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首页文档碳中和资料行业政策可再生能源2022—分析和预测至2027（英）-IEA

可再生能源2022—分析和预测至2027（英）-IEAVIP专享VIP免费

Renewables
2022
Analysis and forecast to 2027
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.
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.
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:
Argentina
Brazil
China
Egypt
India
Indonesia
Morocco
Singapore
South Africa
Thailand
Ukraine
INTERNATIONAL ENERGY
AGENCY
Renewables 2022 Abstract
Analysis and forecasts to 2027
PAGE | 3
I EA. CC BY 4.0.
Abstract
Renewables 2022 is the IEA’s primary analysis on the sector, based on current
policies and market developments. It forecasts the deployment of renewable
energy technologies in electricity, transport and heat to 2027 while also exploring
key challenges to the industry and identifying barriers to faster growth.
The current global energy crisis brings both new opportunities and new challenges
for renewable energy. Renewables 2022 provides analysis on the new policies
introduced in response to the energy crisis. This year’s report frames current policy
and market dynamics while placing the recent rise in energy prices and energy
security challenges in context.
In addition to its detailed market analysis and forecasts, Renewables 2022 also
examines key developments and trends for the sector, including the more
ambitious renewable energy targets recently proposed by the European Union;
the issue of windfall profits; the diversification of solar PV manufacturing;
renewable capacity for hydrogen production; and a possible feedstock crunch in
the biofuels industry and viable ways to avoid it.
/159
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Renewables2022Analysisandforecastto2027TheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,11associationcountriesandbeyond.Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:ArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandUkraineINTERNATIONALENERGYAGENCYRenewables2022AbstractAnalysisandforecaststo2027PAGE3IEA.CCBY4.0.AbstractRenewables2022istheIEA’sprimaryanalysisonthesector,basedoncurrentpoliciesandmarketdevelopments.Itforecaststhedeploymentofrenewableenergytechnologiesinelectricity,transportandheatto2027whilealsoexploringkeychallengestotheindustryandidentifyingbarrierstofastergrowth.Thecurrentglobalenergycrisisbringsbothnewopportunitiesandnewchallengesforrenewableenergy.Renewables2022providesanalysisonthenewpoliciesintroducedinresponsetotheenergycrisis.Thisyear’sreportframescurrentpolicyandmarketdynamicswhileplacingtherecentriseinenergypricesandenergysecuritychallengesincontext.Inadditiontoitsdetailedmarketanalysisandforecasts,Renewables2022alsoexamineskeydevelopmentsandtrendsforthesector,includingthemoreambitiousrenewableenergytargetsrecentlyproposedbytheEuropeanUnion;theissueofwindfallprofits;thediversificationofsolarPVmanufacturing;renewablecapacityforhydrogenproduction;andapossiblefeedstockcrunchinthebiofuelsindustryandviablewaystoavoidit.Renewables2022AcknowledgementsAnalysisandforecaststo2027PAGE4IEA.CCBY4.0.Acknowledgements,contributorsandcreditsThisstudywaspreparedbytheRenewableEnergyDivisionintheDirectorateofEnergyMarketsandSecurity.ItwasdesignedanddirectedbyHeymiBahar,SeniorAnalyst.Thereportbenefitedfromanalysis,draftingandinputfrommultiplecolleagues.Theleadauthorsofthereportwere,YasminaAbdelilah,HeymiBahar,TrevorCriswell,PiotrBojek,FrançoisBriens,JeremyMoorhouseandLauraMariMartinez,whowasalsoresponsiblefordatamanagement.ThereportalsobenefitedfromanalysisanddraftingfromKazuhiroKurumiandKartikVeerakumar.PaoloFrankl,HeadoftheRenewableEnergyDivision,providedstrategicguidanceandinputtothiswork.Valuablecomments,feedbackandguidancewereprovidedbyotherseniormanagementandnumerousothercolleagueswithintheIEA,inparticular,KeisukeSadamoriandLauraCozzi.OtherIEAcolleagueswhohavemadeimportantcontributionstothisworkinclude:AbdullahAl-Abri,AnaAlcandeBascones,CarlosAlvarezFernandez,ElisaAsmelash,PraveenBains,JoseMiguelBermudezMenendez,StéphanieBouckaert,Davided’Ambrosio,SyrineElAbed,AsthaGupta,IlkkaHannula,CiaránHealy,PabloHevia-Koch,JoergHusar,KevinLane,StefanLorenczik,RitaMadeira,YannickMonschauer,BrianMotherway,FrancescoPavan,UweRemme,LuisFernandoRosa,BrentWanner.TimelydatafromtheIEAEnergyDataCentrewerefundamentaltothereport,withparticularassistanceprovidedbyPedroCarvalho,LucaLorenzoni,TaylorMorrison,NickJohnstone,JulianPrimeandRobertaQuadrelli.ThisworkbenefitedfromextensivereviewandcommentsfromtheIEAStandingGrouponLong-TermCo-operation,IEARenewableEnergyWorkingParty,membersoftheRenewableIndustryAdvisoryBoard(RIAB)andexpertsfromIEApartnercountriesandotherinternationalinstitutions.TheworkalsobenefitedfromfeedbackbytheIEACommitteeonEnergyResearchandTechnology,IEATechnologyCollaborationProgrammes(IEATCPs).ManyexpertsfromoutsideoftheIEAprovidedvaluableinput,commentedandreviewedthisreport.Theyinclude:Renewables2022AcknowledgementsAnalysisandforecaststo2027PAGE5IEA.CCBY4.0.CountriesArgentina(MinistryofEnergy),Brazil(EmpresadePesquisaEnergética),Canada(NaturalResourcesCanada),China(EnergyResearchInstitute–ERI),Denmark(MinistryofClimate,EnergyandUtilities),EuropeanUnion(EuropeanCommission–DGEnergy),Finland(MinistryofEconomicAffairsandEmployment),Japan(MinistryofEconomy,TradeandIndustry-METI),Spain(InstituteforEnergyDiversificationandEnergySaving-IDAE).TechnologyCollaborationProgramme(TCPs)BioenergyTCP,HeatPumpCentre(HPC)TCP,HydropowerTCP,PhotovoltaicPowerSystems(PVPS)TCP,SolarHeatingandCoolingTCP,SolarPacesTCP,WindEnergyTCP.OtherOrganisationsArcherDanielsMidlandCompany(ADM),AustralianEnergyMarketOperator(AEMO),Enel,EnergyInformationAdministration(EIA),EuropeanCommission,EuropeanHeatPumpAssociation(EHPA),EuropeanRenewableEthanolAssociation(EPURE),EuropeanSolarThermalIndustryFederation(ESTIF),GlobalWindEnergyAssociation(GWEC),Iberdrola,NationalRenewableEnergyLaboratory(NREL),NaturalResourcesCanada,Neste,Ørsted,SiemensGamesaRenewableEnergy,SolarEnergyCorporationofIndiaLtd.(SECI),SolarPowerEurope,Solrico,SPVMarketResearch,TheEnergyandResourcesInsitute(TERI),USGrainsCouncil,Vestas,WindEurope,WorldBank,WorldBioenergyAssociation.TheauthorswouldalsoliketothankKristineDouaudforskilfullyeditingthemanuscriptandtheIEACommunicationandDigitalOffice,inparticularJonCuster,AstridDumond,JadMouawad,BarbaraMoure,JethroMullen,JuliePuech,RobertStoneandThereseWalshfortheirassistance.Inaddition,IvoLetrafromtheOfficeofManagementandAdministrationsupporteddatamanagement.Questionsorcomments?PleasewritetousatIEA-REMR@iea.orgRenewables2022TableofcontentsAnalysisandforecaststo2027PAGE6IEA.CCBY4.0.TableofcontentsRenewables2022......................................................................................................................1Analysisandforecaststo2027...............................................................................................1Abstract...................................................................................................................................3Acknowledgements,contributorsandcredits.........................................................................4Tableofcontents.....................................................................................................................6Executivesummary...............................................................................................................10Chapter1.Renewableelectricity..........................................................................................17Forecastsummary...................................................................................................................17China........................................................................................................................................28UnitedStates............................................................................................................................30Europe......................................................................................................................................34AsiaPacific...............................................................................................................................56LatinAmerica...........................................................................................................................70MiddleEastandNorthAfrica...................................................................................................76Sub-SaharanAfrica..................................................................................................................81Chapter2.TransportBiofuels...............................................................................................84Forecastsummary...................................................................................................................84Demand,supplyandtrade.......................................................................................................92Chapter3.Renewableheat................................................................................................108Recenttrendsandpolicyupdate...........................................................................................108Outlookto2027......................................................................................................................110Chapter4.Trendstowatch.................................................................................................117Question1:IstheEuropeanUnionontracktomeetitsREPowerEUgoals?.......................117Question2:IsrenewableenergycapacityintheEuropeanUnionmakingwindfallprofitsfromhighwholesaleprices?...........................................................................................................129Question3:WillnewPVmanufacturingpoliciesintheUnitedStates,IndiaandtheEuropeanUnioncreateglobalPVsupplydiversification?......................................................................135Question4:Isthebiofuelindustryapproachingafeedstockcrunch?...................................141Question5:Howmuchwillrenewablehydrogenproductiondrivedemandfornewrenewableenergycapacityby2027?......................................................................................................146Question6:Istheenergycrisisreallymakingthebusinesscaseforheatpumps?..............151Generalannex.....................................................................................................................156Abbreviationsandacronyms..................................................................................................156Unitsofmeasure....................................................................................................................157Renewables2022TableofcontentsAnalysisandforecaststo2027PAGE7IEA.CCBY4.0.ListofFiguresUpwardrevisionstorenewablecapacityexpansionforecastsfromRenewables2021toRenewables2022........................................................................................17Renewablecapacitygrowthinthemainandacceleratedcases,2010-2027..........18Quarterlyaverageutility-scalesolarPVandonshorewindauctioncontractandwholesalepowerpricesinselectedEuropeancountries,2018-2022......................19RenewablecapacitygrowthoutsideofChina,mainandacceleratedcases,2010-2027..........................................................................................................................20Renewableannualnetcapacityadditionsbytechnology,mainandacceleratedcases,2015-2027.....................................................................................................21Renewablecapacityauctionedbyregion,Q12018toQ32022..............................23Auctioncontractpricesforutility-scalesolarPV(left)andonshorewind(right)byregion........................................................................................................................24Cumulativepowercapacitybytechnology,2010-2027............................................26Globalelectricitygenerationbytechnology,2015,2021and2027.........................26Hydropowerelectricitygenerationabsoluteyear-on-yearchange,2018-2022.......27Chinarenewablecapacityadditions,2010-2027(left)andsharesofrenewablesinelectricitygeneration,2015-2027(right)...................................................................28UnitedStatesannualrenewablecapacityadditionsbytechnology,2020-2027(left)andtotalrenewablescapacitygrowth,2010-2027(right)........................................31UnitedStatessolarPVcapacityadditions,2019-2027(left)andmediantimebetweensolarPVinterconnectionrequestandplantcommissioningforselectedsystemoperators,2013-2021(right)........................................................................32UnitedStatesonshorewindcapacityadditionsandmaximumPTCcreditrate,2020-2027(left)andoffshorewindprojectstatus(right)...................................................33Europerenewableelectricitycapacityadditions,2022-2027(left)andwholesaleelectricitypricesforselectedmarkets(right)............................................................35Germanyrenewablecapacityadditions,2022-2027(left)and2030targetsforcumulativeinstalledcapacityinEEG2021andEEG2023vsinstalledcapacitytoday(2021).......................................................................................................................39Historicalfeed-inpremiums(2014-2021)andnewratesundertheEEG2023withfullfeed-inpremium(2023-2024)...................................................................................40Francecapacityadditionsbytechnology,2010-2027(left)andprojectpipelinevsannualcommissioning,2016-2021(right)................................................................44Spainrenewablecapacityadditionsbytechnology,2010-2027(left)andannualauctionsvsdeploymenttargets,2022-2026(right)..................................................45TheNetherlandsrenewablecapacityadditions,2020-2027(left)andcapacitytosolarPVandothertechnologiesinSDE+andSDE++(right)..................................47Belgiumrenewablecapacityadditionsbytechnology,2010-2027(left)andDenmarkrenewablecapacityadditionsbytechnology,2010-2027(right)..............................50Italyrenewablecapacityadditions,2010-2027(left)andresultsofFERrenewableenergyauctions(right)..............................................................................................51UnitedKingdomrenewablecapacityadditions,2010-2027(left)andCfDauctionresults,capacitylimitsandprojectspipelineinRenewableEnergyPlanningDatabase(right)........................................................................................................53Polandrenewablecapacityadditions,2010-2027(left)andquarterlydistributedPVcapacityadditions,2019-2022(right).......................................................................55AsiaPacificrenewablecapacityadditionsbytechnology,2010-2027(left)andannualcapacityadditionsbycountry,2019-2027(right).........................................57Indiarenewablecapacityadditions,2010-2027(left)andrenewablecapacityawardedinauctions,2017-2022(right)....................................................................58Indiaawardedandcommissionedrenewablecapacity,2017-2022(left)andDISCOMenergymarketsharesbyintegratedrating,2015-2021(right).................60Renewables2022TableofcontentsAnalysisandforecaststo2027PAGE8IEA.CCBY4.0.Japanrenewablecapacityadditions,2010-2027(left)andFIT-approvedcapacityandpricesforsolarPVandonshorewind,2012-2021(right)..................................63Korearenewablecapacityadditions,2010-2027(left)andfixed-pricesolarPVcapacityandaveragerevenueperMWhbytechnology,2017-2022(right)............64Australiarenewablecapacityadditions,2010-2027(left)andquarterlydistributedPVcapacityadditions,2017-2022(right).......................................................................66ASEANrenewablecapacityadditions,2010-2027(left)andannualcapacityadditionsbycountry,2019-2027(right)....................................................................68Brazilrenewablecapacityadditions,2020-2027(left)andutility-scalesolarPVandonshorewindcapacitybymarketregistration(right)...............................................71Chilerenewablecapacityadditions,2020-2027(left)andcapacityandpricesawardedinChileanenergyauctions(right)..............................................................72Colombiarenewablecapacityadditions,2020-2027(left)andinstalledrenewablecapacityinREMR2022forecastvsColombia’sNationalEnergyPlan(right)..........73Mexicorenewablecapacityadditions,2010-2027(left)andArgentinarenewablecapacityadditions,2010-2027(right).......................................................................75MiddleEastandNorthAfricarenewablecapacityadditions,2010-2027(left)andrenewableadditionsbytechnologyandcountry,2022-2027(right)........................76MiddleEastandNorthAfricarenewablecapacityadditionsdedicatedtohydrogenproduction,2010-2027(left)andprojectstatusforelectrolysersusingdedicatedrenewableswithcommissioningplannedby2027(right)........................................80Sub-SaharanAfricarenewablecapacityadditions,2010-2027(left)andrenewableadditionsbytechnologyandcountry,2016-2027(right)..........................................82Biofueldemandgrowthbyfuelandregion,2021-2022...........................................84Ethanolandgasolineprices(left),andbiodieselanddieselprices(right),2019-2022..................................................................................................................................85Globalbiofueldemand(left)andgrowthforadvancedandemergingeconomies(right),maincase,2021-2027..................................................................................86Forecastgrowthbycountry(left)andbiofuelshareoftransportdemand(right),maincase,2021-2027.......................................................................................................87Globalbiojetfueldemandandsupplygrowth,2022-2027.......................................89Demandgrowthbycountry(left)andtotaldemand(right),acceleratedcase,2021-2027..........................................................................................................................91UnitedStatesfive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027...93Brazilfive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027................96Europefive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027.............98Indonesiafive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027.......101Indiafive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027...............102Othermarketsfive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027104Globalincreaseinrenewableenergyconsumptionandshareoftotalheatdemandinbuildingsandindustry,2010-2027.....................................................................110Increaseinrenewableheatconsumptioninindustryandshareofrenewablesinindustrialheatdemand,selectedregions,2016-2027...........................................111Contributionofdifferentfactorstorenewableelectricityconsumptiongrowthinindustryandbuildings,selectedregions,2022-2027.............................................113Buildingssectorincreaseinrenewableheatconsumptionandshareofrenewablesinheatdemand,selectedregions,2016-2027.......................................................114Renewableelectricitysharesinmaincase(left),andaverageannualadditionsforsolarPV(middle)andwind(right)inthemainandacceleratedcases(2022-2027)................................................................................................................................119EuropeanUnionrenewableenergyshareintransport,maincase(left)andacceleratedcase(right),2020-2030......................................................................123Shareofrenewablesinheatingandcooling,historicalaverageannualprogressandproposedtargetsforEUmemberstates................................................................127Renewables2022TableofcontentsAnalysisandforecaststo2027PAGE9IEA.CCBY4.0.EuropeanUnionsharesofinstalledrenewablecapacitybyexposuretowholesalemarketprice,basedonmembercountrypolicyschemes......................................130RevenueandEBITDAcomparisonofmajorEuropeanutilitiesforthefirsthalvesof2022and2021(left)andtheirsharesininstalledgenerationcapacitymix(right).132TotalmanufacturingcostsformonoPERCc-Sisolarcomponentsbyinput,2022136IndiaPLIsubsidiesandinvestmentcostdifferencewithlowestcostmanufacturing(left)andUSc-SimanufacturingcostswithandwithoutIRAManufacturingProductionTaxCredit,comparedwithChinaandASEAN(right)..........................137SolarPVmanufacturingcapacityoutsideChinaandtotalinvestmentby5-yearperiods,2017-2027................................................................................................139SolarPVmanufacturingcapacityandproductionbycountryandregion,2021-2027................................................................................................................................140Totalbiofuelproductionbyfeedstock(left)andgrowthbyregion(right),maincase,2021-2027..............................................................................................................141Biofueldemandsharesofglobalcropproduction(left)andwastesandresidues(right),maincase,2010-2027................................................................................143Totalrenewablecapacitydedicatedtohydrogenproductioninthemainandacceleratedcaseglobally(left)andformaincasebyregion(right),2021-2027...146Europededicatedrenewablecapacityinthemaincasebycountry,2021-2027(left),andproposedEUtargetsforrenewablesofnon-biologicaloriginintransportandreplacingnon-renewablewithrenewablehydrogenuseinindustry(right)............148Levelisedcostofheatingforair-to-waterheatpumpsandgasboilersforselectedcountries,andfuel-pricesensitivity........................................................................154ListofTablesRenewableenergytargetsbyAustralianstate........................................................66SummaryofInflationReductionActprovisionsforbiofuels.....................................94Policyandassumptionsummary,mainandacceleratedcases............................105SummaryofrenewableenergybenchmarksbysectorinREPowerEUplanandinmainandacceleratedcases..................................................................................118Transportrenewableenergyshareswithandwithoutmultipliers,mainandacceleratedcases..................................................................................................124EuropeanUnionproposedtargetsforrenewableheatingandcooling..................125SelectedEuropeancountriesthathaveintroducedorannouncedawindfall-profittax................................................................................................................................134PlannedsolarPVcomponentmanufacturingexpansionintheUnitedStatesandIndiain2022...........................................................................................................137Liquidbiofuelproductionpathways,costsandfeedstockpotential.......................145ChangeinresidentialconsumerpricesforelectricityandgasbetweenH12021andH12022(left)andmarginalcostofheatingwithresidentialheatpumpsandgasboilersunderdifferentenergycostassumptions(right),selectedcountries..........152Prevalentpublicinvestmentsupportforheatpumpsbypolicytype,selectedcountries,2022.......................................................................................................153Renewables2022ExecutivesummaryAnalysisandforecaststo2027PAGE10IEA.CCBY4.0.ExecutivesummaryEnergysecurityconcernsandnewpoliciesleadtolargesteverupwardrevisionofIEA’srenewablepowerforecastThefirsttrulyglobalenergycrisis,triggeredbyRussia’sinvasionofUkraine,hassparkedunprecedentedmomentumforrenewables.Fossilfuelsupplydisruptionshaveunderlinedtheenergysecuritybenefitsofdomesticallygeneratedrenewableelectricity,leadingmanycountriestostrengthenpoliciessupportingrenewables.Meanwhile,higherfossilfuelpricesworldwidehaveimprovedthecompetitivenessofsolarPVandwindgenerationagainstotherfuels.Renewablecapacityexpansioninthenextfiveyearswillbemuchfasterthanwhatwasexpectedjustayearago.Over2022-2027,renewablesareseengrowingbyalmost2400GWinourmainforecast,equaltotheentireinstalledpowercapacityofChinatoday.That’san85%accelerationfromthepreviousfiveyears,andalmost30%higherthanwhatwasforecastinlastyear’sreport,makingitourlargesteverupwardrevision.Renewablesaresettoaccountforover90%ofglobalelectricitycapacityexpansionovertheforecastperiod.TheupwardrevisionismainlydrivenbyChina,theEuropeanUnion,theUnitedStatesandIndia,whichareallimplementingexistingpoliciesandregulatoryandmarketreforms,whilealsointroducingnewonesmorequicklythanexpectedinreactiontotheenergycrisis.China’s14thFive-YearPlanandmarketreforms,theREPowerEUplanandtheUSInflationReductionActarethemaindriversoftherevisedforecasts.Renewableswilltransformtheglobalpowermixthrough2027,becomingthelargestsourceofelectricityRenewablesbecomethelargestsourceofglobalelectricitygenerationbyearly2025,surpassingcoal.Theirshareofthepowermixisforecasttoincreaseby10percentagepointsovertheforecastperiod,reaching38%in2027.Renewablesaretheonlyelectricitygenerationsourcewhoseshareisexpectedtogrow,withdecliningsharesforcoal,naturalgas,nuclearandoilgeneration.ElectricityfromwindandsolarPVmorethandoublesinthenextfiveyears,providingalmost20%ofglobalpowergenerationin2027.Thesevariabletechnologiesaccountfor80%ofglobalrenewablegenerationincreaseovertheforecastperiod,whichwillrequireadditionalsourcesofpowersystemflexibility.Meanwhile,thegrowthofdispatchablerenewablesincludinghydropower,Renewables2022ExecutivesummaryAnalysisandforecaststo2027PAGE11IEA.CCBY4.0.bioenergy,geothermalandconcentratedsolarpowerremainslimiteddespitetheircriticalroleinintegratingwindandsolarPVintoglobalelectricitysystems.SolarPV’sinstalledpowercapacityispoisedtosurpassthatofcoalby2027,becomingthelargestintheworld.CumulativesolarPVcapacityalmosttriplesinourforecast,growingbyalmost1500GWovertheperiod,exceedingnaturalgasby2026andcoalby2027.AnnualsolarPVcapacityadditionsincreaseeveryyearforthenextfiveyears.Despitecurrenthigherinvestmentcostsduetoelevatedcommodityprices,utility-scalesolarPVistheleastcostlyoptionfornewelectricitygenerationinasignificantmajorityofcountriesworldwide.DistributedsolarPV,suchasrooftopsolaronbuildings,isalsosetforfastergrowthasaresultofhigherretailelectricitypricesandgrowingpolicysupporttohelpconsumerssavemoneyontheirenergybills.Globalwindcapacityalmostdoubles,withoffshoreprojectsaccountingforone-fifthofthegrowth.Over570GWofnewonshorewindcapacityareforecasttobecomeoperationaloverthe2022-27period.However,onshorewindadditionswillonlybreaktheirannualrecord,setin2020,bytheendoftheforecastperiodbecauseoflengthypermittingproceduresandlackofimprovementstogridinfrastructure.Offshorewindgrowthacceleratesglobally,whileEurope’sshareofinstalledoffshorecapacitydeclinesfrom50%in2021to30%in2027asChina’sprovincialpoliciessupportfasterexpansionandtheUnitedStatesbecomesasizeablemarketattheendoftheforecastperiod.Improvedpoliciescannarrowthegaptonetzeroby2050Ouracceleratedcaseshowsglobalrenewablecapacitycanexpandbyanadditional25%comparedwiththemainforecastifcountriesaddresspolicy,regulatory,permittingandfinancingchallenges.Mostadvancedeconomiesfacechallengestoimplementation,especiallyrelatedtopermittingandgridinfrastructureexpansion.Inemergingeconomies,policyandregulatoryuncertaintiesstillremainmajorbarrierstofasterrenewableenergyexpansion.Finally,indevelopingeconomies,weakgridinfrastructureandalackofaccesstoaffordablefinancinghamperthetimelycommissioningofprojectsinourmainforecast.Shouldcountriesaddressthosechallenges,globalrenewablecapacitycouldexpandbyalmost3000GW.Thisfasterincreasewouldsignificantlynarrowthegapontheamountofrenewableelectricitygrowththatisneededinapathwaytonetzeroemissionsby2050.Russia’sinvasionofUkraineisaturningpointforrenewablesinEuropeThewarisexpeditingEurope’scleanenergytransitions.TheenergycrisishittheEUwhileitwasalreadydiscussingambitiousrenewablestargetsundertheFitRenewables2022ExecutivesummaryAnalysisandforecaststo2027PAGE12IEA.CCBY4.0.for55package.AfterRussiainvadedUkraineinFebruary2022,energysecurityemergedasanadditionalstrongmotivationtoacceleraterenewableenergydeployment.AttheEUlevel,theEuropeanCommission’sREPowerEUplanreleasedinMay2022proposesendingthebloc’srelianceonRussianfossilfuelsby2027.Amongothergoals,theplanaimstoincreasetheshareofrenewablesinfinalenergyconsumptionto45%by2030,exceedingthe40%previouslyundernegotiation.Europe’srenewableelectricityexpansiondoublesoverthe2022-2027periodasenergysecurityconcernsaddtoclimateambitions.ManyEuropeancountriespassedorproposedactionplanstofurtherraisetheirambitions,increasedpolicysupportandaddressednon-financialchallenges.OurforecastforgrowthintheEUhasbeenrevisedupwardsignificantly(by30%)fromlastyear’sreport,ledbyGermany(50%higher)andSpain(60%higher).Germanyhasincreasedrenewableelectricitytargets,introducedhigherauctionvolumesandimprovedremunerationfordistributedPVwhilereducingpermittingtimelines.SpainhasstreamlinedpermittingforsolarPVandwindplants,andincreasedgridcapacityfornewrenewableenergyprojects.SluggishgrowthofrenewablesinthetransportandheatingsectorsholdsbackhigherrenewableenergypenetrationintheEU.Inourmaincase,renewables’shareoftransportenergydemandexpandsfrom9%in2020to15%in2027,whichisnotinlinewiththeEU’saspirationsfor2030.Whiledemandforelectricvehiclesandbiofuelexpands,stateandEU-levelincentivestomeethigherrenewablesharesarenotinplaceinmostcases.Forheatingandcooling,theannualincreaseintheshareofrenewableswouldneedtoalmostquadruplefromhistoricalandforecastedgrowthtobeontrackwiththeREPowerEUplantargets.PolicyimprovementscandrasticallyincreaserenewablesexpansionandputtheEuropeanUnioninlinewithREPowerEUgoals.OurmainforecastfallsshortofthemodelledgoalsofREPowerEUplanforallsectors.Forelectricity,inordertoreachtheinstalledcapacityneededtogenerate69%ofelectricityfromrenewablesby2030,averageannualnetadditionsneedtobe30%higherforsolarPVandmorethantwiceashighforwind.FasteraccelerationofwindandsolarPVwouldrequireEUmemberstatestoreducepermittingandlicensingtimelines,extendauctionschemeswithclearschedules,redesignauctionstoreflecttheincreasingcostofrenewablesandtheirenergysecuritybenefits,andimproveincentiveschemesfordistributedsolarPVgeneration.IfEUgovernmentsrapidlyimplementthesechanges,theacceleratedcaseseesgrowth30%higher,puttingtheEUontrackwithitsmoreambitiousREPowerEUmodelledgoals.Fortransport,countrieswouldneedtoimplementmoreambitioustransportdecarbonisationprogrammes,includingbothbiofuelsandEVs.Intheacceleratedcase,renewableenergy’sshareintransportclimbsto20%by2027,narrowingthegapwiththeEUgoalof29%by2030.Forheatingandcooling,acceleratingtheRenewables2022ExecutivesummaryAnalysisandforecaststo2027PAGE13IEA.CCBY4.0.rolloutofheatpumpswillrequireovercominghighupfrontcoststhroughincentives,regulationsandlow-costfinancingforhouseholdstofacilitateinvestment.Marketinterventionsmustsheltercitizensfromhighcostsbutwithouthurtingthebusinesscasefornewrenewableenergyinvestments.InOctober2022,theEuropeanCouncilpassedemergencyregulationstoprotectvulnerablecustomersfromhighenergyprices,includingwindfallprofitleviesonelectricitygenerators.Whilethereisstrongrationalebehindtheseinterventions,theirimpactneedstobeassessedintermsofthepotentialharmtorenewabledevelopers’capacitytoinvestinnewprojects.CurrentandproposedmarketinterventionsinEurope(suchaswholesalemarketcapsandwindfall-profittaxes)couldcreateuncertaintiesforrenewableenergyinvestmentsiftheyarenotwelldesignedorco-ordinatedacrosscountries.Moreover,theongoingenergycrisishasalsosparkednewdiscussionswithintheEuropeanUnionconcerningpossiblefutureelectricitymarketdesign.Theseproposedreformscould,inprinciple,boostmarket-drivenrenewableenergydeployment,ensureenergysecurityandencourageinvestmentinflexibilityresources.However,itisimportantthatanyproposalsbecarefullyandtransparentlyprepared,withclearvisibilityontimingandinvolvingallrelevantstakeholders,inordertoavoidunintendeduncertaintyamonginvestors.China,theUnitedStatesandIndiaalldoubletheirrenewablecapacityexpansioninthenextfiveyears,accountingfortwo-thirdsofglobalgrowthChinaisforecasttoinstallalmosthalfofnewglobalrenewablepowercapacityover2022-2027,asgrowthacceleratesinthenextfiveyearsdespitethephaseoutofwindandsolarPVsubsidies.PolicyguidelinesandtargetsinChina’snew14thFive-YearPlanonrenewableenergyarethebasisforthisyear’s35%upwardrevisiononlastyear’sforecast.Veryambitiousnewrenewableenergytargets,marketreformsandstrongprovincialgovernmentsupportprovidelong-termrevenuecertaintyforrenewables.InmostChineseprovinces,utility-scalerenewablesarecheaperthanregulatedcoalelectricityprices,drivingrapidadoption.Inthemainforecast,Chinaisexpectedtoreachits2030targetof1200GWoftotalwindandsolarPVcapacityfiveyearsinadvance.IntheUnitedStates,theInflationReductionActisprovidingunprecedentedlong-termpolicyvisibilityforwindandsolarPVprojects.PassedinAugust2022,thelegislationextendedtaxcreditsforrenewablesuntil2032.Inaddition,37outof50stateshaverenewableportfoliostandardsandgoalssupportingexpansion.By2027,USannualwindandPVcapacityadditionsdoublecomparedwith2021.GiventhattheUnitedStatesnowhasclearlong-termpolicyvisibility,Renewables2022ExecutivesummaryAnalysisandforecaststo2027PAGE14IEA.CCBY4.0.anyremainingforecastuncertaintiesrelatetosupplychainconstraints,trademeasures,gridinfrastructureinadequacyandlongpermittingleadtimes.InIndia,newinstallationsaresettodoubleoverourforecastperiod,ledbysolarPVanddrivenbycompetitiveauctionsimplementedtoachievethegovernment’sambitioustargetof500GWofnon-fossilcapacityby2030.NewpoliciesintheUnitedStatesandIndiacanleadtomorediversifiedglobalsolarPVmanufacturingSolarPVmanufacturinginvestmentinIndiaandtheUnitedStatesisexpectedtoreachalmostUSD25billionover2022-2027,asevenfoldincreasecomparedwiththelastfiveyears.India’sProductionLinkedIncentives(PLI)initiativeclosesnearly80%ofIndianmanufacturers’investmentcostgapwiththelowest-costmanufacturersinChina.Meanwhile,fullymonetisingmanufacturingtaxcreditsintheUnitedStatescouldbringallsegmentsofPVmanufacturingtocostparitywiththelowest-costmanufacturers.Inadditiontomanufacturingsubsidies,tariffsonimportedPVequipmentandlocal-contentpremiumsencourageprojectdeveloperstopurchasedomesticallymanufacturedproductsinbothIndiaandtheUnitedStates.TheglobalsolarPVsupplychainisdiversifying,butChinawillcontinuetodominatemanufacturing.DespitegrowinginvestmentintheUnitedStatesandIndia,ChinaisforecasttoinvestUSD90billionovertheforecastperiod,morethantripletheexpectedinvestmentbytherestoftheworldcombined.China’sshareinglobalmanufacturingcapacitycoulddecreaseslightly,from80-95%todayto75-90%,dependingonthemanufacturingsegment.Furthermore,ifcountriesmaintaintradepoliciesthatlimitimportsandfavourdomesticallyproducedPVproducts,greatergeographicaldistributionofproductioncouldresultinChina’sshareshrinkingmoresignificantlyto60-75%by2027dependingonthesegment.Atthesametime,investmentplansalsoindicatesupplysignificantlyexceedingexpectedglobalPVdemandeveninthemostoptimisticforecastsby2027.Intheabsenceoffastergrowthinglobaldemand,thiscouldresultinplantutilisationfactorsaslowashalftoday’slevelsforallmanufacturingsegmentsinChina.PolicyeffortsareturninghydrogenproductionfromwindandsolarPVintoanewgrowthareaGlobalrenewablecapacitydedicatedtoproducinghydrogenincreases100-foldinthenextfiveyears,offeringopportunitiestodecarboniseindustryandtransport.Policiesandtargetsintroducedinmorethan25countriesacrossallcontinentsareexpectedtoresultin50GWofwindandPVcapacityfocusedonproducinghydrogenoverthe2022-2027period.Thisexpansionisgeographicallydiversified,withChinaleadingthegrowth,followedbyAustralia,ChileandtheRenewables2022ExecutivesummaryAnalysisandforecaststo2027PAGE15IEA.CCBY4.0.UnitedStates.Together,thesefourmarketsaccountforroughlytwo-thirdsofdedicatedrenewablecapacityforhydrogenproduction.Whilerenewablecapacitydedicatedtohydrogenaccountsforonly2%ofourmainforecast,theshareissignificantlyhigherat13%intheMiddleEastandNorthAfricaand5%inLatinAmericabecauseofexportopportunities.ClimateandenergygoalsunderpinrobustbiofuelsforecastTotalglobalbiofueldemandexpandsby35000millionlitresperyear(MLPY),or22%,over2022-2027inthemainforecast.TheUnitedStates,Canada,Brazil,IndonesiaandIndiamakeup80%ofglobalexpansioninbiofueluse,asallfivecountrieshavecomprehensivepolicypackagesthatsupportgrowth.Renewabledieselisexpectedtoleadtheglobalexpansionforthefirsttimemainly,drivenbypoliciesdesignedtoreducegreenhousegasemissionsinadvancedeconomies.Biojetfueldemandexpandssignificantlyto3800MLPYinourmainforecast–35timesthe2021level–toaccountfornearly1%oftotaljetfuelconsumption.RecentUStaxincentivesandtheEU’sReFuelEUtargetpropelmostofthegrowthinbiojetfuel.Meanwhile,risingethanolandbiodieseluseoccursalmostentirelyinemergingeconomiesastheyaimtoreduceoilimportswhilebenefitingthelocaleconomybyusingindigenousresources.WasteandresiduesareakeygrowthareaforbiofuelsbutrequireactiontopreventasupplycrunchOne-thirdofnewbiofuelsproductionissettocomefromwasteandresiduesby2027.TransportgreenhousegasreductionpoliciesinEuropeandtheUnitedStatesarefuellingglobaldemandforwasteandresidues.TheUnitedStates’InflationReductionActdrivesa20%increaseinourbiojetandrenewabledieselforecast.Thepolicyrewardslowergreenhousegasintensityfuels,drivingbiofuelproducerstofocusonwasteandresidues.InEurope,theexistingRenewableEnergyDirectiveandmemberstatepoliciesrewardbiofuelsmadefromwasteandresidues.MostbiofuelgrowthinEuropeisalsoforrenewabledieselandbiojet.SingaporeandChinaarealsoexpandingrenewabledieselandbiojetproductionfromwasteandresiduestoservetheEuropeanandUSmarkets.Unprecedenteddemandgrowthisstrainingsupplychains,butgovernmentpoliciesandinnovationmayyetproviderelief.Demandforwasteandresidueoilsandfatsisexpectedtonearlyexhaustsuppliesofthemostreadilyavailablesourcesby2027.Inadvancedeconomies,supplylimitsarepromptingbiodiesel,renewabledieselandbiojetproducerstosecureconventionalvegetableoilssuchsoybeanoilandrapeseedoil.Vegetableoilsuppliesdedicatedtobiofuelproductionexpandto23%from17%overtheforecastperiod.However,higherRenewables2022ExecutivesummaryAnalysisandforecaststo2027PAGE16IEA.CCBY4.0.pricesduetostrongdemandwillpromptcompaniesandgovernmentstoimprovefeedstocksupplychains,seekoutnewsuppliesanddevelopnewtechniques.Policiesandinnovationcanalsohelpunlockuntappedsuppliesandsupporttechnologydevelopment,enablingtheuseofmorewidelyavailablefeedstocksforsustainablebiofuelproductionHeatingwithrenewablesgrowsbutnotfastenoughtocontainfossilfueluseModernrenewableconsumptionforheatingpurposesisexpectedtoincreasebyalmostone-thirdduring2022-2027,raisingthemodernuseofrenewablesinheatfrom11%to14%by2027.Renewableheatcurrentlybenefitsfrompolicymomentum,inparticularintheEuropeanUnion,inresponsetotheenergysecurityconcernsfuelledbythecurrentenergycrisis.Inboththeindustryandbuildingssectors,thecombinationofrisingsharesofrenewablesinthepowersectorandgreaterrelianceonelectricityforheating,includingthroughheatpumps,makesthelargestcontributiontorenewableheatuptake.Nevertheless,renewableheatdevelopmentsareinsufficienttocontainfossilfuel-basedheatconsumption.