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Renewable Energy

Market Update

Outlook for 2023 and 2024

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies

that will enhance the

reliability, affordability

and sustainability of

energy in its

31 member countries,

11 association

countries and beyond.

Please note that this

publication is subject to

specific restrictions that limit

its use and distribution. The

terms and conditions are

available online at

www.iea.org/t&c/

This publication and any

map included herein are

without prejudice to the

status of or sovereignty over

any territory, to the

delimitation of international

frontiers and boundaries and

to the name of any territory,

city or area.

Source: IEA. All rights

reserved.

International Energy Agency

Website: www.iea.org

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

IEA association

countries:

INTERNATIONAL ENERGY

AGENCY

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

South Africa

Thailand

Ukraine

Revised version, June 2023

Information notice found:

www.iea.org/corrections

Renewable Energy Market Update June 2023

PAGE | 3

I EA. CC BY 4.0.

Abstract

The key areas examined by the report include the latest data and analysis on

renewable power capacity additions in 2022 – globally and for major markets – as

well as forecasts for 2023 and 2024.

The update will look at key topics for renewables this year and next, including how

the energy crisis will affect their deployment in the EU, their impact on energy

affordability, and the latest trends in the United States, China and India. It will also

explore the implications of developments affecting major technologies like solar,

wind and biofuels – including market dynamics, financing, energy security

priorities, manufacturing and power system integration.

The report provides the IEA’s latest assessment of the state of play in renewables

markets since the publication of our Renewables 2022 report in December.

In exploring the most recent market and policy developments as of April 2022, our

Renewable Energy Market Update forecasts new global renewable power

capacity additions and biofuel demand for 2023 and 2024. It also discusses key

uncertainties and policy-related implications that may affect projections for 2024

and beyond.

