Annual additions to global renewable electricity capacity are expected to average around 305 GW per year between 2021 and 2026 in the IEA main case forecast. This implies an acceleration of almost 60% compared to renewables’ expansion over the last five years. Continuous policy support in more than 130 countries, ambitious net zero goals announced by nations accounting for almost 90% of global GDP, and improving competitiveness of wind and solar PV are all driving this expansion. Nonetheless, despite this growing support, renewables face a range of policy uncertainties and implementation challenges, including those relating to financing, permitting, social acceptance and grid integration. Current increases in commodity prices have put upward pressure on investment costs, while the availability of raw materials and rising electricity prices in some markets pose additional challenges for wind and solar PV manufacturers in the short term. However, the impact of volatile commodity and transport prices on demand are expected to be limited, as high fossil fuel prices improve the competitiveness of wind and solar PV further.

Our accelerated case assumes that governments address policy, regulatory and implementation challenges in the next couple of years. The stabilisation and eventual decline of commodity prices to levels observed over 2015-2019 and more affordable financing from the private sector also contribute to the accelerated growth of renewable electricity in this case. Accordingly, annual renewable capacity additions are a quarter higher than in our main case, reaching over 380 GW on average over 2021-2026. However, the gap between both our main and accelerated case forecasts and the trajectory necessary to meet Net Zero by 2050 remains significant. Annual capacity growth under the IEA Net Zero Scenario during 2021-2026 needs to be 80% faster than in our accelerated case, implying that governments need to not only address policy and implementation challenges, but also to increase their ambition.

Additions of renewable power capacity are on track to set yet another annual record in 2021, driven by solar PV. Almost 290 gigawatts (GW) of new renewable power will be commissioned this year, which is 3% higher than 2020’s already exceptional growth.

In our main case forecast for 2021-2026, we expect annual average renewable capacity additions to reach 305 GW, 58% higher than the figure for the last five years. Despite surging commodity prices increasingly affecting solar PV investment costs, we expect the annual market to grow by 17% year-on-year to almost 160 GW in 2021 with additions reaching almost 200 GW in 2026. In the significant majority of countries worldwide, utility-scale solar PV provides the lowest cost of adding new electricity capacity, especially in the context of increasing natural gas prices.

Overall, solar PV alone accounts for almost 60% of all renewable capacity additions, with almost 1 100 GW becoming operational over the forecast period in our main case. The expansion of solar PV capacity in the next five years is expected to be almost double that of the previous five years. Utility-scale projects continue to provide over 60% of all solar PV additions worldwide. Annual additions of distributed PV are increasing thanks to policy initiatives in China, the European Union and India stimulating the deployment of commercial and residential projects. 

Under the accelerated case, total growth of global solar PV capacity could be 22% higher with annual additions growing continuously, reaching almost 260 GW by 2026. The upside is largest in key markets such as China, Europe, the United States and India, but considerable growth potential remains in nascent markets such as sub-Saharan Africa and the Middle East. However, reaching the accelerated case will require the major markets to address their persistent challenges. These are the highlights: 

China: Clarify the rules around the new renewable portfolio standard and green certificate scheme for utility-scale and large-scale commercial applications. Continue support for residential solar PV following the phase-out of incentives in 2021.

United States: Extend investment tax credits and the monetisation of credits through a direct-pay scheme.

India: Improve the distribution companies’ financial health, reducing delays in signing PPAs following solar PV auctions, accelerate grid expansion and improve the remuneration for distributed PV applications.

European Union: Increase auction capacity and improve participation rates in utility and large commercial-scale auctions via smoother permitting procedures when these are required for bidding. Increase support for distributed solar PV through the EU resilience and recovery fund.

Japan: Smooth the transition to the feed-in premium (FIP) scheme to build up a declining project pipeline from the former feed-in tariff (FIT).

Middle East and North Africa: Increase the frequency of auction rounds, and speed up bidder selection and contractual negotiations to accelerate utility-scale PV rollout. More rapid expansion of transmission and distribution grids allows the connection of additional solar PV capacity.

Global onshore wind additions reached almost 108 GW in 2020, driven by acceleration in China as developers rushed to complete projects before the expiry of subsidies. Our forecast expects lower onshore wind growth through the forecast period, averaging 75 GW a year. Still, this is almost 25% higher than average annual additions between 2015 and 2020. China, Europe and the United States together account for 80% of global onshore wind expansion of 451 GW during 2021-2025.

In general, the challenges of permitting, social acceptance, grid connection and integration combined to limit faster onshore wind growth. These challenges prevent developers from participating in wind-specific or technology-neutral auctions, especially when permitting and grid connection agreements are required for participation. In addition, higher steel and transport costs have seen turbine prices rise by 10-25% in several markets, increasing challenges associated with project financing and profitability. In our accelerated case, global onshore wind capacity growth is almost 30% higher, assuming that governments tackle social acceptance and expand network capacity faster and tackle grid integration challenges. In addition, the accelerated case assumes countries introduce higher auction capacity or increase auction participation as a result of smoother permitting. In this case, annual additions reach 110 GW by 2026, slightly higher than the record level achieved in 2020.

The offshore wind market is forecast to accelerate in 2021, with additions reaching 11 GW, almost double compared with last year. This is driven by expansion in China, as developers rush to secure expiring national subsidies. Despite China’s growth slowing through to 2026, offshore annual capacity additions reach 21 GW globally thanks to rapid expansion in new markets beyond the United Kingdom, Germany, Belgium, Denmark and the Netherlands. Large-scale projects are expected to be commissioned in France, Chinese Taipei, Korea, Viet Nam, Japan and the United States in the next five years, pushing our forecast up. Cumulative offshore capacity is forecast to more than triple by 2026, reaching almost 120 GW. The share of offshore capacity in overall annual wind additions reaches over 20% in the main case, up from 5% in 2020, breaking a record at the end of our forecast period. However, faster offshore and onshore grid expansion in the United Kingdom and the European Union, rapid cost decline and strong provincial-level policies in China, and the early-commissioning of large-scale pipeline in the United States together could push cumulative global offshore wind capacity to 134 GW in 2026 in the accelerated case.

The growth of dispatchable renewables such as hydropower, bioenergy, geothermal and CSP slows by 5% compared with expansion over 2015-2020. Relatively higher investment and generation costs compared with wind and solar PV, the lack of policy support and limited recognition of the flexibility of dispatchable renewables prevent their faster expansion.

For hydropower, annual additions are volatile according to the commissioning deadlines of large reservoir projects in China, India and Turkey. These three large markets drive our main case forecast of 153 GW over 2021-2026, which is similar to the deployment achieved in the last five years. Considering long environmental permitting and construction times, the upside for hydropower remains limited in the next five years.

Expansion of bioenergy for power capacity is expected to slow by 10% over the forecast period. China provides almost 60% of this new capacity due to waste-to-energy projects driven by growing urbanisation. Beyond China, supply chain challenges, lack of policy support and relatively high generation costs contribute to the slowdown in expansion. Despite its great resource potential, geothermal growth is limited to less than 5 GW over 2021-2026, representing only 0.2% of our forecasted renewable capacity expansion. Limited policy support to address the technology’s pre-development risks hampers investment in large-scale geothermal projects. For CSP, we expect less than 3 GW to be commissioned by 2026. Relatively high investment costs, lack of dedicated auctions and competition from solar PV and battery storage projects prevent faster expansion of CSP.