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE17IEA.CCBY4.0.Chapter1.RenewableelectricityForecastsummaryTheglobalenergycrisisispushingtheacceleratoronrenewableenergyexpansionGlobalrenewablecapacityisexpectedtoincreasebyalmost2400GW(almost75%)between2022and2027intheIEAmain-caseforecast,equaltotheentireinstalledpowercapacityofthePeople’sRepublicofChina(hereafter“China”).Renewablesgrowthispropelledbymoreambitiousexpansionpoliciesinkeymarkets,partlyinresponsetothecurrentenergycrisis.This85%accelerationonthelastfiveyears’expansionrateresultsprimarilyfromtwofactors.First,highfossilfuelandelectricitypricesresultingfromtheglobalenergycrisishavemaderenewablepowertechnologiesmuchmoreeconomicallyattractive,andsecond,Russia’sinvasionofUkrainehascausedfossilfuelimporters,especiallyinEurope,toincreasinglyvaluetheenergysecuritybenefitsofrenewableenergy.Thisyear’sforecasthasbeenrevisedupwardsbyalmost30%fromlastyear’sdespiteenergymarketturbulence,mainlybecauseChina,Europe,theUnitedStatesandIndiaareimplementingexistingpolicies,regulatoryandmarketreformsandnewpoliciesmorequicklythanexpectedtocombattheenergycrisis.China’s14thFive-YearPlanandmarketreforms,theREPowerEUplanandtheUSInflationReductionAct(IRA)aretheforemostpolicychangessinceourlastforecastofDecember2021.UpwardrevisionstorenewablecapacityexpansionforecastsfromRenewables2021toRenewables2022IEA.CCBY4.0.0%5%10%15%20%25%30%35%40%ChinaEUGlobalUnitedStatesIndiaForecastrevisionfrom2021Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE18IEA.CCBY4.0.Theforecastformostadvancedeconomiesisbasedonthesecountries’ambitioustargetsandpolicyincentives,butimplementationchallengesremain,especiallyrelatedtopermittingandgridinfrastructureexpansion.Inemergingeconomies,policyandregulatoryuncertainties,inadditiontoimplementationchallenges,continuetobekeybarrierstofasterrenewableenergyexpansion.Finally,indevelopingcountries,weakgridinfrastructureandalackofaccesstoaffordablefinancinghamperfastercommissioningofmultipleprojectsinourmain-caseforecast.Shouldcountriesaddressthosechallengesoverthenext12-24months,renewablecapacityexpansionundertheacceleratedcaseisdemonstratedtobealmost25%higherthaninthemaincase,producingnearly2950GWintotaladditionsglobally.Globally,thepaceofrenewablecapacityexpansionovertheforecastperiodinthemaincaseneedstoincrease60%tobeinlinewiththeIEANetZeroby2050Scenario.Intheacceleratedcase,however,growthinthenextfiveyears(underpoliciesthataddresschallengesandfasterimplementationofcountries’existingplans)narrowsthegapforrenewableelectricitygrowthneededtoachievenetzeroemissionsby2050.Overall,Chinaonitsownisforecasttoinstallalmosthalfofnewglobalrenewablepowercapacityover2022-2027,asgrowthacceleratesinthenextfiveyearsdespitethephaseoutofwindandsolarPVsubsidies.Ambitiousrenewableenergytargetsinthe14thFive-YearPlan,marketreformsandstrongprovincialgovernmentsupportprovidelong-termrevenuecertaintyforrenewables.Themain-caseforecastthusexpectsChinatoreachits2030windandsolarPVcapacitytargetsin2025.However,theearlyachievementof2030targetsleavestheacceleratedcase’supsidepotentialrelativelylimited.Renewablecapacitygrowthinthemainandacceleratedcases,2010-2027IEA.CCBY4.0.Note:acc.case=acceleratedcase.050010001500200025003000350040002010-152016-212022-27maincase2022-27acc.case2022-27NetZeroby2050ScenarioGWChinaAdvancedeconomiesOtheremerginganddevelopingcountriesRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE19IEA.CCBY4.0.TheEuropeanUnion,thesecond-largestgrowthmarketafterChina,hashadstablerenewablecapacityexpansioninthepastfiveyearscomparedwith2010-2015,butitspaceofexpansionisexpectedtomorethandoubleduring2022-2027.WhileseveralEUmembercountrieshadalreadyintroducedambitioustargetsandpoliciestoacceleraterenewableenergydeploymentbeforeRussia’sinvasionofUkraine,sincethentheEuropeanUnionhasproposedevenmoreaggressivegoalsundertheREPowerEUpackagetoeliminateRussianfossilfuelimportsby2027.OurforecastthusexpectsthatEUandcountry-levelpoliciesimplementedsincethebeginningofthewarwillacceleraterenewableelectricitydeployment.FortheEUelectricitysector,expandingwindandsolarPVpowergenerationremainsoneofthemosteffectivewaystoreducenaturalgasconsumption.Steepelectricitypricesresultingfromrecord-highnaturalgaspricescontinuetoimprovethecompetitivenessofutility-scalerenewableswithfossilfuel-basedalternatives.Infact,fromDecember2021toOctober2022,averagecontractpricesforlong-termwindandsolarPVprojectswere77%belowwholesalemarketprices.Inaddition,uptakeofdistributedsolarPVapplicationsisexpandingbecausetheycanhelpindustrialandresidentialcustomersreducetheirelectricitybills,whichhaverisensignificantlysincethebeginningof2022.Whilethesedriversindicatefasterexpansioninthemaincase,forecastupsidepotentialisstillhighanddependsoncountriesresolvingpre-existingdeploymentchallengesbysimplifyingpermittingprocedures,upgradingandexpandingtransmissionanddistributionnetworks,andprovidinglong-termvisibilityoverpolicysupportforbothutility-scaleanddistributedprojects.Infact,accelerated-casemodellingshowsthattheEuropeanUnioncouldinstallover30%morerenewableenergycapacity,thelargestabsoluteupsidepotentialofallkeycountriesandregions.Quarterlyaverageutility-scalesolarPVandonshorewindauctioncontractandwholesalepowerpricesinselectedEuropeancountries,2018-2022IEA.CCBY4.0.Notes:Italy’sspotpricereferstotheITA-CSO.ElectricitypricesinSpainhavebeenlowerthaninotherEUcountriesduetotheintroductionofgaspricecap.050100150200250300350400450500123412341234123412320182019202020212022USD/MWhUtility-scalesolarPVGermanyFranceItalySpainUKGermanyauctionpriceFranceauctionpriceItalyauctionpriceSpainauctionpriceUKauctionprice050100150200250300350400450500123412341234123412320182019202020212022OnshorewindRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE20IEA.CCBY4.0.IntheUnitedStates,renewableenergyexpansionalmostdoublesfromthelastfiveyearsinourmaincase.TheIRApassedinAugust2022extendedtaxcreditsforrenewablesuntil2032,providingunprecedentedlong-termvisibilityforwindandsolarPVprojects.InIndia,newinstallationsaresettodoubleoverourforecastperiod,ledbysolarPVanddrivenbycompetitiveauctionsimplementedtoachievethegovernment’sambitioustargetof500GWofrenewablepowerby2030.InBrazil,forecastgrowthisbasedontheboomingdistributedPVmarketandtheconsiderablepipelineofutility-scalewindandsolarprojectscontractedthroughbilateralpowerpurchaseagreementsoutsidethegovernment-ledauctionscheme.RenewableenergyexpansionalsoacceleratesintheMiddleEastandNorthAfrica(MENA),sub-SaharanAfrica,AssociationofSoutheastAsianNations(ASEAN)andotherregions,owingmostlytopolicyincentivesthattakeadvantageofthecost-competitivenessofhydro,solarPVandonshorewindpower.RenewablecapacitygrowthoutsideofChina,mainandacceleratedcases,2010-2027IEA.CCBY4.0.Renewablecapacityadditionsreachnewrecordhighsthrough2027,ledbysolarPVandwindAnnualadditionsareexpectedtorampupin2022,rangingfrom350GWinthemaincaseto400GWintheacceleratedcase,withsolarPVandwindaccountingforalmost90%ofallnewrenewableenergyinstallations.Achievingthehigherlevelofadditionsthisyearwillmostlydependonthepaceofcommissioningforutility-scaleanddistributedPVprojectsinChinaandtheEuropeanUnion.Annualrenewablecapacityadditionsareforecasttoincreasecontinuouslyovertheforecastperiod,reachingarecord460GWin2027inthemaincase,60%050100150200250300350400450500EuropeanUnionUnitedStatesIndiaBrazilMENASub-SaharanAfricaASEANOthercountriesGW2010-152016-212022-27maincase2022-27acc.caseRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE21IEA.CCBY4.0.higherthanlastyear’sgrowth.Attheendoftheforecastperiod,solarPVandwindprovidethevastmajorityofglobalrenewablecapacityadditionsin2027,accountingfornearly95%astechnology-specificchallengesandlimitedpolicysupporthamperfasterexpansionofhydropower,bioenergy,geothermal,CSPandoceantechnologies.SolarPVonitsownaccountsforover60%ofallrenewablecapacityexpansion,settingrecordsforannualadditionseveryyearthrough2027.Althoughmodulepriceshaveincreased,utility-scalesolarPVistheleastcostlyoptionfornewelectricitygenerationinasignificantmajorityofcountriesworldwide.CommercialandresidentialsolarPVsystemsmakeup26%oftheglobalrenewablecapacityadditionsforecastforthenextfiveyears,andtheoutlookfordistributedsolarPVapplicationshasbeenrevisedupwardsbecausehighnaturalgaspricesareraisingretailelectricitybills.DistributedPVapplicationsthusremainakeyelementinfastersolarPVgrowthintheacceleratedcase,inwhichannualadditionsreachalmost170GWby2027.AchievingfastersolarPVexpansioninthenextfiveyearsalsodependsonadeclineinmoduleprices,whicharecurrently25-30%higherthanin2020.GreatersolarPVaffordabilitythereforeunderpinstheacceleratedcase,asitwouldimproveeconomicattractivenessworldwide.Renewableannualnetcapacityadditionsbytechnology,mainandacceleratedcases,2015-2027IEA.CCBY4.0.Onshorewindadditionsalsoincreaseinourmain-caseforecast,from74GWin2021to109GWin2027.Thisisjustslightlyabovetherecordgrowthachievedin2020,whichwaspropelledbydevelopersinChinarushingtocompleteprojectsbeforesubsidiesweresuspended.Onshorewindadditionsareclimbingmostquicklyincountriesthathavestablepolicyframeworksprovidinglong-term60%65%70%75%80%85%90%95%100%01002003004005006007002015201620172018201920202021202220232024202520262027202220232024202520262027HistoricalMaincaseAcceleratedcaseGWOtherrenewablesBioenergyHydropowerOffshorewindOnshorewindDistributedPVUtility-scalePV%ofwindandPV(rightaxis)Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE22IEA.CCBY4.0.revenuecertainty,policiesthataddresspermittingchallengesandplansfortimelygridexpansion.However,justasmallnumberofcountries,includingChina,GermanyandSpain,havesofarmadeimprovementsinallthreeareas.SimilartosolarPV,highcommodityandfreightpriceshaveledwindturbinemanufacturingcoststosurgein2022to25-30%abovethe2020level,exceptinChina.Achievingaccelerated-caseannualonshorewindadditionsof145GWin2027willthereforerequiretheresolutionofpermitting,policyuncertaintyandgridexpansionconcernsworldwide.In2022,annualoffshorewindcapacityadditionsareforecasttodeclinemorethan30%comparedwith2021becauseChina’srecordexpansionoflastyearwillhalvenowthatdevelopersarenolongerrushingtobeatsubsidyphaseouts.Still,globalannualoffshorewindinstallationsareexpectedtoincrease50%toover30GWin2027,propelledbypolicysupportintheEuropeanUnion,theUnitedStatesandChina.Takinglongleadtimesandexistingauctionsandleasingschedulesintoconsideration,furtherupsidepotentialispossiblebutlimited.Accordingly,offshorewindcapacitygrowthis20%higherintheacceleratedcase,withChinaclaimingthemajority.Globalcompetitiveauctioncapacityisexpectedtobreakanotherrecordin2022asaresultofChineseandEUpoliciesCompetitiveauctionsremainthemaindriverofforecastgrowth,withincreasingcontributionsfromcorporatePPAs,bilateralcontractsandmerchantactivity.FromJanuarytoSeptember2022,77GWofnewrenewableauctioncapacitywasawardedglobally,mostlyinsolarPVandwind.Thisisa70%increasefromthesameperiodin2021,withChinaandEuropeaccountingforthree-quartersoftotalawardedcapacity.InChina,provincialauctionshavereplacednationaltendersandfeed-intariffs,bothofwhichwerephasedoutin2020forsolarPVandonshorewindandin2021foroffshorewind.NineprovincesheldauctionsinQ42021,whileanadditional13heldauctionsinQ3of2022.InEurope,auctionvolumesinthefirstthree-quarterswere60%higherthaninthesameperiodin2021owingtoarecord11GWofrenewablecapacitybeingawardedintheUnitedKingdom.ExcludingtheUnitedKingdom,auctionvolumesinEuropehaveremainedstablein2022becauseFrance,GermanyandItalyhaveawardedsimilarlevelsofcapacityaslastyear.PolandandTürkiye,whichawardedacombined3.5GWofrenewablecapacitylastyear,havenotyetheldauctionsinthefirstthree-quartersof2022.OutsideofChinaandEurope,theworldawarded26%lessrenewablecapacityduringthefirstthree-quartersof2022.IntheAsiaPacificregion,IndiaawardedRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE23IEA.CCBY4.0.37%lesscapacitythisyearthanin2021.Similarly,auctionedvolumesinLatinAmericawere60%lowerinthefirstthree-quarters,asmoderatepowerdemandfromdistributioncompaniesreducedauctionvolumesinBrazil,andChile’stenderdidnotallocateasmuchcapacityasexpected.IntheMiddleEastandNorthAfrica,inSeptember2022SaudiArabialauncheda3.3-GWtenderforwindandsolarprojectsthathasnotyetbeenclosed,butitwouldincreaseauctionedvolumesintheregionbymorethanhalfifannouncedcapacityisfullyallocatedbytheendof2022.Renewablecapacityauctionedbyregion,Q12018toQ32022IEA.CCBY4.0.Afteradecade-longdownwardtrend,highcommoditypricesarecausingauctionpricestoriseElevatedcommodityprices,highfreightcostsandongoingsupplychaindisruptionshavecausedonshorewindinvestmentcoststoincreaseby15-25%andsolarPVby10-20%frompre-Covidlevels.Asaresult,auctionpricesforonshorewindandsolarPVroseworldwidein2022,reversingadecade-longdecliningtrend.Twofactorshaveledtohighercontractprices:developersarereflectingpriceincreasesintheirbiddingstrategies;andsomegovernmentsincreasedreferencebiddingpricestoofferhigherremunerationonaccountofrisinginvestmentcosts.PricesfortheprimarymaterialsusedinwindandsolarPVtechnologiesincreaseddrasticallyfromJanuary2021toApril2022.Forinstance,thepriceofPV-gradepolysiliconalmostquadrupled,aluminiummorethandoubled,coppershotupby90%,steelwas40%higher,andfreightfeesrosefourfold.Someoftheserawmaterialsbrokepricerecords,consideringtotalincreasessincethebeginningoftheCovid-19crisis.0500010000150002000025000300003500040000123412341234123412320182019202020212022MWNorthAmericaMiddleEastandNorthAfricaLatinAmericaEuropeEurasiaChinaAsiaPacificAfricaRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE24IEA.CCBY4.0.CommoditypriceshavebeenfallingsinceMay2022,witheconomicslowdowninChina,EuropeandtheUnitedStatesresultingfromtheglobalenergycrisiscausedbyRussia’sinvasionofUkraine.However,turbineandsolarPVmodulepricesarenotexpectedtodropimmediately,ascompanieshavebeenadjustingtheirbusinessmodelstoongoingmacroeconomicuncertainty.Inaddition,highpowerprices,especiallyinEurope,areraisingmanufacturingcosts,asmostplantsuseelectricityfortheirmainindustrialprocesses.InEurope,averageauctionpricesin2022were44%higherforsolarPVand21%higherforonshorewindthanin2021,inUS-dollarterms.IntheAsiaPacificregion,averagecontractpricesfromgovernment-ledauctionsinUSdollarsincreasedslightlyforsolartechnologiesandwind.InIndia,depreciationoftheIndianrupeeagainsttheUSdollarledtoa1%decreaseinaverageauctionpricesexpressedinUSdollars,buta4%increaseinIndianrupeeterms.InLatinAmerica,higherreferencebiddingpricesinBrazilandChileduetohigherinvestmentcostsledtohighercontractpricesintheregion.Auctioncontractpricesforutility-scalesolarPV(left)andonshorewind(right)byregionIEA.CCBY4.0.020406080100120140160180201220142016201820202022USD/MWhAfricaAsiaPacificChinaEurasiaEuropeLatinAmericaNorthAmericaMiddleEastandNothAfrica020406080100120140160180201220142016201820202022Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE25IEA.CCBY4.0.Dispatchablerenewablesmakeupjust10%offorecastgrowthdespitegrowingwindandPVintegrationchallengesHigherinvestmentcoststhanforwindandsolarPV,alackofpolicysupportandinadequaterecognitionoftheflexibilityvalueofhydropower,bioenergy,CSP,geothermalandoceantechnologiesarepreventingfasteruptakeofdispatchablerenewablepowergeneration.Forhydropower,annualadditionspeakedin2013withthecommissioningofalmost45GW,butdeploymentovertheforecastperiodisvolatile,rangingfrom17GWto33GWaccordingtothecommissioningdeadlinesoflargereservoirprojectsinChina,IndiaandTürkiye.Thesethreelargemarketsformthebasisofourmain-caseforecastof141GWover2022-2027,whichisslightlylowerthandeploymentachievedinthelastfiveyears.Becauseenvironmentalpermittingandconstructiontimesarelong,theupsidepotentialforhydropowerremainslimited,withonlyanadditional40GWdeemedpossibleintheacceleratedcase.Forbioenergy,over60%ofglobalcapacityexpansionisinChinathankstoitsongoingpolicysupportattheprovinciallevelforwaste-to-energyprojects.OutsideofChina,Türkiyepromotesbioenergygrowththroughfeed-intariffsandBrazilhasimplementedauctions.Despitegeothermalenergy’sgreatresourcepotential,growthishamperedbyalackofpoliciestoaddresspre-developmentandresourceexplorationrisks,withanticipatedexpansionoflessthan6GWover2022-2027concentratedinAfricaandSoutheastAsia.ForCSP,relativelyhighinvestmentcostsandlimitedsupporttodevelopstoragecapabilitiesresultinanincreaseofalmost5GWduringtheforecastperiod.SolarPVclaimsthemostinstalledpowercapacityworldwideby2027,surpassingcoal,naturalgasandhydropowerCumulativePVcapacityalmosttriplestoover2350GWby2027inthemaincase,surpassinghydropowerin2024,naturalgasin2026andcoalin2027tobecomethelargestinstalledelectricitycapacityworldwide.Hydropowerisfallingtothirdplaceintermsofinstalledrenewablecapacityduetotherapidexpansionofwind.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE26IEA.CCBY4.0.Cumulativepowercapacitybytechnology,2010-2027IEA.CCBY4.0.Source:IEAanalysisbasedonWorldEnergyOutlook2022.(2022),Fossilfuelcapacity.Overallrenewableelectricitygenerationisexpectedtoincreasealmost60%toreachover12400TWh,withhydropowerremainingtheprimarysourceofrenewableelectricitygenerationthroughouttheforecastperiodeventhoughitscapacityexpandslessthanthatofwindandsolarPV.Themain-caseforecastexpectsrenewablestobecometheprimaryenergysourceforelectricitygenerationgloballyinthenextthreeyears,overtakingcoal.Renewablesaccountforalmost40%ofglobalelectricityoutputin2027,makingupfordecliningsharesofcoal,naturalgasandnuclear.Globalelectricitygenerationbytechnology,2015,2021and2027IEA.CCBY4.0.Source:IEAanalysisbasedonWorldEnergyOutlook2022.(2022),Fossilfuelandelectricitygeneration.05001000150020002500201020112012201320142015201620172018201920202021202220232024202520262027GWSolarPVWindHydropowerBioenergyCoalNaturalgas0%10%20%30%40%50%60%70%80%90%100%201520212027OilNuclearNaturalgasRenewablesCoalRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE27IEA.CCBY4.0.Largehydropowermarketsrecoverslowlyfromseveredroughtsin2021,exceptintheEuropeanUnionSeveredroughtconditionsinBrazil,theUnitedStates,ChinaandTürkiyerestrictedglobalhydropowergenerationin2021,withoutputdecliningforthefirsttimeintwodecades(-3%year-on-year).Althoughtheforecastindicatesa15%dropinEUhydropowergenerationin2022,dataforthefirstninemonthsofthisyearindicatethathydropowergenerationinChina,theUnitedStatesandBrazilwillbehigherthanin2021,withdroughtconditionseasinginothercountriesaswell.WhileEUhydropowergenerationissubjecttoahighlevelofuncertainty,historicaltrendsindicatethatitcouldrebound.GiventheEuropeanUnion’seagernesstodisplacenaturalgasgenerationnextwinter,higherhydropoweroutputcouldnotonlycontributesignificantadditionalrenewableelectricitybutimproveenergysystemflexibility.Hydropowerelectricitygenerationabsoluteyear-on-yearchange,2018-2022IEA.CCBY4.0.-400-300-200-10001002003004005002011201220132014201520162017201820192020202120222023TWhOthercountriesBrazilIndiaUnitedStatesEuropeanUnionChinaRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE28IEA.CCBY4.0.ChinaChinaissettosurpassitsnewlyannouncedrenewableelectricitytargetsthankstorapidwindandPVdeploymentChina’scumulativerenewablepowercapacityisexpectedtodoubleduring2022-2027,increasingbyalmost1070GW.SolarPVandwindaccountfor90%ofrenewableenergygrowth,withhydropowerprovidingmostoftheremainder.Inthemaincase,Chinaisexpectedtoreachits2030targetof1200GWoftotalwindandsolarPVcapacityfiveyearsearly.By2023,solarPVwillhavesurpassedhydropowertohavethelargestportionofinstalledrenewablecapacityinChina.PolicyguidelinesandtargetsinChina’snew14thFive-YearPlanonrenewableenergy(releasedinJune2022)arethebasisforthisyear’s35%upwardrevisiononlastyear’sforecast.Forthefirsttime,Chinahasshifteditspolicyfocusfrominstalledcapacitytosharesofrenewableenergysourcesinelectricitygeneration.Accordingly,thecountryaimsfor33%renewablesand18%windandsolarPVinelectricitygenerationby2025.Dependingonoverallpowerdemandgrowthandhydropoweroutput,Chinacouldreachitsrenewableenergygenerationtargetsevenearlier.Chinarenewablecapacityadditions,2010-2027(left)andsharesofrenewablesinelectricitygeneration,2015-2027(right)IEA.CCBY4.0.InformingourforecastforChinaarethefourpolicyaimsofits14thFive-YearPlanonrenewableenergy:1)acceleratelarge-scalerenewableenergydeployment;2)increasetheshareofrenewablesinoverallenergydemandthroughelectrification;0%5%10%15%20%25%30%35%02004006008001000120014002010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%0%5%10%15%20%25%30%35%40%45%2015201620172018201920202021202220232024202520262027%%ofwindandsolarPV%ofrenewablesRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE29IEA.CCBY4.0.3)shiftfromsubsidy-orientedtomarket-orientedrenewableenergydeploymentwithfixedprices;and4)promoteelectricitysystemstabilityandsecurity.China’sgovernmenthasidentifiedlarge-scaledeploymentbasesforutility-scalePV,withonshoreandoffshorewindeasingprojectpermitting.Ithasalsophasedoutsubsidiesforrenewableelectricityprojectsbecausegenerationcostsformega-sizedfacilities(i.e.500-2000MW)caneasilybelowerthanforcoal-firedgeneration,especiallyinprovinceswithhighrenewableresourcepotential.Utility-scaleonshorewindandlarge-scalesolarPVprojectswith500GWofcapacityhavebeenannounced,tobeinstalledmainlyintheGobiDesertinXinjiang,aroundtheYellowRiverinInnerMongolia,andintheHexiCorridorinGansu.Theselargeplants,mostofwhichareexpectedtobeoperationalby2027,aretoexportpowerthroughunderutilisedultra-high-voltage(UHV)transmissionlinestodemandcentres.Tosupportlarge-scaleprojectdeployment,the14thFive-YearPlanalsoproposesthatnewUHVlinesbebuiltby2025toraisepowerexportcapacityfromeasttowestfrom200GWto300GW.RecentmarketreformsenabletheuseofnewbusinessmodelsforsolarPVandwindprojects,supportingforecastgrowth.SinceNovember2021,largecommercialandindustrialconsumershavebeenexposedtomarket-basedelectricityprices,andinthefirstquarterof2022almosthalfofChina’selectricitydemandwastradedintheliberalisedmarket,mostlythroughprovinciallong-termcontracts.Inaddition,thegovernmentpassedaregulationenablinglargeconsumerstosigncleanenergypowerpurchaseagreementswithnewprojectsdevelopedwithoutsubsidies.Thus,developersandconsumerscanexchangegreencertificatesandenvironmentalattributesinthemarket.Dependingontheagreement,projectsreceiveapremiumeitherfromgreencertificatesorenvironmentalattributesontopofmarket-basedprices,improvingprojectbankability.NewgovernmentinitiativesandregulationsareexpectedtoenablefasterdistributedsolarPVexpansionover2022-2027.Atthebeginningof2022,commercialandindustrialretailelectricitypricesroseto10-20%abovelastyear’sinmostprovincesbecausedevelopershavebeguntopassthecostoftheirhigherfossilfuelbillsontoconsumersundertheliberalisedmarket.Inourmain-caseforecast,thesehigherpricesareexpectedtohastencommercialandindustrialPVdeployment.TheChinesegovernmentalsointroducedanewtargetrequiring50%ofalllargepublicbuildingsandnewbuildingsinindustrialparkstohaverooftopPVinstallations.Forresidentialconsumers,retailelectricitypricesremainregulatedandrelativelylow,butprovincialincentivesfromruraleconomicdevelopmentprogrammescontinuetosupportsmallPVapplications.