/87

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RenewableEnergyMarketUpdateOutlookfor2023and2024TheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,11associationcountriesandbeyond.Pleasenotethatthispublicationissubjecttospecificrestrictionsthatlimititsuseanddistribution.Thetermsandconditionsareavailableonlineatwww.iea.org/t&c/Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.Allrightsreserved.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:INTERNATIONALENERGYAGENCYArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandUkraineRevisedversion,June2023Informationnoticefound:www.iea.org/correctionsRenewableEnergyMarketUpdateJune2023PAGE3IEA.CCBY4.0.AbstractThekeyareasexaminedbythereportincludethelatestdataandanalysisonrenewablepowercapacityadditionsin2022–globallyandformajormarkets–aswellasforecastsfor2023and2024.Theupdatewilllookatkeytopicsforrenewablesthisyearandnext,includinghowtheenergycrisiswillaffecttheirdeploymentintheEU,theirimpactonenergyaffordability,andthelatesttrendsintheUnitedStates,ChinaandIndia.Itwillalsoexploretheimplicationsofdevelopmentsaffectingmajortechnologieslikesolar,windandbiofuels–includingmarketdynamics,financing,energysecuritypriorities,manufacturingandpowersystemintegration.ThereportprovidestheIEA’slatestassessmentofthestateofplayinrenewablesmarketssincethepublicationofourRenewables2022reportinDecember.InexploringthemostrecentmarketandpolicydevelopmentsasofApril2022,ourRenewableEnergyMarketUpdateforecastsnewglobalrenewablepowercapacityadditionsandbiofueldemandfor2023and2024.Italsodiscusseskeyuncertaintiesandpolicy-relatedimplicationsthatmayaffectprojectionsfor2024andbeyond.RenewableEnergyMarketUpdateJune2023PAGE4IEA.CCBY4.0.Acknowledgements,contributorsandcreditsThisstudywaspreparedbytheRenewableEnergyDivisionintheDirectorateofEnergyMarketsandSecurity.ItwasdesignedanddirectedbyHeymiBahar,SeniorAnalyst.Thereportbenefitedfromanalysis,draftingandinputfrommultiplecolleagues.Theleadauthorsofthereportwere,YasminaAbdelilah,HeymiBahar,TrevorCriswell,PiotrBojek,FrançoisBriens,JeremyMoorhouseandLauraMariMartinez,whowasalsoresponsiblefordatamanagement.ThereportalsobenefitedfromanalysisanddraftingfromKazuhiroKurumiandKartikVeerakumar.PaoloFrankl,HeadoftheRenewableEnergyDivision,providedstrategicguidanceandinputtothiswork.Valuablecomments,feedbackandguidancewereprovidedbyotherseniormanagementandnumerousothercolleagueswithintheIEA,inparticular,KeisukeSadamori.TheauthorswouldalsoliketothankKristineDouaudforskilfullyeditingthemanuscriptandtheIEACommunicationandDigitalOffice,inparticularPoeliBojorquez,JonCuster,AstridDumond,JadMouawad,BarbaraMoure,JethroMullen,IsabelleNonain-Semelin,JuliePuech,RobertStone,ClaraVallois,LucileWallandThereseWalshfortheirassistance.Inaddition,IvoLetrafromtheOfficeofManagementandAdministrationsupporteddatamanagement.RenewableEnergyMarketUpdateJune2023PAGE5IEA.CCBY4.0.TableofcontentsExecutivesummary................................................................................................................8Introduction...........................................................................................................................13Didallrenewableelectricitytechnologiesbreakdeploymentrecordsin2022?.............16SolarPVwastheonlytechnologytobreakarecordforannualcapacityadditions................16Windpowercapacityadditionsdecreasedthepasttwoconsecutiveyears............................17Willrenewableelectricitycapacityadditionscontinuetobreaknewrecordsin2023and2024?.....................................................................................................................................182023:SolarPVdominatesgrowth,andonshorewindadditionsreboundtobreakthe2020record.......................................................................................................................................182024:Anotherrecordyearforglobalcapacityadditions,ledbysolarPV...............................19HowwilltheenergycrisisaffectEUrenewableenergydeploymentin2023and2024?21RapiddistributedsolarPVgrowthisthemainreasonfortheupwardsforecastrevision........21Permittingchallengesandlimitedparticipationincompetitiveauctionspreventfastergrowthofutility-scalewindandsolarPV.................................................................................................23HowareEuropeancountriesaddressingpermittingchallengestoacceleraterenewableenergydevelopment?...........................................................................................................24PermittinghasfinallybecomeakeypolicyfocusinEurope....................................................24HowmuchlessmoneyistheEuropeanUnionspendingonexpensiveelectricitythankstoadditionalrenewableenergycapacity?..........................................................................28ReducedRussiannaturalgassuppliesandmulti-yearlowsinhydroandnuclearoutputledtoanunparalleledincreaseintheEUwholesaleelectricityspotprice........................................29NewPVandwindcapacityisexpectedtoprovidesavingsofEUR100billionsincethebeginningoftheenergycrisis..................................................................................................30WillhydropowerinEuroperecoverin2023followingaseveredroughtlastyear?.......32TowhatextentcanrenewableenergyusedisplacegasconsumptioninEUbuildingsin2023and2024?.....................................................................................................................34WillChina’sroleinglobalrenewableenergydeploymentdeclinein2023and2024?...37China’scontributiontoglobalrenewablecapacityadditionsisexpectedtoincreasein2023and2024thankstodistributedsolarPVandwind...................................................................37China’sincreasingsolarPVandwindmanufacturingcapabilitieswillmaintainastrongdomesticdemand.....................................................................................................................38WilltheUSinflationReductionActimpactwindandPVdeploymentintheshortterm?................................................................................................................................................40Tradeandsupplychainconcernsledtolowercapacityadditionsin2022,butwindandPVexpansionwillacceleratethisyear...........................................................................................40TheInflationReductionAct’simpactonrenewableenergytechnologydeploymentwillbecomeevidentin2025.........................................................................................................................41RenewableEnergyMarketUpdateJune2023PAGE6IEA.CCBY4.0.WillIndia’srenewableenergydeploymentboomin2023and2024?..............................42Higherprices,lowerauctionvolumesandtradepoliciesweighonshort-termPVdeployment..................................................................................................................................................42Large-scalePVmanufacturingisemerging,butitcreatesshort-termdemandandsupplymismatches..............................................................................................................................43Arecompetitiverenewableenergyauctionsincreasinglyundersubscribed?................45TheenergycrisishasnegativelyaffectedparticipationinEuropeanauctions........................45WillmarketforcesnowdrivetheexpansionofwindandsolarPVplants,orispolicystillkey?................................................................................................................................48EconomicattractivenessandconsumerdemanddrivePPAgrowthintheUnitedStates.......49CompetitiveauctionsdriveEuropeangrowthin2023-2024,butthepacewilldependonpolicyresponsestovolatilewholesalepricesandrisingcosts..........................................................50Istherenewableenergyindustry’sfinancialhealthimproving?......................................53Multiplechallengeshavetestedthefinancialhealthofrenewableenergycompaniessince2019.........................................................................................................................................53Abrightfutureforthefinancialhealthoftherenewableenergyindustryisonthehorizon,butitrequiresgovernmentsandtheindustrytotacklemultiplechallenges.....................................55WillsolarPVandwindcostsfinallybegintofallagainin2023and2024?.....................57DohighersharesofwindandsolarPVgenerationalwaysimplymorecurtailment?....60Theimportanceofgridinfrastructure.......................................................................................61Policyandsystemplanning......................................................................................................62Marketdesignandoperation....................................................................................................62HowarehighersharesofwindandsolarPVchallengingpowersystems?...................64WillglobalsolarPVandwindtechnologymanufacturingcapacitybeadequatetomeetNetZerodemandin2030?...................................................................................................66WithPVmanufacturingcapacitytomorethandoubleby2024,theindustryisrushingheadlongintoasupplyglut......................................................................................................66AnnouncednewPVmanufacturinginIndia,theUnitedStatesandEuropereaches30GWforpolysiliconand100GWformoduleassembly,withsignsofdiversificationemerging............66ChinaleadssluggishgrowthinwindequipmentmanufacturingasWesternequipmentsuppliersstrugglefinancially....................................................................................................68Whereweregovernmentsabletorelyonbiofuelstosecureenergysuppliesduringthe2022energycrisis?..............................................................................................................70Somemarketsincreasedbiofuelproductiontomitigatehighpricesandaddresssupplyconcerns…...............................................................................................................................71…butoverallbiofueldemandgrowthdeclinedby40%duringtheenergycrisis....................71Willenergysecurityconcernsdrivebiofuelgrowthin2023-2024?.................................73Emergingmarketstoleadgrowthin2023-2024......................................................................73Renewabledieselgrowthremainsstronginadvancedeconomies,butoverallbiofueldemandexpansionwillnotaccelerateby2024.....................................................................................74Willweseelowerbiofuelpricesin2023-2024?..................................................................77AdvancedbiofuelimportsdrivedownbiodieselcostsinEurope.............................................78RenewabledieselgrowthsupportshighervegetableoilpricesintheUnitedStates..............78RenewableEnergyMarketUpdateJune2023PAGE7IEA.CCBY4.0.HighBraziliansugarandsoybeanproductionsupportsdomesticandinternationaldemandincreases..................................................................................................................................79Whataregovernmentsandcompaniesdoingtoavoidasupplycrunch,andisitenough?................................................................................................................................81Thefeedstocksupplycrunch...................................................................................................81Governmentpoliciesandmarketreactionsareencouragingthelargest-everexpansioninnewbiofueltechnologies.................................................................................................................82Moreeffortsareneededtoexpandfeedstocksupplies...........................................................83Generalannex.......................................................................................................................84Abbreviationsandacronyms....................................................................................................84Unitsofmeasure......................................................................................................................85RenewableEnergyMarketUpdateJune2023PAGE8IEA.CCBY4.0.ExecutivesummaryLedbysolarPV,renewablepowergrowthissurging–drivenbytheglobalenergycrisisandpolicymomentumGlobalrenewablecapacityadditionsaresettosoarby107gigawatts(GW),thelargestabsoluteincreaseever,tomorethan440GWin2023.ThisisequivalentofmorethantheentireinstalledpowercapacityofGermanyandSpaincombined.Thisunprecedentedgrowthisbeingdrivenbyexpandingpolicysupport,growingenergysecurityconcernsandimprovingcompetitivenessagainstfossilfuelalternatives.Thesefactorsareoutweighingrisinginterestrates,higherinvestmentcostsandpersistentsupplychainchallenges.SolarPVcapacity,includingbothlargeutility-scaleandsmalldistributedsystems,accountsfortwo-thirdsofthisyear’sprojectedincreaseinglobalrenewablecapacity.Inresponsetohigherelectricitypricescausedbytheglobalenergycrisis,policymakersinmanycountries,particularlyinEurope,haveactivelysoughtalternativestoimportedfossilfuelsthatcanimproveenergysecurity.ThisshiftingfocuscreatedafavourableenvironmentforsolarPV,especiallyforresidentialandcommercialsystemsthatcanberapidlyinstalledtomeetgrowingdemandforrenewableenergy.ThesesmallerdistributedPVapplicationsareontracktoaccountforhalfofthisyear’soveralldeploymentofsolarPV–largerthanthetotaldeploymentofonshorewindoverthesameperiod.Followingtwoconsecutiveyearsofdecline,onshorewindcapacityadditionsareoncoursetoreboundby70%in2023to107GW,anall-timerecordamount.ThisismainlyduetothecommissioningofdelayedprojectsinChinafollowinglastyear’sCovid-19restrictions.FasterexpansionisalsoexpectedinEuropeandtheUnitedStatesasaresultofsupplychainchallengespushingprojectcommissioningfrom2022into2023.Ontheotherhand,offshorewindgrowthisnotexpectedtomatchtherecordexpansionitachievedtwoyearsagoduetothelowvolumeofprojectsunderconstructionoutsideofChina.SolarPVadditionswillcontinuetoincreasein2024whilechallengesremainforwindexpansion.Decliningmoduleprices,greateruptakeofdistributedsolarPVsystemsandapolicypushforlarge-scaledeploymentaredrivinghigherannualsolaradditionsinallmajormarkets–includingChina,theEuropeanUnion,theUnitedStatesandIndia.Incontrast,withoutrapidpolicyimplementation,globalonshorewindadditionsin2024areexpectedtofallbyaround5%from2023levels.WhileChina’swindenergyadditionswillcontinuetoincreasein2024,theyaresettobemorethanoffsetbyundersubscriptionofauctionsandpendingpermittingdelaysinEurope.ThesituationinEuropeisexpectedtoimproveonceRenewableEnergyMarketUpdateJune2023PAGE9IEA.CCBY4.0.newlegislationisimplemented.Overall,cumulativeworldrenewablecapacityisforecasttoreachover4500GWattheendof2024,equaltothetotalpowercapacityofChinaandtheUnitedStatescombined.Globalrenewablecapacityadditionscouldreach550GWin2024inouracceleratedcase,almost20%higherthaninthemainforecast.ThisismainlyduetoamorerapiddeploymentofresidentialandcommercialPVinstallations,assumingafasterimplementationofrecentpoliciesandincentives.Theupsideforutility-scaleonshorewindandsolarPVprojectsmostlydependsonthepaceofpermitting,constructionandtimelygridconnectionofprojectsunderdevelopment.RenewablesareattheforefrontofEurope’sresponsetotheenergycrisisThecrisistriggeredbyRussia’sinvasionofUkrainehasacceleratedrenewableenergydeploymentintheEuropeanUnion,drivingthebloctourgentlyreduceitsdependenceonRussiannaturalgasimports.PolicyactionsinmanyEuropeancountrieshasledustoreviseourforecastforrenewablecapacityadditionsintheEUin2023and2024upwardsby40%comparedwithbeforethewar.RapidgrowthindistributedsolarPVisthemainreasonforthemorepositiveoutlook,accountingforalmostthree-quartersoftheEUforecastrevisions.ThisisdrivenbyhighelectricitypricesthatmakesolarPVmorefinanciallyattractiveandbyincreasingpolicysupportinkeyEUmarkets,especiallyinGermany,ItalyandtheNetherlands.Europeancountriesintroducedmorepolicyandregulatorychangestoeasepermittinginthelast18monthsthanovertheentirepreviousdecade.WhilepermittinghasbecomeakeypolicyfocusinEuropetoacceleratethedeploymentoflarge-scalewindandsolarPVandearlybenefitsarestartingtobevisible,theproposedpolicychangesareexpectedtohavelimitedimpactonthedeploymentofrenewablesin2023and2024comparedwithotherdrivers,suchasinstallationsofsmall-scaleresidentialandcommercialsolarPV.EUelectricityconsumersaresettosaveanestimatedEUR100billionduringthe2021-2023periodthankstonewlyinstalledsolarPVandwindcapacity.AcceleratingrenewableenergydeploymentinEuropesince2021hasmitigatedtheeconomicimpactoftheenergycrisis.Low-costwindandsolarPVareoncoursetodisplaceanestimated230terawatt-hours(TWh)ofexpensivefossilfuelgenerationoverthe2021-2023period,helpingtoreducewholesaleelectricitypricesinallEuropeanmarkets.Withoutthesecapacityadditions,theaveragewholesalepriceofelectricityintheEUin2022wouldhavebeen8%higher,hurtingconsumers,businessesandgovernmentbudgets.RenewableEnergyMarketUpdateJune2023PAGE10IEA.CCBY4.0.RenewablescouldhelpEuropedisplacemorenaturalgasforheatingbuildingsnextwinter.LastyearwasthesecondwarmestwinteronrecordinEurope,whichhelpedtheEUuselessgasforheatingbuildings.Projectedgrowthofrenewableenergysuchascleanelectricity,bioenergyboilers,heatpumps,andsolarthermalandgeothermaltechnologiescoulddisplacealmost8bcmofEUbuildings-relatedgasconsumptionannuallyin2023andmorethan17bcmin2024.Thiswouldrepresentasignificantcontributiontocoverincreasinggasdemand,shouldharsherwintersandhottersummersoccuroverthecourseof2023-2024.Chinaispoisedtooutpacetherestoftheworldinrenewablecapacityinstallationsin2023and2024China’scontributiontoglobalrenewablecapacityadditionsisexpectedtoincreasein2023and2024,consolidatingitspositionastheundisputedleaderinglobaldeployment.In2022,Chinaaccountedforalmosthalfofallnewrenewablepowercapacityworldwide.By2024,thecountry’sshareissettohaveexpandedtoarecord55%ofglobalannualrenewablecapacitydeployment.By2024,Chinawilldeliveralmost70%ofallnewoffshorewindprojectsglobally,aswellasover60%ofonshorewindand50%ofsolarPVprojects.IntheUnitedStates,capacityadditionswillreboundthisyearafteradifficult2022.TheUSmarketsforwindandsolarPVcontractedlastyearduetorestrictivetrademeasuresandsupplychainconstraints,butannualadditionsforbothtechnologiesaresettoincreasebyaround40%in2023,withsolarPVsettinganewrecord.Thecurrentforecastisunderpinnedbyexistingtaxincentives,whiletheInflationReductionActwillshowitsfulleffectafter2024,providingunprecedentedcertaintyforrenewableenergyprojectsuntil2032.India’srenewablecapacityadditionsareexpectedtoincreaseagainin2023and2024,owingtofasteronshorewind,hydropoweranddistributedsolarPVdeployment.However,utility-scalesolarPVprojects,India’slargestrenewableelectricitygrowthsegment,areexpectedtoslowbrieflythisyearduetosupplychainchallenges,lowerauctionvolumesandtradepolicies.Whilelarge-scalePVmanufacturingisemerginginIndia,importtariffsarecausingshort-termdemandandsupplymismatches.CompetitivenessofwindandsolarPVhasimproved,butpoliciesneedtoadapttochangingmarketconditionsElectricitygenerationcostsfromnewonshorewindandsolarPVplantsareprojectedtodeclineby2024butwilllikelyremain10-15%abovetheirpre-CovidlevelsinmostmarketsoutsideChina.Regardless,solarPVandonshorewindremainthelowestcostoptionsfornewelectricitygenerationinmostRenewableEnergyMarketUpdateJune2023PAGE11IEA.CCBY4.0.countries.Futurepowercontractsfortheendof2023andinto2024intheEuropeanUnion,theUnitedStates,Japan,AustraliaandIndiaindicatewholesalepowerpricestwotothreetimesabove2020averages.Today,windandsolarPVplantscanprovideelectricityatprices30-50%lowerthanthoseoffuturepowercontractsinmostkeymarkets,increasingrenewables’attractivenessforinvestors.Policyuncertaintiesandvolatilepricesleftone-sixthofrenewableenergyauctionvolumesunallocatedin2022.Competitiverenewableenergyauctionsresultedintheawardingofarecord-breaking100GWofcapacity.However,20GWremainedunallocated,thehighesteverlevelwithEuropeaccountingfortwo-thirdsofit.Governmentauctiondesignsneedtotakeintoaccountrecentinflation,interestraterisesandturbulenceincommodityprices–andtoenvisagedynamicindexationmethodstoattractinvestments.Market-drivenprocurementisexpectedtocontributetoapproximatelyone-fifthofsolarPVandwindcapacityexpansionin2023and2024,drivenbycorporatepowerpurchaseagreements.TheUnitedStatesleadsexpansionincorporatepowerpurchasingagreements,followedbyBrazil,Australia,SpainandSweden.Theseagreementsaremotivatedbytheeconomicattractivenessofrenewables,bytheopportunitytohedgeagainstrisingandvolatilepowerprices,andbysustainabilitygoals.Thefinancialhealthofrenewableenergyvaluechainsiscriticalfortheindustry’ssustainablegrowth.Despitechallengesfromvolatilecommodityprices,higherinterestrates,supplychainconstraintsandtrademeasures,therenewableenergyindustryhasshownfinancialresilienceoverall.However,thereissignificantvariationacrosssectorsandcountries.ThesolarPVmanufacturingsectorhasapositiveoutlookwithincreasingcapacityadditions,butpotentialsupplyglutsanddecliningpricesmayreducecompanyprofitmargins.Westernwindmanufacturersfacechallengesfromhighcommodityprices,aswellaspermittingandauctiondesignsthatdonotreflectchangingfinancingenvironments.Whiletheenergycrisishasalsohurttheprofitabilityofsomespecificelectricityutilities,thesecompaniesoverallaremaintainingtheirroleaslargeinvestorsinrenewables.GlobalmanufacturingcapacityofsolarPVisprojectedtoreachnearly1000GWin2024,sufficienttomeetannualdemandintheIEA’sNetZeroEmissionsby2050Scenario.Incontrast,windequipmentmanufacturingisexpandingmoreslowlyandmaystruggletokeepupwithdemandgrowththrough2030.WhileChinawillcontinuetodominateglobalmanufacturingcapacityforsolarPV,announcementsofsolarPVmanufacturingprojectsintheUnitedStatesandIndiahavedoubledsinceDecember,indicatingthatsupplychainsarediversifyinginthemediumterm.RenewableEnergyMarketUpdateJune2023PAGE12IEA.CCBY4.0.TherapidexpansionofwindandsolarPVneedstobeaccompaniedbypoliciesandmarketrulessupportinggridinfrastructureandflexibilityinvestments.AnincreasingamountofelectricitygenerationfromwindandsolarPVisbeingcurtailedinmanymarkets,particularlywheregridinfrastructureandsystemplanninglagbehinddeploymentofthesevariablerenewables.However,curtailedgenerationremainsrelativelylow,rangingfrom1.5%to4%inmostlargerenewableenergymarkets.MultiplecountriesinEurope–includingSpain,GermanyandIreland–willseetheirannualshareofwindandsolarPVreachover40%by2024,whichwillrequireeffectivegridmanagementtoholdbackrisingcurtailmentrates.BiofuelshavesupportedenergysecurityduringtherecentcrisisbutarefacingchallengesoftheirownBiofuelsavoidedtheconsumptionof2millionbarrelsofoilequivalentperday(mboe/d)in2022,equivalentto4%ofglobaltransportsectoroildemand.Argentina,IndiaandIndonesiaallacceleratedbiofuelusein2022.However,whilebiofuelsofferedenergysecuritybenefits,theirpricesclimbedmorequicklythanthoseofgasolineanddieselinmanycountries.Tomitigateincreasesintransportfuelcosts,Brazil,SwedenandFinlanddelayedplannedincreasestobiofuelblendingobligationsin2022.Biofuelpricesaresettodeclinein2023and2024whileremainingwellabovepre-Ukrainewarlevels.Biofuelpriceshavedeclinedinallmajormarketsfromtheirpeaksin2022.Inthefirstfourmonthsof2023,ethanolpricesdeclined7%-16%fromtheir2022averageandbiodieselpricesdropped15%-28%acrossdifferentmarkets.Whilebelow2022peaks,pricesformajorbiofuelfeedstockssuchascorn,sugarandvegetableoilsareexpectedtoremainabovepre-warpricelevels,keepingbiofuelpricesathistoricallyhighlevelsthrough2024.Biofueldemandistoexpandby11%by2024,supportedbyexistingpoliciestargetingenergysecurityobjectives.OnlyIndonesiaandBrazilareacceleratingdeploymentby2024.Inadvancedeconomies,newpoliciesarenotlikelytoinfluenceproductionuntilafter2024ashighprices,feedstockconcernsandtechnicalconstraintslimitadditionalgrowthpotential.RenewableEnergyMarketUpdateJune2023PAGE13IEA.CCBY4.0.IntroductionTheIEAcreatedtheRenewableEnergyMarketUpdateinMarch2020toevaluatetheshort-termimpactoftheunprecedentedCovid-19crisisonrenewableenergy.AspartoftheIEA'sRenewablesMarketReportSeries,thisupdateconcentratesonshort-termdeploymenttrendsratherthanofferingacomprehensivefive-yearforecastforelectricity,transportandheatdevelopments.The2020and2021assessmentsfocusedonrenewableenergymarketimplicationsoftheCovid-19pandemicinanincreasinglychallengingeconomicenvironment.In2022,theRussianFederation’s(hereafter“Russia”)invasionofUkrainesentshockwavesthroughenergyandagriculturemarkets,resultingintheworld’smostseriousenergycrisistodate.Lastyear’seditionofthisreportthereforeprovidedanearlyassessmentofpossibleshort-termimpactsofthewaronrenewableenergycapacityadditionsandbiofueldemand.Thisyear,withgeopoliticaltensions,afragileglobaleconomyandhighenergypricespersisting,policymakersandinvestorsaswellasindustryandcivilsocietymembersinvolvedinrenewableenergyhavemorequestionsthananswersconcerningrecentdevelopments.Thisyear’sRenewableEnergyMarketUpdatehasthusbeenredesignedtoaddress21keyquestionsthatfocusontherenewableenergyoutlookfor2023and2024.Despitetheglobalenergycrisis,renewableelectricitycapacityadditionsbrokeanotherrecordin2022,promptingustoask:1.Didallrenewableelectricitytechnologiesbreakdeploymentrecordsin2022?Theanswerisno,butthisleadsnaturallytoamorepertinentquestionconcerningtheshort-termoutlook:2.Willrenewableelectricitycapacityadditionscontinuetobreaknewrecordsin2023and2024?TheglobalenergycrisisthatfollowedRussia’sinvasionofUkrainehitEurope’senergysystemshardduetotheirdependenceonRussiannaturalgasimports.ThisreportattemptstoanswerfourquestionsconcerningEurope’schangingpoliciesandmarketdevelopments,andtheirimplicationsforrenewableenergyin2023and2024:3.HowwilltheenergycrisisaffectEUrenewableenergydeploymentin2023and2024?4.HowmuchlessmoneyistheEuropeanUnionspendingonexpensiveelectricitythankstoadditionalrenewableenergycapacity?5.WillhydropowerinEuroperecoverin2023?RenewableEnergyMarketUpdateJune2023PAGE14IEA.CCBY4.0.6.HowareEuropeancountriesaddressingpermittingchallengestoacceleraterenewableenergydevelopment?7.TowhatextentcanrenewableenergyusedisplacegasconsumptioninEUbuildingsin2023and2024?WhiletheEuropeanUnionisacceleratingdeploymenttoaddressenergysecurityconcerns,thePeople’sRepublicofChina(hereafter“China”)remainstheworld’slargestrenewableenergymarketforallrenewableenergytechnologies.Thecountry’sshareinglobalcapacityadditionsdependsonpolicychangesandmarketconditions,impactingtheglobaloutlook.Thisreport’sseventhquestionistherefore:8.WillChina’sshareinglobalrenewableenergydeploymentdeclinein2023and2024?IntheUnitedStates,theInflationReductionAct(IRA)hasintroducedunprecedentedpolicyuncertaintyforwindandsolarPVdevelopers,beggingthequestion:9.HowwilltheUSInflationReductionActimpactwindandPVdeploymentintheshortterm?Meanwhile,inIndia,considerablesupplychainchallengesstemmingfromtheCovid-19crisishaveaffectedrenewableenergydevelopment,causingustowonder:10.WillIndia’srenewableenergydeploymentboomin2023and2024?Theglobalenergycrisishasplacedenergyandsupplychainsecurityattheheartofglobalpolicydiscussions.Althoughenlargingrenewableenergyusecouldtacklemultiplepolicychallengesatthesametime–includingthoserelatedtoenergysecurity,climatechangeandaffordability–deploymentcouldbedeterredbysupplychainchallenges,highpricesandelevatedinterestrates.Thenextfourquestionsthereforeaddressemergingpolicyandregulatoryhurdlesandongoingmacroeconomicchallenges:11.Arecompetitiverenewableenergyauctionsincreasinglyundersubscribed?12.WillmarketforcesnowdrivetheexpansionofwindandsolarPVplants,orispolicystillkey?13.Istherenewableenergyindustry’sfinancialhealthimproving?14.WillsolarPVandwindcostsfinallybegintofallagainin2023and2024?Whilemorefavourablepoliciesandmarketconditionscanacceleraterenewablecapacitydeployment,systemintegrationandgridexpansionimplicationsareboundtoarise.Ournexttwoquestionsthereforeaddressthethreatsofrisingcurtailmentratesandslowgridexpansion,whichcouldimpedeprojectapplication:15.DohighersharesofwindandsolarPVgenerationalwaysimplymorecurtailment?RenewableEnergyMarketUpdateJune2023PAGE15IEA.CCBY4.0.16.HowarehighersharesofwindandsolarPVchallengingpowersystems?DemandforsolarPVpanelsandwindturbineswillgrowdrasticallyoverthenextdecadetomeettheIEANetZeroEmissionsby2050Scenariotargets.Theracetoacquirethecapacitytomeetthisdemandisthereforeongoingandcleanenergytechnologymanufacturingisexpandingrapidly,butwehavetowonder:17.WillglobalsolarPVandwindtechnologymanufacturingcapacitybeadequatetomeetNetZerodemandin2030?Eventhoughelectricityremainsatthecoreofglobalenergydiscussions,thetransportsectorregistersgreaterfinalenergyconsumptionthantheelectricitysector.Becausetheenergycrisishasalsoaffectedbiofuelsupply,demandandpricesworldwide,ourfinalsectionofquestionsrelatestotheimpactofbiofuelsonenergysecurity:18.Whereweregovernmentsabletorelyonbiofuelstosecureenergysuppliesduringthe2022energycrisis?19.Willenergysecurityconcernsdrivebiofuelgrowthin2023-2024?20.Willweseelowerbiofuelpricesin2023-2024?21.Whataregovernmentsandcompaniesdoingtoavoidasupplycrunch,andisitenough?RenewableEnergyMarketUpdateJune2023PAGE16IEA.CCBY4.0.Didallrenewableelectricitytechnologiesbreakdeploymentrecordsin2022?SolarPVwastheonlytechnologytobreakarecordforannualcapacityadditionsOverallrenewableenergycapacityadditionsrosebyalmost13%tonearly340GWin2022.However,solarPVwastheonlytechnologythatbrokeadeploymentrecordlastyear,withnetadditionsofnearly220GW–a35%increasefrom2021.ExpansionsinChinaandtheEuropeanUnionaloneaccountedforover85%ofthegrowthinannualPVcapacityadditions.AnnualPVgrowthroseinallmajormarketslastyearexcepttheUnitedStates,whereitshrankalmost15%duetosupplychainchallengesandrisingcosts.AftersolarPV,hydropowerwasthenext-largestcontributortorecord-levelrenewableenergyexpansionglobally,owingtothecommissioningofmultiplelargeprojects,mostlyinAsia.Whileglobalhydropowercapacityadditionsdidnotbreakanyrecords,theywerethehighesttheyhavebeensince2016thankstocontinuousexpansioninChina.Renewableelectricitynetannualcapacityadditions,2017-2022IEA.CCBY4.0.050100150200250300350400201620172018201920202021DeclineIncrease2022GWOthersHydropowerWindSolarPVAllrenewablesRenewableEnergyMarketUpdateJune2023PAGE17IEA.CCBY4.0.WindpowercapacityadditionsdecreasedthepasttwoconsecutiveyearsAnnualwindcapacityadditionsfell21%from2021to2022,decliningforthesecondyearinarowfollowingrecord-levelexpansionin2020,whendevelopersinChinawererushingtocompleteprojectsbeforesubsidiesfromthecentralgovernmentendedthatyear.In2022,Covid-relatedrestrictionsdelayedthecommissioningofmultiplewindprojectsinChina,resultinginadropinannualadditions.LikeinChina,capacityadditionsintheUSmarketdeclinedforthesecondconsecutiveyearbecauseofpolicyuncertaintyaheadofpromulgationoftheInflationReductionAct(IRA)andsupplychainconstraintsleadingtoprojectdelays.IntheEuropeanUnion,however,windcapacitygrowthwasmuchstrongerthankstorapidexpansioninGermanywiththecommissioningofpreviouslyauctionedcapacity,andinSpainowingtoitslargecorporatePPAmarket.Globaladditionsofbioenergyproductionforpowergenerationalsodeclinedin2022duetothephaseoutofsubsidiesinChina,theworld’slargestmarket.Forgeothermalandconcentratedsolarpower(CSP)technologies,globalannualmarketgrowthremainedsmallbutstablebecausepolicysupportisconcentratedinjustafewcountries.RenewableEnergyMarketUpdateJune2023PAGE18IEA.CCBY4.0.Willrenewableelectricitycapacityadditionscontinuetobreaknewrecordsin2023and2024?Thedeploymentofnewrenewableelectricityinstallationsisexpectedtobreakrecordsinboth2023and2024thankstostrongandcontinuouspolicysupportaswellashighelectricityprices,whichwillincreasetheeconomicattractivenessofdistributedPVsystems.Globalrenewablecapacityadditionsaresettosoarby107gigawatts(GW),thelargestabsoluteincreaseever,tomorethan440GWin2023.Despiteahikeininterestrates,risingsystemcostsandpersistentsupplychainchallenges,fastersolarPVandwindexpansionunderpinsthisaccelerationduetocontinuouspolicysupportandimprovingcompetitiveness.Renewableswillbreakanotherannualdeploymentrecordin2024,drivenbysolarPV,whichwillaccountforthetwo-thirdsofnextyear’sentirerenewablecapacityadditions.2023:SolarPVdominatesgrowth,andonshorewindadditionsreboundtobreakthe2020recordSolarPVremainsthemainsourceofglobalrenewablecapacityexpansionin2023,accountingfor65%ofgrowthwithdistributedapplications,includingresidentialandcommercialsystems,accountingforalmosthalfofglobalPVexpansion.SinceRussia’sinvasionofUkraine,theglobalenergycrisishasdrivenupwholesaleandretailelectricitypricesinmanypartsoftheworld,makingsmallsolarPVsystemsmoreeconomicallyattractiveforresidentialandcommercialcustomers.Policymakersinmanycountries,especiallyinEurope,havebeenseekingoptionsforimmediatediversificationawayfromimportedfossilfuels,improvingthepolicyenvironmentfordistributedsolarPVsystemsthatcanbeinstalledrapidly.Followingtwoconsecutiveyearsofdecline,annualglobalonshorewindcapacityadditionsareexpectedtojump70%in2023tobreakthe2020record.ThissurgeisbeingfuelledmostlybythecommissioningofprojectsinChinathatweredelayedbyCovid-relatedrestrictionslastyear.SupplychainchallengesalsoslowedthepaceofconstructionintheUnitedStatesandEurope,pushingprojectcommissioningfrom2022to2023.OffshorewindgrowthisalsoexpectedtorecoverfromamajordropinannualadditionslastyearresultingfromapolicyrushinChinain2021.WhileannualRenewableEnergyMarketUpdateJune2023PAGE19IEA.CCBY4.0.offshoreadditionsareforecasttoincreasealmost50%in2023,thisgrowthisnotsufficienttomatchtherecord-levelexpansionoftwoyearsago.Intheacceleratedcase,renewablecapacityadditionscouldreachover500GWthisyear,almost15%highercomparedwiththemaincase.DistributedsolarPVaccountsforthelargestupside.WhilenewpoliciesincentiviseresidentialandcommercialPVinstallationsandhigherelectricitypricesimprovethebusinesscase,uncertaintyremainsoverthepaceofconsumeradaptionconsideringcurrentmacroeconomicenvironmentwithelevatedinterestrates.Theupsideforutility-scaleonshorewindandsolarPVprojectsmostlydependsonthepaceofconstruction,permittingandtimelygridconnectionofprojectsunderdevelopment.Netrenewableelectricitycapacityadditionsbytechnology,historical,mainandacceleratedcasesIEA.CCBY4.0.2024:Anotherrecordyearforglobalcapacityadditions,ledbysolarPVAnnualsolarPVmarketgrowthisexpectedtocontinue,reachingalmost310GWin2024,anincreaseofover7%from2023.Lowermoduleprices,greaterdistributedPVsystemuptakeandapolicypushforlarge-scaledeploymenttriggerhigherannualadditionsinallmajormarketsincludingChina,theEuropeanUnion,theUnitedStatesandIndia.InBrazil,policychangesonnetmeteringrulesreduceremunerationratesforsurplusgenerationandcauseadditionstodeclinefrom2023to2024.Foronshorewind,annualadditionsareexpectedtofallaround4%from2023to2024.WhileChina’swindenergyexpansionisforecasttocontinuewiththecommissioningoflarge-scaleonshoreprojectsinmega-basesinthenortheastaswellasprovincialincentivesthatsupportoffshoreplants,additionsinothermajor01002003004005006002017201820192020202120222023202420232024HistoricalMaincaseAcc.caseGWOthersBioenergyHydropowerOffshorewindOnshorewindPV-distributedPV-utilityRenewableEnergyMarketUpdateJune2023PAGE20IEA.CCBY4.0.marketsareexpectedtodecline.InEurope,undersubscriptioninmultipleauctionsinGermanyandSpain,permittingdelaysinFranceandturbineplacementrestrictionsinPolandpreventfasterwindexpansion.IntheUnitedStates,thepaceofaddingnewcapacitydeceleratesin2024becauseproductiontaxcreditratesarelowerthanunderthepreviousfederalpolicy.Netrenewableelectricitycapacityadditionsbycountry/region,maincaseIEA.CCBY4.0.Meanwhile,higherturbinepricesinIndiaduetosupplychainchallengesreducethebankabilityofalready-auctionedprojects,resultingindelays.LimitedauctioncapacityintheBrazilianmarketalsocutsannualwindadditionsbyhalfbetween2023and2024.Intheacceleratedcase,renewablepowercapacityadditionsin2024couldbe17%higherthaninthemaincaseforecast,reachingover540GW.ThiswillrequirebothfasterdeploymentofdistributedPVsystemsandexpeditedcommissioningoflarge-scalesolarandwindprojectsinthepipeline,especiallyinChina,Europe,IndiaandtheUnitedStates.010203040506070ChinaEuropeanUnionUnitedStatesIndiaBrazilGWOnshorewind202220232024020406080100120140160180ChinaEuropeanUnionUnitedStatesIndiaBrazilSolarPV202220232024RenewableEnergyMarketUpdateJune2023PAGE21IEA.CCBY4.0.HowwilltheenergycrisisaffectEUrenewableenergydeploymentin2023and2024?Russia’sinvasionofUkrainehaspushedtheacceleratoronrenewableenergydeploymentintheEuropeanUnion,impactingshort-termdeploymentespecially,astheblocurgentlyneedstoreduceitsdependenceonRussiannaturalgasimports.AsaresultofpolicyactionsinmanyEuropeancountries,wehaverevisedtheforecastforrenewablecapacityadditionsfor2023and2024upwardsby38%comparedwithIEAexpectationsbeforethewarinDecember2021.RapiddistributedsolarPVgrowthisthemainreasonfortheupwardsforecastrevisionIntheEuropeanUnion,residentialandcommercialsolarPVsystemsaccountfor74%oftheincreasetoourforecast,withthemajority(82%)oftherisecomingfromsixkeymarkets:Germany,Spain,theNetherlands,France,ItalyandSweden.Twomaindevelopmentsaredrivingthistransformation:thefirstistheincreasinglyattractivebusinesscaseforself-consumptionsinceJanuary2021.EUcapacityadditionsin2023-2024(left)andaveragehouseholdelectricitypricesforselectedcapitalcities(right)IEA.CCBY4.0.Notes:Retailpricesforhouseholdsexcludetaxesandvalue-addedtaxes.Householdpricesconsidernewtariffoffers.Quarterlydataareanaverageofthemonths.Thepricetrendincapitalcitiesareconsideredaproxyforthatcountry.Source:(right)HouseholdEnergyPriceIndex(HEPI)byEnergie-ControlAustria,MEKHandVaasaETT,©2023VaasaETTLtd.01002003004005006007008001Q20183Q20181Q20193Q20191Q20203Q20201Q20213Q20211Q20223Q20221Q2023EUR/MWhParisBerlinRomeAmsterdamMadridStockholm020406080100120140Renewables2021RevisionRenewables2023(May)GWDistributedsolarPVUtilitysolarPVWindonshoreWindoffshoreRenewableEnergyMarketUpdateJune2023PAGE22IEA.CCBY4.0.RisinggasandcoalpricesduringtheeconomicreboundfromCovid-19causedretailelectricitypricesintheEuropeanUnion1toclimbapproximately60%betweenJanuary2021andJanuary2022,makingself-consumptionmoreeconomicallyappealing.Thisaccountsfor32%oftheupwardsrevisionfordistributedsolarPV.ThesecondreasonforthistransformationisthenewmarketconditionstriggeredbyRussia'sinvasionofUkraineandthepolicyresponseofsomecountriestoincentivisedistributedsolarPVdeployment.HigherretailpricesandconcretepolicyactioninEuropeexplainalmost60%ofthedistributedsolarPVforecastrevision.FollowingRussia’sinvasionofUkraine,Europeanelectricitypricesincreasedanother40%fromFebruarytoOctober2022duetogassupplyrestrictions.PolicymakersactedswiftlytoacceleratedistributedPVdeploymenttohelpmitigatetheburdenofenergycostincreasesforconsumers.RevisionstothedistributedsolarPVforecast(2023-2024)duetopolicyandmarketchanges(left)andbymajorcountry(right)IEA.CCBY4.0.Note:“Other”referstotheshareofremainingEUcountriesintherevisedforecastfornetdistributedPV(Poland,Italy,Portugal,Greece,Austria,Finland,Denmark,Belgium,Ireland,Lithuania,Romania,Croatia,Hungary,Bulgaria,Estonia,Cyprus,Luxembourg,Slovenia,Slovakia,Latvia,theCzechRepublicandMalta.).NotebyTürkiye:Theinformationinthisdocumentwithreferenceto“Cyprus”relatestothesouthernpartoftheIsland.ThereisnosingleauthorityrepresentingbothTurkishandGreekCypriotpeopleontheIsland.TürkiyerecognisestheTurkishRepublicofNorthernCyprus(TRNC).UntilalastingandequitablesolutionisfoundwithinthecontextoftheUnitedNations,Türkiyeshallpreserveitspositionconcerningthe“Cyprusissue”.NotebyalltheEuropeanUnionmemberstatesoftheOECDandtheEuropeanUnion:TheRepublicofCyprusisrecognisedbyallmembersoftheUnitedNationswiththeexceptionofTürkiye.TheinformationinthisdocumentrelatestotheareaundertheeffectivecontrolofthegovernmentoftheRepublicofCyprus.Forinstance,Germanyofferedmoredirectfinancialsupport,raisedexistingremunerationlevelsandintroducedfurtherincentives(premiums)tosellallgenerationtothegrid.TheprolongationoftaxrebatesinItalyandnetmeteringin1DatafortheEuropeanUnionisfromtheHouseholdEnergyPriceIndex(HEPI)forEuropebyEnergie-ControlAustria,MEKHandVaasaETT,©2022VaasaETTLtd.ReleasedMarch31,2023.0123456SpainNether-landsGermanyFranceSwedenItalyGWCommericalPVResidentialPVMarket&policy:Pre-January202232%Other11%Market&policy:Post-January202257%RenewableEnergyMarketUpdateJune2023PAGE23IEA.CCBY4.0.theNetherlands,whichwerebothduetoexpirebeforethewarbegan,arealsodrivingfasterdistributedsolarPVuptake.Meanwhile,Spain’sregulatoryreformstoexpeditetheenvironmentalpermittingprocessandtofreeupgridcapacityforself-consumptionarealsopromptingfasterexpansion.InFrance,thegovernmentmodifiedauctionstoretroactivelyincreaseawardedcapacityby40%forlargecommercialinstallations.Thesepolicyactions,combinedwithhigherretailprices,underpintheupwardsforecastrevisionsforthesemarkets.However,evenintheabsenceofconcretepolicychange,consumeractiontoreduceelectricitybillsremainsakeydriverofacceleratedresidentialsolarPVgrowthinSweden,FranceandSpainwhereretailpricesremainabovepre-warlevels.WhileelectricitypriceshavebeguntofallsinceJanuary2023inmostEuropeanmarkets,theyremainapproximately80%higherthanJanuary2021.Permittingchallengesandlimitedparticipationincompetitiveauctionspreventfastergrowthofutility-scalewindandsolarPV.Permittingchallengesandlimitedparticipationincompetitiveauctionspreventfastergrowthofutility-scalewindandsolarPVUtility-scalegrowthfor2023and2024hasalsobeenrevisedup,buttoamuchlesserextentduetopermittingchallenges,auctionundersubscriptionandlongdevelopmenttimelines.WhileEuropeancountriesandtheEuropeanCommissionaremovingquicklytostreamlinepermitting(see“HowareEuropeancountriesaddressingpermittingchallengestoacceleraterenewableenergydevelopment?”),theimpactondeploymentin2023-2024isexpectedtobelimited.Developersfacemultiplechallenges,includingrisingequipmentcosts,inflation,andsupplychainconstraints,whichhavemadethemlesseagertoparticipateincompetitiveauctions.Partofthisisduetorelativelylowceilingorreferenceprices,aswellasfixedcontractpricesthatarenotindexedtoinflation.Somegovernmentshavetakenstepstomodifyauctiondesignstobetterreflectthechangingpricingenvironment:forinstance,GermanyraiseditsauctionceilingpricesandPortugalhasadjustedcontractpricesforinflation.Wehaveaccordinglyrevisedtheforecastforutility-scalesolarPVupwardsforthesemarkets.Meanwhile,Spain’scorporatePPAmarketgrowthisalsoresultinginrevisedutility-scaledeploymentforthatcountry,buttheupsidepotentialforothermarketsismoreuncertain(see“WillmarketforcesnowdrivetheexpansionofwindandsolarPVplants,orispolicystillkey?”).Foronshorewindcapacity,theupwardrevisionresultsfromdelayedprojectscomingonlineaftersupplychainconstraintsandcumbersomepermittingprocedureslengthenedprojectleadtimes.RenewableEnergyMarketUpdateJune2023PAGE24IEA.CCBY4.0.HowareEuropeancountriesaddressingpermittingchallengestoacceleraterenewableenergydevelopment?MostcountriesinEuropehaveintroducedpoliciestoaddressthechallengesposedbyslowandcomplexpermittingproceduresforrenewableenergyprojects.Infact,morepoliciesandregulatorychangeshavebeeninstitutedinthelast18monthstoeasepermittingthanovertheentirepreviousdecade.ThetimerequiredtoobtainpermitscanvarysignificantlyfromoneEUcountrytothenext,rangingfromonetofiveyearsforground-mountedsolarprojectsandfromthreetonineyearsforonshorewindprojects.Delaysresultingfromcomplexandslowauthorisationproceduresareleadingtolimitedparticipationinrenewableenergyauctions,increasingprojectrisksandcostsandultimatelyweakeningprojecteconomicsandthebankabilityofpowerplants.PermittinghasfinallybecomeakeypolicyfocusinEuropeTodayatleast59GWofonshorewindcapacity(fourtimesthecapacitycommissionedin2022)isheldupinvariouspermittingproceduresinEurope.ForsolarPV,theaveragelengthofpermittingproceduresisshorterthanforwind,buttherecouldbeasignificantnumberofprojectsawaitingpermitting.Forexample,solarPVprojectswaitingforconstructionandgenerationpermitsinPortugalamounttomorethan4GW,whichisalmostfivetimesthecapacitycommissionedin2022.Althoughlongpermittingtimelinesremainamajorchallengeinmanycountries,theybecameakeypolicyfocusintheEuropeanUnionfollowingRussia’sinvasionofUkraine.InMay2022,theEuropeanCommissionreleasedrecommendationsonpermittinginthecommunicationpackageofitsREPowerEUPlan.TheEuropeanCouncilalsoagreedtomemberstates’identificationofrenewableenergy“go-toareas”wherelowenvironmentalriskandsuitabilityforrenewablepowerplantscouldallowshortenedandsimplifiedpermittingtobeapplied.MostlyfollowingtheEUguidelines,halfoftheEUmemberstatesandtheUnitedKingdomhavemadeimportantpolicychangestostreamlinepermittingprocedures.Thesepoliciesfocusonthreemajorareas:simplifyingpermittingproceduresand/orsettingclearpermittingtimelines(adoptedby10countries);identifyingpreferentialareasforrenewableenergyprojectstofast-trackpermittingRenewableEnergyMarketUpdateJune2023PAGE25IEA.CCBY4.0.