to a 20% downward revision in previous biofuel demand growth forecasts.
   • Russia’s invasion of Ukraine has put upward pressure on biofuel feedstock prices, particularly vegetable oils.

5. Policy Implications:

   • The focus on energy security, especially in the European Union, is triggering unprecedented momentum towards accelerating energy efficiency and renewables.
   • The success of the forecast depends on the introduction and implementation of new and stronger policies in the next six months.

Summary of Key Data:

• Renewable Capacity Additions:

  • 2021: 295 GW, 6% increase
  • 2022 Forecast: 320 GW, 8% increase
  • 2023 Forecast: Stable growth, dependent on new policies

• Biofuel Demand:

  • 2021: Near 2019 levels
  • 2022 Forecast: 5% growth
  • 2023 Forecast: 3% growth
  • Downward revision: 20%

• Global Energy Crisis Impact:

  • Increased urgency for clean energy transitions
  • Potential to reduce European reliance on Russian natural gas

• Policy Support:

  • Strong support in China, EU, and Latin America
  • Focus on energy security and accelerating renewables

• Challenges:

  • Supply chain challenges
  • High raw material and freight prices
  • Policy uncertainties and macroeconomic challenges