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE30IEA.CCBY4.0.Intheacceleratedcase,renewablecapacitygrowthinChinacouldbe10%oralmost120GWhigherthaninourmaincase,mainlyowingtofastersolarPVandwinddeployment.Plus,addressingremainingpolicyandmarketchallengescouldleadtostrongeruptakeofrenewablesintheelectricitysectorover2022-2027.Thepaceofimplementinglarge-scalerenewableenergybasesfarfromdemandcentresdependspartlyonthetimelyexpansionofinterprovincialtransmissionlines.Intheabsenceofsubsidies,revenuerisksassociatedwithcurtailmentcontinuetobeachallengeforonshorewindandsolarPVprojects.Furthermore,risingrenewableenergyinvestmentcosts,especiallyforsolarPV,havereducedtheprofitabilityandthusthebankabilityofsomeprojects.Developersofutility-scalerenewableenergyprojectswillalsobeincreasinglyexposedtomarketpricefluctuationsforgreencertificatesandenvironmentalattributes.Althoughvolumesareincreasing,thesemarketsarestillnascentandtheinteractionsamongvariousproductsremainunclear,especiallyregardingconnectionswithcorporatePPAs.Additionally,newgovernmentpolicyrequirescommercialandindustrialdistributedPVapplicationstomaximiseself-consumption,butadetailedaccountingregimeforself-consumptionhasyettobereleased.UnitedStatesInflationReductionActincentivesprovideunprecedentedpolicycertainty,boostingwindandPVdeploymentRenewableenergycapacityintheUnitedStatesisforecasttoincrease74%,orover280GWfrom2022to2027,withsolarPVandwindaccountingfornearlyallrenewableexpansion.Thisupwardsrevisionofmorethan25%fromlastyear’sforecasttakesaccountofnewincentivesundertheIRA,whichprovidesunprecedentedlong-termpolicyvisibilityformultipletechnologies.WhilepreviousIEAforecastsassumedcapacityadditionuncertaintyorevendecliningcapacityadditionsbecausefederaltaxcreditsforsolarPVandonshorewinddevelopersweredecliningorexpired,theIRAnowoffersuncappedinvestmenttaxcredits(ITCs)andproductiontaxcredits(PTCs)through2032.Ourupdatedforecastisthereforemoreoptimisticandwillimpactdeploymentbeyond2023.11ThemaximumratefortheITCis30%,andforthebasePTCrateisUSD0.026/kWh;thePTCisadjustedforinflation.ITCandPTCratesstepdowninthefinalyearscoveredbytheIRA.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE31IEA.CCBY4.0.IRAincentivesareexpectedtosupporttheBidenAdministrationtargetof100%carbon-pollution-freeelectricityby2035.Inaddition,37outof50stateshaverenewableportfoliostandardsandgoalssupportingexpansion.Giventhatthecountrynowhasclearlong-termpolicyvisibility,uncertaintiesintheUSrenewableelectricityforecastrelatetoprojectdelaysduetosupplychainconstraints,trademeasures,theavailabilityofgridinfrastructureandlongpermittingtimelines.UnitedStatesannualrenewablecapacityadditionsbytechnology,2020-2027(left)andtotalrenewablescapacitygrowth,2010-2027(right)IEA.CCBY4.0.Despitetheintroductionofnewincentives,however,USrenewablecapacityadditionsareforecasttodecreaseover20%in2022comparedwithlastyear.Overall,utility-scalesolarPVandwindprojectshavebeendelayedbysupplychainchallengesandrisingcosts.Inadditiontosupplychaininterruptions,severalmeasuresimpactingimportshavealsoimpededsolarPVprojectdevelopment.First,theUnitedStatesstartedananti-dumpingandcircumventioninvestigationintosolarpanelsfromseveralSoutheastAsianexportersinMarch2022.WhileanexecutiveorderofJune2022suspendedtheinvestigationfortwoyears,thethree-monthperiodofuncertaintystalleddecisionsthroughouttheprojectpipeline.Second,theUyghurForcedLabourActcameintoforceinJune2022,requiringimportsfromChina’sXinjiangprovincetobeaccompaniedbydocumentationstatingthatnomaterialsweremanufacturedusingforcedlabour.Sincetheactcameintoforce,confirmationandcomplianceproceduresatUSportshavedelayedthedeliveryofsomePVproductstodevelopers.010203040506070809010020202021202220232024202520262027GWHydropowerWindBioenergyPV-utilityPV-distributedOtherrenewablesAcc.case0%2%4%6%8%10%12%14%16%18%20%0501001502002503003504002010-152016-212022-272022-27HistoricalMaincaseAcc.caseForecastrevision%Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE32IEA.CCBY4.0.UnitedStatessolarPVcapacityadditions,2019-2027(left)andmediantimebetweensolarPVinterconnectionrequestandplantcommissioningforselectedsystemoperators,2013-2021(right)IEA.CCBY4.0.Note:REMR2021=Renewableenergymarketreport2021(i.e.Renewables2021).Nevertheless,whiletrademeasureshamperfastersolarPVexpansionintheshortterm,IRAincentivesinduceamoreoptimisticforecastbeyond2023.ExtensionoftheITC,thenewavailabilityofthePTC,andoptionsforstrongersupportbasedonlabouranddomestic-contentbonusesareexpectedtomakethebusinesscasemoreattractiveforutility-scaleprojects.TheinclusionofinterconnectioncostswithintheITCandnewwaystomonetisetaxcreditsarealsoexpectedtofacilitaterapiduptake.FordistributedPV,theextensionoftaxcreditsandattractiveeconomicsresultingfromnet-meteringrulesinsomestatesdrivegrowth.Infact,net-meteringincentivesanddemandforself-sufficiencyresultedinover4GWofresidentialinstallationsin2021,surpassingpreviousexpectationsevenbeforetheIRAcameintoeffect.However,ongoingdiscussionsconcerningCalifornia’snet-meteringreformstoswitchtotime-of-usepricingandapplygridusefeescontinuetoimposeforecastuncertainty,asthestateremainsthelargestgrowthmarketforresidentialandcommercialinstallationsintheUnitedStates.Foronshorewind,lastyear’sforecastexpectedamorethan60%declineinannualadditionsin2026comparedwith2021duetothephaseoutoftaxincentives.However,thelong-termtaxcreditcertaintyprovidedbytheIRAisnowexpectedtoleadtoanincreaseincapacityadditions,especiallybeyond2023(theUSgovernment’spreviousone-yearPTCextensionsprovidedlittlepolicycertainty,creatingboom-bustcyclesofadditions).0102030405060201920202021202220232024202520262027GWResidentialCommercialUtility-scaleAcceleratedcaseREMR202102040608010012020132015201720192021monthsCAISOERCOTPJMNationalRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE33IEA.CCBY4.0.UnitedStatesonshorewindcapacityadditionsandmaximumPTCcreditrate,2020-2027(left)andoffshorewindprojectstatus(right)IEA.CCBY4.0.Notes:PTCvaluesinleftfigurearebasevaluesandexcludeinflationadjustment.ThePTCwillchangetoatechnology-neutralCleanEnergyProductionTaxCreditbeginningin2024.Source:(right)IEAanalysisbasedoninformationfromtheUnitedStatesPermittingDashboardforFederalInfrastructureProjects(accessedNovember2022).TheUSoffshorewindforecastexpectsmorethan11GWofnewcapacitybecauseprojectspreviouslyawardedatthestatelevelareenteringfederalreview,leadingtotheirfastercommissioning.Theforecastthusexpectsmostprojectsthathavebeenapproved(nearly1GW)orcurrentlyunderthefederalpermittingreviewprocess(over14GW)tobecomeoperationalby2027.Nevertheless,longdevelopmenttimelinesremainakeychallenge.Forinstance,VineyardWind1wasawardeditsleaseareain2015whileonlybeinggrantedfederalpermittingapprovalin2021,withconstructionfinallybeginningin2022.Tohelpachievethefederaltargetof30GWofoffshorewindcapacityby2030,federalandstategovernmentshaveheldadditionalleaseauctionsandidentifiednewareasforfuturedevelopment.However,severalbarriersmuststillbeovercome,includinglongfederalandstate-levelpermittingwaittimes;JonesAct2requirementsthatreducethenumberofinstallationvesselsavailable;andtheneedforportandtransmissioninfrastructuredevelopment.Intheacceleratedcase,growthis30%higheriftheprimaryuncertaintiesaffectingutility-scalesolarPVandonshorewindexpansioninthemain-caseforecastareaddressed.Thefirstchallengeisthebacklogofgridinterconnectionapplications.Theaveragetimefrominterconnectionapprovaltocommissioningisoverfour2TheJonesActallowsonlyUS-builtand-operatedshipstomovegoodsbetweenUSports.OffshorewindinstallationvesselsarecurrentlyunderconstructionintheUnitedStates,sothenumberofvesselsavailabletoinstallturbinesislimited.0.000.501.001.502.002.503.000246810121416182020202021202220232024202520262027cents/kWhGWOnshorewindcapacityadditionsPreviousforecastMaximumPTCrate(USDcents/kWh)0246810121416FederalapprovalFederalreviewFederalreviewplannedFederalawardStateawardGWOffshorewindcapacityRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE34IEA.CCBY4.0.years(andashighassixtosevenforsomeindependentsystemoperators)andhasbeenincreasingsteadilyoverthelastdecade.Growthcouldthereforebehigherifproposedlegislation(theEnergyIndependenceandSecurityAct)tohelpfacilitatetransmissionexpansionispassed.AnotherforecastuncertaintyishowwelldeveloperswillbeabletofullymonetiseallIRAratemultipliers.Ifconditionsforlabour,localcontentandprojectlocationaremet,theITCratecouldalmostdoubleandthePTCcouldbefivetimesashigh,buttheInternalRevenueServicehasyettoreleasefurtherguidanceoninterpretingtheserequirements.EuropeEurope’srenewablecapacityexpansiondoublesasenergysecurityconcernsaccelerateactionstowardsclimategoalsCumulativerenewableelectricitycapacityinEuropeisexpectedtoincreasenearly60%(+425GW)between2022and2027,morethantwiceasmuchasinthepreviousfive-yearperiod(2016-2021).SolarPVleadsgrowth,followedbyonshorewind,offshorewind,bioenergyandhydropower.Three-quartersofEuropeanexpansionisconcentratedinsevencountries–Germany,Spain,theUnitedKingdom,Türkiye,France,theNetherlandsandPoland.Europe’smaindriversforgrowtharelong-termrenewableenergytargetsandcompetitiveauctionsforutility-scaleprojects.FordistributedsolarPV,feed-intariffsorself-consumptionwithremunerationforexcessgenerationpromoteuptake.Theincreasingattractivenessofprojectsdevelopedoutsideofgovernment-ledauctionschemes,throughbusinessmodelsthatemploycorporatePPAs,revenuesfromthespotmarket,oramixtureofboth,alsospurgrowth.Thisyear’smain-caseforecasthasbeenrevisedupwards30%toreflectpolicychangesmadebygovernmentsoverthelastyeartoacceleratecleanenergytransitionsandreducerelianceonRussianfossilfuels.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE35IEA.CCBY4.0.Europerenewableelectricitycapacityadditions,2022-2027(left)andwholesaleelectricitypricesforselectedmarkets(right)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.PolicymomentumandmarketconditionswerealreadysignallingfasterrenewableenergygrowthbeforetheenergycrisisEvenbeforetheenergycrisisbegan,policyactionsin2021werepointingtowardsamoreoptimisticrenewableenergyforecastforEurope,promptedbypolicyreformstoacceleraterenewableenergygrowthtoreachmoreambitiousclimategoals.Lastyear,theEuropeanCommissionreleaseditsFitfor55policypackageandproposedraisingthetargetedEUrenewableenergysharefrom32%toatleast40%by2030toputtheEuropeanUniononanetzeroGHGemissionstrajectoryforclimateneutralityby2050.Thefinaltargetisstillundernegotiation,butonceithasbeenset,memberstateswillhavetoupdatetheirNationalEnergyandClimatePlans(NECPs)during2023-2024toreflectnewnationaltargetsandidentifysupportpolicies.Bytheendof2021,somememberstateshadalreadybeguntoraisetheirambitionsinanticipationofahigherEUtargetandhadintroducedpolicyandregulatorychangestoacceleratetheuseofrenewableenergysources.Forinstance,Ireland’sNationalDevelopmentPlanincreasedthetargetedshareofrenewablesinelectricityconsumptionto80%by2030(upfromitscurrentNECP’s70%),andItaly’sMinistryofEcologicalTransitionproposedincreasingtheshareofrenewableelectricityto72%(upfrom55%inthecountry’scurrentNECP).Meanwhile,othercountriescontinuedtoboostexistingsupport.Forexample,FranceraisedthesizelimitforcommercialPVeligibilityforfeed-intariffsandthe0%5%10%15%20%25%30%35%01002003004005006002010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%01002003004005006002021-1Q2021-2Q2021-3Q2021-4Q2022-1Q2022-2Q2022-3QEUR/MWhGermanyFranceItalyNetherlandsUnitedKingdomNordpoolPolandRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE36IEA.CCBY4.0.Netherlandsextendednetmetering.Outsideofpolicyaction,countriesalsobegantotacklepermittingbarriersbysimplifyingprocedures:forinstance,Greeceunveiledadigitalone-stop-shopapplication.Atthesametime,favourablemarketconditionsin2021werealsopositioningEuropeforfastergrowth.InmanyEuropeanmarkets,wholesaleelectricitypricesmorethandoubledbetweenthefirstandfourthquartersof2021,improvingtheattractivenessofmerchantprojects.Inaddition,pipelinesofcorporatePPAprojectsexpandedinseveralmarketsasenergy-intensiveenduserssoughttolockinlowertariffstohedgeagainstpossiblehikesinretailprices.Higherretailpricesalsoimprovedthebusinesscaseforself-consumption.ReducingrelianceonfossilfuelimportsexpeditesactiononEurope’srenewableenergyplansFollowingtheFebruary2022invasionofUkraine,energysecurityemergedasanadditionalmotivationtoacceleraterenewableenergydevelopment.Governmentsrespondedbymakingtheirtargetsmoreambitiousandbyfast-trackingpoliciestofacilitatequickergrowth.AttheEUlevel,theEuropeanCommission’sREPowerEUstrategyreleasedinMay2022proposesincreasingtheshareofrenewablesinfinalenergyconsumptionto45%by2030,exceedingthe40%currentlyundernegotiation.Reachingthistargetwillrequirealmost600GWofsolarPV3and510GWofwindcapacityby2030.4TheCommissionalsoproposesamendingtheRenewableEnergyDirectivewithrequirementsformemberstatestostreamlineandshortenpermittingprocesses.WhilelegislationsupportingthisstrategyhasnotyetpassedattheEUlevel,memberstatesandotherEuropeancountrieshavealreadybeguntoannounceplans,draftlegislation,andswiftlyimplementaraftofreformstoquicklyenddependencyonRussiangasandmitigatetherisingcostofenergytoconsumers.Thesepolicyactionscanbeclassifiedintothreecategories,andthemaincaseconsidersthemonacase-by-casebasisdependingonthestatusofthelegislativeprocessandcountry-specificchallenges:Raisingrenewableenergyambitions.InMarch2022,Germanyraisedits2030renewableelectricitytargetfrom65%to80%andacceleratedthepaceofsolarPVandwindexpansion,aimingfor350GWinstalledby2030comparedtotheprevious191GW.TheUnitedKingdomproposeda2030PVtargetforthefirsttimeinitsenergystrategy,andPortugalannouncedplanstomeetits2030target3Referstoalternatingcurrent(AC)asoutlinedintheEUSolarEnergyStrategy.4TheStaffWorkingDocumentoninvestmentneedstoimplementtheREPowerEUActionPlanstatesthat510GWofcumulativewindcapacityand592GWofsolararerequiredtoreachthetargetof45%renewablesinfinalenergyconsumptionby2030.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE37IEA.CCBY4.0.by2026.Theforecastismoreoptimisticinthesemarkets,basedontheexpectationofdraftlegislationcomingintoforcewithinthenextfiveyears.Increasingpolicysupport.Governmentactionsincluderaisingremunerationlevelsandintroducingnewfinancialsupport.Forexample,Germanyincreasedfeed-intariffsfordistributedPV,theNetherlandseliminatedtheVATforresidentialPVsystems,andtheUnitedKingdomunveiledplanstoholdannualauctionsforthefirsttime.Othercountriesmodifiedexistingschemes(e.g.Franceadjusteditsauctionrulessothatdeveloperscouldincreasecapacityaftertheauction)orextendedcurrentones(e.g.Cyprus5,6allocatedadditionalfundingfornetmeteringuntil2023).Asthemaincaseassumesthatthesechanges,amongothers,willincreasetheattractivenessofrenewableenergyprojects,theforecastwasadjustedupwards.Addressingnon-financialchallenges.Governmentshavepassedregulatoryreformstostreamlinepermitting,makegridconnectioneasierandimprovenetworkcongestion–threebarriersthathavelengthenedprojectdevelopmenttimes.Forinstance,GermanyoverhauledonshorewindsitingrequirementsandstreamlinedcompliancewithenvironmentallawswhileSpainintroducedasimplifiedpermittingprocedureandmadegridcapacityavailableforrenewableenergyprojects.Portugaleliminatedenvironmentalimpactassessmentsforrenewableenergyprojects,whileItalyraisedthesizelimittoqualifyforlicensingexemptions.Thesechangesareexpectedtoraiseauctionsubscriptionlevelsandacceleratemovementinprojectpipelines,resultinginstrongergrowthWhilethisyear’smain-caseforecastismoreoptimisticthanlastyear’s,non-policy-relatedbarriersthreatenthepaceofgrowth.Theimpactofsupplychaindisruptionsandrisingrawmaterialpricesonfutureinvestmentcostscontinuetoimposeforecastuncertainty,andalackofskilledworkerstoinstallhighervolumesofdistributedsolarPVisanotherchallenge.PermittingdelaysareakeybarriertofastergrowthforbothsolarPVandwindinEurope.Foronshorewind,windturbineordersfell36%inQ32022comparedwithQ32021.In2021,onshorewindauctionsheldinGermany,France,ItalyandtheUnitedKingdomwereundersubscribedbecauseprojectscouldnotobtainpermitsduetoauthorisationcomplexity,sitingrestrictionsorsocialopposition.Asaresult,theonshorewindforecastforthesemarketshasbeenreviseddownwards.Gridcongestion,coupledwithalackofinvestmentandlongleadtimesfornetworkupgrades,alsoconstrainrenewableenergygrowth.5FootnotebyTürkiye:Theinformationinthisdocumentwithreferenceto“Cyprus”relatestothesouthernpartoftheIsland.ThereisnosingleauthorityrepresentingbothTurkishandGreekCypriotpeopleontheIsland.TürkiyerecognisestheTurkishRepublicofNorthernCyprus(TRNC).UntilalastingandequitablesolutionisfoundwithinthecontextoftheUnitedNations,Türkiyeshallpreserveitspositionconcerningthe“Cyprusissue”.6FootnotebyalltheEuropeanUnionmemberstatesoftheOECDandtheEuropeanUnion:TheRepublicofCyprusisrecognisedbyallmembersoftheUnitedNationswiththeexceptionofTürkiye.TheinformationinthisdocumentrelatestotheareaundertheeffectivecontrolofthegovernmentoftheRepublicofCyprus.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE38IEA.CCBY4.0.Inaddition,currentandproposedmarketinterventionsinEurope(suchaswholesalemarketcapsandwindfall-profittaxes)couldcreateuncertaintyforrenewableenergyinvestmentsintheupcomingmonthsiftheyarenotwelldesigned.Moreover,theongoingenergycrisishasalsosparkednewdiscussionswithintheEuropeanUnionconcerningfutureelectricitymarketdesign.Whilereformscould,inprinciple,boostmarket-drivenrenewableenergydeployment,ensureenergysecurityandencourageinvestmentinflexibilityresources,itisimportantthatanyreformproposalbecarefullyandtransparentlyprepared,involvingallrelevantstakeholders.Failureinthisregardcouldincreaseinvestoruncertaintyandslowrenewableexpansion.Europe’srenewablecapacityexpansionduring2022-2027couldbe30%higherifaccelerated-caseconditionsaremet.Simplifiedpermittingregulationsandshorterlicensingtimeswouldaccelerateonshorewinddevelopment.ThiscouldbeachievedifthetemporaryemergencyregulationstoaddresspermittingbottlenecksproposedbytheEuropeanCommissionwereformallypassedandimplementedatthecountrylevel.InNovember2022theEuropeanCommission7proposedthedesignationofrenewablesasamatterofpublicinteresttobenefitfromsimplifiedproceduresfornewpermits,anditintroducedcapsonpermittingresponsetimesundercertainconditions.Accelerated-casegrowthisalsopossiblewithmoregridcapacityandfasternetworkimprovementstointegratenewprojects;simplifiedpermittingregulationsandshorterlicensingtimestoaccelerateonshorewinddevelopment;trainingprogrammestoincreasethenumberofskilledworkers;andgreaterlandavailabilityfornewprojectstoshrinkbottlenecksandallowdevelopment.Furthermore,anincreaseinauctionvolumeswouldaccelerateutility-scaleprojectdevelopmentwhilelowerinvestmentcostsandelevatedelectricitypricescouldofferfurtherstimulusforunsubsidisedprojects.GermanyGermany’sswiftpolicyandregulatoryresponsetotheenergycrisisdoublesthepaceofrenewableenergyexpansionBetween2022and2027,Germany’srenewablepowercapacityisexpectedtoexpand67%(97GW),morethantwiceasmuchasduringthepreviousfive-yearperiodowingtoambitiousnewrenewableenergytargetsdesignedtodecrease7In29November2022,EUenergyministersinformallyagreedtodesignaterenewableenergyprojectsaspartofthe“over-ridingpublicinterest”thatwouldbevalidfor18months.However,thisregulationproposalisexpectedtobeformallyapprovedbytheEuropeanCouncilafterthepublicationoftheRenewables2022report.