(adoptedby2governments);andremovingcertainpermittingrequirementsforsmallrenewablepowerprojectsorincreasingtheminimumcapacityrequirementforenvironmentalimpactassessments(adoptedby4countries).Thesechangesaimtoreducepermittingleadtimes,increaseprojectbankability,andultimatelyacceleratethedeploymentofrenewableenergyinEurope.PolicychangesonrenewableenergypermittinginEUandothercountriesfollowingRussia’sinvasionofUkraineCountry/RegionMonthandyearTechnologyCategoryDescriptionEuropeanUnionMay2022Allrenewables1)Simplifypermittingprocedures2)Identifypriorityareas3)RevisitthresholdforpermittingTherecommendationonpermittingundertheREPowerEUPlanidentifiesbestpracticesandprovidesguidancetospeeduppermit-grantingproceduresforrenewableenergyprojects.Dec2022Allrenewables1)Simplifypermittingprocedures2)Identifypriorityareas3)RevisitthresholdforpermittingTheEuropeanCouncilagreedontargetedamendmentstotheRenewableEnergyDirective.Memberstateswilldesigndedicated“go-toareas”forrenewableenergydevelopment,withshortenedandsimplifiedpermittingprocessesinareaswithlowerenvironmentalrisks.Memberstatesarealsorequiredtoensurepublicinvolvementtoaddresssocialacceptanceissues,andtoexemptPVequipmentonbuildingsfromenvironmentalimpactassessments(EIAs).AustriaJan2023SolarPV1)SimplifypermittingproceduresInAustria,EIAsforsolarPVprojectswillbeacceleratedgiventheirspecialpublicintereststatus,whileprojectsthatreceivenocomplaintswillnothavetobehalted.CzechRepublicApr2023SolarPV1)SimplifypermittingproceduresTheCzechRepublicapprovedanamendmenttotheconstructionlawtocreateasimplifiedpermittingprocedureforsolarpanelinstallationwithfixeddeadlines.EstoniaFeb2023Wind1)SimplifypermittingproceduresTospeeduppermittingproceduresinEstonia,windfarmdevelopershavetheopportunitytowaivethesecondstageofplanninginthecaseofspecialplanningofthestateandlocalgovernment.FinlandAug2022Allrenewables1)SimplifypermittingproceduresCertainrenewableenergyprojectsinFinlandaretobegiventemporarypriorityuntiltheendof2025inregionaladministrativeagencies’processingofpermits.RenewableEnergyMarketUpdateJune2023PAGE26IEA.CCBY4.0.Country/RegionMonthandyearTechnologyCategoryDescriptionFranceFeb2023Allrenewables2)IdentifypriorityareasFranceadoptedalawempoweringlocalauthoritiestocreatepreferred“go-to”and“no-go”areasforrenewableenergydevelopment.GermanyApr2022Offshorewind1)SimplifypermittingproceduresAsapartoftheEasterPackage,Germanyhasprioritisedoffshorewindinmaritimespatialplanningandstreamlinedpermittingprocedures.Dec2022Onshorewind1)SimplifypermittingproceduresGermanyrelaxedairradionavigationrulestoacceleratethepermittingprocessforonshorewind.IrelandOct2022SolarPV3)RevisitthresholdforpermittingIreland’srevisedlawonexemptionsforrooftopsolarpanelinstallationsremovedtherequirementforplanningpermissionandextendedtheexemptionstonewbuildingcategories.ItalyMar2022Allrenewables1)SimplifypermittingproceduresItalybeganbypassingregionalauthoritiestopermitsomerenewableenergyprojects.ThegovernmentalsosimplifiedpermittingprocessestoinstallcommercialrooftopPVsystems.Feb2023SolarPV1)SimplifypermittingproceduresAnewlawsimplifiesthePVinstallationprocessandsetsalimitof150daysonthepermittingprocess.LithuaniaApr2022SolarPVWind3)RevisitthresholdforpermittingLithuaniaabolishedsolarPVandwindproductionpermitsforself-consumption(powerplantsofupto30kWcurrentlydonotrequirethem).LuxembourgJan2023SolarPV1)SimplifypermittingproceduresLuxembourgadoptedaregulationtolimitthepermit-grantingtimetolessthanthreemonthsforsolarPVinstallationsandco-locatedenergystoragesystems.PortugalApr2022Allrenewables1)Simplifypermittingprocedures2)IdentifypriorityareasPortugal’sexceptionalmeasurestosimplifyproceduresforrenewableenergyprojectsexemptdevelopersfromsecuringanoperatinglicence/certificate,providedthatthenetworkoperatorconfirmsconditionsforgridconnection.TheyalsosimplifyEIAproceduresaslongasprojectsarenotlocatedinsensitiveareas.Dec2022SolarPVWind3)RevisitthresholdforpermittingPortugalscrappedEIArequirementsforsolarPVinstallationsoccupyinglessthan100hectaresandforwindstationslocatedmorethan2kmapart.SpainMar2023SolarPVWind3)RevisitthresholdforpermittingSpainhasenabledanacceleratedtemporaryprocedureuntil2024tograntenvironmentalapprovalsforwindpowerplantsoflessthan75MWandsolarparksnotexceeding150MW.RenewableEnergyMarketUpdateJune2023PAGE27IEA.CCBY4.0.Country/RegionMonthandyearTechnologyCategoryDescriptionSwedenNov2022Allrenewables1)SimplifypermittingproceduresTostrengthenitsenergysupply,Swedenproposedalistofbudgetaryinvestmentsthatincludesstreamliningpermittingprocessesforgridconnection.UnitedKingdomSep2022Onshorewind1)SimplifypermittingproceduresTheUnitedKingdomhaspresentedmeasurestorelaxplanningrulesforapprovingonshorewindprojectsandtostreamlineEIAs.Inlastyear’sRenewables2022report,wedeterminedthataddressinganumberofbarriers,includingpermittingchallengesinEurope,couldresultin30%morerenewableenergydeploymentthanwhatwasdetailedinthemainforecastfor2022-2027.RenewableEnergyMarketUpdateJune2023PAGE28IEA.CCBY4.0.HowmuchlessmoneyistheEuropeanUnionspendingonexpensiveelectricitythankstoadditionalrenewableenergycapacity?EUelectricityconsumersareexpectedtosaveanestimatedEUR100billionduring2021-2023thankstoadditionalelectricitygenerationfromnewlyinstalledsolarPVandwindcapacity.Low-costnewwindandsolarPVinstallationshavedisplacedanestimated230TWhofexpensivefossilfuelgenerationsinceRussia’sinvasionofUkraine,leadingtoareductioninwholesaleelectricitypricesonallEuropeanmarkets.Withoutthesecapacityadditions,theaveragewholesalepriceofelectricityintheEuropeanUnionin2022wouldhavebeen8%higher.CumulativeelectricitycostsdecreaseduetoPVandwindadditions,andaverageEUwholesalespotelectricityprice,actualandinno-RES-additionsscenario,2021-2023IEA.CCBY4.0.Notes:RES=renewableenergysource.Theno-RES-additionsscenarioassumesnoPVorwindcapacityadditionsin2021-2023.Source:IEAanalysisbasedonENTSO-ETransparencyPlatform(accessedApril2023).0100200300400500020406080100123456789101112123456789101112123456789101112202120222023EUR/MWhblnEURGermanyFranceSpainNetherlandsPolandItalyRestofEUActualav.price(rightaxis)No-RES-additionsav.price(rightaxis)ScenarioRenewableEnergyMarketUpdateJune2023PAGE29IEA.CCBY4.0.ReducedRussiannaturalgassuppliesandmulti-yearlowsinhydroandnuclearoutputledtoanunparalleledincreaseintheEUwholesaleelectricityspotpriceFollowingRussia’sinvasionofUkraine,RussiannaturalgasdeliveriestotheEuropeanUnionbypipelinedecreasedby80%from2021to2022.Thissharpdropcoincidedwithmulti-yearlowsinEuropeanhydroandnuclearpoweroutput.BetweenJanuary2021andAugust2022,theaveragemonthlynaturalgaspriceincreasedten-foldandthepriceofhardcoalquintupled.Asaresult,thecostofpowergenerationfromnaturalgas,whichusuallysetstheelectricitypriceinmostEUwholesalemarkets,increasedtounparalleledlevels,reachingalmost800EUR/MWhforopen-cyclegasturbines(OCGTs)and500EUR/MWhforcombined-cyclegasturbines(CCGTs).EUCO2emissionsallowances,naturalgasprices,coalpriceindex,andvariableelectricitygenerationcosts,2021-2023IEA.CCBY4.0.Notes:CCGT=combined-cyclegasturbine.OCGT=open-cyclegasturbine.Naturalgasprice–TTFindex;hardcoalprice–API2index;CO2price–EECindex.Gen:generationSource:BloombergLPTerminal(accessedApril2023).IntheEuropeanUnion,thewholesaleelectricityspotmarketisthebenchmarkformostelectricitysupplycontracts,drivingpricesupforallconsumers.Thepriceissetbythemostexpensivegeneratorneededtofilldemandatanygivenmoment.Duetothesteepincreasesinnaturalgasandcoalpricesin2021-2022,consumersinthewholesalemarketsuchasretailersorlargecompanieswithlimitedfixed-contractenergyportfoliosandwithoutstronghedgingpositionshadtopurchaseelectricityatratesofupto15-20timestheaveragesof2015-2020.010020030040050060070080002004006008001000120014001600123456789101112123456789101112123202120222023Variablecosts(EUR/MWh)Index(Jan2021=100)CO2priceNaturalgaspriceCoalpriceHardcoalgen.costs(rightaxis)CCGTgen.costs(rightaxis)OCGTgen.costs(rightaxis)RenewableEnergyMarketUpdateJune2023PAGE30IEA.CCBY4.0.Germanyhourlygenerationfromhardcoalandnaturalgas,andfromPVandwind,andhourlywholesaleelectricityspotprice,actualandinno-RES-additionsscenario,8-14August2022IEA.CCBY4.0.Note:RES=renewableenergysource.Theno-RESscenarioassumesnoPVorwindcapacityadditionsin2021-2023.Source:IEAanalysisbasedonENTSO-ETransparencyPlatform(accessedApril2023).NewPVandwindcapacityisexpectedtoprovidesavingsofEUR100billionsincethebeginningoftheenergycrisisIn2021and2022,theEuropeanUnionaddednearly90GWofPVandwindcapacity.Thiscapacityhasdisplacedalmost10%ofhardcoalandnaturalgasgeneration,pushingthemostexpensivepowerplantsoutofthemarketandeffectivelyreducingthepriceforallconsumers.Inaddition,another60GWofsolarPVandwindisexpectedtocomeonlinein2023,increasingdisplacementtoalmost20%thisyear.Basedonthehistoricalrelationshipbetweenhourlygenerationfromhardcoalandnaturalgas,andwholesaleelectricityspotpricesforseverallargeEUeconomiesin2021and2022,wemodelledascenariofor2023toestimatethefurthersavingspossiblewithadditionalwindandsolarPVcapacity.TheresultsshowthatwithoutPVandwindcapacitygrowthin2021-2023,averagewholesaleelectricitypriceswouldbehigherbyabout3%in2021,8%in2022and15%in2023,raisingthecostofelectricitysupplyfortheentireEuropeanUnionbyroughlyEUR100billion.Forinstance,newrenewableenergycapacityinSpainofferssavingof60%morethanthecountry’sallocatedbudgetofEUR6.3billionforanEC-approvedtemporaryinterventiontoreducewholesaleelectricityprices.ForGermany,savingsgainedthroughnewrenewablegenerationcapacitywouldpayforthegovernment’srecentproposaltosupportelectricitypricesforenergy-intensiveindustriesuntil2030.01002003004005006007000102030405060891011121314EUR/MWhGWHardcoalandgasHardcoalandgasdisplacedPVandwindActualprice(rightaxis)No-RES-additionsprice(rightaxis)RenewableEnergyMarketUpdateJune2023PAGE31IEA.CCBY4.0.Acceleratingannualrenewableenergydeploymentsince2021hasprovidedacost-effectivesolutiontotheenergycrisis’economicchallenges.Long-termcontractssecuredthroughpolicymechanismsandregulationsprovidestablepricesformostwindandsolarPVpowergeneratorsinEurope,limitingtheirexposuretovolatileelectricityprices.Theycanalsohelpshelterconsumersfromrisingelectricityprices.ThetotalinvestmentcostofdeployingPVandwindcapacityover2021-2023isexpectedtoamounttoaboutEUR200billion.Almost50%ofthisinvestmentcostwilllikelybereturnedintheformofsavingsonpowerconsumers’billsbyasearlyastheendof2023,whilethesepowerplantswillcontinuetoprovidebenefitsforthenext20-25years.AccordingtotheIEAacceleratedcaseforecast,savingscouldhavebeenabout15%higherifEUcapacityhadbeenincreasedmorerapidly,throughquickerimplementationofpoliciessupportingthedeploymentoftechnologieswithshortleadtimes(i.e.distributedsolarPV)andareductioninredtapeforprojectsattheadvancedstagesofpermitting.RenewableEnergyMarketUpdateJune2023PAGE32IEA.CCBY4.0.WillhydropowerinEuroperecoverin2023followingaseveredroughtlastyear?Europeanhydropowergenerationdeclinedby15%(80TWh)in2022to460TWh,droppingtoitslowestlevelsince2004.Variationsinhydropoweroutputarecommonduetonaturalfluctuationsinrainfall,butlastyear’sdropwasthelargestannualdeclineintheregionsince1990.Fourconsecutivebelow-averagerainyseasonsledtodroughtconditionsandloweredreservoirlevels.Thereducedhydropoweroutputresultedinanestimatedadditional13-14bcmofnaturalgasbeingusedtogenerateelectricitylastyear.ThisexacerbatedthealreadyhighelectricitypricestheregionwasexperiencingduetoreducedgassupplycausedbyRussia’sinvasionofUkraineandnuclearplantoutagesinFrance.SomelargehydropoweroperatorsinEuropesufferedfinanciallossesastheyhadtobuybackpowerathigherpricestomeettheirelectricitydeliverycommitments.Annualyear-on-yearchangeinhydropowergenerationinEurope(1992-2022)andhistoricalandforecast(2013-2023)IEA.CCBY4.0.Notes:2023=forecast.Minimum=thelowerboundforthe2023forecastandMaximum=theupperbound.In2023,hydropowerelectricitygenerationisforecasttoincreaseby3%year-on-year(16TWh),basedonpreliminarydataforthefirstthreemonthsofthisyear.FirstquarterdatainEuropeisup5%year-on-yearcomparedto2022,thankstohigheroutputfromtheIberianandBalkanregions.GenerationforJanuarythroughMarchinSpainandPortugalwasup60%and140%respectively,ashigh-100-80-60-40-2002040601992199419961998200020022004200620082010201220142016201820202022TWhChangeingeneration010020030040050060070080020132014201520162017201820192020202120222023TWhApril-DecemberJanuary-MarchMinimumMaximumRenewableEnergyMarketUpdateJune2023PAGE33IEA.CCBY4.0.precipitationinJanuaryhelpedfillreservoirstoaboveaveragelevelsforthefirstquarter.HeavierthanaveragerainfallalongtheDanubealsoboostedannualoutputfromrun-of-riverplantsinRomania,Croatia,andSloveniabyabout40%.Whilegenerationin2023isexpectedtoincreaseto480TWh,thisisstill9%belowthe10-yearaverage(530TWh)asdroughtconditionsinkeymarketscontinuedduringthepastwinter.Firstquartergenerationisdownyear-on-yearinFrance,Italy,andGreecefollowinglowrainfall.IntheAlps,warmerwintertemperaturesandlesssnowfallareexpectedtoresultinbelowaveragesnowmeltfortheremainderoftheyear.Outputwillalsodependonwhetheroperatorsdecidetofillreservoirsorgenerate.However,generationwilldependonhowmuchprecipitationEuropegetsfromApriltoDecember,akeyuncertaintyfortheforecast.Seasonalprecipitationpatternsarebecomingincreasinglyunpredictableandcanexhibitdifferenttrendscomparedtothefirstquarter.Forinstance,afterthethreeconsecutivemonthsofyear-on-yeargrowthinJanuarytoMarch2023,hydropowergenerationinSpaindropped15%inAprilcomparedto2022.LowerprecipitationlevelsacrossseveralmarketscouldresultinEurope’shydrogenerationfallingto470TWh,thoughthisisstillabovelastyear’slevels.Conversely,shouldsomemarketsreceiverhigherprecipitation,suchasItalywhererainfallwasheavierinMaythanpreviousmonths,Europe’sgenerationcouldexceed535TWh.Thisupsidepotentialofaround50TWhcouldcontributetodisplacingaround9-10bcmofadditionalnaturalgasinEurope.RenewableEnergyMarketUpdateJune2023PAGE34IEA.CCBY4.0.TowhatextentcanrenewableenergyusedisplacegasconsumptioninEUbuildingsin2023and2024?Withheatingandcoolingbeingthelargestenergyend-usersintheEUbuildingssector,airtemperatureistheprimaryshort-termdeterminantofthebloc’sbuildingssectorenergydemand.Directandindirectuseofrenewableenergythroughelectricity,inadditiontogreaterenergyefficiencyandenergysobriety,canplayakeyroleinreducingEUgasdemandintheshortterm.AnnualEUbuildingsnaturalgasdemand,includingindirectconsumption,hasrangedfrom150bcmto210bcmsince2010.Thenumberofheatingdegreedayshaslargelyinfluencedthisdemandalongwithpricesandconsumerbehaviour.The2022/23heatingseasonwasthesecondwarmestonrecordfortheEuropeanUnion,withtheaverageairtemperature1°Cabovethepreviousten-yearaverage,and9%fewerheatingdegreedays.SensitivityoftotalfinalelectricityconsumptiontotemperatureinFrance,2021-2022(left),correlationsbetweenannualheatingdegreedaysandfinalconsumption(directuse)ofnaturalgasinbuildingsintheEU,1991-2020(centre),andEUlong-termaverageairtemperatureandvariabilityduringtheheatingseason,1980-2022(right)CCBY4.0.Note:Theheatingdegreedaysserieswascalculatedbasedonareferencetemperatureof18°Cwitha15°Cthreshold.Sources:Eurostat(2023),Heatingandcoolingdegreedays-statistics;IEA(2022),EnergyBalances;Entsoe(2023),TransparencyPlatform;IEA(2023),WeatherforEnergyTracker.0.00.51.01.52.02.5-5051015202530Dailyelectricitydemand(TWh)Averagedailytemperature(°C)050010001500200025003000350040000123456789198019851990199520002005201020152020Heatingdegreedays(°C)°CAverageairtemperaturefromOctoberofthepreviousyeartoMarchAnnualheatingdegreedays(rightaxis)-20%-15%-10%-5%0%5%10%15%20%19911994199720002003200620092012201520182021ChangeinannualheatingdegreedaysChangeinannualgasconsumptioninbuildingsRenewableEnergyMarketUpdateJune2023PAGE35IEA.CCBY4.0.Allotherthingsbeingequal,suchmildwinterconditionsalonewouldentailanestimated7%dropingasconsumptioninbuildingsfrompreviouswinters.ThismildweatherthereforeeasedpressureonEUgasmarketsconsiderablyinthewinterof2022/23.2Whilelong-termclimatetrendspointtoanoveralltemperaturerise,aharshwinterandahotsummercouldintensifyEUbuildingssectorheatingandcoolingdemandintheshortterm.EUhistoricalgasconsumptioninthebuildingssector,2010-2022CCBY4.0.Note:Theheatingdegreedaysserieswascalculatedbasedonareferencetemperatureof18°Cwitha15°Cthreshold.Sources:Eurostat(2023),Heatingandcoolingdegreedays-statistics;IEAenergybalances(2023);IEA(2023),WeatherforEnergyTracker.2022e:2022estimateTherapidexpansionofrenewableenergytechnologyuseinbuildingscaneaseEUnaturalgasdemandandcontributetothebloc’senergysecurityintheshortterm.Projectedcumulativenewdevelopmentsindirectuseofrenewableheatandexpansionofrenewableelectricitypost-2022woulddisplacealmost8bcmofEUbuildings-relatedgasconsumptionannuallyin2023andmorethan17bcmin2024.3Thisisequivalenttoavoidedemissionsofmorethan50MtCO2in2023-2024.2Inadditiontoweather,behaviouralfactors(i.e.adropinspaceheatingasaresultofvoluntaryeffortsorinreactiontohighgasprices)alsohelpedreducegasdemandintheEUbuildingssector.3Thesecalculationstakeintoconsiderationhourlydemandprofilesandgenerationpatternsofeachrenewableelectricitytechnologyatthecountrylevel.050010001500200025003000350040000501001502002502010201120122013201420152016201720182019202020212022(e)(°C)bcmIndirectgasconsumption(districtheating)Indirectgasconsumption(electricity)DirectgasconsumptionHeatingdegreedays(rightaxis)RenewableEnergyMarketUpdateJune2023PAGE36IEA.CCBY4.0.NaturalgasconsumptiondisplacedbyprojectedadditionalrenewableenergysupplyintheEuropeanUnionin2023andcumulativein2024CCBY4.0.Notes:RE:renewableenergy.Thelargestcontributiontogasdisplacementinbuildingsisexpectedtocomefromprojecteddevelopmentofrenewablesintheelectricitysector,withadditionalrenewablegenerationcomparedto2022substituting5bcmofgasconsumptionforbuildingselectricityconsumptionin2023andmorethan10bcmin2024.Countriesforwhichgrowthinelectricitygenerationisprojectedtodisplacethemostgascumulativelyin2023-2024areSpain,Italy,Netherlands,GermanyandFrance.SpainandItalyhaveimportantsharesofgasintheirelectricitymixesandtheybenefitfromwell-matcheddemand-supplyprofileswithsolarPVgenerationpatternsaccommodatingsummercoolingdemand.Thesustainedgrowthofannualheatpumpsalesdrivenbypolicyincentivesinmanycountriesisanticipatedtorepresentanotherquarterofthegasdisplacedinbuildings(7bcmcumulativelyby2024).Limitedbiomassstovesandboilers,solarthermalandgeothermaldevelopmentsinbuildingsyieldonlymarginalgassavingsby2024(lessthan3bcmcumulatively).Whiletheserenewableenergycontributionswillhelpeasepotentialtensionsongasmarkets,thepotentialofrenewableheattechnologiesisstilllargelyuntapped,bothinbuildingsandindustry.Harnessingtheirpotentialwould,however,requiresustainedandcomprehensivepolicyactiontoimproveconsumerawareness,reducehighupfrontcostsandsplit-incentivechallenges,alleviatesupplychainchallenges,expeditepermittingprocedures,establishtrainingprogrammesandsupportR&Dtofurtherimprovetechnologies.0246810121416182020232024bcmNaturalgasdisplacedbynewdirectusesofREheatNaturalgasdisplacedbyadditionalREelectricitygenerationNaturalgasdisplacedbynewheatpumpdeploymentRenewableEnergyMarketUpdateJune2023PAGE37IEA.CCBY4.0.WillChina’sroleinglobalrenewableenergydeploymentdeclinein2023and2024?China’sambitioustargetofnetzeroemissionsby2060,itsstrongandcontinuouspolicysupportforrenewableenergy,andthelargesizeofitsdomesticmanufacturingindustryforallrenewabletechnologiesconsolidateChina’spositionastheundisputedleaderinglobalrenewableenergydeploymentin2023and2024.China’scontributiontoglobalrenewablecapacityadditionsisexpectedtoincreasein2023and2024thankstodistributedsolarPVandwindIn2022,Chinaaccountedfor49%ofglobalrenewablecapacityadditions,duemostlytoaccelerationinsolarPVgrowth,particularlyfordistributedsystems.FollowingthephaseoutofsolarPVsubsidies,theChinesegovernmenthastransferredthefocusofitsrenewableenergydeploymentstrategytotwoprincipalareasthatunderpintheforecastfor2023and2024.Chinanetrenewablecapacityadditions(2017-2024)anditsshareinglobaldeploymentIEA.CCBY4.0.China’sfirstaimistodeveloplarge-scalemegaprojectsfarfromdemandcentresthatcanprovidepoweratpricesequaltoorlowerthanprovincialbenchmarkcoal0%10%20%30%40%50%60%05010015020025030020172018201920202021202220232024GWAnnualcapacityadditionsPV-utilityPV-distributedOnshorewindOffshorewindHydropowerBioenergyOthertechnologies%ofChina0%10%20%30%40%50%60%70%80%90%20202021202220232024%ofChinainglobalcapacityadditionsPV-utilityPV-distributedOnshorewindOffshorewindHydropowerRenewableEnergyMarketUpdateJune2023PAGE38IEA.CCBY4.0.electricityprices.Second,thegovernmentisincentivisingdistributedsolarPVprojectsthroughcapacitytargetsforpublicinstitutionsandlargestate-ownedenterprisesforself-consumption,andforsmallerresidentialsystemsthroughsubsidiestopromoteruraleconomicdevelopment.Owingtorisingindustrialelectricitypricesandgovernmentpolicysupport,distributedPVapplicationsarethemainsourceofChina’srenewablecapacityexpansionin2023and2024,withthecountry’sshareinglobalexpansionreachingalmost55%.Highermodulepricesoverthelast12-18monthshaveaffectedthecompetitivenessofdistributedapplicationslessthanthatofutility-scaleprojects,forwhichprofitmarginsremaintightandmodulesaccountforalargershareoftotalsystemcosts.Ourforecastexpectsonshorewindtoreboundstronglyin2023comparedwithlastyear,asChinadeployedalmost30%lesswindenergythanwasanticipatedintheIEARenewables2022report.AsmovementrestrictionsduetotheCovid-19outbreakin2022delayedthecompletionofmultipleonshoreandoffshorewindprojects,wenowexpecttheseinstallationstobecomeoperationalin2023and2024,pushingChina’sshareinglobalonshoreandoffshorewindexpansiontoover60%.Consideringthatthecentralgovernmentphasedoutdirectfinancialincentivesin2021,thestrengtheningroleofChinainglobalwindgrowthindicatesgreatercompetitivenessandstrongprovincialsupport,motivatedbytheeconomicbenefitsofruraldeployment.China’sincreasingsolarPVandwindmanufacturingcapabilitieswillmaintainastrongdomesticdemandChina’sdemandandsupplypoliciesforwindandsolarPVtechnologiesarewellestablished,anditsindustrialpolicieshavebeendesignedholisticallytoproducecompetitivecleanenergyequipmentforbothdomesticdemandandexports.In2022,China’sannualmanufacturingcapacityforsolarPVequipmentcontinuedtoexpandmuchmorequicklythanglobaldemand.Lastyear,manufacturingcapacityincreased40-50%forwafers,cellsandmodulesandalmostdoubledforpolysilicon.Today,utilisationratesofChinesesolarPVmanufacturingfacilitiesrangefrom20%to40%,andthecountryisexpectedtodoubleitsPVmanufacturingcapacityagainbytheendof2024,significantlyswellingthesupplyglut.Thus,strongdomesticdemandinChinaremainsessentialtomaintainorincreasemanufacturers’utilisationratesin2023and2024.RenewableEnergyMarketUpdateJune2023PAGE39IEA.CCBY4.0.Forwind,Chinaisexpectedtoexpandonshoreandoffshoremanufacturingfacilitiesalmost20%by2025,especiallyforoffshorewind.Morethan90%ofdomesticdemandismetbyChinesecompaniesandtheirexportsarelimited,highlightingtheimportanceofastrongdomesticmarket.RenewableEnergyMarketUpdateJune2023PAGE40IEA.CCBY4.0.WilltheUSinflationReductionActimpactwindandPVdeploymentintheshortterm?TheimpactoftheIRAonwindandsolarPVdeploymentin2023and2024willbelimited.WhilefederaltaxcreditsundertheIRAprovideunprecedentedinvestmentcertaintyforrenewableenergyprojectsupto2032,installationsduetocomeonlinewithinthenexttwoyearshavealreadyqualifiedforprevioustaxincentiveschemes.Thus,pre-IRApoliciesaswellasdevelopmentsconcerningsupplychainconstraintsandtrademeasuresaffectourshort-termcapacityforecast.Tradeandsupplychainconcernsledtolowercapacityadditionsin2022,butwindandPVexpansionwillacceleratethisyearIn2022,theUSanti-dumpingandcircumventioninvestigationinvolvingsolarpanelsfromseveralSoutheastAsiancountriesinMarchandtheUyghurForcedLabourActinJunedelayedthedeliveryofPVproducts.Inaddition,highercommoditypricesandcontinuoussupplychainchallengesforrenewableequipmentpartscomingfromChinapushedwindturbineandsolarpanelpricesup.ForsolarPV,theimpactoftrademeasuresondeploymentandpriceswasmuchlargerthanforwind.In2022,thesolarPVmarketcontracted15%duetouncertaintyovertraderestrictions,whichpausedimportsandslowedprojectdevelopment.However,aninterimorderpublishedinJune2022addressedsometradeissuesand,asaresult,themarketisexpectedtoexpandinthenexttwoyears.Infact,solarPVadditionscouldbreaknewrecords,reachingmorethan30GWin2024–a50%increasefrom2022–thankstoacceleratedutility-scaleprojectdeployment.Meanwhile,distributedsolarPVadditions,whichbenefitfromtheInvestmentTaxCredit(ITC)andlocalnetmeteringprovisions,remainstableataround8GW.However,twoimportantpolicydevelopmentscounteractoneanothertopreventhighertotalannualsolarPVadditions.WhilechangestoCalifornia’snetmeteringlawcouldslowdowndeploymentinthelargestdistributedPVmarketintheUnitedStates,commercialsolarPVisexpectedtostartbenefittingfromnewIRAincentivessuchaseligibilityforcommunitysolarandeconomicaddersin2023,makingcommercialsolarPVmoreeconomicallyattractive.RenewableEnergyMarketUpdateJune2023PAGE41IEA.CCBY4.0.TheUSonshorewindmarketadded8GWofnewcapacityin2022–a40%fallfrom2021anda50%dropfromrecord-levelexpansionin2020.Thisdeclinewasexpectedwiththereductionandeventualexpirationofthepre-IRAproductiontaxcreditpolicy,butsupplychainconstraintsandinflationarypressurealsocausedprojectcommissioningdelayslastyear.Asaresult,thecommissioningofdelayedprojectswillmean40%higheradditionsthisyearthanin2022.However,duetolowerproductiontaxcreditratesundertheprevioustaxpolicy,onshorewindadditionsareforecasttodecelerateagainin2024.Nonetheless,thecommissioningofroughly2GWoflarge-scaleoffshoreprojectsisexpectedtokeepannualUSwindcapacityadditionsstableataround12GWin2023and2024.NetsolarPVandwindcapacityadditionsbyyear,2021-2024IEA.CCBY4.0TheInflationReductionAct’simpactonrenewableenergytechnologydeploymentwillbecomeevidentin2025ForbothsolarPVandwindprojects,long-termtaxincentivesundertheIRAareagame-changer.Consideringthedeploymenttimelinesforlarge-scaleinstallations,theIRA’simpactwillbecomevisiblemainlybeginningin2025.Undertheact,solarPVprojectsareonceagaineligiblefortheproductiontaxcreditifconstructionbeginsbefore2025,providinganalternativedriverfornewcapacityadditionsbeyondtheITC.After2025,multipletechnologies,includingforwindandsolarPV,willbeeligiblefortheCleanEnergyProductionTaxCredit.WhiletheIRA’slong-termcreditvisibilitywillcreatesteadilyincreasingdemandforrenewableenergy,itwillalsoplacegreaterpressureonpermitting,transmissionanddistributiongrids,andsupplychains.0510152025303520212022202320242021202220232024WindSolarGWRenewables2021Renewables2022Renewables2023MayUpdateRenewableEnergyMarketUpdateJune2023PAGE42IEA.CCBY4.0.WillIndia’srenewableenergydeploymentboomin2023and2024?India’srenewablecapacityadditionsareexpectedtoincreaseagainin2023and2024owingtofasteronshorewind,hydropoweranddistributedsolarPVdeployment.However,annualadditionsforutility-scaleprojects,India’slargestrenewableelectricitygrowthsegment,areexpectedtoslowbrieflythisyearduetosupplychainchallenges,preventingrenewableenergygrowthfromtrulyboomingintheshortterm.Higherprices,lowerauctionvolumesandtradepoliciesweighonshort-termPVdeploymentIn2022,India’sutility-scalesolarPVcapacityadditions(madeupmainlyofcapacityawardedinauctions)reachedarecord-breaking14GW,accountingforovertwo-thirdsofrenewableenergygrowthinthecountry.For2023,however,lowerauctionvolumesandsupplychainchallengesindicatethataslowdownofalmost20%isprobable,withapossiblerecoveryin2024.Indianetrenewablecapacityadditionsbytechnology,2018-2024IEA.CCBY4.0.In2022,auctionvolumesdroppedbyone-third,withonly10GWACawarded,thelowestamountsince2017andsignificantlybelowthevolumesrequiredtoreachthenationaltargetof500GWofnon-fossilcapacityby2030.AveragesolarPV0510152025302018201920202021202220232024GWHydropowerWindBioenergyPV-utilityPVdistributed05101520252018201920202021202220232024GWPV-utilityPV-commercialPV-residentialPV-off-gridRenewableEnergyMarketUpdateJune2023PAGE43IEA.CCBY4.0.tariffsfrom2022auctionswere15%higherthanin2021,whichdiscourageddistributioncompanies(DISCOMs)inpoorfinancialhealthfromsigningcontracts.Inaddition,somestatesthathadfulfilledtheirRenewablePurchaseObligationsneglectedtoorganisefurtherauctions,andfederalagencieswereputtingmoreemphasisonhybridtenders.Lowerawardedcapacityisexpectedtotranslateintoaslowdownincapacityadditionsin2023-2024.Toimprovethesituation,inMarch2023theIndiangovernmentorderedfederalagenciestoincreaseauctioncapacityto50GWACannuallystartinginFY2023-2024,whichshouldleadtohigherdeploymentbeyond2025.Indiarenewablecapacityawardedinauctions,2017-2023(left)andPVmodulesupplyanddemand,2021-2024IEA.CCBY4.0.DataforJanuary-Aprilonly.Indicatesapotentialannualsupplyofover500Wofmodulesbyproducerswithover1GWofmanufacturingcapacity.Note:Planned2024-2028capacityindicatestargetedannualauctionawards.Sources:(left)BridgetoIndia(2023),IndiaRENavigator(accessedApril2023);BNEF(2023),Q12023GlobalAuctionandTenderResultsandCalendar.(right)PVInfoLink(2023),SupplyandDemandDatabase(accessedApril2023);MinistryofNewandRenewableEnergy(February2023),ApprovedListofModelsandManufacturers.Large-scalePVmanufacturingisemerging,butitcreatesshort-termdemandandsupplymismatchesIndia’spushtoexpanddomesticmanufacturingistriggeringasupply-demandmismatchandhigherpricesintheshortterm,affectingPVexpansionin2023and2024.Historically,Indiahasimportedalmost90%ofitssolarPVmodulesfromChina.However,thegovernment’sproduction-linkedincentives(PLIs)forPVmanufacturingaimtoincreaseIndia’sdomesticmanufacturingcapabilitiesto0.00.51.01.52.02.53.03.50102030405060INR/kWhGWACPVWindHybridAv.PVprice(rightaxis)Av.windprice(rightaxis)05101520253035402021202220232024GWTotalcapacityCapacity>1000-MWplantCapacity>500WmodulesPotentialsupplyDemand-lowDemand-highPlannedRenewableEnergyMarketUpdateJune2023PAGE44IEA.CCBY4.0.reduceoreliminateimports.ThetworoundsofthePLIsubsidyschemeshouldallowIndiatobecomefullyself-sufficientintermsofsolarPVsupplyinthenextfourtofiveyears.Intheshortterm,however,demandforhigh-capacitymodulesfromlarge-scaletop-tiermanufacturersexceedssupply.Althoughthelistofgovernment-approvedmanufacturers(ALMM)inFebruary2023impliedtotalmanufacturingcapacityof22GW,onlylessthan5GWweredeclaredbylargeproducersofferingmoduleswithover500Wofpower.Developersdemandthesehigh-qualitytop-tiermodulesfortheircostefficiencyandtomoreeasilysecurelow-costfinancing.Alongwithsupply-demandmismatches,theintroductionofhigherimporttariffsonPVmodulesandcellsinApril2022ledtoa30-40%increaseinmodulepricesinthesecondhalfof2022.Thisreducedprojectbankability,forcingdeveloperstoeithercancelordelayprojectswhilewaitingforPVpricestofall.Inresponse,thegovernmentpostponedALMMrequirementsforallprojectscommissionedbyApril2024andextendedthecommissioningdeadlines.Althoughgovernmentactionshavemitigatedsomechallenges,ourforecastneverthelessexpectsthatthetemporarysupply-demandmismatchfortop-tierPVmoduleswillpreventrapidutility-scalePVexpansionin2023and2024.However,theIndianmarketshouldexperiencearealdeploymentboombeyond2025,withhigherauctionvolumesandlowerprices.RenewableEnergyMarketUpdateJune2023PAGE45IEA.CCBY4.0.Arecompetitiverenewableenergyauctionsincreasinglyundersubscribed?In2022,competitiverenewableenergyauctionsresultedingovernmentsawardingarecord-breaking100GWofcapacity.However,unallocatedcapacityalsoreacheditshighest-everlevellastyear(20GW)withonlycloseto85%ofproposedcapacitybeingawarded,thelowestrateever.TheenergycrisishasnegativelyaffectedparticipationinEuropeanauctionsIn2022,Europeaccountedfortwo-thirdsofglobalunallocatedcapacityincompetitiverenewableenergyauctions,triplethevolumeofthepreviousyear.Meanwhile,India’sauctionallocationrateshavebeenimprovingsince2019thankstopolicychanges.However,outsideofthesetwomarketsinwhichcompetitiveauctionsdriveutility-scalerenewableenergydevelopment,9%ofauctionvolumesremainedunallocatedin2022.IfChinaisexcluded,unallocatedvolumesriseto23%,amorethanten-foldincreasefrom2021inabsolutevalue.Globalrenewableenergyauctionresults(left)andvolumesofunawardedauctioncapacitybyregion(right)IEA.CCBY4.0.India’sauctionvolumesforrenewablecapacitydecreasedin2022,withthecountryofferingaswellasawardinglessthanhalfofwhatithadannuallyduring50%60%70%80%90%100%0204060801001201402019202020212022GWCapacityawardedCapacitynotawardedSubscriptionrate(%)02468101214162019202020212022IndiaEuropeRestofworldRenewableEnergyMarketUpdateJune2023PAGE46IEA.CCBY4.0.2019-2021.Auctionvolumesdroppedbecausestate-leveltendersprioritisethesigningofpreviouslyawardedpowerpurchaseagreements,andbecausedevelopersarecurrentlyfocusedoncompletingconstructionofalarge-scaleprojectpipeline.In2022,Indiaawardedalmost90%ofauctionedcapacitythankstopolicyimprovementstoreduceofftakerrisks.Contrarytohistoricaltrends,lastyearthecentralgovernmentofferedmorecapacitythanthefinanciallychallengedstateDISCOMsdid,andrapidimplementationofthesolarparkprogrammefacilitatedlandprocurementandgridconnection.Europeexperiencedtheoppositetrend.Thereasonforrecord-levelundersubscriptioninEuropeanauctionsisanincreaseininvestmentcostsforwindandsolarPVcomparedwithpreviousyears,combinedwithanunchangedauctionceilingandstaticreferenceprices.Furthermore,somedevelopershavefoundcorporatepowerpurchaseagreementsandwholesalemarketopportunitiestobemoreeconomicallyattractivethanauctions,allowingthemtotapintohigherprices.Pricevolatilityincommoditymarkets,risinginterestratesandinflationhavealladdedtouncertaintyoverprojecteconomics.AsmostEuropeancontractpricesfromcompetitiveauctionswerenotindexedtoaddressrisingcosts,developerswerereluctanttoparticipate.UnawardedcapacityinrenewableenergyauctionsinEurope,2022IEA.CCBY4.0.InGermany,sluggishpermittingproceduresandrisingauctionvolumeshaveleftrecordamountsofcapacityunallocated.Infact,thecountryallocatedonlytwo-thirdsofofferedcapacityinfeed-in-premiumauctions,sustainingthetrendofrisingundersubscriptionthatbeganin2020.Toaddressthesechallenges,in2022Germanyincreasedtheceilingpriceoftendersforthefirsttimesince2020.10%20%30%40%50%60%70%80%90%100%0510152025GermanyFranceSpainItalyPolandRestofEuropeGWCapacityawardedCapacitynotawardedUndersubscriptionrateRenewableEnergyMarketUpdateJune2023PAGE47IEA.CCBY4.0.Spain’sthirdauctionfor3.3GWin2022wasundersubscribedduetoacombinationoffactors.Risingcosts,lowceilingprices,andlong-termcontractswithoutinflationindexingweresuggestedasamainreasonthatonly5%oftheofferedcapacity(3.3GW)wasawarded.DevelopersmayhavealsofoundcorporatePPAsandmerchantprojectsoffermoresuitableeconomicsorcontractualarrangements.Similarly,Polandexperiencedarecord-high75%undersubscriptionratein2022,significantlyhigherthantheusualrateoflessthan10%inpreviousyears.Italyconductsthreetechnology-neutralauctionroundsperyearundertheFERprogramme,witheachroundrollingoverunallocatedcapacityfromthepreviousone.In2022,however,itallocatedonlyhalfofthecapacityinitiallytargetedandrolledovercapacityfromthepreviousyear.Forthepasttwoyears,alltendershadundersubscriptionratesofmorethan70%,resultinginalargeamountofcapacitybeingrolledoverandevenextensionoftheFERprogrammeinto2023.InSouthAfrica,gridaccesschallengesinareasofhighwindpotentialresultedin3GWofwindprojectsremainingunallocatedinrecentauctions.InChile,asuccessful1-GWauctionin2021wasfollowedbya2022auctionofsimilarsizethatallocatedonly15%ofthecapacityoffered,astheauctionpricesdidnotaddresschallengesassociatedwithrisingcostsandinterestrates.RenewableEnergyMarketUpdateJune2023PAGE48IEA.CCBY4.0.WillmarketforcesnowdrivetheexpansionofwindandsolarPVplants,orispolicystillkey?Market-drivenprocurementisexpectedtoaccountforone-fifthofutilitysolarPVandwindcapacityexpansionbetween2023and2024,andalmosttwiceasmuch(36%)whenChinaisexcluded.Market-drivenprocurementisabusinessmodelthatallowsforrenewablepowerpricediscoverybetweenbuyersandsellers.Modesincludebilateralcontracts(PPAs)betweenIPPsandcorporateconsumersorutilities;merchantprojects;andremunerationfromcertificateschemes.Conversely,policy-drivenprocurementreferstomodelsinwhichgovernmentdecisionsaffectthepricesignalforinvestment.Itcantaketheformofpolicysupport,suchasthesettingofvolumesorcontrollingofprices,orregulatorymeasures,whichdirectlyaffectcompetition.Thetwomostprominentpolicieshavebeenadministrativelysettariffsforremuneration(whereinthegovernmentdecidesonafixedtarifftoofferdevelopers)andcompetitiveauctions(whereinthegovernmentputsasetamountofcapacityupforbidandsetsalimitonwhatitwillpayforthepower).Utility-ownedprojectsinregulatedmarketsconstituteathirdpolicy-basedprocurementmethod,asthepricesignaliseffectivelyabsentbydefaultoftheregulatoryenvironment.SolarPVandwindforecastbyprimaryprocurementtype,2023-2024IEA.CCBY4.0.Notes:Thisanalysisonlycoversprocurementmethodsforthesaleofelectricity;itexcludesanyadditionalsubsidiesoninvestmentcostssuchastaxcredits,accelerateddepreciation,rebates,grants,etc.).PPA=powerpurchaseagreementsaredefinedinthisreportascontractsthatarebilaterallynegotiated.“other”(leftgraph)includesrenewablecertificatesandcapacitydedicatedtorenewablehydrogenproduction.“Restofworld”(rightgraph)referstotheMiddleEastandNorthAfrica,Eurasiaandsub-SaharanAfrica.