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE39IEA.CCBY4.0.relianceonimportedRussiangasandachieveclimategoals.Thisyear’sforecasthasbeenrevisedupwards52%fromlastyear’storeflectthepassingofpolicyreformsandsupportschemestomeetthesenewtargets.InJuly2022,GermanyreviseditsRenewableEnergySourcesAct(EEG2023)justtwoyearsafterthepreviousrevision(EEG2021)toraisetheshareofrenewablesinelectricitygenerationfrom65%to80%by2030.Thegovernmentalsoincreasedthe2030capacitytargetsforsolarPVandwindsubstantially.Accompanyingthetargetrevisionsaresupportpolicies,includinghigherauctionvolumes,increasedremunerationfordistributedsolarPV,andregulationstoreducepermittingtimesforonshorewind.RenewableenergytechnologieswerealsolegallyestablishedasamatterofoverridingpublicinterestintheEEG2023,givingthempriorityinapprovalandpermittingdecisionswhenevaluatedagainstcompetinginterests.Germanyrenewablecapacityadditions,2022-2027(left)and2030targetsforcumulativeinstalledcapacityinEEG2021andEEG2023vsinstalledcapacitytoday(2021)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.SolarPVaccountsfor70%oftotalforecastgrowth,ledbydistributedPV,whichisalsoresponsibleforhalfoftheupwardsrevisiontothisyear’sforecast.Thisyear’sforecastfordistributedPVismoreoptimisticthanlastyear’sbecausethenewEEG2023offersgreatersupport.Forthefirsttimesince2014,feed-intariffs(FITs)andfeed-inpremiums(FIPs)willrisein2023,monthlydegressionshavebeenhalteduntil2025,andthesizelimitforsystemstoqualifyfortheFIPwasraisedfrom750kWto1MW.Inaddition,apremiumontopofremunerationreceivedthroughtheFIPorFITwasintroducedforsystemsoflessthan1MWthatdonotself-consumeandinstead0%10%20%30%40%50%60%03060901201502010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-commercialPV-residentialOtherrenewablesForecastrevision%050100150200250SolarPVWindonshoreWindoffshoreBioenergyGWEEG20212030targetEEG20232030target2021Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE40IEA.CCBY4.0.feedalltheirelectricityintothegrid.Withthisextrabenefit,designedtoencourageinstallationsonunusedroofspace,totalsupportwouldreturntolevelsnotseensince2013forresidentialsystemsand2018forcommercialones.Thisyear’sdistributedPVforecastisalsomoreoptimisticowingtoprospectsofamoreattractivebusinesscaseforself-consumptionwithremovaloftheEEGsurchargeandanticipationofhigherretailelectricityprices.Utility-scalesolarPVgrowthhasalsobeenrevisedupwardsbecauseofgreatercapacityallocatedtoauctionsundertheEEG2023andanincreaseintheamountoflandavailablefordevelopmentnearmotorwaysandagriculturalsites.Historicalfeed-inpremiums(2014-2021)andnewratesundertheEEG2023withfullfeed-inpremium(2023-2024)IEA.CCBY4.0.Notes:Intherightgraph,feed-inratesforresidentialrefertosystemsoflessthan10kWandforcommercialareforsystemsoflessthan400kW.Theannualfeed-inrateisanaverageofmonthlyfeed-inratesforthatyear.Nonetheless,twomainchallengesthreatensolarPVgrowth,andresolvingthemresultsinnear30%greaterexpansionintheacceleratedcase.Thefirstisundersubscribedbidauctionsandhigherbidpricesbecauseofsupplychainchallenges.Forinstance,utility-scaleauctionsinJune2022wereundersubscribedforthefirsttimesincetheschemewaslaunchedin2017.Only62%ofthe1.1GWonofferwereawarded,andbidpricesincreased6%to55EUR/MWhforthefirsttimesince2019.Contractpricesforthefirsttwolargecommercialrooftopauctionsin2022werealsohigher,andonly26%ofofferedcapacitywasawarded.Thesecondchallengeislabourshortages,whichareslowingthepaceofdistributedPVinstallation.Naturally,highdemandforsystemscoupledwithashortageofskilledlabourraisestheforecast’sdownsidepotential.Thus,intheacceleratedcase,moreequipment,fewerdelays,anadequateworkforceandan020406080100120140160USD/MWhFeed-inpremiumPremiumfor100%gridfeed-in020406080100120140160Premiumfor100%gridfeed-inFeed-inpremiumRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE41IEA.CCBY4.0.attractivebusinesscaseforcorporatePPAsboostgrowthinannualadditionsto19GWby2027,inlinewiththenew2030target.Foronshorewind,theforecasthasalsobeenrevisedupwards30%toreflectincreasedauctionvolumes,newregulationstomakemorelandavailablefordevelopment,acceleratedpermittingandlessdecommissioning.From2024,thegovernmentwilldoubleauctionvolumesto10GWperyear.However,permittinghasbeenthemajorchallengeforonshorewinddevelopmentinGermany,withlongprojectapprovalwaittimesresultingfromsocialopposition,landdevelopmentrestrictionsandnatureconservancyrequirements.Becauseofpermittingchallenges,14outof25onshorewindauctionshavebeenundersubscribedsince2017,resultingin5GWofunawardedcapacity.Toaddressthesehindrances,thegovernmentpassedtheOnshoreWindAct(Wind-an-Land-Gesetz)insummer2022,mandatingthateachofthefederalstatesdedicateanaverage2%oftheirlandtoonshorewinddevelopmentby2032.Untilthesetargetsarereached,rulesonminimumdistancesfromresidentialhomesarebeingsuspendedandturbinescanbepermittedinlandscapeprotectionareas.TheSpeciesProtectionActwasalsorevisedtoreducelitigationandfacilitatecompliancewithnatureconservancylaws.Speciesprotectionassessmentshavebeenstandardisedatthenationallevel,permittingtimesforspeciescompliancehavebeenreducedfromthreetotwoyears,andafinitelistofendangeredbirdspecieshasbeencompiled.Underthemaincase,weexpectthesereformstomakemorelandavailableforprojectdevelopment,shortenpermittingwaittimes,andsubsequentlyallowmoreprojectstobidintoauctionsandbeawarded.Althoughannualadditionsfromauctionsinthemaincaseareforecasttoreach5.5GWby2027,upfromanaverageof1.5GWduring2019-2022,thisstillfallsbelowthe10GWonofferannuallyinthenewauctionschedule.Theforecastiscautiousaboutfullsubscriptions,giventherapidincreaseinauctionvolumesandthetimeneededforindustrytoadjusttothenewrules.Alackofavailablegridcapacityisanotherimpedimenttorapiddeploymentofonshoreadditions,andthepaceofgridinfrastructureexpansionremainsaforecastuncertainty.Since2008,ahigh-voltagelinehasbeenplannedtoconnectwindsitesinthenorthtodemandcentresinthesouth,butithasyettobecommissioned.Complicationsinvolvingpermittingacrossmultiplejurisdictionsandashortageofskilledlabourerswithexperiencearefurtherbarrierstofastergridexpansion.Thesecondreasontheonshorewindforecasthasbeenrevisedupwardsisthatdecommissioningestimateshavebeenlowered:itisnowexpectedthatturbinesRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE42IEA.CCBY4.0.forwhichsupportisexpiringwillgainsufficientrevenuefromthespotmarketorcorporateoff-takers.Inthefirsthalfof2022,only100MWoutof5.6GWweredecommissionedbecausetheirFITsexpired;theremainingcontinuedtooperatethankstohighmarketprices.Intheacceleratedcase,onshorewindgrowthcouldincrease38%to32GWover2022-2027ifseveralconditionsaremet.Permittingreformswouldhavetobeimplementedmorequicklytoshortenleadtimesandraiseauctionsubscriptionrates,andnetworkupdateswouldhavetobeundertakensoonertoreducecongestionandallowformorecapacitytobebuilt.Furthermore,thebusinesscaseforonshorewindsystemswouldhavetobemademoreattractivethroughcorporatePPAs,andtherewouldalsohavetobelessdecommissioningofolderplants.Foroffshorewind,theforecastremainsunchangedfromlastyeareventhoughGermanyhasraisedits2030targetfrom10GWto20GW.Becauseoflongprojectleadtimesandtransmissioncapacityconstraints,themaincasedoesnotexpecthigher2030targetstoresultinstrongergrowthbefore2027.Theforecastthereforereflectsonlythecurrentprojectdevelopmentpipeline,whichisontracktobecommissionedaspreviouslyanticipated.Regardingbioenergy,thisyear’sforecastismoreoptimisticduehigherexpectationsforbiomethanecapacity.Comparedwithbiomassauctions,whichhavebeenconsistentlyundersubscribedsince2017,Germany’sfirsttwobiomethaneauctionshavebeenfullysubscribedandweexpectthistrendtocontinueunderthenewEEG2023emphasisonincreasedauctions.FrancePermittingissuesimpairdeployment,butongoingpolicyeffortstoshortendevelopmentleadtimescouldhelpunlockfasterexpansionfromauctionsInthemaincase,France’scumulativerenewablecapacityisprojectedtogrowby50%(31GW)over2022-2027,withthegreatestannualcapacityadditionsinsolarPV(+2.8GW/yearonaverage)andwind(+2.3GW/yearonaverage).Overall,France’sforecasthasbeenreviseddownwardsfromlastyearmainlybecausepermittingchallengesarehamperingfasterexpansionofutility-scalerenewableenergyprojects,particularlyonshorewind.Permittingdelaysandlandconstraintshavecausedgovernment-ledFIPauctionstobeundersubscribed,andlongdevelopmentwaittimesarewideningthegapbetweenthetimeprojectsenterthepipeline(i.e.intheannouncedorpermittingphase)andtheiractualdeployment.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE43IEA.CCBY4.0.ThecurrentFIPauctionframeworkofferspotentialforfastergrowthforbothutility-scalesolarPVandonshorewind.Today,projectdevelopmenttimelinesinFrancearedoublethoseofneighbouringEUcountries,withaboutfourtofiveyearsonaverageforgroundPV,sevenyearsforonshorewindandtenyearsforoffshorewind.8Thesedelaysareraisingdevelopmentcostsandleadingtohighprojectcancellationrates.Tomitigatetheeconomicimpactsoflengthyprojectdevelopmenttimelines,theregulator(CRE)introducedmodifiedtenderspecificationsinSeptember2022.Producersnowhavetheoptionofsellingtheirgenerationonthemarketbeforetheyreceivegovernmentsupport,enablingadditionalrevenuestooffsethighertechnologycosts.TheCREalsoextendedthecommissioningdeadlinesforauctionedprojectstoavoidpenaltiesfordevelopers,anditallowsdeveloperstoincreaseprojectcapacitybyupto140%ofthatsecuredintenders.Morerecently,thegovernmentannouncedanewbilltostreamlineandassurepermitdeliveryandtoshortenconnectiondelays,enhancingcitizenparticipationinprojectsandsimplifyingaccesstodegradedlandforrenewableenergyprojects.However,theeffectivenessofregulatorymeasuresandthedetailsoftheannouncedbilltoeasepermittingarestrongforecastuncertainties.Annualonshorewindadditionsareexpectedtostepupin2022,primarilybecauseofrisingauctionvolumesoverthepastfewyears.CorporatePPAuseisstillmarginalbutexpanding,whichpresentsopportunitiesforbothnewsmall-scaleplantsandtheincreasingnumberofprojectsreachingtheendoftheir20-yearpolicysupportperiod.In2022,Francelaunchedlarge-scaleoffshorewindgenerationwithfullcommissioningofa480-MWprojectatSaint-Nazaire,afulldecadeafterthetenderingcompetitionhadbeenheld.Cumulativeoffshorewindcapacityisexpectedtoreach3.6GWattheendoftheforecastperiodwiththecommissioningofsixotherprojectsfromthesametenderingscheme.In2021,France’sannualPVinstallationsmorethandoubledfrom2020withthecommissioningofpreviouslyauctionedcapacityforutility-scaleandcommercialPVprojects.ModifiedtenderingspecificationsandanincreasedthresholdforcommercialsolarPVprojecteligibilityfortheon-demandFITleadtoamoreoptimisticforecastthisyear,despiteongoingsupplychainchallengesandrisingcosts.Inaddition,highelectricitypricesandexpectationsoffurtherincreasesstimulatedemandfromresidentialconsumers,whomaybenefitfromnewself-consumptionsupportmeasuresthegovernmentannouncedinSeptember2022.Overall,France’sinstalledPVcapacitymorethandoublesover2022-2027inourmaincase.8Incomparison,theleadtimeforgroundsolarPVprojectsinGermanyisgenerallyjustoveroneyeartothreeyears.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE44IEA.CCBY4.0.Francecapacityadditionsbytechnology,2010-2027(left)andprojectpipelinevsannualcommissioning,2016-2021(right)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Source:WindandsolarPVprojectpipelinedataarefromSER(2021),Panoramadel’électricitérenouvelable.Accelerated-casemodellingsuggeststhatFrance’srenewablecapacityadditionsover2022-2027couldbemorethanone-thirdhigherthaninourmaincaseifseveralconditionsaremet.Forinstance,theacceleratedcaseassumesthesimplificationoflandeligibilitycriteriaforprojects,whichcurrentlyencompassmultipleregulationsatdifferentjurisdictionallevels;fasterhandlingofadministrativeandpermittingprocedures;re-evaluationofthecost-competitivenesscriteriaforauctions,9especiallyforthebuildingandrooftopPVsegment,inwhichsmallprojectsstruggletocompetewithlargeones,leavingsignificantPVpotentialuntapped;improvementstotheadequacyofnetworkconnectioncapacity;andthesecuringofareliablesupplychainforequipment.SpainRenewablepowercapacityalmostdoublesthankstofavourablemarketconditionsandreformstoaddresspermittingandgridchallengesSpain’sinstalledrenewableelectricitycapacityisexpectedtoalmostdoubleby2027ascompetitiveauctions,corporatePPAsandmerchantprojectsadd58GWofsolarPV,onshorewindandpumped-storagehydro.Thisyear’sforecasthasbeenrevised63%upwardstoreflectamoreoptimisticoutlookforsolarPVfortworeasons.9AlthoughFrance’sauctiondesignalreadyintegratesnon-economiccriteriatoevaluateseveralenvironmentaldimensionsofrenewableprojects,thesecriteriaarecurrentlyaccordedrelativelylowerweightinthefinalscoringmethodology.-5.0%-4.0%-3.0%-2.0%-1.0%0.0%1.0%0510152025303540452010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%02468101214161820201620172018201920202021201620172018201920202021WindPVGWProjectsindevelopment(net)AnnualadditionsRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE45IEA.CCBY4.0.Thefirstisanincreasinglyattractivebusinesscaseforbothunsubsidisedutility-scalesolarPVandself-consumptionindistributedPV.Inbothsegments,growthwasstrongerthanexpectedin2021,resultingintotalPVadditionsof4.7GW,thehighestonrecordinSpain.ThesecondreasonisthepassingofregulatoryreformstoacceleraterenewablecapacitygrowthinresponsetothewarinUkraine.ThereformsstreamlinepermittingforsolarPVandwindplants,increasegridcapacityfornewrenewableenergyprojects,andprovideclarityoverclawbackpoliciesforwindfallprofits.Spainrenewablecapacityadditionsbytechnology,2010-2027(left)andannualauctionsvsdeploymenttargets,2022-2026(right)IEA.CCBY4.0.InMarch2022,SpainpassedRoyalDecree06/2022–aseriesofreformstoaddresspermittingchallengesandgridcongestionforrenewableenergyprojects.Amongtheirvariousmeasures,thesereformsunderpinamoreoptimisticforecastby:IntroducingsimplifiedenvironmentalapprovalsforsolarPVprojectsoflessthan150MWandwindprojectsbelow75MW,andbyshorteningtheregulatoryresponsedeadlinefromsixtotwomonths.Requiringdistributiongridoperatorstoearmark10%oftheirinvestmentbudgetforupgradestofacilitateconnectionfornewsmall-scalerenewablepowerplants.Mandatingthat10%oftransmissioncapacitybereleasedspecificallyforlargeself-consumptionprojects.Announcinganenddateforwindfall-profitcapsformerchantprojectsandclarifyingthatprojectswithfixed-pricePPAswouldbesubjecttotheclawbackonlyifthecontractpriceisaboveUSD67/MWh.0%10%20%30%40%50%60%70%80%01020304050607080902010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%0246810121416SolarPVOnshorewindCSPBioenergyAuctionsAnnualdeploymenttargetRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE46IEA.CCBY4.0.Projectsoutsideoftheauctionschemeaccountfor50%ofthemain-caseforecastforutility-scalegrowth.Theregulatoryreformsclarifyingtheclawbackmechanism,shorteningpermittingtimesandincreasinggridcapacityareexpectedtoaddresschallengesthatlimitedthepaceofunsubsidisedprojectexpansioninlastyear’sforecast.Accordingly,theutility-scalesolarPVforecasthasbeenrevisedupwardsby60%.Whilethereformsarealsoexpectedtofacilitateonshorewindexpansion,theirimpactislimitedbecausethedecommissioningofolderplantsoffsetsupwardsrevisionsresultingfromthereforms.Notallprojectscomingtotheendoftheirfeed-in-tariffeligibilityareexpectedtogainsufficientrevenueinthespotmarketorfromcorporateoff-takerstomaintainoperationsorrepower.FordistributedPVapplications,theforecasthasbeenrevisedupwards,with88%moreexpansionin2021thanexpectedasself-consumptionisincreasinglyeconomicallyattractiveandgridreformswillfacilitateconnection.TheSpanishgovernment’s2019decisionstoliftthetaxonself-consumption,allowcollectiveconsumptionandremunerateexcessgenerationhaveimprovedthebusinesscaseforcommercialandresidentialapplications,causingcapacityadditionstoincreasefrom2020to2021.Themaincaseexpectstheprospectofhigherretailelectricitytariffstomakeself-consumptionevenmorefinanciallyattractive,whilerecentregulatoryreformsreducegridcongestionandshortenconnectionqueues.Accelerated-caseforecastingindicatesthatgrowthcouldbealmost40%higherthaninthemaincaseundertwoconditions.Thefirstishighergrowthfromunsubsidisedutility-scaleprojectsanddistributedPV,encouragedbylowerinvestmentcostsandsustainedorhigherelectricityprices.Thesecondistheawardingofmorecapacitythroughcompetitiveauctions.ForsolarPVandonshorewind,greatervolumeswouldhavetobeallocatedunderthetenderingscheme.Currentauctionvolumesdonotprovideenoughannualdeploymenttomeetthe2030targets,implyingthattheresidualwouldcomefromprojectscontractedoutsideoftheauctionscheme.Higherauctionvolumeswouldboostgrowthandincreasetheprobabilityofmeetinglong-termtargets,particularlyforonshorewind,forwhichunsubsidisedmarketsarenotasattractiveasforsolarPV.ForCSP,raisingbiddingthresholdscouldalsoresultinstrongergrowth.Thefirstauctionfor200MWofCSPinOctober2022awardednocapacitybecausethebidsexceededtheceilingpriceofUSD110/MWh.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE47IEA.CCBY4.0.NetherlandsSubsidyprogrammesandnetmeteringencouragesolarPVandwindexpansion,butgridandroofinfrastructurechallengespersistTheNetherlandsisforecasttoaddnearly30GWofrenewablepowercapacityfrom2022to2027,ledbysolarPVandoffshorewind.TheSDE+andSDE++programmes,whichprovidesubsidiesforrenewableenergygenerationorCO2emissionsreductions,promptonshorewindandutility-scaleandcommercialsolarPVuptake.Meanwhile,offshorewindcapacityexpandsthankstotenderingschemes,andnetmeteringencouragesresidentialPVgrowth.The2022forecasthasbeenrevised20%upwardsfromlastyearbecauseutility-scaleandcommercialPVprojectsweredeployedmorequicklythanexpected,andthegovernmentextendednet-meteringbenefits.TheNetherlandsrenewablecapacityadditions,2020-2027(left)andcapacitytosolarPVandothertechnologiesinSDE+andSDE++(right)IEA.CCBY4.0.Source:(right)IEAanalysisbasedondatafromtheNetherlandsEnterpriseAgency(accessedOctober2022).Dutchutility-andcommercial-scalePVcapacityisforecasttoincreaseover17GWin2022-2027.However,annualadditionsdeclinebecausetheNetherlands’subsidyschemenowprescribesfewerauctionsperyearandtherequestedSDE++budgetsubsidyforsolarPVin2022ishalvedcomparedwithlastyear.Intheresidentialsegment,fullnet-meteringbenefitswereextendedto2024andwillcontinuetobeamajordriverofgrowthbeforetheirphasedown01234567820202021202220232024202520262027GWHydropowerOnshorewindOffshorewindBioenergyPV-utilityPV-commercialPV-residentialAcc.case0123456789201620172018201920202021GWOthertechnologiesAwardedsolarPVcapacityRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE48IEA.CCBY4.0.beginsin2025.Inaddition,theDutchgovernmentrecentlydecidedtolifttheVATonresidentialsolarpanelsstartingin2023,makingsystemsmoreeconomicallyattractive.Fewerauctionbidsandlowawardedcapacityduetogridconstraintsalsoaffectannualonshorewindcapacityadditionsovertheforecastperiod,withjust2.8GWofnewonshorewindcapacityanticipated.Offshorewindadditionsofover3.5GWareexpectedinpreviouslyawardeddevelopmentzones,includinganadditional1.4GWthatwillbetenderedthisyear.Althoughthegovernmentincreasedits2030capacitytargetfrom11.5GWto21GWtohelpreducedependencyonRussiangas,muchoftheadditionalcapacityhasyettobetenderedandisexpectedtobecomeoperationalonlyafter2027.Threemajorobstacleschallengeexpansion.Thefirstisgridconstraints,whicharerenderingsomeregionsunabletoacceptnewcapacityuntil2029.Thesecondisfuturepolicyuncertainty.UndertheEUClimateAgreement,theNetherlandshaspledgedtogenerate35TWhofelectricityfromonshorerenewablesby2030.TheDutchgovernmentexpectsthatenoughonshorerenewablecapacitywillbeawardedtoachievethisgoalbythe2023SDE++auctionroundcreatinguncertaintyaboutfuturesubsidiesforonshorerenewablesfrom2024.Thethirdimpedimentisrooftopinfrastructure,asmostlargeroofshaveinadequateload-bearingcapacity.From2022,buildingownersmustdemonstratearoof’sabilitytohostasolarinstallationtobeeligibleforasubsidy;thegovernmentisthusconsideringpolicyassistancetohelpownersretrofitroofsforsolarpanelsuitability.Theacceleratedcasedemonstratesnearly20%greateradditions,assumingtheSDE++schemecontinuestoawardhighvolumesofonshorerenewablesbeyond2023.Plus,growthintheresidentialandcommercialPVsectorscanbehigherifapolicytoaddressroofstructureissuesispassed.ExpandingtheuseofcorporatePPAs,whichhavebeenemployedinconjunctionwithSDEsubsidies,couldalsoachievegreatercapacityincreases.Finally,acceleratingthepaceofgridupgradestoaddresscongestionissueswouldfreeupadditionalcapacityforlarge-scaleonshorewindandsolarPVprojects.BelgiumandDenmarkPolicysupportandhighretailpricesleadtofasterdistributedsolarPVexpansioninBelgiumBelgiumissettoaddalmost6GWofrenewablecapacityover2022-2027,drivenbydistributedsolarPVandwindinthemaincase.Forecastgrowthisslightlylowerthaninthepreviousfiveyearsduetolimitedoffshorewindexpansion.Overall,Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE49IEA.CCBY4.0.fourseparategreencertificate(GC)programmesspurgrowth:onefromthefederalgovernmentforoffshorewindandhydropowerandthreeregionalones(inFlanders,WalloniaandBrussels).FordistributedPV,rebatesforresidentialsystemsintheFlandersregionarebeingcontinued.Plus,thefederalgovernmenthasextendedtheVATreductionforresidentialsolarapplicationstobuildingsconstructedsince2010,asitwaspreviouslyavailableforolderonesonly.ThecombinationoffederalandregionalincentiveshasimprovedthebusinesscasefordistributedPV,especiallyinthecontextofhigherretailprices.FollowingRussia’sinvasionofUkraine,inMarch2022Belgium’sfederalgovernmentdecidedtoextendtheoperationof2GWofnuclearcapacitybytenyears.ItalsointroducedaEUR1.2-billionfinancialpackagetoacceleratethecountry’senergytransitionandprotectconsumersfromhighenergyprices.Thepackage’smeasuresincludedevelopingnewoffshorewindzonestoexpandandaccelerateoffshorewinddeployment,raisingthecountry’swindtargetfrom4GWto5.7GWby2030.Thisnewtargetspursadditionaloffshorecapacitydeploymentof800MWinourmain-caseforecast.ThepackagealsosupportsacceleratedsolarPVuptakeatnationalrailwaystationsandonfederalbuildings,aswellasfloatingPVsystems.ItalsoprioritisestheshorteningofpermittingandlicensingwaittimesforonshorewindandsolarPV.Intheacceleratedcase,renewableenergygrowthisdemonstratedtobenearly50%higher,withoffshorewindanddistributedPVshowingthemostupsidepotential.InMay2022,Belgium,Denmark,GermanyandtheNetherlandssignedtheEsbjergdeclaration,aEUR135-billionoffshorewindpacttodeployatleast65GWby2030and150GWby2050.Furthermore,Belgium’snationalrecoveryandresilienceplanincludesEUR100milliontodevelopanoffshorehubandgreenhydrogenproduction.Theaccelerated-caseforecastthusassumesanearlylaunchoftheEnergyIslandhubwiththeNorthSeaEnergyCooperationandanadditional2GWofoffshorewindcapacityby2027.Plus,fasterdistributedPVexpansionowingtohigherretailelectricitypricesandincreasedauctioncapacityinFlandersandotherregionsleadsto35%highersolarPVdeployment.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE50IEA.CCBY4.0.Belgiumrenewablecapacityadditionsbytechnology,2010-2027(left)andDenmarkrenewablecapacityadditionsbytechnology,2010-2027(right)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Subsidy-freeprojectsandbilateralcontractsspurrenewableenergyexpansioninDenmarkWithstrongerambitionstowards2030,Denmark’srenewableelectricitycapacitynearlydoublesover2022-2027inthemaincase,ledbysolarPV.Thisyear’sforecasthasbeenrevisedupwardsby40%becauseconsiderableutility-scalesolarPVadditionsareexpected,mainlyfromunsubsidisedprojectsfinancedthroughmerchantrevenuesandbilateralcontracts.Inthemaincase,almost2GWofoffshorewindcapacityiscommissioned,includingtheThorwindfarmawardedlastDecember.Onshorewindexpansionincludestherepoweringofexistingcapacity,eitherthroughcompetitiveauctionsorcorporatePPAs.However,renewablecapacitygrowthintheacceleratedcaseisalmost30%higherthaninthemaincase,withmoresubsidy-freePVprojectsbasedonPPAsordirectparticipationintheelectricitymarket.Towardstheendof2030,thestateisexpectedtoputanadditional9GWofoffshorewindouttotender.Furthermore,fastercommissioningofprojectsinthepipelineandsimplifiedpermittingcouldprovideanadditional1GWofutility-scalesolarPVcapacityand1GWofwind.0%1%2%3%4%5%6%7%8%01234567892010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWOnshorewindOffshorewindBioenergyPV-utilityPV-distributedOtherrenewablesForecastrevision(%)0%5%10%15%20%25%30%35%0246810122010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE51IEA.CCBY4.0.ItalyItalyisacceleratingrenewablecapacitydeploymentinresponsetotheenergycrisis,butpermittingchallengespersistItaly’srenewablecapacityisexpectedtoincrease25GWover2021-2027(+40%).Utility-scaleanddistributedsolarPVeachaccountfor40%ofgrowth,withonshorewindprovidingtheremainder.Thisyear’sforecasthasbeenrevisedupwards17%becausestrongerdistributedPVexpansionisexpectedfromItaly’snet-billingscheme,generoustaxincentivesandhigherelectricityprices,whichimprovethetechnology’seconomicattractiveness.Meanwhile,themaindriversforutility-scaledeploymentarecompetitiveauctionswithgrowingcontributionsfrommerchantprojectsandbilateralPPAs.However,whileutility-scalesolarPVandonshorewindadditionsaccelerateovertheforecastperiod,theyexpandmoreslowlythanpreviouslyexpectedbecausepermittingchallengespersistdespitereformattempts.Italyrenewablecapacityadditions,2010-2027(left)andresultsofFERrenewableenergyauctions(right)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Source:(right)IEAanalysisbasedondatafromItaly’sGSE(GestoreServiziEnergetici),2022.Althoughauctionsremaintheprimarydriverofutility-scalePVdeploymentinItaly,theaverageallocationratewasjust35%inallrounds.Afternineauctions,totalawardedcapacityhadreached5GW,whilethepipelineofPVandonshorewindprojectsapplyingforgridconnectionattheendof2020was105GW.Acomplicatedandlengthypermittingprocessisthemainobstacleimpedingprojectdevelopmentandpreventingdevelopersfrombidding.0%2%4%6%8%10%12%14%16%18%05101520253035402010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%012345678GWWindandPVUnallocatedRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE52IEA.CCBY4.0.Inaddition,regulationsrestrictingtheparticipationofprojectsbuiltonagriculturallandsignificantlylimitcapacityavailableforauctions.AlthoughthegovernmentintroducednewregulationsinDecember2021tostreamlinepermittingandfacilitateinvestmentonagriculturalland,auctionsconductedin2022remainedundersubscribed.Nevertheless,ourforecastanticipatesanuptickinutility-scaleprojectdeployment.FordistributedsolarPV,policiesintroducedinresponsetotheenergycrisisshouldleadtorapidexpansion.ThenewregulationshavesignificantlysimplifiedthepermittingprocessforrooftopPVsystemsoflessthan200kWoncommercialbuildingsandextendedthe110%taxrebateintroducedduringtheCovid-19crisisbyanotheryear.Inaddition,higherelectricitypriceshaveimprovedtheeconomicattractivenessofdistributedPVunderthenet-billingscheme.Accordingly,distributedPVadditionsin2022willreachalmost2GW,thehighestgrowthsince2012.Intheacceleratedcase,Italycouldachievealmost50%higherrenewablecapacitygrowthover2022-2027thaninthemaincase.Significantlystreamliningpermittingprocesseswillbecrucialtospurdevelopmentofthehugepipelineofutility-scalePVandwindprojects.Atthesametime,raisingsupportfordistributedPVthroughnewtaxrebates,subsidiesandrooftopPVmandatesshouldincentivisegreaterconsumerinvestment.Inparallel,fasterdevelopmentofpowergridsandflexibilityresourceswillbenecessarytoensureefficientintegrationofadditionalvariablerenewablecapacity.UnitedKingdomNewrenewablecapacitytargetsandpoliciesimprovingpermittingleadtoamoreoptimisticforecastRenewablecapacityintheUnitedKingdomisforecasttoincreasenearly70%(36GW)over2022-2027,almostdoublingthepaceofgrowthofthelastfiveyears.Offshorewindaccountsforhalfofthisexpansion,followedbysolarPVandonshorewind.Utility-scaleprojectsleadthesurge,spurredbycompetitivecontractfordifference(CfD)auctions.Inresponsetotheenergycrisis,theUKgovernmentincreasedits2030offshorewindtargetfrom40GWto50GWandestablisheda70-GWsolarPVtargetfor2035inthenewBritishEnergySecurityStrategy.Thisyear’sforecasthasthusbeenrevisedupwardsalmost10%toreflectrecentlyintroducedandanticipatedpolicies.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE53IEA.CCBY4.0.UnitedKingdomrenewablecapacityadditions,2010-2027(left)andCfDauctionresults,capacitylimitsandprojectspipelineinRenewableEnergyPlanningDatabase(right)IEA.CCBY4.0.Includesprojectswith“underconstruction”and“awaitingconstruction”statusintheRenewableEnergyPlanningDatabaseasofSeptember2022.Notes:Acc.case=acceleratedcase,CfD=contractfordifference.“CfDRound-4limits”reflectsthemaximumCfDRound-4capacityavailableforallocationtoPVandonshorewindprojects.Source:(right)IEAanalysisbasedondatafromUKDepartmentforBusiness,EnergyandIndustrialStrategy,2022.TheCfDauctionconductedin2022resultedinthecontractingofalmost7GWofoffshorewindprojects,andforthefirsttimea32-MWprojectwithfloatingfoundationwonacontract.Currently,thepipelineofoffshorewindprojectsunderdevelopmentrepresentsonly70%ofthecapacityneededtomeettheUnitedKingdom’s2030target.Offshoreprojectdevelopmentcantakeupto13years,limitingthepotentialofnewprojectstobecommissionedbefore2030.However,theUKgovernmentplanstohalvedevelopmentleadtimesbystreamliningadministrativeprocedures.TheforecastthereforeassumesadditionalcapacityfromplannedCfDauctionsandimprovementsinpermitting.Whilethe2022CfDauctionofferedanunprecedented3.5GWofcapacityeachforsolarPVandonshorewind,only2GWofsolarand1GWofonshorewindwereawardedeventhoughtheprojectpipelineforeachwasatalmost7GW.Manydeveloperspreferrednottoparticipateintheauction,presumablytotakeadvantageofhighelectricitypricesthroughcorporatePPAsorbecausetheywantedtowaitforequipmentandmaterialpricestofall.FutureauctionroundswillbeorganisedannuallyinsteadofeverytwoyearsandwillcontinuetoincludePVandonshorewind.Auctionsremainthemaindriverofexpansion,followedbycorporatePPAs,whichcontribute0.5-1GWofadditionsannually.Thegovernmentalsoplanstoeaselocalpermittingrulestomakealargerportionoftheprojectpipelineeligibleforbidding.0%2%4%6%8%10%12%14%16%051015202530354045502010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindonshoreWindoffshoreBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%0510152025PVOnshorewindOffshorewindGWCfDRound-4resultsCfDRound-4limitsProjectspipelineRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE54IEA.CCBY4.0.FordistributedPV,thegovernment’sstrategyincludesintroducingdesignstandardstoencouragerooftopPVinstallationonnewbuildings,increasingtheavailabilityoflow-costfinancingandfacilitatingpermitting.Inaddition,highelectricitypricesareexpectedtomakedistributedPVmoreeconomicallyattractive.Asaresult,capacitygrowthinboththeresidentialandcommercialPVsegmentsisexpectedtoincreasesignificantlyintheforecastperiod,exceedinglastyear’sexpectations.Intheacceleratedcase,UKrenewableenergydeploymentover2022-2027is27%higherthaninthemaincase.Onshorewindhasthehighestupsidepotentialifpermittingandconsentingrulesarestreamlined.Meanwhile,allocatingmoreonshorewindandsolarPVcapacityinfutureauctionsandraisingpricecapsshouldattractmoreinterestfromdevelopersandresultinhigherdeploymentofutility-scaleprojects.Successfulimplementationofplanstostreamlinepermittingforoffshorewindwillalsobenecessaryforthetimelydevelopmentofnewprojectstoachieve2030targets.PolandRenewablecapacityalmosttriplesby2027,ledbysolarPVPolandisexpectedtoalmosttripleitsinstalledcapacitybyadding31GWofrenewablesover2022-2027,withdistributedPVprojectsaccountingfornearlyhalfofallexpansion,followedbyutility-scalePV.Inaddition,itsfirstoffshorewindcapacitywillstartoperationin2026,adding2GWbytheendoftheforecastperiod.Competitiveauctionsareexpectedtoremainthemaindriverofutility-scalePVandonshorewinddeployment.AfterastepincreaseindistributedPVcapacitygrowthin2021andthefirsthalfof2022,theannualinstallationpacewillslowwiththetransitionfromnetmeteringtonetbilling,whichislessgenerous.Still,thedistributedsolarPVforecastforthisyearismoreoptimisticthanlastyear’sthankstohigher-than-expecteddeploymentover2021-2022andelevatedelectricitypricesincreasingprofitability.FasterrooftopPVadoptionisthemainreasonforPoland’s27%upwardforecastrevision.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE55IEA.CCBY4.0.Polandrenewablecapacityadditions,2010-2027(left)andquarterlydistributedPVcapacityadditions,2019-2022(right)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Source:(right)IEAanalysisbasedonPTPiREE(2022),MicroinstallationsinPoland.Investmentsubsidies,taxrebatesandagenerousnet-meteringschemeallowedPoland’sdistributedPVcapacitytoquintuplebetween2019and2021,exceedinggovernmentexpectations.Asaresult,thecountryalreadysurpassedits2030PVtargetlastyear.Subsidieswerescaleddownin2022andnetbillingreplacednetmeteringinApril2022,asintegratingrapidlyrisingvolumesofnewcapacityintotheenergysystemhasbeenchallengingfordistributiongridinfrastructure.Policychangesledtoanalmost60%decreaseininstallationsbetweenQ1andQ32022,buthighelectricitypricesaremakingrooftopPVinvestmentsconsiderablymoreattractive,leadingtohigher-than-expectedinstallationsinthesecondhalfof2022.Auctionsaretheprincipaldriverofutility-scalecapacityexpansion,with6GWofPVand5GWofonshorewindexpectedtocomeonlineasaresultofcontractsawardedduring2016-2021.ThenextauctionswillbeheldinDecember2022andthegovernmenthaspublishedaregulationdeterminingtheannualtenderingscheduleupto2027.Plannedauctionsareexpectedtoresultintheinstallationof9GWofutility-scalePVand3GWofonshorewind.Theforecastincludescommissioningofsomeoftheseprojectsby2027.Foroffshorewind,Polandawarded6GWofcapacityin2021viacontractsfordifference,whilethenextauctionsareplannedfor2025.PolandhasalsorequestedaroundEUR3.7billioningrantsandloansthroughtheEURecoveryandResilienceFacilitytosupportdevelopmentofportinfrastructure.Thepaymentshavebeendelayed,however,puttingthetimelycommissioningofawardedprojectsatrisk.Plus,restrictive-distancerulesforturbinescontinuetoslowthepaceofonshorewindcapacityadditions,leadingtoadownwardforecastrevisionforthistechnology.0%5%10%15%20%25%30%0510152025303540452010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerOnshorewindOffshorewindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%0.00.20.40.60.81.01.21.4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q32019202020212022GWDistributedPVcapacityadditionsRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE56IEA.CCBY4.0.Intheaccelerated-caseforecast,Polandachieves36%higherrenewablecapacityadditionsover2022-2027thaninthemaincase,withonshorewindhavingthelargestupsidepotential.Whilefasteronshorewindexpansioncouldbeachievedthroughtheprompteasingofturbineplacementrestrictions,offeringhighervolumesinplannedauctionswouldleadtofastergrowthofbothonshorewindandutility-scalePV.ExtendingtaxrebatesandsubsidiesforresidentialPVownersandsmallcompanieswouldacceleratedeploymentsignificantly,butgreaterinvestmentintransmissionanddistributiongridswillbenecessarytoenablefasterwindandsolarPVcapacitygrowth.Inaddition,updatingnationalstrategicdocumentsforlong-termpowersectordevelopmentwouldprovidegreatervisibilityforrenewableenergydevelopers,encouraginginvestment.AsiaPacificSolarPVleadsdeploymentthankstocompetitiveauctions,butbetterpolicysupportcouldboostgrowthRenewablecapacityintheAsiaPacificregion(excludingChina)isexpectedtogrowby360GW(+70%)over2022-2027.SolarPVaccountsforovertwo-thirdsofdeployment,followedbywindandhydropower.Indialeadsexpansionintheregionwithmorethana40%shareintotalgrowth,thankstoauctionsforutility-scalePVandonshorewindcapacityandbetterincentivesfordistributedPV.IntheASEANregion,theintroductionofcompetitiveauctionsinIndonesiaandthePhilippines(andplansfortheminVietNam)acceleratesrenewablecapacitygrowth.However,expansionremainslimitedbypersistentchallengesrelatedtothelackoflong-termpolicysupport.InAustralia,newstate-levelauctionsandhighdemandforcorporatePPAshaveledtosignificantupwardrevisionstothisyear’sforecast.Incontrast,renewableenergydeploymentinJapanisexpectedtoslowafter2023asthetransitionfromaFITtoaFIPleadstofewercapacityawards,whilepermittingchallengesinKoreacausedevelopmenttostagnatedespiteprolongationofitsattractivefixed-pricescheme.Overall,despitedownwardforecastrevisionsfortheASEAN(duetodelaysinpolicyimplementation)aswellasforJapanandKorea,positivedevelopmentsinIndiaandAustraliacausetheforecastforAsiaPacifictobe6%higherthisyearthanlast.Intheacceleratedcase,renewablecapacitygrowthintheregionover2022-2027ismorethan40%higherthaninthemaincase.SuchstrongupsidepotentialresultsmostlyfromtheenlargementofcurrentlylimitedpolicysupportintheRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE57IEA.CCBY4.0.ASEAN,forexamplebyspeedingtheimplementationofplannedcompetitiveauctionsinVietNamandIndonesiaandintroducingeffectivesupportpoliciesinThailand.Inaddition,relaxinglocal-contentandprojectownershiprulesandimprovingthebankabilityofstandardPPAswouldencouragemoreinternationalinvestment.RenewablepowerdevelopmentinIndiacouldalsobeacceleratedconsiderablyifpersistentchallengesrelatedtodistributioncompanies’poorfinancialhealthandlandprocurementweresolved.InAustralia,moreauctions,timelyinvestmentingridsandrapiddevelopmentofgreenhydrogenprojectswouldresultinalmost50%fasterdeploymentofrenewables.Throughouttheregion,simplifyingpermitting,especiallyintheASEANregion,KoreaandJapan,andboostinginvestmentingriddevelopmentwillbenecessarytoacceleratedeployment.AsiaPacificrenewablecapacityadditionsbytechnology,2010-2027(left)andannualcapacityadditionsbycountry,2019-2027(right)IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.ASEAN=AssociationofSoutheastAsianNations.AsiaPacificexcludesChina.IndiaConsistentpolicysupportandambitiouslong-termtargetsenableIndiatodoubleitsrenewablecapacityby2027Withtheadditionof145GW,Indiaisforecasttoalmostdoubleitsrenewablepowercapacityover2022-2027.SolarPVaccountsforthree-quartersofthisgrowth,followedbyonshorewindwith15%andhydropowerprovidingalmostalltherest.Renewablecapacitydeploymentwillbedominatedbyutility-scaleplants0%1%2%3%4%5%6%7%01002003004005006002010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%020406080100120201920202021202220232024202520262027GWIndiaASEANAustraliaJapanKoreaAcc.caseRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE58IEA.CCBY4.0.contractedthroughcompetitiveauctions.However,distributedPVisexpectedtobeincreasinglyimportantthankstogrowingconsumerawarenessandcontinuedpolicysupport.Thisyear’sforecasthasbeenrevisedupwards7%fromlastyear’sowingtohigher-than-expectedPVcapacityadditionsin2022,theannouncementofseveralambitiousdomesticPVmanufacturingprojectsandaplannedimprovementofauctionrulesforwindfarms.TheoverarchingdriversofrenewableenergygrowthareIndia’stargetsof500GWofnon-fossilinstalledcapacityby2030andnetzeroemissionsby2070,ensuringlong-termvisibilityforrenewableenergydevelopers.Indiarenewablecapacityadditions,2010-2027(left)andrenewablecapacityawardedinauctions,2017-2022(right)IEA.CCBY4.0.DataforJanuary-Septemberonly.Notes:Acc.case=acceleratedcase.Av.=average.