“Unidentified”referstocountriesforwhichthebreakdownbyprocurementwasnotapplied.Globally,almost60%ofutility-scalesolarPVandwinddeploymentinthenexttwoyearswillbedevelopedunderpolicieswithadministrativelysetremuneration050100150200250300350ChinaNorthAmericaEuropeAsia-PacificLatinAmericaRestofworldGWFixedtariffsandpremiumsUtility-ownedCompetitiveauctionsPPA(corporate)PPA(utility)MerchantandotherUnidentifiedUtility-owned3%Fixedtariffsandpremiums56%Competitiveauctions20%Unidentified4%PPA(corporate)13%PPA(utility)3%Merchantandother1%Market-driven17%RenewableEnergyMarketUpdateJune2023PAGE49IEA.CCBY4.0.policiessuchasfixedtariffs,premiums,andutility-ownedprojects.However,mostofthisdeploymentwillbeinChina,wheredevelopersreceivetariffssetattheprovincialbenchmarkelectricitypricenowthatrenewableenergyfeed-intariffshavebeenphasedout.ExcludingChina,lessthan15%oftheworld’sutility-scalesolarPVandwindcapacityadditionsareexpectedtobeprocuredthroughadministrativelysettariffs.ThelargestgrowthisintheUnitedStates,fromutility-ownedprojectsinregulatedmarkets,followedbytheAsiaPacificregion,fromfeed-intariffsinJapan,ChineseTaipeiandVietNam.InEurope,growthinadministrativelysetprocurementismostlyinonshorewindinFrance,whereafeed-inpremiumexistsforsmallprojects,andfromfeed-intariffsintheRepublicofTürkiye(hereafter“Türkiye”).Competitiveauctionsarethelargestsourceofpolicy-drivengrowthoutsideofChina,accountingforalmosthalf,ledbyEuropeandfollowedbyIndia,theUnitedStates,Korea,theUnitedArabEmiratesandBrazil.Themainmotivationsforauction-basedgrowtharepolicyactionstomeetclimategoals(intheEuropeanUnion),utilitychoice(intheUnitedStates)andeconomicattractiveness(intheMiddleEastandNorthAfrica).Market-drivengrowth,whichaccountsfor17%oftheworld’sutilitysolarandwindexpansion,isdominatedmostlybycorporatePPAs.TheUnitedStatesleadsexpansionincorporatePPAs,followedbyBrazil,Australia,SpainandSweden,allmotivatedbytheeconomicattractivenessofthesetechnologies,theopportunitytohedgeagainstrisingandvolatilepowerprices,andsustainabilitygoals.Unsolicitedbilateralcontractswithutilities(PPAswithutilityofftake)areprominentmostlyinregulatedmarkets,whilesomegrowthisexpectedfrommerchantprojectsinChile,theUnitedStates,DenmarkandSpain.OutsideofChina,Europeleadsmostofthepolicy-drivenrenewablecapacityexpansion,whilemarket-drivengrowthremainsveryimportantintheUnitedStatesandNorthAmericaingeneral.Howeachofthesemarketsevolvesoverthenexttwoyearswilldependonthewholesaleelectricitypriceenvironmentandonregulatoryandpolicydecisions.EconomicattractivenessandconsumerdemanddrivePPAgrowthintheUnitedStatesOverhalfofUSutility-scalesolarandwindgrowthisexpectedtocomefrombilateralcontractsforeithercorporateorutilityofftake,spurredbybotheconomicattractivenessandcorporatedemandtomeetsustainabilitygoals.CorporatePPAsareforecasttoaccountforthelargestshare(40%),mostlyintheformofRenewableEnergyMarketUpdateJune2023PAGE50IEA.CCBY4.0.virtualPPAs4inderegulatedwholesalemarkets.Over80%ofthevirtualPPAssignedbetween2021-2023wereintheERCOT,MISOandPJMserviceareas.However,risingPPApricesdoposeadownsiderisk.Climbinginterestrates,equipmentpriceincreasesandinterconnectionqueueshavedrivenupcostsfordevelopers,whilesupplychaindelaysslowedsupplyamidrisingdemand.Asaresult,CPPApricesroseanestimated11%intheERCOT,PJMandMISOserviceareasbetweenQ42022andQ12023.Nonetheless,consumerdemandforvirtualPPAsisexpectedtoremainstrong,inpartbecauseofthecostsavingstheycanofferconsumersbyaggregatingdemandacrossmultiplelocations.Fordevelopers,theeconomicsofPPAsareexpectedtoremainappealingwiththeIRAextendingtheITC,andwithnewopportunitiesfor10%premiumsforprojectsbeingdevelopedinenergycommunitiesstartingin2023.Additionalrevenuefromrenewableenergycertificates(RECs)insomemarketsalsostrengthensthebusinesscase.Theremaining60%ofUSrenewablecapacityexpansionover2023-2024ismostlyfromutility-ownedplants,competitiveauctions,andPPAswithutilities.ThesearethedominantprocurementmethodsinregulatedmarketsintheSoutheastern,SouthwesternandNorthwesternstates,butprocurementapproachesvaryacrossstatesdependingontheregulatoryenvironmentandwhetherutilitieshaveachoice.Themaindriversforgrowthareconsumerdemandforrenewablepower(sometimesintheformofgreentariffs),theeconomicattractivenessofPVandwindsystemscomparedwithautility’sexistingfleet,andtheneedtocomplywithagovernment’srenewableenergytargets.CompetitiveauctionsdriveEuropeangrowthin2023-2024,butthepacewilldependonpolicyresponsestovolatilewholesalepricesandrisingcostsTheleadingprocurementmethodinEuropeiscompetitiveauctions,accountingforatleast60%5ofrenewablecapacitygrowthbetween2022and2024.Almosthalfofthisgrowthwillbefromauctionsfortwo-wayfixedcontractsfordifference,6ledbyPoland,theUnitedKingdom,France,Italy,andSpain.Türkiyeuseone-way4VirtualPPAsareafinancialcontractfordifferencebetweenawholesaleelectricitypriceandthePPAprice.AsvirtualPPAsrequireaccesstothewholesalemarket,themajorityofthecorporatePPAgrowthwilloccurinderegulatedmarkets.5ThevaluerepresentsdeploymentinGermany,Spain,France,theUnitedKingdom,Poland,theNetherlands,Sweden,Italy,Denmark,Belgium,andTürkiye,whichaccountfor85%ofEurope’sgrowth.ThevaluewouldbehigherifcompetitiveauctionsfromtheremainingEuropeancountriesareincluded.6Inthismodel,developersreceiveasubsidyfromthegovernmentwhenthewholesalepriceisbelowthestrikepriceandwillpaybackanyrevenuesthatexceedthestrikeprice.RenewableEnergyMarketUpdateJune2023PAGE51IEA.CCBY4.0.fixed-tariffauctionswithpriceindexation,whereinthestrikepriceisthecontractualpriceirrespectiveofthewholesalemarketprice.Meanwhile,Germany,theNetherlands,theCzechRepublicandSloveniauseaone-wayfloorthatguaranteesdeveloperstheminimumstrikepriceandanuncappedmaximumfromthewholesalemarket.7InSeptember2022,theEuropeanUnionagreedtobegintaxingwholesalemarketrevenuesofmorethan180EUR/MWhinanattempttoreducetheburdenonconsumers,withsomememberstatesimplementingevenlowerthresholds.Europesolarandwindforecast(2023-2024)bypolicyandprocurementtype(left)andGermanypricesforwholesaleelectricity,PPAsandauctionceilings(right)IEA.CCBY4.0.Notes:PPA=powerpurchaseagreement.August2022datawerenotpublished,sothefigureisestimatedastheaveragebetweenJulyandSeptember2022.ReferstoPexapark’sindex.Sources:(right)Pexapark(monthlyreportsfrom2021,2022,2023),BloombergNewEnergyFinance(accessedMay2023),andBundesnetzagentur(accessedMay2023).However,uncertaintyoverfuturecapacitygrowthinEurope’sauctionsismountingbecausetheyhavebeenincreasinglyundersubscribedduetopermittingchallenges,andmorerecentlyduetotherisingcostsdevelopersarefacingfromcommodityprices,equipmentcosts,interestratesandinflation.Asaresult,developersarewonderingwhethertheyshouldturntowholesalemarketsanddirectPPAswithcorporationsandutilitieswiththeprospectofhigherremuneration.Forinstance,auctionceilingpricesinGermanyattheendof2022werejustEUR60/MWh,comparedwithcorporatePPAofalmostEUR100/MWhandwholesalepricesover250EUR/MWh.7NewregulationstoprotectconsumershaveintroducedtemporarywholesaleandgaspricecapsinmultipleEuropeancountries.0100200300400500Jan-21Mar-21May-21Jul-21Sep-21Nov-21Jan-22Mar-22May-22Jul-22Sep-22Nov-22Jan-23Mar-23EUR/MWhWholesalePPAindexAuctionceiling(PV)Auctionceiling(onshorewind)05101520BelgiumDenmarkItalySwedenTürkiyeNetherlandsPolandUnitedKingdomFranceSpainGermanyGWAuction(one-wayminimum)Auction(two-wayfixed)Auction(one-wayfixed)PPA(corporate&utility)MerchantOtherRenewableEnergyMarketUpdateJune2023PAGE52IEA.CCBY4.0.Goingforward,unsubsidisedprojectsintheformofPPAsandmerchantplantsareexpectedtoaccountfor22%ofEurope’scapacityexpansion.ThemajorityofthiswillbecorporatePPAs,ledbySpain,Sweden,Germany,theNetherlands,andDenmark,withprojectsemergingintheUnitedKingdom,Italy,andPoland.Whileinstallationsbeingdevelopedonafullymerchantmodelarelikelytoconstituteaminority,PPAprojectsareexpectedtostackrevenuesbycombiningamerchanttail.Nonetheless,thepaceofgrowthforunsubsidisedprojectsintheEuropeisalsosomewhatuncertain.Ambiguityoverhowlonghighwholesalepriceswillpersist,especiallywiththeshareofmarginal-costPVandwindincreasing,posesadownsiderisktoplantsrelyingsolelyonmerchantrevenue.Inaddition,signedPPAvolumesinEuropeweredown20%in2022comparedto2021,asdevelopersraisedcontractpricestoaccountforrisingcosts,whilebuyerswerehesitanttolockinhighertariffs.TheprimaryfactoraffectingprocurementmethodsinEuropewillbecountries’policyandregulatoryresponsestotherisksdevelopersface.Forcompetitiveauctions,somegovernmentshavealreadybeguntotakeactiontoaccelerategrowthbyadjustingauctiondesignsandcontractstoreflectdevelopers’costuncertainties.In2023,Germanyraiseditsauctionpriceceilingsby90%(toEUR113/MWh)foronshorewindandby25%(toEUR74/MWh)forsolarPV.Asaresult,solarPVauctionswereoversubscribedforthefirsttimesince2021.Portugal,meanwhile,willadjustthestrikepricesofitslastthreeyearsofprojectstoaccountforinflationandrisingequipmentprices,andFrancewillallownon-operationalauctionedprojectstosellelectricityonthespotmarketfor18monthspriortothecontractstartdate.OurforecastalsoexpectscorporatePPAgrowthtoresume.PPApricesinMarch2023havefallenaround30%fromNovember2022,andtheEuropeanCommission’sdraftofelectricitymarketreformssuggestsPPAsmayplayamoreprominentroleinthefuture.TheMarch2023draftproposesthatauctionsbechangedtotwo-waycontractsandthatauctionbiddersbeallowedandencouragedtoalsoenterintobilateralPPAswithotherofftakers.Whileafinalproposalwillnotbeapproveduntil2025,developersmaybegintodevisebusinessmodelsinanticipation.RenewableEnergyMarketUpdateJune2023PAGE53IEA.CCBY4.0.Istherenewableenergyindustry’sfinancialhealthimproving?Despitechallengesassociatedwithenergysecurityconcerns,volatilecommodityprices,supplychainconstraintsandtrademeasures,therenewableenergyindustryhasshownfinancialresilience.Thisisevidentacrossvarioussegmentsoftheindustry,includingamongmajorequipmentmanufacturers,developersandinvestors.Intheshortterm,strongpolicysupportinmajoreconomies,increasingdemandandfallingcommoditypricescanimprovethefinancialperformanceofrenewableenergycompanies,althoughchallengesandriskswillpersist.Multiplechallengeshavetestedthefinancialhealthofrenewableenergycompaniessince2019PriortotheCovid-19pandemic,therenewableenergyindustryhadbeensurpassingmostmajormarketindicesandtheenergysectoroverallinequitymarkets.Inthefirsthalfof2020,however,windturbineandsolarequipmentmanufacturersrecordednegativeearningsbeforeinterest,taxes,depreciationandamortisation(EBITDAs)asrevenuestemporarilyfellduetoCovid-19impacts.In2021,risingcommoditypricesledtohighersolarPVmoduleandwindturbinecosts.Thenin2022,Russia’sinvasionofUkrainetriggeredaglobalenergycrisis,leadingtoafurtherincreaseininputcosts(includingforelectricity,rawmaterialsandtransportation),higherinterestratesandcontinuedsupplychaindisruptions.Despitethechallengesposedbyenergysecurityconcerns,volatilecommodityprices,supplychainconstraintsandtrademeasures,therenewableenergyindustryhasdemonstratedremarkablefinancialresilience.ThisisespeciallytrueforthesolarPVsector,whichhasrecordedstableprofitsinrecentyears.OneofthereasonsforthisistheincreasingmarketshareofChineseintegratedcompaniessincetheearly2010s,thankstoChina’sindustrialpolicyandgrowingglobaldemand.Thesecompanieshaveachievedcostefficienciesthroughintegrationandtheirabilitytoabsorbpriceshocks,allowingthemtoproducetheworld’slowest-costsolarPVequipment.Inthelasttwoyears,tightpolysiliconsuppliesandrisingPVdemandhaveledtoamorethanfourfoldincreaseinpolysiliconprices,thehighestlevelsincetheearly2010s.Thishasimprovedmanufacturers’netmargins,andpolysiliconproducersarepostingrecordprofits.IncontrastwiththestableprofitsseeninthesolarPVsector,thewindindustryhasfacedsignificantfinancialchallengesinrecentyears.WesternwindRenewableEnergyMarketUpdateJune2023PAGE54IEA.CCBY4.0.manufacturershaveregisterednegativenetmarginsforeightconsecutivequarterssince2019,duetofactorssuchasvolatileglobaldemand,supplychainandlogisticalchallenges,andrisingcosts.Thesechallengeshaveimpactedtheirprofitability,particularlyforcontractssignedwithdevelopersthroughcompetitiveauctionsduring2017-2020.Thesemanufacturershavebeenunabletopasstheircostincreasesontodevelopers.Chinesewindturbinemanufacturershavebeenlessaffectedbycommoditypricevolatility,andstrongdomesticdemandhassupportedtheirfinancialhealth.ThisispartlybecauselargeChinesemanufacturersarealsoimportantprojectdevelopers,whichgivesthemgreatercontroloverprojectcostsandenablesthemtoabsorbpriceshocksmoreeffectively.Quarterlyweightedaveragenetmarginofrenewableenergycompanies,largeutilitiesandoilmajors,2021,2022and2023(Q1)IEA.CCBY4.0.Note:Windmanufg.=windequipmentmanufacturingcompanies.Source:IEAanalysisbasedonannualfinancialreports.Thefinancialhealthofutilitiesiscrucialforthesustainablegrowthoftherenewableenergyindustry,buttheglobalenergycrisishasposedchallengestotheirfinancialperformanceandprofitability.Whilelargeglobalutilitiesreportedveryhighrevenues,theywerealsoexposedtovolatilegasandelectricityprices,whichincreasedtheirenergyprocurementcostsandsales.Theirprofitabilitywasdependentontheirretailexposureandonhydropowerandnuclearoutput,andEuropeanutilitiesfounditchallengingtopassonthehighergenerationcostsresultingfromexistingornewregulatorymeasurestoprotectvulnerablecustomers.Furthermore,somelargeutilitiesincurredhedginglossesbycontractingenergyathighprices,especiallyforQ42022whenelectricitypricesbegantodeclinefrom-25%-20%-15%-10%-5%0%5%10%15%20%25%30%Q1Q2Q3Q4Q1Q2Q3Q4Q1202120222023WeightedaveragenetmarginPolysiliconSolarPVintegratedWindmanufg.UtilitiesOilmajorsWindmanufg.ChinaWindmanufg.non-ChinaRenewableEnergyMarketUpdateJune2023PAGE55IEA.CCBY4.0.peaklevels.Europeanutilitiesalsoregisteredhighertaxesthaninpreviousyearsbecauseoftaxationonwindfallrevenues/profits,whichaffectedtheiroverallprofitability.Meanwhile,medium-tolarge-sizedglobalutilitiesmademarginalprofitsorlossesthankstotheirgeographicaldiversity,whichallowedthemtocompensateforlossesincertainmarketsbygainingprofitsinothers.IntheUnitedStates,utilitiesreported2022tobeoneofthebestyearsfornewrenewableenergyresourcegrowththankstoincentivessuchasaccelerateddepreciationandincometaxcredits.Someutilitiesusedhedgingstrategies,long-termcontractsandmarkettradingactivitiestogainprofitsbysellingsuppliesathighermarketprices.Thebetter-performingutilitieshadasignificantshareofrenewablesintheirgenerationmix,whichalsoallowedthemtotakeadvantageoffavourableweatherconditionsinsomeregionsandmarkets.Abrightfutureforthefinancialhealthoftherenewableenergyindustryisonthehorizon,butitrequiresgovernmentsandtheindustrytotacklemultiplechallengesForthesolarPVmanufacturingsector,increasingannualcapacityadditionsin2023and2024andgovernmentambitionsinthelongtermprovideapositiveoutlookfordemandgrowth.Intheshortterm,integratedmanufacturers,mostlybasedinChina,willbenefitfromlowercommodityprices,costefficienciesandlimitedcompetitiontomaintainhealthyprofitability.However,thehighprofitabilityofpolysiliconproducerscouldbeshort-livedbecauseglobalpolysiliconcapacityisexpectedtodoubleby2024,andpricedeclineshavealreadybegun.Overall,solarPVdemandisnotexpectedtogrowasquicklyassupplyintheshortterm,leavingcapacityutilisationofallmanufacturingsegmentsrelativelylow.Inthepast,thissituationhasledtonegativemarginsfortheindustrybutdidnotresultinmajorbankruptciesforChinesemanufacturers.However,newmanufacturinginvestmentsinIndia,theUnitedStatesandEuropearealsomovingaheadandwillcontributetothesupplyglut.Whiletrademeasuresareexpectedtoshelternewmarketsfromcompetition,itwillbedifficultforthesenewfacilitiestomaintainlong-termprofitsustainability.Windequipmentmanufacturersareexpectedtobenefitfromlowercommodity,electricityandfreightprices,whichcouldimprovetheirmarginsasdemandexpandsintheshortterm.However,turbinepricesarelikelytoremainrelativelyhigh,especiallyforWesternmanufacturers,duetouncertaintiesregardingcommodityprices,interestratesandpolicies.Moreover,currentsuppliesinRenewableEnergyMarketUpdateJune2023PAGE56IEA.CCBY4.0.EuropeandtheUnitedStatesmaynotkeepupwithgrowingdemandoverthemediumtermbecausemanufacturers’poorfinancialhealthispreventingthemfrominvestinginnewfacilities.Toimprovethefinancialhealthofcompanies,itiscrucialthatgovernmentpoliciesaddresspermittingchallenges,raiseauctionvolumesandchangetenderdesignswithcontractpriceindexation.InChina,competitioninlocalmarketshasloweredturbinepriceseventhoughcommoditypricesremainhigh,reducingcompanyprofitability.WhilelowerpricescreateopportunitiesforChinesemanufacturerstoincreasetheirglobalmarketshare,theirsuccesswilldependontheirfinancialsustainability.Despitechallengesstemmingfromelectricitypricevolatility,mostlargeutilitieshavedecidedtostrengthentheirrenewableenergyportfolios.However,risinginterestratesandpolicyuncertaintiesthreatentheabilityofutilitiestoincreasetheirinvestmentsinrenewables.RenewableEnergyMarketUpdateJune2023PAGE57IEA.CCBY4.0.WillsolarPVandwindcostsfinallybegintofallagainin2023and2024?Electricitygenerationcostsfromnewutility-scaleonshorewindandsolarPVplantsareexpectedtodeclineby2024,butnotrapidlyenoughtofallbelowpreCovid-19valuesinmostmarketsoutsideChina.Althoughcommodityandfreightpriceshavedroppedfromlastyear’speaks,theyremainelevated.Atthesametime,developers’financingcostshaveincreasedduetorisinginterestrates.Asaresult,globalaveragelevelisedcostsofenergy(LCOEs)foronshorewindandsolarPVareexpectedtoremain10-15%above2020levelsin2024.SolarPVandwindLCOEindexbasedonaverageannualinputcosts,2018-2024IEA.CCBY4.0.Notes:“Other”includesremaininginvestmentcosts,includingothercommodities,labour,energy,manufacturingprocesses,constructionetc.LCOE=levelisedcostofenergy.WACC=weightedaveragecostofcapital.LCOEindexcalculationsarebasedonWACCof4.5%in2020-2022and5.5%in2023-2024.Analysedcommoditiesincludesteel,copper,aluminiumandpolysilicon.Technologyimprovementimpactisbasedonhistoricaltrends.ThedataexcludesChina.InitialinvestmentaccountsforthemajorityofsolarPVandwindpowerplantgenerationcosts,asoperationsandmaintenanceexpendituresarelow.Inlate2020,thepricesofmajorinputssuchassteel,copper,aluminiumandpolysiliconbegantorisesharply,asdidfreightandlandtransportcosts,duetosupplychainchallengesandgrowingdemandduringthepostCovid-19globaleconomicrebound.Atitshighestpointin2022,theaveragemonthlypriceofpolysilicon–acrucialmaterialforcrystallinesiliconsolarPVcellproduction–wasfourtimeshigherthanatthebeginningof2020.Thepriceofsteel,themainconstructionmaterialforbothutility-scalePVandonshorewindplants,increased75%inChina,160%inthe020406080100120140160201820192020202220232024LCOE(2020=100)WindonshoreOtherCommodities,logisticsFinancingCommodities,logisticspricechangeTechnologyimprovementWACCincrease020406080100120140160201820192020202220232024PVutility-scaleRenewableEnergyMarketUpdateJune2023PAGE58IEA.CCBY4.0.UnitedStatesand270%inEurope,whilecopperandaluminiumbecame60-80%moreexpensive.Thehighestgrowthwasinfreightrates,whichrosealmostsixfold.In2022,theshareofmaincommoditiesandcostsassociatedwithtransportationaccountedforanestimated30-35%ofoverallCAPEXforutility-scaleandwindprojects,twiceasmuchasin2020.Takingthefullimpactofhigherpricesonprojectdevelopmentcostsintoaccount,andtheusualannualcostreductionsfromcontinuedtechnologicalinnovation,theresultingLCOEincreasefor2022isestimatedat15-20%forthesetechnologies.Monthlycommodityandfreightpriceindexes,2020-2023IEA.CCBY4.0.Notes:SteelUnitedStates:NorthAmericasteelplatespotpriceex-works.SteelChina:Chinadomestic20-mmsteelplateaveragespotprice.Polysilicon:BNEFsolar-gradesiliconspotprice.Copperandaluminium:LondonMetalExchange3-monthforwardcontractprice.Freight:WCIDCOMPIndex.In2023,commoditypriceshavefallensignificantlybelowtheirpeaks,buttheyremainelevatedcomparedwith2020.AveragepricesinQ12023comparedwithJanuary2020werehigherbyover200%forpolysilicon;by100%forsteelintheUnitedStatesandEurope;andby20-40%foraluminium,copperandfreight.Inmanycases,commoditypricechangeshavenotyetbeendirectlyreflectedbyequipmentmanufacturersbecauseoftheirsupplycontracts.However,manysuppliersmayattempttorecovertheirincreasedcostsbyraisingpricesinupcomingyears,leadingtohigherinvestmentcosts.Inaddition,macroeconomicrisksintheglobaleconomy–associatedwithrisinginflation,higherinterestratesandtheenergycrisiscausedbyRussia’sinvasionofUkraine–leadtoahighercostofcapital,includingforrenewableenergyprojects.Inrealterms(i.e.excludingtheimpactofinflation),theweightedaveragecostofcapital(WACC)isexpectedtoincreaseinmostlargesolarPVandwindmarkets,excludingChina.Thehighercostofcapitalcouldoffsetmostofthecost0100200300400500600700135791113579111357911132020202120222023Priceindex(Jan2020=100)SteelUnitedStatesSteelChinaPolysiliconCopperAluminiumFreightRenewableEnergyMarketUpdateJune2023PAGE59IEA.CCBY4.0.decreasesresultingfromlowercommoditypricesandfurthertechnologyinnovationinthenexttwoyears.Consequently,theaverageLCOEforutility-scalePVandwindcouldbe10-15%higherin2024thanitwasin2020.AlthoughtheircostscontinuetoexceedpreCovid-19levels,solarPVandonshorewindremainthecheapestoptionfornewelectricitygenerationinmostcountries.Furthermore,powercontractsfortheendof2023andinto2024intheEuropeanUnion,theUnitedStates,Japan,AustraliaandIndiaallindicatewholesaleelectricitypricestwotothreetimesabove2020averages,increasingtheeconomicattractivenessofwindandsolarPV.Continuedinnovationisalsoexpectedtoreducecostsfurther,improvingcompetitivenessevenwithexistingfossilfuel-firedplants.RenewableEnergyMarketUpdateJune2023PAGE60IEA.CCBY4.0.DohighersharesofwindandsolarPVgenerationalwaysimplymorecurtailment?Asthepenetrationofvariablerenewableenergy(VRE)increases,theshareofcurtailedwindandsolarPVgenerationisalsoontheriseinmanymarkets.Thistrendisparticularlyevidentinareaswheremajorgridinfrastructureinvestmentsand/oradvancedmarketdesignandregulationarenotkeepingpacewithVREdeployment.VREsharesingenerationandtechnicalcurtailmentforselectedcountriesIEA.CCBY4.0.Notes:Datapointsrepresentofficiallyreportedcurtailedorconstrainedenergyandcombinesvariousschemesdependingonthecountry.VREreferstosolarPVandwindunlessotherwisespecified.Italyincludesonlywind.SpainincludesPV,wind,CSPandbiomasstechnologies.TheUnitedKingdomincludesonlywind.