“PV–12GWmanufacturing”referstotheJanuary2020auctionlinkedtonationalsolarPVmanufacturing.Sources:(right)BNEF(2022),3Q2022GlobalAuctionandTenderResultsandCalendar;BridgetoIndia(2022),IndiaRENavigator(accessedOctober2022).India’sauctionvolumesdeclinedin2022,buttheparticipationraterosethankstopolicyimprovements.FromJanuarytoSeptember2022,Indiaauctionedover8GWofrenewablecapacity,30%belowtheaverageforthesemonthsin2019-2021.ThisslowdownwascausedbyauctionorganisersfocusingonfinalisingPPAsanddevelopersprioritisingtheexecutionofprojectsalreadyunderconstruction.Almostone-quarterofcapacityawardedsince2021hasbeencontractedthroughhybridauctionsthatrequiremultiplerenewabletechnologiestoprovidepoweratspecifiedminimumannualcapacityutilisationfactors.Theseauctionsusuallyresultintheadditionofsignificantlymorecapacitythanwhathasbeencontracted,alongwithenergystoragetoensurecompliancewithpoweravailability0%1%2%3%4%5%6%7%0501001502002502010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%0102030405060051015202530201720182019202020212022USD/MWhGWUnallocatedcapacityPV-12GWmanufacturingPVHybridWindAv.PVprice(rightaxis)Av.windprice(rightaxis)Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE59IEA.CCBY4.0.requirements.HybridauctionsarethusexpectedtobeanincreasinglyimportantgrowthdriverasthepenetrationofwindandPVtechnologiesinIndia’spowersystemgrowsandgridintegrationchallengesemerge.Theundersubscriptionratefelltojust10%in2022,withmostauctionssignificantlyoversubscribed.Reducingoff-takerriskspromptedgreaterauctionparticipationasthenumberofauctionsheldbynationalratherthanstateagenciesincreasedandthesolarparksprogrammeadvanced,facilitatinglandprocurementandgridconnection.Onthedemandside,higherrenewablepurchaseobligations,whichwereannouncedinJuly2022andspecifytargetsforwind,hydroandotherrenewableenergysources(solar,bioenergy),shouldfurtherencouragepowerutilities(DISCOMs)toprocurerenewableenergy.Increasingparticipationinauctions,anexpandingprojectpipelineandhigherrenewableenergydemandfromDISCOMsareallexpectedtoaccelerateutility-scalecapacitygrowthinIndiaover2022-2027.However,thepoorfinancialhealthofIndia’sDISCOMscontinuestopreventfasterrenewablecapacitydeployment.Thenumberofoverduepaymentstorenewablepowerproducerscontinuestogrow,worthalmostUSD3billioninJune2022–anincreaseofnearly60%sinceJanuary2021.AccordingtotheMinistryofPower’slatestannualfinancialperformancereport,theshareofenergysuppliedbythelowest-ratedDISCOMsincreasedfrom32%inFY2019-2020to70%inFY2020-2021.WhileDISCOMpaymentdelaysnegativelyaffectdevelopers’profitsandincreaseprojectrisks,DISCOMsarealsooftenreluctanttosupportrooftopPVdeploymentintheirgridsbecausetheyfearlosingrevenuefromenergysales.Althoughtheyareobligatedtofulfiltheirrenewablepurchaseobligationsandincreaserenewableenergyprocurement,theyoftenlackthefinancialcapacitytosignnewPPAswithauctionwinners,resultinginprojectcommissioningdelays.InJune2021,India’sgovernmentapprovedanothersupportschemeforDISCOMs,linkedwithachievingfinancialandoperationalimprovementsworthalmostUSD40billion.Sofar,about65%oftheplannedamounthasbeenearmarkedfor38qualifiedDISCOMs,buttheactualeffectsoftheprogrammeremaintobeseen,asprevioussuchincentives(UDAY)didnotimprovethesituationsubstantially.In2022,theaveragetariffawardedinPV-onlyauctionsincreasedby10%inIndianrupeeterms,andisnowbackatthe2019leveltocompensateforhigherPVequipmentpricessince2021.Moreover,inApril2022thedutyonimportsincreasedfrom15%to40%forPVmodulesandto25%forsolarcells.DeveloperspreparedforthischangebystockinguponPVequipment,leadingtorecordRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE60IEA.CCBY4.0.importsofroughly10GWinQ12022.Thisimportrushisexpectedtoresultinanunprecedented16GWofPVcapacityadditionsin2022,60%morethanin2021.However,futureprojectsbenefittingfromanytypeofpolicysupportwillhavetosourcetheirsuppliesfromgovernment-approvedmanufacturers.AsofAugust2022,thelistofauthorisedmanufacturersencompassesabout18GWofPVmodulemanufacturingcapacity,alldomestic.AlthoughthisisenoughtocoverIndia’sdemandinupcomingyears,themodulesofferedareoftenbasedonoutdatedtechnologyandaresmallerthanthetop-tierproductspredominantlyusedbydeveloperstoday.Thelowavailabilityofdomestictop-tiermodulescouldraiseinvestmentcostsandtariffsintheshortterm.Atthebeginningof2022,thegovernmentawardedsupportfortheProduction-LinkedIncentive(PLI)scheme’sfirst9GWofintegratedPVmanufacturingcapacity,andthesecondbatchofprojectsisintheallocationprocess.ThisprogrammeaimstoexpandIndia’ssolarPVcellandmodulemanufacturingcapacitytoover70GWinthisdecade,including29GWofmanufacturingcapacityfullyintegratedacrossthewholesupplychain.Supply-demandsynergyintheIndianPVmarketisalsoexpectedtostimulatecapacitygrowthinthemediumterm.Indiaawardedandcommissionedrenewablecapacity,2017-2022(left)andDISCOMenergymarketsharesbyintegratedrating,2015-2021(right)IEA.CCBY4.0.IntheTenthAnnualIntegratedRatingandRankingofPowerDistributionUtilities,thegradingscalechangedfromA+,A,B+,B,C+,CtoA+,A,B,B-,C,C-,D.Forcompatibilitywithpreviousreports,gradesforFY2020-21aregroupedasfollows:D,C-,CasC,C+;B-,BasB,B+;A,A+asA,A+.Sources:(left)IEAanalysisbasedonBNEF(2022),3Q2022GlobalAuctionandTenderResultsandCalendar(accessedOctober2022);BridgetoIndia(2022),IndiaRENavigator(accessedOctober2022);(right)IEAanalysisbasedonIndia,PowerFinanceCorporationLtd(2017-2022),ReportonPerformanceofStatePowerUtilities,editionsforFY2016-17toFY2020-2021;India,PowerFinanceCorporationLtd(2016-2022)AnnualIntegratedRatingandRankingofPowerDistributionUtilities,fourthtotentheditions.0%10%20%30%40%50%60%70%80%90%0102030405060708090Auctioned2017-2020Comissioned2019-2022Auctioned2013-2020Comissioned2014-2022WindPVGWWindcapacityPVcapacityRealisationrate%0%10%20%30%40%50%60%70%80%90%100%FY2015-16FY2016-17FY2017-18FY2019-20FY2020-21A,A+B,B+C,C+NoratingRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE61IEA.CCBY4.0.OnshorewinddeploymentinIndiahasbeenslowinrecentyearsasaresultoflandprocurementandgridconnectionchallengesaswellasCovid-19-relatedsupplychaindisruptions.Inaddition,anunexpectedincreaseinmaterialandequipmentcostssince2021hasrenderedmanyprojectseconomicallyunviable.Inconsequence,alargeportionofcapacityawardedinauctionshasbeendelayedorcancelled:asofSeptember2022,only45%ofthe14GWofwindprojectsawardedduring2017-2020hadbeencommissioned.InJuly2022,theIndiangovernmentannounceditissuspendingreversebiddinginwindauctionsandisconsideringlimitingtheprocesstoclosed-envelopesubmissions.Thiscouldraisetariffsforwindenergy,whichshouldmakeprojectsmorefeasible.AlthoughDISCOMsmaybereluctanttoaccepthigherenergyprices,thenewrenewablepurchaseobligationforwindshouldencouragethemtosignPPAs.Inaddition,expandingwind-basedpowergenerationhasthepotentialtoalleviatesomeofthegridintegrationissuesfacedbyDISCOMsthathavehighsharesofsolarPVintheirsystems.Thesepositivepolicychangesarethebasisofourupwardwindforecastrevisionthisyear.AnnualdistributedPVadditionsdoubledin2021withthecommissioningofmanyprojectsdelayedbyCovid-19-relateddisruptions.Althoughexpansionslowedin2022,deploymentisexpectedtoacceleratesteadilyinupcomingyears.Publicawarenessisgrowing,andtheeconomicattractivenessofinvestingindistributedPVisbecomingapparentforcommercialandindustrialconsumers,especiallyintimesofhigherenergycosts.Still,severalmajorobstaclesarepreventingIndiafromachievingdeploymentcommensuratewithitshugepotential.WhileDISCOMsarehesitanttosupportrooftopPVgrowthbecausetheyfearrevenuelossfromreducedenergysalesandhighergridcosts,financingoptionsforsmallcommercialandresidentialconsumersremainlimited.Overone-thirdofrooftopPVsystemsaddedin2022wereinstalledinthestateofGujarat,whichishometojust5%ofIndia’spopulation.Highdeploymentinthisstatewasachievedthroughnetbillingandsubsidies,whichexistinmostIndianstates.Thisindicatesthateffectiveon-the-groundimplementationofpoliciesiscrucialtoachievefasterdistributedPVgrowthinIndia.Intheacceleratedcase,Indiaachieves50%higherrenewablecapacitydeploymentover2022-2027thaninthemaincase,puttingthecountryfirmlyoncoursetomeetits2030targets.RaisingthecapabilityofDISCOMstoprocuremorerenewableenergywillbecrucialtoachievefastergrowth.Tothisend,improvingthefinancialperformanceofDISCOMsandincreasingpenaltiesfornon-compliancewithrenewablepurchaseobligationsshouldlimitdelaysinsigningPPAswithauctionwinners,makingdevelopersandinvestorsRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE62IEA.CCBY4.0.morewillingtoundertakenewutility-scaleprojects.Inaddition,offeringDISCOMsfinancialandregulatoryincentivestoincreaserooftopPVdeploymentintheirgridsshouldencouragethemtoattracttensofmillionsofpotentialprosumersbyfacilitatinginvestment,therebytriplingmain-casedistributedPVdeploymentfor2022-2027.AchievingfastersolarPVgrowthwillalsorequirethetimelydeploymentofmanufacturingprojectsincludedinthePLIschemeandexpansionofcompetitiveauctions.Forwind,therapidimplementationofsimplifiedauctionrules,moregovernmentsupportinsiteidentificationandlandprocurement,andgreaterpolicysupportforrepoweringcoulddoublethemaincase’scapacitygrowth.JapanSolarPVremainsthemainsourceofrenewableenergygrowth,butsmoothtransitiontoafeed-inpremiumiscrucialtoaccelerateexpansionRenewablecapacityinJapanisexpectedtoincrease44GW(+30%)over2022-2027inthemaincase,ledbysolarPVandwind.Theforecasthasbeenreviseddownslightly(-2%)fromlastyear,mainlybecausethecommissioningofprojectspreviouslyapprovedundertheFITschemehasbeenslowerthanexpected.UncertaintyaboutcapacityawardedunderthenewlyintroducedFIPalsoaffectstheforecast.Regardlessofthechallenges,however,thepaceofgrowthexpectedover2022-2027indicatesthatthecountryisontracktoreachits2030renewablegenerationtargets(36-38%ofelectricitygeneration)introducedin2021.AnnualsolarPVcapacitygrowthisforecasttobeslowerovertheforecastperiodthaninthepreviousfiveyears,withprojectsapprovedundertheFITscheme(16GWasofJune2022)remainingtheprimarysourceofexpansion.Japan’sgoalintransitioningfromFITstoFIPsistoimprovethemarketintegrationofrenewablesandspurutility-scalePVgrowth.Meanwhile,policyimprovementstoidentifypreferentialareas,includingpublicbuildingsandagriculturalland,andtopromotecorporatePPAs,areexpectedtofosterdistributedsolarPVdevelopment.Whilethesepolicymeasuresaremakingtheoutlookfornewprojectsmoreoptimistic,fewerFITapprovals(an70%declinefornon-residentialPVinthepastfiveyears)duetolowerlandavailabilityforlarge-scalesolarPVprojectsnegativelyaffectstheforecast.Japan’swindforecastremainsmostlyunchangedfromlastyear,withgridconnectionandenvironmentalpermittingdifficultiesremainingkeyimpedimentstofasterwindenergyuptake.CapacityadditionscomemainlyfromprojectspreviouslyapprovedundertheFITscheme(11GWasofJune2022–doublethe2019level).Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE63IEA.CCBY4.0.In2021,thegovernmentraisedtheenvironmentalimpactassessmentthresholdforonshorewindfrom10MWto50MW.Thispolicychangecouldleadtofastercommissioningofprojectsalreadyintheonshorewindpipeline,ashalfoftheFIT-approvedprojectsarebelow50MW.Meanwhile,offshorewindexpansionacceleratesduring2022-2027withover0.5GWofcapacitycommissioned.TheJapanesegovernment’spolicychangesforoffshorewindincludeaFIT,seaareadesignationandimprovedcommunityengagement.However,whilethesepolicieswillpromotegrowth,theywillnotaffectthepresentforecastbecausetheirimpactwillbepertinentonlyafter2027,accordingtocurrentprojectdevelopmenttimelines.Thisyear’sforecastalsoassumesthatsomeprojectswillbecommissionedbeforethegovernment-setbenchmarkdates,thankstothenewauctionruleincentivisingearlycommissioning.Japanrenewablecapacityadditions,2010-2027(left)andFIT-approvedcapacityandpricesforsolarPVandonshorewind,2012-2021(right)IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.FY=financialyear(April-March).Intherightgraph,solarPVcapacityandpricerefertoPVsystemsofmorethan10kW.SolarPVpricesbetweenFY2017andFY2021aretheaverageauctionprice.Sources:(right)IEAanalysisbasedonJapan,METI(MinistryofEconomy,TradeandIndustry)(2022),78thProcurementPriceCalculationCommittee;METI(2022),FITportalsite(accessedNovember2022).Intheacceleratedcase,Japan’srenewablecapacitygrowthis22%higherthaninthemaincase.ForsolarPV,realisingtheupsidepotentialdependsonfurtherapprovalofprojectsundertheFITscheme.Inaddition,smoothtransitiontotheFIPforutility-scalePVprojectsandthewideruseofPPAscouldaccelerategrowth.Foronshorewind,greaterpermittingandgridconnectionefficiencyaswellashighercompletionofapprovedFITprojectscouldenablefasterexpansion.-12%-8%-4%0%4%8%12%01020304050602010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%01002003004005000510152025USD/MWhGWSolarPVapprovedcapacityOnshorewindapprovedcapacitySolarPVpriceOnshorewindpriceRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE64IEA.CCBY4.0.KoreaWhilepermittingcomplicationsslowPVexpansion,newpoliciesensuringrevenuestabilityforwindimprovetheforecastKorea’srenewablecapacityisexpectedtodoubleinthemaincase,expandingby28GWover2022-2027,withsolarPVaccountingforalmost85%ofallexpansion.However,thisforecasthasbeenreviseddownslightly(-8%)fromlastyear’sbecausepermittingchallengeshaveledto80%lowerbiddingcapacityforfixed-pricePVcontractsoverthelasttwoyears.Inaddition,theschemewasundersubscribedforthefirsttimesinceitsintroductionin2017becausethegovernmentloweredtheauctionceilingpriceeventhoughcostshadrisen.Korea’scumulativewindcapacityisexpectedtomorethantripleby2027.AlthoughPVexpectationsarelower,theforecastforwinddevelopmentsismoreoptimisticthanlastyear.Whilehigherrenewableenergycertificate(REC)pricesandstrongwholesalepricesremainkeydriversofgrowth,thenewpolicyintroducing20-yearfixed-pricecontracts(fromthesecondhalfof2022)foronshoreandoffshorewindprojectswillespeciallyimprovetheirrevenuecertaintycomparedwiththeRECscheme,leadingtomoreoptimisticoutlook.Korearenewablecapacityadditions,2010-2027(left)andfixed-pricesolarPVcapacityandaveragerevenueperMWhbytechnology,2017-2022(right)IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.Intherightgraph,averagerevenues(excludingPVauction)arecalculatedusingthesystemmarginalprice(SMP)andweightedRECprice.Offshorewindassumesprojectswithatotalinterconnectiondistanceofmorethan15km.PVauctionpricesreflectbiannualaverageawardedprices.Sources(right):IEAanalysisbasedonKoreanNewandRenewableEnergyCentre(2022),ResultsofbiddingforsolarPVfixed-pricecontracts;KPX(KoreanPowerExchange)(2022),MonthlySMP;KPX(2022),RECspotmarkettradevolumesandprices.-12%-8%-4%0%4%8%12%16%051015202530352010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%01002003004005006000123456H1H2H1H2H1H2H1H2H1H2H1201720182019202020212022USD/MWhGWPVannouncedcapacityPVbidcapacityPVaverageprice(auction)PVaverageprice(large-scale)OnshorewindaveragepriceOffshorewindaveragepriceRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE65IEA.CCBY4.0.Intheacceleratedcase,Korea’srenewablemarketgrowthcouldbe23%higherthaninourmaincase.Thiswouldresultmainlyfromgreaterauctionvolumesifthegovernmentadjuststheceilingpriceupwardstoaccountforhighercosts.Plus,corporatePPAmarketexpansionundertheKoreangovernment’sK-RE100initiativecouldacceleratethedevelopmentofrenewableenergyprojectsofmorethan300kWofcapacity.Permitting,socialacceptanceandlandavailabilityobstacles,whichremainkeyimpedimentstobothsolarPVandwindexpansion,needtobeaddressedtoenablefastercommissioning.AustraliaWhilegridfeesandsystemcostsimpairdistributedsolarPVgrowth,state-leveltargetsandPPAspropelexpansionofutility-scalerenewablesWithnearly40GWofnewadditionsexpected,Australia’srenewablepowercapacityisforecasttoincreasemorethan85%from2022to2027thankstostate-levelauctions,incentivesfordistributedsolarPVandcorporatePPAs.Thisyear’sforecasthasbeenrevisedover30%upwardsfromlastyear’storeflecttheannouncementofnewauctions,continuedcorporatepowerpurchaseactivitytomeetprivatesectordecarbonisationgoals,andnewprojectsassociatedwithrenewableenergyzones(REZs).Withthefederallarge-scalerenewableenergytarget(LRET)havingbeenachievedin2019,stateshavesetadditionalrenewableenergytargets.Thecurrentgovernment’sClimateBill2022pledgestoreducecarbonemissions43%by2030from2005levelsandachievenetzeroemissionsby2050.Thisnewlawisexpectedtocreateanadditionalimpetusforrenewableenergygrowth.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE66IEA.CCBY4.0.Australiarenewablecapacityadditions,2010-2027(left)andquarterlydistributedPVcapacityadditions,2017-2022(right)IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.Source:(right)IEAanalysisbasedonAustralia,CleanEnergyRegulator(2022),Postcodedataforsmall-scaleinstallations.Ofallrenewabletechnologies,distributedPVdeploymentexpandsthemost,butannualmarketgrowthisexpectedtoslowasnewchargesforexportedpowerareproposedandhighersystempricesreduceitseconomicattractiveness.InQ42021,forinstance,thequarterlyinstallationpaceslowedforthefirsttimesince2015,atrendthathaspersistedinto2022.Since2017,distributedsolarPVuptakehasgrownbyover1GWannuallythankstonetmetering,solarFITsandlowinvestmentcosts.However,theupsurgeinself-consumptionandpowerexportsresultingfromallthisnewcapacityhasputpressureonthedistributiongrid.Newmarketruleswerethereforeintroducedallowingdistributorstochargeforexportingelectricitytothegrid.RenewableenergytargetsbyAustralianstateStateTargettypeYearTargetNewSouthWalesNewrenewablegeneration203024600GWhQueenslandPercentagerenewablegeneration203270%QueenslandPercentagerenewablegeneration203580%SouthAustraliaPercentagerenewablegeneration2030100%TasmaniaTotalrenewablegeneration203015750GWh0%5%10%15%20%25%30%35%40%01020304050602010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%0100200300400500600700800900Q1Q2Q3Q4MW201720182019202020212022Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE67IEA.CCBY4.0.StateTargettypeYearTargetTasmaniaTotalrenewablegeneration204021000GWhVictoriaPercentagerenewablegeneration202540%VictoriaPercentagerenewablegeneration203050%WesternAustraliaEmissionsreduction203080%Note:TargetsarefromAEMOInputsandAssumptions,unlessotherwisenoted.Utility-scalesolarPVandonshorewindgrowthhavebothbeenrevisedupwardsover35%fromlastyearowingtostate-levelauctionsfornewcapacity,projectsassociatedwithemergingREZsandagrowingnumberofcorporatePPAswithgovernments,utilitiesandbusinesses.Non-pricefactors,suchascorporatesustainabilitygoalsandemissionsorrenewableenergytargets,aretheprimarystimulantsofcorporatePPAmarketgrowth.Meanwhile,risingLRETgenerationcertificatepricesresultingfromdemandincreasesprovideadditionalrevenuefordevelopers.However,higheramountsofvariablerenewableenergygenerationhaveledtosystemintegrationconcerns.Connectiondelaysandcurtailmentremainkeyforecastchallenges.Theacceleratedcaseforecastsnearly25%higheradditionsthanthemaincase,withupsidepotentialenabledbymorestate-levelauctionsandfaster-than-expectedcommissioningofREZs.Furthermore,additionalcoal-firedplantretirementscouldallowforthedeploymentofnewlarge-scalerenewableenergyinstallationspairedwithbatterystorage.FordistributedPV,thecontinuationofhighwholesaleandretailpricescouldencouragegreaterinvestment.Inaddition,renewableadditionsfromcaptivewindandsolarPVcapacityassociatedwithhydrogenfromrenewableenergycouldaddover6GWofadditionalcapacityovertheforecastperiod.ASEANNewauctionschemeswillacceleratedeploymentinupcomingyears,butpolicyuncertaintyremainsachallengeRenewablecapacityintheASEANregionisexpectedtoincreaseby51GWduring2022-2027(+56%).SolarPVwillaccountforoverhalfofthegrowth,followedbyonshorewindandhydropower.ASEANisalsoexpectedtobealeadingregioningeothermalpowerdeploymentworldwide,responsibleforclosetoone-thirdofglobaladditionsupto2027.SolarPVleadsrenewablecapacitygrowth,andthespeedofdeploymentisexpectedaccelerateovertheforecastperiodowingtoRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE68IEA.CCBY4.0.policyimprovements,notablynewauctionandprocurementschemesinthePhilippinesandIndonesia.VietNamleadsexpansionasitscommercialdistributedPVdeploymentacceleratesanditsplannedauctionsystemhastenswinduptake.Renewablecapacityexpansion,ledbyPV,willalsoaccelerateinotherASEANcountriesover2022-2027,drivenbypolicyimprovementssuchasthePhilippines’andIndonesia’snewcompetitiveauctionschemes.Inaddition,afewlarge-scalehydropowerprojectsareexpectedtocomeonlineinMalaysiaandIndonesia.Althoughthemain-caseforecastislargelyunchangedfromlastyear,theacceleratedcasehasbeenrevised9%downwardsduetodelaysinimplementingnewpoliciesinVietNam,IndonesiaandThailand.AlthoughtheASEANregionhasthepotentialformuchstrongerrenewableenergygrowth,policyuncertaintyisthemainchallenge.Inalmostallcountriesintheregion,delaysinintroducingsupportpoliciesarediscouraginginvestment,whilelengthyandcomplicatedpermittingproceduresarehinderingfasterprojectdevelopment.Gapsinpolicysupporthaveledtoboom-bustcyclesinVietNamandThailand.Furthermore,lowprojectbankabilityduetolimitedriskprotectioninstandardPPAsiscurbingtheinterestofinternationalinvestors,andstrictlocal-contentandprojectownershiprulesfurtherinhibitforeigninvestmentandraisethecostofrenewableenergy.Undertheacceleratedcase,allthesechallengesareresolvedwithfocusedpolicies,leadingtosignificantlyhigherdeployment.ASEANrenewablecapacityadditions,2010-2027(left)andannualcapacityadditionsbycountry,2019-2027(right)IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.“RestofASEAN”comprisesBrunei,Cambodia,LaoPDR,Malaysia,MyanmarandSingapore.