“Technicalcurtailment”referstothedispatch-downofrenewableenergyduetonetworkorsystemreasons.Dispatched-downenergyduetoeconomicormarketconditionsisnotincludedinthischart.Sources:AustralianEnergyMarketOperator(AEMO),QuarterlyEnergyDynamics(multiplereleases);CoordinadorEléctricoNacionaldeChile(CEN),ReduccionesdeenergíaeólicaysolarenelSEN(multiplereleases);NationalBureauofStatisticsofChina(NBS),ChinaEnergyDatasheet2000-2021;);Bundesnetzagentur,MonitoringReport2022;GestoreServiziEnergetici(GSE),Rapportoattivita2021;EirGrid,RenewableDispatch-Down(ConstraintandCurtailment)reports(multiplereleases);HokkaidoElectricPowerNetwork,Areasupplyanddemanddata(multiplereleases);TohokuElectricPowerNetwork,Areasupplyanddemanddata(multiplereleases);TEPCOPowerGrid,Areasupplyanddemanddata(multiplereleases);ChubuElectricPowerGrid,Areasupplyanddemanddata(multiplereleases);HokurikuElectricPowerTransmission&Distribution,Areasupplyanddemanddata(multiplereleases);KansaiTransmissionandDistribution,Areasupplyanddemanddata(multiplereleases);ChugokuElectricPowerTransmission&Distribution,Areasuppyanddemanddata(multiplereleases);ShikokuElectricPowerTransmission&Distribution,Areasupplyanddemanddata(multiplereleases);KyushuElectricPowerTransmissionandDistribution,Areasupplyanddemanddata(multiplereleases);OkinawaElectricPower,Areasupplyanddemanddata(multiplereleases;RedEléctricadeEspaña(REE),I3DIA(multiplereleases);CaliforniaIndependentSystemOperator(CAISO),ProductionandCurtailmentsdata(multiplereleases;RenewableEnergyFoundation,BalancingMechanismWindFarmConstraintPayments.AlthoughVREcurtailmentisincreasingoverall,theshareofcurtailedwindandsolarPVgenerationremainsrelativelylow,rangingfrom1.5%to4%inmostlargerenewableenergymarkets.However,higherVREsharesdonotnecessarilyresult0%2%4%6%8%10%12%14%16%18%0%5%10%15%20%25%30%35%40%45%Rewableenergycurtailment(%)VREshare(%)AustraliaChileChinaGermanyIrelandItalyJapanSpainUS-CaliforniaUnitedKingdomRenewableEnergyMarketUpdateJune2023PAGE61IEA.CCBY4.0.inrisingcurtailmentrates,ascountriescaneffectivelymanagerenewableenergyintegrationchallengeswithtimelymeasures.TheimportanceofgridinfrastructureInadequateinvestmentingridinfrastructureremainsachallengeworldwidenotonlyforfastergrowthinnewwindandsolarPVcapacity,butalsoformaximisinggenerationpotentialfromexistingpowerplants.China'slarge-scaleinvestmentingridinfrastructure(USD75billiononaverageperyearsince2010)hassignificantlyreducedVREcurtailment,decreasingitfrom16%in2012tolessthan3%lastyear.Duringthisperiod,Chinaincreasedtheinterconnectioncapacitybetweenwindandsolarresource-richnorthernandnorthwesternprovincestoloadcentresinthesouthernandeasternregions.InvestmentintransmissionanddistributiongridsforselectedcountriesIEA.CCBY4.0.Source:IEA,WorldEnergyInvestment2023.GermanyhasexperiencedincreasingVREcurtailmentoverthepastdecade,butthistrendhasstabilisedsince2015.Whilemostofthecountry’swindcapacityissituatedinthenorth,majorindustriesandloadcentresareinthesouth,leadingtoageographicalmismatchbetweenrenewablegenerationandconsumption.Thismismatchresultsincurtailment,particularlywhenthecountrycannotexportitsrenewableelectricityduetolimitedinterconnectioncapacity.Whilemajorgridinvestmentdecisionstostrengthenthenorth-southcorridorarestillpending,Germanyhasimplementedsmaller-scalegridexpansions.Thesehavehelpedthecountryreduceonshorewindcurtailmentby2percentagepointssince2015,butoffshorewindcurtailmentincreasedfromlessthan1%toaround8%overthesameperiod.010203040506070809010020152016201720182019202020212022ChinaUSDbillionTransmissionDistribution02468101220152017201920212015201720192021201520172019202120152017201920212015201720192021AustraliaGermanyItalySpainUnitedKingdomRenewableEnergyMarketUpdateJune2023PAGE62IEA.CCBY4.0.InChile,thegeographicalmismatchbetweenVREdeploymentanddemandhasresultedinhighcurtailmentrates.Thecountry'sstrongsolarandwindpotentialislocatedprimarilyinthenorth,whereasmostdemandisconcentratedinthecentre.Toaddressthismismatch,Chilemergeditscentralandnorthernelectricitysystemsin2017,resultinginaninitialreductionfrom14%curtailmentthatyearto2%afewlater.However,thistrendwasnotsustained,withVREcurtailmentreachingalmost6%in2022,aswindandsolarPVcapacitymorethantripledsince2017,whilethecommissioningofadditionalgridcapacityfaceddelays.In2022,theUnitedKingdomgeneratedone-fourthofitselectricityfromwindpower,mainlyfromonshorewindfarmsinScotlandandoffshoreinstallations.However,mostelectricitydemandisinthecountry’ssoutheast.Thishasledtoincreasedcurtailment,withtheamountreachingalmost4TWhin2022.Curtailmentratesremainedstableataround3%inthesecondhalfofthe2010sbuthavesinceincreasedduetolimitedtransmissioncapacityattheScottish-Englishinterface.Toaddressthischallenge,thenationalenergyregulatorplanstobuildanhigh-voltagedirectcurrent(HVDC)linkontheeastcoasttoincreaseinterconnections.PolicyandsystemplanningTosuccessfullymanagerisingVREintegration,itiscrucialtonotonlymakephysicalchangestothepowersystem,buttoadjustsystemplanning.China’ssuccessinreducingcurtailmentstemsnotonlyfromgridcapacityexpansionbutfromthegovernmentchangingFITremunerationratestoprovidehigherincentivesinprovinceswithlimitedsystemintegrationchallenges,amongothermeasures.Asleadtimesforgridinvestmentcanbelong,policiespromotingelectricitystoragesystemscanalsobeusefultorelievehighcurtailmentrates.Chile's2022lawonelectricitystorageandelectromobilityaimstotacklerenewableenergycurtailmentbyincentivisinginstallationofbatteriesandenablingelectricvehiclestoinjectenergyintothedistributiongrid.Meanwhile,IrelandhasallocatedbudgetaryfundsforstorageinfrastructureinitsRenewableElectricitySupportScheme(RESS)andhasbeguntoawardprojectsthroughauctionsbyprovidingthemlong-termrevenuecertaintyandreducedfinancingcosts.MarketdesignandoperationIntegratingVREsourcessuchaswindandsolarPVhasnecessitatedchangestotraditionalpowermarkets,bothintheirdesignandtechnicalregulation.SomecountriesareupdatingtheirmarketdesigntofacilitatetheVREparticipationintheirpowermarkets,forinstancebyshorteningtheimbalancesettlementperiod,reducingthegateclosuretime,andincreasingthegeographicalgranularityofthemarket.Furthermore,renewableenergygeneratorscouldalsobeincludedinRenewableEnergyMarketUpdateJune2023PAGE63IEA.CCBY4.0.intradaymarkets(orbalancingmarkets).Operationalmeasurestoincreasesystemflexibilityinvolveloweringthethermalfleet’sminimumoperationalrequirementsandenhancingforecastingmethods.IrelandhasincreaseditsSystemNon-SynchronousPenetrationlimitandreducedminimumnegativerampingreserverequirementswhileofferingwindfarmsfinancialincentivestovoluntarilyreducetheiroutputduringhigh-generationperiods.Chileisalsoconsideringoptionstofurtherreducethermalplants’minimumoperationrequirementstoincreasesystemflexibility.AustraliatechnicalandeconomiccurtailmentIEA.CCBY4.0.Notes:“Technicalcurtailment”referstothedispatch-downofenergyduetonetworkorsystemreasons;“Economiccurtailment”referstothequantitiesbidoutofdispatchinbalancingandintradaymarkets.SpainincludesPV,wind,CSPandbiomasstechnologies.Sources:AustralianEnergyMarketOperator(AEMO),QuarterlyEnergyDynamics(multiplereleases).EnablingVREtocompeteinbalancingmarketswouldprovideadditionalincomeforrenewablegeneration,whileexposuretoimbalancepenaltieswouldincentiviseproducerstosmooththeiroutputandimproveforecasting.CaliforniahasintroducedanEnergyImbalanceMarket(EIM)tobalancesupplyanddemandtocurbrapidlyincreasingcurtailmentrates.Thisapproachrelatestotheconceptofeconomicdispatch-down,whereingeneratorsmaybidoutofdispatchduringtimeswhenhighlevelsofrenewableenergyareavailableanddemandislow,whichcouldresultinzeroornegativeprices.Forinstance,economiccurtailmentinAustraliahasincreasedsince2017andwasresponsibleforthemajorityofcurtailmentin2021.0%1%2%3%4%5%0500100015002000250020172018201920202021Energycurtailed(GWh)TechnicalcurtailmentEconomiccurtailmentTotalVREcurtailmentshare(%)RenewableEnergyMarketUpdateJune2023PAGE64IEA.CCBY4.0.HowarehighersharesofwindandsolarPVchallengingpowersystems?RapidwindandsolarPVcapacityexpansionispresentingnewpowersystemchallenges,butIEAanalysisofsystemintegrationphasesforvariablerenewableenergy(VRE)ishelpinggovernmentsidentifyrelevantdifficultiesandprioritisemeasurestofacilitateintegration.Since2015,acceleratingVREdeploymenthaspromptedsystemintegrationphaseshiftsinmanycountries,amplifyingchallengesforpowersystemoperatorsandregulators.WhileVREgenerationdidnothavearelevantimpact(phase1)onthepowersystemofVietNamin2015,todaywindandsolarPVoutputisdeterminingtheoperationpatterns(phase3).WindandsolarPVcapacitysurgedfromlessthan500MWin2018to25GWin2022thankstothecountry’sgenerousFITpolicy,causingthenationtojumptwophasesandresultinginrisingwindandsolarPVpowergenerationcurtailment.However,afterexperiencingpowersystemchallenges(includingcurtailment)followingthisunprecedentedexpansion,VietNamphasedoutallincentivesandVREpenetrationisnotexpectedtoincreaseanyfurtherby2024.Variablerenewableenergysharesandphasesforselectedjurisdictions,2015,2022and2024IEA.CCBY4.0.0%10%20%30%40%50%60%70%80%90%100%SolarPVandwindshareinannualelectricitygeneration2015(leftcolumn,indiagonalstripes)2022(rightcolumn,insolidcolour)2024Phase1-NorelevantimpactatsystemlevelPhase2-MinortomoderateimpactonsystemoperationPhase3-VREdeterminesthesystem'soperationpatternPhase4-VREmeetsalmostalldemandinsomeperiodsPhase5-GrowingamountsofVREsurplus(1dayormore)RenewableEnergyMarketUpdateJune2023PAGE65IEA.CCBY4.0.TheUnitedKingdomalsojumpedtwophasesinthesameperiodasaresultofrapidoffshorewindandsolarPVgrowth,transitioningfromVREhavingaminortomoderateimpactonsystemoperations(phase2)toperiodswhenVREmakesupalmostallgeneration(phase4).MultipleEuropeancountries(e.g.Germany,SpainandIreland)alsoreachedphase4in2022,forthemaone-phaseincreasefrom2015.AcceleratingwindandsolarPVpowergenerationinthesecountriesfollowingRussia’sinvasionofUkraineindicatesthatVREshareincreasesfor2024willbehigherthanpreviouslyexpected.Forinstance,Spain’sannualVREshareisforecasttoincreasebynearly15percentagepointstoalmost50%,enlargingitsVREsurplus,whichcanbeonlypartiallyexportedtotherestofEuropeduetolimitedinterconnectioncapacitywithFrance.Denmark’spowersystemshavebeenmanaginganover-50%VREsharesince2015thankstothecountry’shighinterconnectioncapacitieswithSweden,Norway,GermanyandtheNetherlands.However,theforecastfor2024indicatesthatDenmark’sVREsharecouldreachalmost90%,intensifyingsystemintegrationchallenges.Consideringthecountry’ssizerelativetoitsinterconnections,itsabilitytotackleupcomingchallengeswillalsodependontheVREsituationinneighbouringcountries.ThetrajectoryofEuropeancountriesintheIEAassessmentofsystemintegrationphaseshighlightstheimportanceofaddressingupcomingintegrationchallengesassoonaspossible.Manymajoreconomies,includingBrazil,China,FranceandTürkiye,havemultipliedtheirwindandPVcapacitybyfourtofivetimessince2015andhavebeguntoexperiencemoderatesystemoperationimpacts.AsalltheselargecountrieshaveambitiousVREexpansionplans,theywillneedtoplanforadditionalflexibilityinvestmentstoaccommodategreaternetloadvariability.RenewableEnergyMarketUpdateJune2023PAGE66IEA.CCBY4.0.WillglobalsolarPVandwindtechnologymanufacturingcapacitybeadequatetomeetNetZerodemandin2030?GlobalsolarPVmanufacturingcapacityisexpectedtoreachalmost1000GWin2024,adequatetomeetannualIEANetZeroby2050demandofalmost650GWin2030.However,windequipmentmanufacturingcontinuestoexpandmoreslowly,suchthatitmaynotbeabletokeeppacewithdemandgrowthunderthisscenariothrough2030.WhileChinawilldominateglobalwindandsolarPVmanufacturingcapacityintheshortterm,PVprojectannouncementsindicatesupplychaindiversification.WithPVmanufacturingcapacitytomorethandoubleby2024,theindustryisrushingheadlongintoasupplyglutChinareaffirmeditsdominantpositionlastyear.In2022,globalsolarPVmanufacturingcapacityincreasedbyover70%toreachalmost450GW,withChinaaccountingforover95%ofnewfacilitiesthroughoutthesupplychain.In2023and2024,globalsolarPVmanufacturingcapacityisexpectedtodouble,withChinaagainclaimingover90%ofthisincrease.Meanwhile,theforecastexpectssignificantwafer,cell,andmodulemanufacturingexpansionintheASEANregionthroughinvestmentsfromChinesemanufacturers.Forthefirsttime,arelativelylargedeploymentofmanufacturingplantsisalsoforecastforIndiaandtheUnitedStates,thankstoindustrialpoliciesintroducedlastyear.AnnouncednewPVmanufacturinginIndia,theUnitedStatesandEuropereaches30GWforpolysiliconand100GWformoduleassembly,withsignsofdiversificationemergingGovernmentsintheUnitedStates,EuropeandIndiahavebeguntoprioritisesolarPVsupplychaindiversification,implementingpoliciessuchasIndia’sProductionLinkedIncentive(PLI)schemeandtheUSInflationReductionAct(IRA)toprovideRenewableEnergyMarketUpdateJune2023PAGE67IEA.CCBY4.0.directfinancialincentivesfordomesticmanufacturerstoincreasetheircompetitivenesswithChineseones.Asaresult,over120%morenewsolarPVmanufacturingprojectswereannouncedfromNovember2022toMay2023,topotentiallycreatenationalPVsupplychainswithover20GWofcapacityineachregion.SolarPVmanufacturingcapacitybyregionandcomponent,2021-2024IEA.CCBY4.0.Notes:APAC=AsiaPacificregionexcludingIndiaandChina.RoW=restofworld.Manufacturingcapacityin2027isthevalueexpectedbasedonannouncedpoliciesandprojects.Manufacturingcapacityreferstoanameplateyear-endvalue.Sources:IEAanalysisbasedonBNEF,SolarPVEquipmentManufacturersdatabase(accessedApril2022),IEAPVPS,SPVMarketResearch,RTSCorporationandPVInfoLink.However,differencesinpolicydesignbetweenIndiaandtheUnitedStateshaveledtothepromotionofdifferentPVproductionsegments.WhileIndia'sPLIfocusesonintegratedfacilities,theIRAprovidestaxcreditsforvariousPVsegments,leadingtomostlysegment-specificprojectannouncements.NewmanufacturingcapacityintheEuropeanUnionmakesupjust14%ofannouncementstrackedbytheIEAsinceAugust2022.TheEUGreenDealIndustrialPlanfortheNet-ZeroAgeandtheNet-ZeroIndustryActtargetspecificpercentagesofdomesticsolarPVmanufacturing,butdonotyetincludespecificincentives.Inaddition,highindustrialpowerpriceshavemadeitmoreexpensivetomanufacturesolarPVequipmentinEUcountries.Withoutamanufacturing0%20%40%60%80%100%020040060080010001200GWChina2021total2022additions2023additions2024additionsShare2021(%)Share2024(%)020406080100120GWAPAC0%5%10%15%20%25%30%India020406080100120GWNorthAmericaEurope0%5%10%15%20%25%30%RoWRenewableEnergyMarketUpdateJune2023PAGE68IEA.CCBY4.0.policyordomestic-contentpremiums,manufacturingsolarPVequipmentintheEuropeanUnionislesscompetitivethaninIndiaortheUnitedStates.AnnouncedsolarPVmanufacturingcapacitybyregionandcomponent,2022-2023IEA.CCBY4.0.Notes:“Integrated”indicatesthreeormoremanufacturingprocessesinonesingleplant.ThebudgetforIndia’sPLIschemewasannouncedinFebruary2022,withprojectcapacitiesforthesecondphaseawardedinMarch2023.Integrated,moduleandthin-filmmanufacturingplantsmakeupnearly85%ofnewfacilities,whilecapacitylagsfordedicatedmanufacturingfornewcells(lessthan1%),ingotsandwafers(9%)andpolysiliconproduction(6%).Integratedmanufacturingplantsproducethreeormorecomponents,butnearly80%ofthisannouncedcapacitydoesnotincludededicatedpolysiliconproduction.Inaddition,whilenewmoduleassemblyplantswillhaveacapacityofnearly30GW,thisamountisnotmatchedbycapacityannouncedforothercomponents,especiallycellsandpolysilicon.ThesenewplantswillthereforestillneedtoimportcellsandothercomponentsfromChina.ChinaleadssluggishgrowthinwindequipmentmanufacturingasWesternequipmentsuppliersstrugglefinanciallyIn2022,manufacturingcapacityforthemainwindpowercomponents(nacelles,towersandblades)remainedrelativelystableat110-120GW.However,globalproductioncapabilitiesareanticipatedtoincreaseinlinewithdemandoverthenextthreeyears,resultinginapproximately120-140GWofcapacityby2025,aboutone-thirdofwhatisrequiredin2030tomeetannualIEANetZeroby2050demand.UnlikesolarPVmanufacturing,windequipmentproductionislessconcentratedgeographically,assuppliersprefertolocateproductionplantsclosetodemand05101520253035404550IntegratedThinfilmModulesCells/modulesCellsWafers/ingotsPolysiliconGWIndiaUSEuropeDecember2022RenewableEnergyMarketUpdateJune2023PAGE69IEA.CCBY4.0.centresduetothehighcostsandrisksassociatedwithtransportinglargeandfragilecomponentsoverlongdistances.Until2025,Chinaisexpectedtoremainthelargestmanufacturinghubforallmainwindenergycomponents,commensuratewithitsgrowingdemand.However,theUnitedStates’firstmanufacturingplantsforoffshorewindequipmentarealsoanticipatedtocomeonlineinthisperiodtosupportplannedoffshorewindfarmdeployment.Windequipmentmanufacturingcapacitybyregionandcomponent,2022-2025IEA.CCBY4.0.Notes:APAC=AsiaPacificregionexcludingIndiaandChina.RoW=restofworld.Manufacturingcapacityreferstoanameplateyear-endvalue.Source:IEAanalysisbasedonBNEFandWoodMackenzie.020406080100'22'25'22'25'22'25'22'25'22'25ChinaAPACNorthAmericaEuropeRoWGWOnshoreDemandNacellesTowersBlades051015202530'22'25'22'25'22'25'22'25'22'25ChinaAPACNorthAmericaEuropeRoWGWOffshoreRenewableEnergyMarketUpdateJune2023PAGE70IEA.CCBY4.0.Whereweregovernmentsabletorelyonbiofuelstosecureenergysuppliesduringthe2022energycrisis?Biofuelproductionexpandedincountrieswithreadilyavailable,affordablefeedstocks,spareproductioncapacityandflexiblepolicyinstruments.Forinstance,Argentina,IndiaandIndonesiaallacceleratedbiofuelusein2022helpingreducefossilfuelimports.However,inmanycountriesbiofuelpricesclimbedmorequicklythangasolineanddieselprices,contributingtohighertransportationcosts.Tomitigateincreasesintransportfuelcosts,Brazil,SwedenandFinlanddelayedplannedincreasestobiofuelblendingobligationsin2022.Forecastchangestobiofueldemandgrowth,2022(2021forecastvs.currentforecast)(left)Avoidedgasolineanddieseldemandandfossilfuelimportsavings,2021-2022(right)IEA.CCBY4.0.Notes:Amountsofavoidedgasolineanddieseldemandarebasedonenergycontentfordomesticallyproducedbiofuels.Gasolineanddieselimportsavingsareestimatesbasedonaverageannualpre-taxmarketpricesforgasolineanddieselin2022.Estimatesincludeanyexportrevenuesfromadditionaloilsalesforoil-exportingcountries.Inthiscase,countriesbenefitedfromadditionaloilexportsduetolessdomesticdemand.Globally,biofuelshelpedavoidconsumptionof2millionbarrelsofoilequivalentperday(mboe/d)in2022,whichaccountsfor4%ofglobaltransportsectoroildemand.Mostofthesefuelswereproduceddomestically,allowingcountriestosaveonimportcosts.Asaresult,countriesavoidedoilimportcostsofUSD90billionin2022,up70%from2021.Domesticproductionofbiofuelsinemergingmarketsalone(mainlyBrazil,IndiaandIndonesia)avoidedUSD38billionofimportcosts.Theseestimatesdonotaccountfortherelativepricesofbiofuelsand02040600.00.30.60.91.21.52021202220212022EmergingeconomiesAdvancedeconomiesExport/importsavings(billionUSD)Avoidedoildemand(mboe/d)AvoideddieseldemandAvoidedgasolinedemandFossilfuelimport/exportsavings030006000900012000150002022PreviousforecastDeclinesIncreases2022ActualDemand(millionlitres/yr)OtherFinlandSwedenArgentinaIndonesiaIndiaFranceBrazilethanolBrazilbiodieselRenewableEnergyMarketUpdateJune2023PAGE71IEA.CCBY4.0.fossilfuelsineachofthesecountries,northebenefitsofincreasedlocaleconomicactivitythatdomesticbiofuelproductioncanstimulate,includingintheagriculturesector.Biofuelsalsocontinuedtodelivergreenhousegas(GHG)reductionbenefits,helpingcountriesmaintainthepaceoftheircleanenergytransitionsinthetransportsector.Somemarketsincreasedbiofuelproductiontomitigatehighpricesandaddresssupplyconcerns…Argentina,IndiaandIndonesiaallacceleratedtheirbiofuelproductionin2022becauseoftheirreadilyavailabledomesticfeedstocks,affordablebiofuelsupplies,availablecapacity,flexiblepolicyinstrumentsandhighdependenceonfuelimports.TheArgentiniangovernment,forinstance,respondedtoconcernsofdieselshortagesbyincreasingitsbiodieselblendingrateandofferingincentives.Thesemeasuresboostedbiodieseluse80%from2021to2022,offsettinganestimated6.5%ofArgentina’sdieseldemand.InIndonesia,higher-than-expecteddieseldemandpromptedthegovernmenttoincreaseitsbiodieselallocation,expandingbiodieselsuppliesby6%aboveplannedbiodieselallocationsfromearlierin2022.InIndia,ethanolsuppliesexpandedmorequicklythanpreviouslyexpected,climbingto10%oftotalgasolinesupplyin2022.EthanolinIndiaisproducedmostlyfrommolassesandsugarcane,forwhichpricesdidnotriseasmuchasforotherbiofuelfeedstocks.InEurope,Francealsoexpandeditsethanolusagethroughacombinationofgeneroustaxbreaksforhighethanolblends(E85)andfinancialsupportforconversionkitstoallowexistingvehiclestorunonE85.TheseeffortshelpedboostE85shareofgasolineuseby2percentagepointsinoneyear,drivinga10%increaseinethanolconsumption.…butoverallbiofueldemandgrowthdeclinedby40%duringtheenergycrisisBytheendof2022,however,fivegovernmentshaddelayedplannedpolicymeasurestoincreasebiofueluseoverconcernsthesepolicieswouldincreasetransportcosts.Thesefivechanges(Brazil,Sweden,Finland,CroatiaandLatvia)accountforthemajorityofthe40%drop.Biofuelconsumptionstillgrew5%in2021-2022,similartoannualgrowthoverthelastdecadebutwellbelowourexpectationsfor2022beforetheenergycrisis.Brazil’sdelayinimplementinghigherbiodieselblendingratesisthemainfactor:in2021andagainin2022,itdelayedafive-percentage-pointincreasetoitsbiodieselblendingmandate,RenewableEnergyMarketUpdateJune2023PAGE72IEA.CCBY4.0.keepingblendingat10%.Itnowplanstoslowlyincreasetheblendingmandateto15%by2026.FinlandandSwedenalsofrozetheirrespectivepoliciesuntil2023.Lastyear’sforecasthadalsoexpectedBrazil’sethanoldemandtobehigher.Althoughthecountrydidmaintainits27%ethanolblendingmandate,securingaportionofethanoldemand,discretionaryblendingdeclinedbecauseethanolwasmoreexpensivethangasolineatsomepointsduringtheyear.Brazilalsomodifieditsfueltaxratestokeepgasolinepriceslow,whichprovidedlesssupportforethanolthanusual.In2022,theUnitedStatesapprovedtheuseof15%ethanolblendsyear-roundinanefforttoreducepumpprices.However,theimpactonethanolusewaslimitedbecauseonlyafewpumpscouldhandlethe15%ethanolblend.RenewableEnergyMarketUpdateJune2023PAGE73IEA.CCBY4.0.Willenergysecurityconcernsdrivebiofuelgrowthin2023-2024?Energysecurityreturnedasaprimaryrationaleforexpandingbiofuelpolicieslastyear.SimilartotheforecastbeforeRussia’sinvasionofUkraine,ourupdatedforecastexpects11%(18000millionlitres)ofnewdemandby2024,supportedbypolicieswithenergysecurityobjectives.However,asin2022,onlyafewmarketsareactivelytryingtoacceleratedeploymentby2024.Inadvancedmarkets,newpoliciesarenotlikelytoinfluenceproductionuntilafter2024,andhighprices,feedstockconcernsandtechnicalconstraintslimitadditionalgrowthbeyondour2021forecast.Emergingmarketstoleadgrowthin2023-2024Nearlytwo-thirdsofbiofueldemandgrowthwilloccurinemergingeconomies,primarilyIndia,BrazilandIndonesia.Allthreecountrieshaveampledomesticfeedstocks,additionalproductioncapacity,relativelylowproductioncostsandapackageofpoliciestheycanleveragetoincreasedemand.Policiesinallthreecountriesarealsorootedinenergysecurityconsiderations,asgreaterbiofuelusewilloffsetsomeoilimports.Indiaimported87%ofitscrudeoilsupplyandIndonesianetimportsmadeup20%ofsupplyin2021.Brazilisanetcrudeexporterbutstillimported19%ofitsgasolineanddieselin2021.Biofueldemandgrowthbyfuelandregion,2022-2024IEA.CCBY4.0.-2000-100001000200030004000500060007000EthanolBiodieselRenewabledieselBiojetfuelEthanolBiodieselRenewabledieselBiojetfuelAdvancedeconomiesEmergingeconomiesDemand(millionlitres/yr)OtheremergingIndiaIndonesiaBrazilOtheradvancedEuropeCanadaUnitedStatesRenewableEnergyMarketUpdateJune2023PAGE74IEA.CCBY4.0.Indonesiaalsoannouncedtwoinitiativestoacceleratebiofueldeploymentattheendof2022.First,itplanstoincreaseitsbiodieselblendingmandateto35%in2023,upfrom30%in2022.Second,itreleasedanEthanolforEnergySecuritystrategytoincreaseethanoluse,butimplementationdetailsremainlimited.Brazilplanstoreinstateaclimbingbiodieselblendingtargettoreach15%blendingby2024,upfrom10%in2022.Ethanoldemandwillexpandaswell,butmoreslowlythananticipatedinour2021pre-energy-crisisforecastbecausesugarpriceshaverisen.Dependingonwhichoptionismoreprofitable,sugarproducersinBrazilcanswitchsomeproductionfromsweetenerstoethanolorthereverse.Thecountryisalsoconsideringa2.5%increasetoitsmandatoryethanolblendingrequirement,butnodatehasbeenreleased.In2022,Indiadidnotannounceanynewbiofuelpolicies.However,thecountryisstillcommittedtoitstargetofachieving20%ethanolblendingby2025,whichwilldrivedemandgrowthinupcomingyears.Renewabledieselgrowthremainsstronginadvancedeconomies,butoverallbiofueldemandexpansionwillnotaccelerateby2024Biofueldemandisprojectedtoriseby6%or5700millionlitresbetween2022and2024inadvancedeconomies,withmostoftheincreaseoccurringintheUnitedStatesandEurope.TheRenewableFuelStandardandtheInflationReductionActintheUnitedStatesareintendedtoachievevariousgoals,includingenhancingenergysecurity.Meanwhile,theEURenewableEnergyDirective(RED),whichmemberstates’governmentshaveimplementedthroughdomesticpolicies,aimstoachieve14%renewablecontentintransportfuelsby2030.OneofthereasonsfortheRED’sinitialimplementationin2003wastodecreaseoilimportreliancetostrengthenEUenergysecurity.In2022,thisrationalewasreiterated,withtheREDadditionallyconsideredameasuretoreducebothenergypricesandEUdependenceonimportedfossilfuels.Nevertheless,wedonotexpectbiofueldemandtoaccelerateinresponsetoenergysecurityconcernsineithertheEuropeanUnionortheUnitedStatesduring2023-2024.AlthoughtheEuropeanUnionisplanningtoincreaseitstargetedshareofrenewableenergyintransportfrom14%to29%by2030,afinalagreementhasyettobereached,andmembergovernmentswouldneedtimetoaligntheirdomestictargets.Ethanol,biodieselandrenewabledieselpricesalsoremainabovethoseofgasolineanddiesel(seenextsection),sobiofuelusecanbelessexpensiveforconsumersonlyifitissubsidised.Furthermore,over40%oftheRenewableEnergyMarketUpdateJune2023PAGE75IEA.CCBY4.0.EuropeanUnion’sbiodiesel(orthefeedstockstoproduceit)wereimportedin2022.Renewedconcernsoverthedifficultyofverifyingthesustainabilitycredentialsoftheseimportspresentsadditionaldoubtsaboutincreasingblendingrequirements.IntheUnitedStates,theIRAprovidesproductionsupportto2027andinvestmentsupportto2031.Wedonot,however,expectanotablechangeinproductionordemandto2024,sinceprojectstakemorethantwoyearstocompleteandwehadassumedthebiodieselblendingcreditavailablein2021wouldremaininplace.TheEnvironmentalProtectionAgency(EPA)hasreleasedproposedvolumeobligationsfor2023through2025,buttheamountsforbiodieselandrenewabledieselarelowerthanourcurrentforecast.Iftheproposedvaluesstand,itwilllikelyleadtoadecreaseinourforecast.TheEPAnotedthat“feedstocklimitationsaremorelikely[thancapacity]tolimitrenewabledieselsupply”.Biofuelpoliciesandenergysecurityrationalebyregion,withinfluenceonforecastCountry/regionEnergysecuritypolicylinksandchangesProductionchangein2023-2024comparedto2021forecastExplanationUnitedStatesWiththeRenewableFuelStandard(RFS),congressintendedtherenewablefuelprogrammetoprovidegreaterUSenergysecurity.TheintentoftheInflationReductionAct(IRA)istotakethemostaggressiveactionevertoconfronttheclimatecrisis,strengtheningtheUSeconomyandenergysecurity.On28April,theUSgovernmentprovidedanemergencywaiverforyear-roundE15blending.NochangeThe2021forecastassumedthebiodieselblendercreditwouldcontinueto2024asithadbeenextendedseveraltimesinthepast.TheIRAisthereforeunlikelytodriveadditionalvolumesintheforecasttimehorizon.TheRFShasnotyetbeensetto2024.Proposedvaluesforbiodieselandrenewablediesel,ifimplemented,wouldlikelydowngradeourforecast.BrazilBrazilintroduceditsfirstethanolblendingrequirementin1976.Sincethenthebiodieselblendingprogrammehasaimedtoreducedieseluseandeffectuatesavingssustainablywhilepromotingsocialinclusion,guaranteeingcompetitiveprices,qualityandsupplies,andenablingbiodieselproductionfromvariousoilsourcesindifferentregions.TheRenovaBioprogrammerecognisesthestrategicroleofallbiofuelsincontributingtoenergysecurity,marketpredictabilityandthemitigationofGHGemissions.DeclineThe2021forecastincluded15%biodieselblendingin2024,whichtheBraziliangovernmenthaddelayedto2026.Werevisedtheethanolforecastdownslightlytoreflectlowerblendingin2022andthepotentialforhighsugarpricesin2023,whichwoulddivertsomesugartosweetenermanufacturingratherthanethanolproduction.RenewableEnergyMarketUpdateJune2023PAGE76IEA.CCBY4.0.Country/regionEnergysecuritypolicylinksandchangesProductionchangein2023-2024comparedto2021forecastExplanationEuropeanUnionIn2023theEUParliamentandCouncilagreedtonewRenewableEnergyDirective(RED)targets,includinga14.5%GHGor29%renewableenergysharetargetfortransportby2030.TheoverallaimoftheREDistoreduceenergypricesaswellasEUdependenceonimportedfossilfuels.However,Swedenannounceditsintentiontoreduceitsblendingobligationto6%,downfrom7.8%forgasolineand30.5%forbiodiesel.DeclineREDIIIhasnotyetbeenfinalisedanditisunlikelythatmembergovernmentswillbeabletoincorporatenewtargetsthatwouldraisedemandby2024.WealsoassumeFinlandreturntoitsinitialtargetasplanned.Swedenreducesblendingobligationto6%byJanuary2024forgasolineanddiesel.IndonesiaIndonesialauncheditsbiodieselblendingprogrammein2006toensurethecountry’senergysupplysecurity,andin2023itincreaseditsbiodieselblendingmandateto35%toreducedieselimportsandexpenses.IndonesiaalsoannouncedanEthanolforEnergySecurityStrategyin2022.IncreaseIndonesiahassetanallocationforadditionalbiodieselandhastheproductioncapacitytosupportthislevelgrowth.Italsohassurpluspalmoilstocks.WedidnotincreaseethanolblendingsincetherearenodetailsontheEthanolforEnergySecurityStrategy.IndiaIndialauncheditsNationalPolicyonBiofuelsasonepartofafive-prongedstrategytomeetenergysecurityobjectives,withtheprimaryenergysecurityaimofreducingimports.IncreaseIn2022Indiaofficiallyadoptedatargetof20%ethanolblendingby2025.Italsoincreasedguaranteedethanolprices,whichcontributetoahigherforecast.TheUnitedStateshasadditionalethanolcapacity,andethanolpricesarecurrentlyclosetogasolineprices.Topromotesales,theUSgovernmentissuedanemergencywaiverin2022allowingforyear-round15%ethanolsales,andhasdonesoagainfor2023tohelpreducegasolineprices.However,ethanolconsumptioncannotbeboostedquicklybecausecompatibleinfrastructureisrequiredforhigherethanolblends.RenewableEnergyMarketUpdateJune2023PAGE77IEA.CCBY4.0.Willweseelowerbiofuelpricesin2023-2024?Biofuelpricespeakedin2022andhavesincedeclined,butweexpectthemtoremainabovepre-warlevelsinmostmarketsin2023-2024.In2022,biodieselpricesrosebyupto160%andethanolpricesbyupto75%from2019levels.Thesepriceincreasesresultedfromacombinationoffactors,includingtradedisruptions,highenergyprices,highfertilisercosts,andweather-relatedsupplyinterruptionsforprimarybiofuelfeedstocks.Inthefirstfourmonthsof2023,ethanolpricesdeclined7-16%fromthe2022averageandbiodieselpricesdropped15-28%(dependingonthemarket).In2023,USethanolpricesareexpectedtoclimbduetoslightlyhigher-pricedcorn,whichisthecountry’sprimaryfeedstockforethanolproduction.InBrazilandIndia,decade-highsugarpricesarelikelytoputupwardpressureonethanolprices,sinceethanolproductioninbothcountriesreliesprimarilyonsugar.Meanwhile,eventhoughvegetableoilpricesforbiodieselproductionhavefallen27%fromrecordhighsin2022,suppliesremaintight,limitingthepaceandscaleofpricedeclinesinthenexttwoyears.TheriskofhigherpricesduetoRussia’sinvasionofUkrainecontinuestobeaconcern,astheconflictmaydisruptinternationalagriculturaltradeagainthisyear.Ethanolandgasolineprices(left)andbiodieselanddieselprices(right)inselectedmarkets,2019-2023IEA.CCBY4.0.Notes:GasolineanddieselpricesarebasedonreportedIEAdataandexcludetaxes.EthanolandbiodieselpricesarebasedonArgus,IHSMarkitandIEAanalysis.0.00.20.40.60.81.01.2Price(USD/litre)Ethanolvs.gasolineUnitedStatesEuropeBrazilUnitedStatesgasolineEuropegasolineUnitedStatesdieselEuropediesel0.00.40.81.21.62.02.4Biodieselvs.dieselRenewableEnergyMarketUpdateJune2023PAGE78IEA.CCBY4.0.AdvancedbiofuelimportsdrivedownbiodieselcostsinEuropeAsofApril2023,biodieselpriceshadfallenbymorethan40%since2022forseveralreasons,includinglowervegetableoilpricesandincreasedimportsoflower-pricedadvancedbiofuelsandfeedstocks.Advancedbiodieselisproducedfromusedcookingoil,tallow,palmoilmilleffluent,andotherresidues.Inthefirstthreemonthsof2023,importsofadvancedbiofuelsandusedcookingoilfromChinaincreased18%fromthesametimelastyear.InmanyEUmarkets,eachlitreofadvancedbiofuelcanbecountedtwicetowardsblendingobligations,displacingtwolitresofconventionalbiodiesel,reducingoverallbiodieseldemandandcontributingtomoresignificantpricedeclines.Ethanolpriceshavealsodeclinedfrompeaksin2022butremain40%above2019levels.Highsugarprices,apoorharvestofsugarbeets(usedtomakeethanol)andstill-highfarminginputcostsfornaturalgasandfertiliserarecontributingtohigherprices.Ethanoldemandisalsoexpectedtoincreaseby12%to8billionlitresby2024ascountriescontinuetopursuebiofuelobligationsandGHGtargetsinthetransportsector.RenewabledieselgrowthsupportshighervegetableoilpricesintheUnitedStatesWeexpectbiodieselpricestodeclineslightlyin2023/24fromtheirhighsin2022owingtodropsinvegetableoilprices.Thecostofsoybeanoil,forinstance,is12%lowerthisyearthanitwasin2022.Thisdeclineisstillbelowtheglobalaverage,however,partlybecauseexpandingrenewabledieselproductionisboostingdomesticdemandwhilesoybeanoilsupplieshavenotincreased.TheUSDAexpectsrisingrenewabledieseldemandtodisplaceexports,reducingthemby75%in2023.Ethanolpricesarestillhighcomparedwithhistoricallevelsandareexpectedtoremainelevatedin2023.TheUSDAforeseesa9%dropincornproductionfrom2021/22to2022/23whiledemandremainsstable,supporting10%highercornprices.Pricesarethenexpectedtodeclineover2023/24.CornisthedominantethanolfeedstockintheUnitedStates.RenewableEnergyMarketUpdateJune2023PAGE79IEA.CCBY4.0.HighBraziliansugarandsoybeanproductionsupportsdomesticandinternationaldemandincreasesInBrazil,ethanolpricesareexpectedtoincreasein2023duetohigherinternationalsugarpricesandrisingdomesticdemand.Globally,sugarpricessoaredto10-yearhighsinthefirstfourmonthsof2023becausekeyproducingregionssuchasIndiahadloweroutputwhileglobaldemandremainedstable.Ethanolproducedfromcorn,15%ofBrazil’sproduction,mayofferreliefifproductionpricesremainbelowthoseofsugarcaneethanol.Brazil’sbiodieselpricesaredown30%fromlastyearandthecountryexpectsarecordsoybeancrop,whichshouldkeeppriceslow.However,raisingofthecountry’sbiodieselblendingmandatewillcommandanadditional7Mtofsoybeans(5%ofestimatedtotalproductionin2023and9%in2024),contributingtohigherdomesticdemand.Braziliansoybeanexportsarealsoexpectedtoincrease17%(13Mt)fromlastyear,makingupfora60%year-on-yeardropinArgentinianproduction.DroughtsinArgentina,theworld’slargestsoymealandsoybeanoilexporter,haveleftitssoycrusherssearchingfornewsupplies,promptingincreasedimportsfromBrazil.Pricedriversperbiofuelbycountry/regionCountry/regionEthanolBiodieselPricepressureDriversPricepressureDriversUnitedStatesIncreasethendecreaseCornpricesareexpectedtorise10%in2023becauseoflowerproductionandstabledemand,andtoreturntobelow2021/22valuesin2023/24.DecreaseVegetableoilpricesareexpectedtodeclineslightlyin2023/24,althoughgreaterrenewabledieseldemandcouldraiseprices.Higherfinalrenewablefuelstandardvolumeobligationsforrenewabledieselandbiodieselcouldalsoinfluenceprices.BrazilIncreaseSugarpricesareup40%fromDecember2022andareexpectedtostayhighin2023becauseofproductiondeclinesinIndia.Ethanoldemandisalsoexpectedtobe11%higherin2024thanin2022.Brazilisexpectinga6%productionincreasethisyeartohelpcoverethanoldemandandexportDecreasePricesforsoybeanoil,Brazil’sdominantbiodieselfeedstock,aredown27%year-on-yearandproductionisatrecordlevels.Demandincreasesfromthebiodieselmandateandhigherexports,butpricesareexpectedtodeclineoverall.RenewableEnergyMarketUpdateJune2023PAGE80IEA.CCBY4.0.Country/regionEthanolBiodieselPricepressureDriversPricepressureDriversexpansion,anditisalsoconsideringa2.5%increasetoitsethanolblendingrequirement,whichwouldboostdemand.EuropeanUnionIncreaseAlthoughagriculturalinputcostsarestillwellabovepre-energy-crisislevels,theyaredownconsiderablyfrom2022peaks,helpingreducefeedstockcosts.However,sugarpriceshavenearlydoubledfrom2022,raisingthepriceofsugarbeets,adominantfeedstockforEUbiofuelproduction.DecreaseIncreasesinadvancedbiofuelimportsfromChina,whichcountdoubleundertheRenewableEnergyDirective,havereducedusedcookingoilpricesby28%,contributingtoa40%declineinbiodieselprices.However,highimportlevelshaveraisedconcernsthatsuppliesdonotmeetsustainabilityrequirements.Validationoftheseconcernscouldslowthepaceofpricedeclines.RenewableEnergyMarketUpdateJune2023PAGE81IEA.CCBY4.0.Whataregovernmentsandcompaniesdoingtoavoidasupplycrunch,andisitenough?Thenumberofplannedprojectsusingunconventionalfeedstocksisnotenoughtoavoidafeedstocksupplycrunchoverthemediumterm.Evenifeveryproposedprojectisbuiltontime,newproductionpotentialamountstojust4%ofexistingbiofuelproductionglobally.Nevertheless,thankstopoliciesinmajorbiofuelmarkets,theseplannedfacilitiescouldmorethantripleexistingcapacityofplantsusingunconventionalfeedstocksby2030.Beyondinvestinginnewprojects,therenewableenergyindustryisalsohelpingexpandfeedstocksupplychainsbyenlargingtheuseofnewoilseeds.Existingandplannedbiofuelcapacityusingnon-conventionalfeedstocksandincorporatingCCUS,2021-2030IEA.CCBY4.0.Notes:CCUS=carboncapture,utilisationandstorage.MSW=municipalsolidwaste.“Existing”projectsarethosewithoperationalcapacityasoftheendof2022.“Underconstruction”areprojectsbeingbuiltasofQ1-2023.“Projects”arethosewithannouncedfinalinvestmentdecisionsorotherwisehighlylikelytomoveforwardasofQ1-2023.“Underconsideration”coversallotherannouncedprojectswithplannedoperationdatesasofQ1-2023.ThefeedstocksupplycrunchInRenewables2022,wefoundthatraisingbiodiesel,renewabledieselandbiojetfuelproductionwouldlikelyrequiremostavailablesuppliesofusedcookingoilandanimalfatsaswellasasharpincreaseinvegetableoilsuppliesto2027.Althoughethanolfeedstockssuchassugarandcornareunderlesspressure,feedstockdiversificationisultimatelynecessaryforallbiofuelpathwaysonanetzerotrajectory.0100020003000400050006000CellulosicOtherNoveloilsAg,forestandMSWAlcoholtojetfuelEthanolBiodiesel,renewabledieselandbiojetfuelVolume(millionlitresperyear)ExistingUnderconstructionProjectsUnderconsideration020004000600080001000012000EthanolRenewabledieselCCUSVolume(millionlitresperyear)RenewableEnergyMarketUpdateJune2023PAGE82IEA.CCBY4.0.Broadly,governmentsandcompanieshavefouroptionstoreducefeedstockpressurewhileexpandingproductionofsustainablebiofuels:1.Enlargeproductionfromexistingfeedstocksbyintensifyingcropproduction,investinginsupplychainsandimprovingwasteandresiduecollection.2.Expandcropproductiontoareaswherethereisnocompetitionfromfoodorfeedcrops.3.Usebiofueltechnologiesthatcanprocessalternativefeedstockssuchaswoodyorganicresidues.4.ReducetheGHGintensityoffuelssothatemissionsreductiontargetscanbemetwithlowerbiofuelvolumes.Governmentpoliciesandmarketreactionsareencouragingthelargest-everexpansioninnewbiofueltechnologiesPlannedprojectsusingunconventionalfeedstockswouldmorethantripleexistingproduction,withgovernmentpoliciesandindustryreactionstomarketdemandhelpingdriveinvestment.Governmentprogrammesandpoliciesfallintothreebroadcategories:1.Strategicplanning:Manyjurisdictionsuseroadmapsandstrategicplanstoaddressfeedstocklimitations.Forexample,threeofthesixactionareasoftheUSSAFGrandChallengeRoadmapfocusonexpandingfeedstocksupplies,asdoChina’sbioeconomyplanandBrazil’sFueloftheFutureProgramme.2.Regulatorydesign:Regulatorydesigncanalsopromptfeedstockdiversification.TheEURenewableEnergyDirective(RED),forinstance,limitsthecontributionofcrop-basedfeedstocks,usedcookingoilandanimalfats,andalsoallowscertainfeedstocks(PartAofAnnexIX)tocountdoubletohelpstimulatedemand.Meanwhile,California’slow-carbonfuelstandardrequiresGHGintensityreductionsfortransportfuels,suchthatfuelproducersreceivefinancialbenefitsperunitofGHGreductiondelivered(ratherthanpervolumeoffuel),helpingachievethesamepolicyobjectivewithlowerfeedstockdemand.3.Financialsupport:Productionandinvestmentincentivesintheformoftaxcredits,guaranteedpricingandgrantsarealsohelpingdriveinvestment.Forinstance,theIRAintheUnitedStatesprovidestaxcreditsthroughtheSecond-GenerationBiofuelIncentive,theAdvancedEnergyProjectCreditandtheTaxCreditforCarbonSequestration.WhileCanadaprovidesfundingforfeedstockdiversification,Indiaisofferingsupportforcellulosicethanolprojects.Thesepoliciesandprogrammes,inadditiontohistoricaleffortstodate,arehelpingspurnewprojectdevelopment.Forbiodiesel,renewabledieselandbiojetfuel,newprojectsarebeingdedicatedtoalcohol-to-jetfuel,thermaltreatmentofRenewableEnergyMarketUpdateJune2023PAGE83IEA.CCBY4.0.agriculturalandforestresiduesandmunicipalsolidwastestreams,andtonoveloilsthatdonotcompetewithfoodorfeedcrops.Infact,eightsprojectsinvolvingmajorbiofuelproducersinvestinginnoveloilsupplychainshavebeenannouncedin2022-2023.Allplannedprojectswouldintroduce7billionlitresofnewcapacity–fourtimestheexistingcapacityfromthesetypesofprojects–buthalfofthemarecurrentlyjustproposalswithnofirmproductiondate.Meanwhile,newcellulosicethanolprojects,mostlyinIndiaandBrazil,wouldtripleexistingproductioncapacity.Althoughtheywouldcoveronlyasmallfractionofnewethanoldemand,thesedevelopmentsarethemostsignificantcellulosicbuildoutinadecade.BiofuelproductioncombinedwithCCUScanalsoreducepressureonfeedstocksuppliesinjurisdictionssuchasCaliforniathathaveGHGintensitytargets.Whilenotinthefigureabove,biofuelproducersarealsoexpandingtheirconventionalsupplychains.InNorthAmerica,crushingcapacity(toproduceoilsfromoilseeds)isexpectedtoincreasebyupto40%by2025forsoybeansalone,helpingbiofuelproducersaccessmorelocalvegetableoilsupplies.MoreeffortsareneededtoexpandfeedstocksuppliesWhilethescaleofnewprojectsisimpressive,itisnotyetatalevelthatwouldavoidafeedstocksupplycrunch,andthefeasibilityofmostnewprojectsisuncertain.Evenifeveryprojectisbuilt,combinedtheywouldrepresentonly16%ofnewproductionexpectedby2024.Inmostcasestheseprojectswillalsonotreplaceexistingdemand.Nevertheless,theseprojectscouldlaythegroundworkforspeedierdeploymentifsuccessfulapproachesaredemonstratedandeconomiesofscaleareestablished.Higherfeedstockprices,whichwouldindicatescarcity,willalsopromptinvestmentinnewsupplies.Inaddition,manyoptionsdonotrequiretheconstructionofnewfacilities,justaccesstonewfeedstocksand/ormodificationstoexistingplants.Changecanthereforehappenquicklywiththerightincentives.RenewableEnergyMarketUpdateJune2023PAGE84IEA.CCBY4.0.GeneralannexAbbreviationsandacronymsAEMOAustralianEnergyMarketOperatorASEANAssociationofSoutheastAsianNationsCAISOCaliforniaIndependentSystemOperatorCCGTCombined-cyclegasturbinesCCUSCarboncapture,utilisationandstorageCENCoordinadorEléctricoNacionaldeCSPConcentratedsolarpowerDISCOMDiscourageddistributioncompaniesEBITDAEarningsbeforeinterest,taxes,depreciationandamortisationEIAEnvironmentalimpactassessmentsEIMEnergyImbalanceMarketEPAEnvironmentalProtectionAgencyFITfeed-intariffGHGgreenhousegasGSEGestoreServiziEnergeticiHEPIHouseholdEnergyPriceIndexHVDCHigh-voltagedirectcurrentIRAInflationReductionActITCInvestmentTaxCreditLCOELevelisedcostsofenergyOCGTOpen-cyclegasturbinesPLIProduction-linkedincentivesPPApowerpurchaseagreementRECRenewableenergycertificatesREDRenewableEnergyDirectiveRESSRenewableElectricitySupportSchemeRFSRenewableFuelStandardTRNCTurkishRepublicofNorthernCyprusVREVariablerenewableenergyWACCWeightedaveragecostofcapitalRenewableEnergyMarketUpdateJune2023PAGE85IEA.CCBY4.0.Unitsofmeasurebblbarrelbbl/dbarrelsperdaybcmbillioncubicmetresbcm/yrbillioncubicmetresperyearcm/scentimetrespersecondEJexajouleGJgigajouleGt/yrgigatonsperyearGtCO2gigatonneofcarbondioxideGtCO2/yrgigatonsofcarbondioxideperyearGWgigawattGWhgigawatthourMLPYmillionlitresperyearMWmegawattMWhmegawatthourInternationalEnergyAgency(IEA)ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualMembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/about/contactRevisedversion,June2023Informationnoticefoundat:www.iea.org/correctionsTypesetinFranceby2023-June2023Coverdesign:IEAPhotocredits:©Shutterstock

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