-9%-8%-7%-6%-5%-4%-3%-2%-1%0%01020304050607080902010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialOtherrenewablesForecastrevision%02468101214161820201920202021202220232024202520262027GWVietNamIndonesiaPhilippinesThailandRestofASEANAcc.caseRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE69IEA.CCBY4.0.VietNamisexpectedtoleadASEANrenewablecapacityexpansionovertheforecastperiod.Whilegeneroussubsidiesledtodeploymentboomsinutility-scalesolarPVprojectsin2019,indistributedsolarPVin2020andinwindin2021,asignificantslowdowninannualadditionsisexpectedin2022-2023withthephasedownofincentives.FurtherdeploymentofbothwindandPVwilldependonhowquicklyVietNam’snewPowerDevelopmentPlan(PDP8)andplannedauctionschemeareimplemented.Itisexpectedthatauctionswillfocusonwind,with20GWofadditionstargetedinthedraftPDP8andjust4GWofutility-scalePV.RapidcapacitygrowthisforecastforthecommercialPVsegment,owingtoeconomicallyattractiveself-consumptionandnewpoliciesfacilitatingbilateralPPAcontracts.InIndonesia,renewablecapacitydeploymentin2022-2027isexpectedtoquadruplefromthe2016-2021level.SolarPVaccountsforalmosthalfofthisgrowth,followedbyhydropower.Wealsoexpectthecountrytoaddover1.5GWofgeothermalcapacityby2027,thesecond-highestadditionglobally.ApresidentialdecreeofSeptember2022introducedcompetitiveauctions,whichwillbethemainimpetusforutility-scalePVandonshorewinddeploymentinthesecondhalfoftheforecastperiod.ThedecreeisanimportantsteptowardsfasterrenewableenergyuptakeinIndonesia,butalackofdetailedregulationsleadstoforecastuncertainty.Inaddition,severallarge-scalehydropowerprojectsaretobecommissionedby2027,basedonbilateralPPAswiththestate-ownedutility(PLN).ThePhilippinesissettoaddmorethan7GWofrenewablecapacityover2022-2027(almostfourtimesasmuchasduring2016-2021),mainlyinsolarPVandwind.InJune2022,thePhilippinesawarded2GWofrenewablecapacitythroughitsGreenEnergyAuctionProgram,andinJuly2022itintroducedtheNationalRenewableEnergyProgram2020-2040,targeting35%renewableenergyinelectricitygenerationby2030and50%by2040.Thegovernmentalsoplanstodoublethegeothermalshareininstalledcapacityfromthecurrent12%to24%by2040.Competitiveauctionsareexpectedtobethemaintoolusedtoachieveallthesetargets.Furthermore,thePhilippines’governmentisconsideringallowingmoreforeignownershipofrenewableenergyassetstoencourageinternationalinvestment,whichisassumedtohastencapacitydeploymentinthemaincase.InThailand,commercialPVinstallationsproducingpowerforself-consumptionareexpectedtodrivecapacitygrowthover2022-2027aspolicysupportforrenewableenergytechnologiesremainslimited.Althoughanewpowerdevelopmentplanisunderconsideration,itisunclearwhichtargetsandmeasuresforrenewablecapacitywillbeincluded.AuctionsandnetmeteringcontinuetoRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE70IEA.CCBY4.0.supportgrowthinutility-scaleandcommercialPVinMalaysia,whiletheprivatePPAmarketwillcontinuetopropelrooftopandfloatingPVuptakeinSingapore.Intheacceleratedcase,renewablecapacitydeploymentinASEANduring2022-2027isover50%higherthaninthemaincase.SolarPVandwindofferthegreatestupsidepotentialbecausetheirgenerationcostsarethelowestofallrenewabletechnologiesandarerapidlybecomingmorecompetitivewithcoal-firedgeneration.FasterimplementationofnewauctionschemesinVietNamandambitiousauctionschedulesinIndonesiaandthePhilippinescoulddrivemuchfasterdeploymentofthesetechnologies.Increasedinvestmentingridinfrastructure,especiallyinVietNam,isalsoneededtoachievefastersolarPVexpansion.Simplifyingpermittingprocedures,easinglocal-contentrequirementsandimplementingstandardisedbankablePPAsshouldpropelinternationalinvestment.Additionally,reducingdelaysinupdatingenergystrategydocumentswithmoreambitiousrenewablecapacitytargetsinVietNam,ThailandandIndonesiacouldprovidelong-termpolicycertaintyandfurtherboostdeployment.LatinAmericaRenewablepowercapacityinLatinAmericaisexpectedtoincrease45%(+130GW)during2022-2027inthemaincase.GrowthshiftsfromhydropowertosolarPV(+78GW)andwind(+36GW),whichtogethermakeupalmost90%oftheregion’sexpansion.Brazilaccountsforover55%ofregionalgrowth,thoughaslowdownindistributedsolarPVisexpectedduetoachangeinnet-meteringcompensation,leadingtoasharpdeclineintheregion’sannualadditions.Lowergovernment-ledauctionvolumesinBrazil,Chile,MexicoandArgentinaareoffsetbygreaternumbersofbilateralpowerpurchasecontracts,whichincreasinglydriveexpansion.However,inadditiontodecliningauctionvolumesandparticipation,thelackoflong-termpolicycertaintyremainsakeychallengeinmarketssuchasArgentinaandMexico,hamperinggrowthinthelongterm.BrazilDeploymentoutsideofthegovernment’sauctionschemeandnetmeteringpromptsovera60%upwardrevisiontotheforecastBrazilisexpectedaddover70GWofnewrenewablecapacitythrough2027,withsolarPVandwindmakingupthemajority.Thisyear’sforecasthasbeenrevisedRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE71IEA.CCBY4.0.upwardsbyover60%toreflectcontinuedutility-scaleprojectgrowththroughthefreemarket,auctiondeadlinesforonshorewindpowerandadeadlinefordistributedPVbenefits.Brazilrenewablecapacityadditions,2020-2027(left)andutility-scalesolarPVandonshorewindcapacitybymarketregistration(right)IEA.CCBY4.0.Note:Valuesfor2022-2027arebasedonprojectsregisteredwithANEELandmaynotreflectfinalvalues.Source:IEAanalysisbasedonANEEL(2022),ANEELdatabase(accessedNovember2022).Forutility-scalesolarPVandonshorewind,free-marketdemandisthemaingrowthdriver,supplementedbypreviouslyawardedauctioncapacity.Demandforfree-marketcapacitycomespartiallyfrombilateralcontractswithretailandindustrialcustomerstohelpmeetcorporatedecarbonisationgoals.Inaddition,theforecastexpectsarushofinstallationsin2023beforethegridusetariffexemptionendsinMarch2024.NewdistributedPVcapacityofmorethan20GWisforecast,withover8GWforecasttocomeonlinethisyear(systemsinstalledbeforeJanuary2023areeligibleforthecurrentgenerousnet-meteringscheme,whichhasprovokedaninstallationrush).Newinstallationswillreceivelesscompensationforsurplusenergy,reducingtheireconomicattractivenessandresultinginlowerannualcapacityadditionsover2024-2027.Still,averagemarketgrowthofover2.5GWperyearisexpectedintheremainderoftheforecastperiodasthebusinesscaseremainsattractivedespitelowerremuneration.Theacceleratedcaseforecasts16%highergrowth,whichcanbeachievedwithadditionalfree-marketcontracts,aslower-than-expecteddemanddropfordistributedPVandhigher-than-anticipatedauctionvolumesduetohigherconsumerdemand.0246810121416182020202021202220232024202520262027GWHydropowerWindBioenergyPV-utilityPV-distributedOtherrenewablesAcc.case0%10%20%30%40%50%60%70%80%90%100%20202021202220232024202520262027Non-ACR(freemarket)ACR(regulated)Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE72IEA.CCBY4.0.ChileAmbitiousrenewables-basedhydrogenproductionaccelerateswindexpansionRenewableenergycapacityinChileisforecasttomorethandoubleby2027,reaching45GW.Onshorewindleadsgrowth,withhalfofnewcapacityintendedtosupplyelectricityforgreenhydrogenandammoniaproduction.Indeed,Chile’sambitiousplanstoexpandrenewables-basedhydrogenproduction,combinedwithsolarPVadditionsinitsderegulatedmarket,incitea46%upwardrevisionfromlastyear’sforecast.Chilerenewablecapacityadditions,2020-2027(left)andcapacityandpricesawardedinChileanenergyauctions(right)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Source:(right)CNE(ComisiónNacionaldeEnergíadeChile).Auctionshavehistoricallydrivenutility-scalerenewablecapacityexpansioninChile.However,thecountryawardedonly15%ofofferedenergyduringitslatestauctioninAugust2022.DespitehigherinvestmentcostsforonshorewindandsolarPVduetoelevatedcommodityprices,auctionreferencepricesremainedunchanged.Thus,three-quartersofthebidssubmittedwerenotacceptedbecausetheyexceededthereferencepriceofUSD42/MWh.Whiletheforecastthereforeexpectslessrenewablecapacitytocomeonlinefromauctions,expansioninthederegulatedmarketisacceleratingowingtohigherprices.In2020,Chileannouncedambitiousplanstorampuprenewables-basedhydrogenproduction,andinDecember2021theChileanNationalDevelopmentAgency(Corfo)issuedacalltofinanceandleveragegreenhydrogenprojects,awardingatotalofUSD50milliontosixgreenhydrogeninitiatives.Theseprojects01234567891020202021202220232024202520262027GWHydropowerWindBioenergyPV-utilityPV-distributedOtherrenewablesAcc.case01020304050607080901000100200300400500600700800Oct-15Aug-16Nov-17Sep-21Aug-22USD/MWhMWWindcapacityPVcapacityWind-averageauctionpricePV-averageauctionpriceRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE73IEA.CCBY4.0.areexpectedtobeoperationalin2025andwilluse100%renewableenergysuppliedbyPVandwindplants(somecurrentlyoperational,andsomeplanned),aswellasemployingPPAs.Renewableenergyprojectsdedicatedtohydrogenproductionrepresent27%ofthemain-caseforecast,whichtakesintoaccountthe10-GWH2Magallanesproject.Theacceleratedcaseestimates31%higherinstalledcapacityovertheforecastperiodcomparedwiththemaincase,ledbywindandsolar.Itassumesadditionalcapacityfrompotentialauctionsinupcomingyearsaswellashighergrowthfromprojectsparticipatinginthederegulatedmarket.Theacceleratedcasealsoincludesfasterexpansionoftransmissionanddistributioninfrastructure,asbottleneckshavebeenrestrictingrenewableenergyexpansion,especiallyinthenorth.ColombiaRealisinghighrenewableenergyambitionsdependsonthetimelyconstructionoftransmissioninfrastructureColombia’srenewablecapacityisforecasttoexpandbymorethan5GW(+44%)during2022-2027.Hydropower,utility-scalesolarPVandonshorewindmakeupnearlyallthisexpansion.Whilethelargestshareoftotalrenewablecapacityiscurrentlyhydropower,auctionstohelpmeetnationaltargetswillenlargethewindandutility-scalesolarPVshareto17%by2027.Colombiarenewablecapacityadditions,2020-2027(left)andinstalledrenewablecapacityinREMR2022forecastvsColombia’sNationalEnergyPlan(right)IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.NEP=NationalEnergyPlan.REMR2022=Renewableenergymarketreport2022(i.e.Renewables2022).Source:(right)UPME(UnidaddePlaneaciónMinero-Energética)(2020),PlanEnergéticoNacional2020-2050.01122320202021202220232024202520262027GWHydropowerWindBioenergyPV-utilityPV-distributedOtherrenewablesAcc.case0510152025GWNEP"Actualización"scenario(mostconservative)NEP"Disrupción"scenario(mostoptimistic)REMR2022maincaseREMR2022acceleratedcaseHistoricRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE74IEA.CCBY4.0.The2.4-GWItuangohydropowerplantisthemainsourceofhydropoweradditions,ascommissioningistobeginin2023anditisexpectedtobefullyoperationalby2026.Meanwhile,pastauctionsenablethecommissioningofover1.1GWofcapacityforeachsolarPVandonshorewindduringtheforecastperiod.Thecountry’sLong-TermAuctionProgrammehasawardedmorethan2GWofwindandsolarcapacitycombined,withadditionalauctionsplannedfor2023.However,slowtransmissioninfrastructuredevelopmentisimpactingthepaceofexpansionandpermittingdelaysduetocommunityacceptanceconcernshaveresultedinprojectdefermentsofuptothreeyears.Offshorewindadditionsof550MWintheforecastperiodcomefromtwoprojectscurrentlyundergoingfeasibilitystudies.Inaddition,ColombialauncheditsOffshoreWindRoadmapinMay2022,outliningthepotentialfor50GWofnewcapacity.Thegovernmentwillopentenderingin2023tohelprealisethiscapacity,thoughawardedprojectswillnotbecommissionedwithintheforecastperiod.Renewablecapacitygrowthcouldbealmost60%higherintheacceleratedcasewithadditionalrenewablecapacityauctionsandtherealisationofmoreannouncedprojects.Inaddition,thiscaseassumesthatcurrenttransmissioninfrastructureissueswillberesolvedquickly,enablingfasterwindandsolarcapacityuptake.Finally,Colombiaaimstobeginproducinggreenhydrogenin2030(with1-3GWofelectrolysiscapacityinstalled),spurringadditionaldevelopmentbytheendoftheforecastperiod.MexicoandArgentinaDistributedsolarPVleadsrenewablecapacityexpansioninMexicoMexico’srenewableenergycapacityissettoexpandnearly8GWduring2022-2027inthemain-caseforecast.AtCOP27,Mexicoannounceditsintentiontodeploy30GWofcombinedwind,solarPV,geothermalandhydropowerby2030.Theforecasthasbeenrevisedupwardsbymorethan20%toreflecthigherdistributedsolarPVuptakeresultingfromnet-meteringandnet-billingbenefits.Distributedprojectsoflessthan500kWdonotrequireagenerationpermitorneedtoberegisteredasmarketparticipants,enablingfasterprojectdeployment.Outsideofgovernment-ledeffortsforutility-scaleexpansion,lackofpolicycertaintyremainsthemainreasonfordecliningadditionsthroughouttheforecastperiod.Growthinutility-scalesolarPVcapacity(+2.5GW)andwind(+1.2GW)isenabledbyprojectsawardedpreviouslythroughgreencertificateauctions,corporatePPAsandbilateralagreements.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE75IEA.CCBY4.0.Mexicorenewablecapacityadditions,2010-2027(left)andArgentinarenewablecapacityadditions,2010-2027(right)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.WhilelargehydroprojectsunderconstructiondriveexpansioninArgentina,policyuncertaintyandgrowingmacroeconomicchallengespromptadownwardrevisiontothewindandPVforecastArgentina’srenewablecapacityissettoincreasebyalmost5GWovertheforecastperiod,ledbyhydropowerandfollowedbyonshorewind.Fullorpartialcommissioningoflarge-scalehydropowerprojects,includingJorgeCepernic,PresidenteNestorKirchnerandBrazoAñaCuá,providesalmosthalfofArgentina’srenewableelectricityexpansion.Historically,thelong-termauctionschemeRenovArwastheprimarydriverofrecordwindandsolarcontractsofmorethan4GW.However,persistenteconomicchallengesandsuspensionofthefourthroundoftheRenovArprogrammehavedelayedmanyprojects.AsofSeptember2022,onlyhalfoftheprogramme’sprojectshadbeencommissioned.Meanwhile,thegovernment’sfundforthedevelopmentofrenewableenergies(FODER)continuestosupportprojectfinancingatpreferentialinterestrates.Thecountryisalsopromotingdistributedrenewableenergygenerationthroughreal-timeself-consumptionmodels.ConsideringArgentina’smacroeconomicchallengesandtheabsenceoflong-termrenewableenergytargets,ourforecastexpectsthatonlysomeofthedelayedprojectswillbecommissionedby2027.Intheacceleratedcase,growthcouldbeover30%higherifthecountryaddresseschallengesoftransmissionnetworkavailability,providesaffordablefinancing,encouragesprivateinvestmentandresumessupplyauctions.0%5%10%15%20%25%024681012142010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-distributedForecastrevision%-6%-5%-4%-3%-2%-1%0%012345672010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE76IEA.CCBY4.0.MiddleEastandNorthAfricaSolarPVdominatesexpansionbecauseitoffersprospectsforlow-costpowerandhydrogenproductionRenewableelectricitycapacityexpansionintheMENAisexpectedtotriplein2022-2027comparedwiththepreviousfive-yearperiod,reaching45GW.SolarPVmakesupthree-quartersofcapacitygrowthintheMENAregionbecauseofitsexpansionduetoattractiveeconomicsforutility-scaleprojects.SignificantsolarresourcepotentialandfavourablefinancingconditionsinsomeMENAcountrieshaveledtosomeoftheworld’slowestawardedbidprices(i.e.USD10.4/MWhin2021inSaudiArabia)contractedincompetitiveIPPauctions.Onshorewinddevelopment,mostlyinMoroccoandEgypt,accountsfor15%oftheregion’sgrowth,whilehydropowerexpansionisconcentratedinIran.Themaincatalystsforrenewablecapacityexpansionarefast-growingpowerdemand,long-termclimatetargets,anddiversificationawayfromfossilfuelsfornet-importingcountries.Hydrogenandammoniaproductionarealsobeginningtodriveinterestinnewrenewablepowerprojects.MiddleEastandNorthAfricarenewablecapacityadditions,2010-2027(left)andrenewableadditionsbytechnologyandcountry,2022-2027(right)IEA.CCBY4.0.StatisticaldataforIsraelaresuppliedbyandundertheresponsibilityoftherelevantIsraeliauthorities.TheuseofsuchdatabytheOECDiswithoutprejudicetothestatusoftheGolanHeights,EastJerusalemandIsraelisettlementsintheWestBankunderthetermsofinternationallaw.Notes:Acc.case=acceleratedcase.CSP=concentratingsolarpower.S.Arabia=SaudiArabia.UAE=UnitedArabEmirates.MENA=MiddleEastandNorthAfrica.Sixmarketsaccountfor85%ofMENA’srenewablecapacitygrowthbetween2022and2027:SaudiArabia,theUnitedArabEmirates,Israel,Oman,Moroccoand0%2%4%6%8%10%12%14%16%18%01020304050607080902010-20152016-212022-20272022-2027HistoricalMaincaseAcc.caseGWHydropowerWindBioenergyPV-utilityPV-residentialPV-commercialCSPForecastrevision%-100%-80%-60%-40%-20%0%20%40%60%80%100%02468101214161820Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE77IEA.CCBY4.0.Egypt.CompetitiveIPPauctionsarethekeypolicymechanismpropellingrenewablecapacitygrowthinmostmarkets.Whilethisyear’sforecasthasbeenrevisedupwards(+16%)becausenewsolarPVauctionshavebeenopenedinboththeUnitedArabEmiratesandSaudiArabia,longleadtimesanduncertaintyoverthetenderingprocessforonshorewindandCSPareemergingaskeychallengestofastergrowthintheregion.Foronshorewind,nonewtendershavebeenannouncedinEgypt,capacitywascancelledinRound3inSaudiArabia,theannouncingofshortlistedbiddersinJordan’sRound-3auctionhasbeendelayedandsomeawardedprojectsinMoroccohavenotstartedconstruction.ForCSP,Egyptcancelleda100-MWtender,whileinMoroccothewinningprojectsforatenderopenedin2019haveyettobeannounced,andthecommissioningofprojectsintheUnitedArabEmiratesistakinglongerthanexpected.Intheabsenceofauctionsforonshorewind,developershavebeenturningtootherprocurementmechanismssuchassellingdirectlytolargeconsumerswhenregulationsallow(throughcorporatePPAs)ordirectlyapproachingthestateutility(unsolicitedbilateralcontracts).SaudiArabiaisexpectedtoadd10GWofrenewablecapacityduring2022-2027,ledbysolarPVanddrivenbyfourprocurementmechanisms:competitiveauctions,unsolicitedbilateralutilitycontracts,corporatePPAsandstate-ownedprojects.Theforecasthasbeenrevisedupwardsfromlastyeartoreflectprogressmadeunderallfourbusinessmodels.Forcompetitiveauctions,PPAsweresignedforone-halfofRound3projects,andRound4openedinSeptember2022withhigher-than-expectedvolumesonoffer.Thecountry’sfirstcorporatePPAprojectwascommissionedin2021afterthenewPrivateSectorParticipationLawcameintoeffectallowingdeveloperstoselldirectlytoconsumersforthefirsttime.Inourmaincase,thisregulatorychangefacilitatesthegrowthoffuturecorporatePPAprojects.Furthermore,inthepastyearthegovernmenthasannouncedplanstodevelopanother2.3GWthroughbilateralcontractsunderthePublicInvestmentFundandbuildstate-ownedprojectsinindustrialcities.Nonetheless,thepaceofauctionsforonshorewindremainsaforecastuncertainty.Round-1projectstookfouryearstocommissionandthecapacityearmarkedforwindinRound3wasneverawarded.TheUnitedArabEmiratesisexpectedtoadd9.5GWofrenewablecapacitybetween2022and2027–quadruplingitscurrentinstallations.SolarPVleadsgrowth,ascompetitiveauctionsforlargevolumesofutility-scaleprojectsaremakingitincreasinglyeconomicallyattractive.BidpricesfellfromUSD56/MWhfor260MWinthefirsttender(heldin2015inDubai)toUSD13.5/MWhfor2GWRenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE78IEA.CCBY4.0.in2020inAbuDhabibecausesolarresourcesareabundant,economiesofscalehavebeenachieved,andfinancingandland-leasingratesarefavourable.ThedistributedPVforecasthasbeenrevisedupwardsowingtotwoconsecutiveyearsofover-100-MWgrowthfromDubai’snet-meteringprogrammeandanexpandingpipelineoflargeindustrialandcommercialprojects.However,longleadtimeschallengetheforecastforCSP.ProjectsawardedinthefirstCSPauctionin2016wereonlycommissionedin2022.Oman’srenewableelectricitycapacityisexpectedtoincrease4.8GWin2022-2027,withsolarPVinstallationsmakingupmostoftheexpansion.Overhalf(2.8GW)oftotalrenewablecapacityadditionswillbededicatedtorenewablehydrogenproduction.Oman’sexcellentsolarandwindresources,itsestablishedhydrogenindustryanditsstrategiclocationalongshippingroutesencouragerenewablehydrogenproductionandammoniaexports.Asresult,apipelineofplannedprojectssituatedatportshasemerged,althoughmanyareintheearlystagesofdevelopment.Nonetheless,themaincaseexpectsrenewablecapacityofsomeoftheseprojectstobeatleastpartiallycommissionedby2027owingtopolicysupportunveiledinthegovernment’snewNationalHydrogenStrategy.Long-termrenewablehydrogenproductiontargets,adedicatedinstitutiontomanagestateinvolvementinhydrogenprojects,andcompetitiveauctionsforleasingearmarkedlandareexpectedtofacilitatedevelopment.Thegovernmentestimates16-20GWofadditionalrenewablecapacityisneededby2030toachievethenewrenewablehydrogenproductiontargetof1-1.25Mt/year.However,securingfinancingandoff-takersarekeyforecastuncertainties.Outsideofcapacitydedicatedespeciallyforrenewablehydrogenproduction,themajorityofgrowthisexpectedtocomefromcompetitiveIPPauctions.Thestateutilityplanstoauctionandcommission1.9GWofrenewablecapacityby2026,buttheforecastcarriesuncertaintybecauseitisnotknownhowquicklythetenderingroundswillbeconducted.Thefirst1GWhasbeenontendersince2019butwinnershaveyettobeawarded,andwindauctionsdependontheoutcomeoffeasibilitystudies.Nonetheless,growthisnowalsopossibleoutsideofauctions.InJanuary2022,thestateutilitylaunchedtheregion’sfirstwholesaleelectricityspotmarket,whereingeneratorscanofferpowerforsaleonedayaheadtothesolepurchaser,OmanPowerandWaterProcurementCompanySAOC(OPWP).TwomainchallengestofasterrenewablecapacityexpansioninOmanarethehighcostofcapitalandinsufficientelectricitystorageintimesofhighsupplyandlowdemand.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE79IEA.CCBY4.0.Israel’s10renewablecapacityisanticipatedtoexpandby6GW,withdistributedsolarPVgrowthdrivenbythecountry’sconsiderablesolarresources,highretailelectricitypricesandasupportivepolicyenvironment.IsraelleadstheMENAregionininstalleddistributedPVcapacitythankstofavourablenet-meteringandFITsforresidentialandcommercialsystems.Competitiveauctionsarethemaindriverforutility-scalesolarPVgrowth,butlandconstraintsremainachallenge.ForMorocco,4.4GWofrenewablecapacitygrowthisforecastfor2022-2027,ledbysolarPV,windandhydropower.Themainimpetusfornewcapacityadditionsisthegovernment’sestablishedcompetitiveIPPauctionprogramme.CorporatePPAsalsoboostonshorewinddevelopment,andsolarPVexpansioncomesfromstate-ownedprojectsandinstallationstoproducerenewablehydrogen.Thisyear’sonshorewindforecastismoreoptimisticthanlastyear’sbecauseMoroccointendstoexpandexistingprojectsandhasannouncednewcorporatePPAprojects.However,wearerevisingtheCSPforecastdownwardstoreflectincreasinguncertaintyoverthegovernment’splansforsolarthermal.Thelasttenderwasopenedinin2019buttheprojecthasstillnotbeenawarded.Meanwhile,theslowpaceofregulatoryreformremainsanobstacletodistributedPVdevelopment.Whilethenewdraftlawreleasedlastyear(No.82-21)makesprogressindefiningself-producersandintroducingproceduresforconnectingtodistributiongrids,itmayalsomakethebusinesscaseforself-consumptionlessattractivebecauseitproposestocapexcessgenerationfedintothegridat10%andintroduceaself-consumptionsurcharge.Egypt’srenewablecapacityisexpectedtogrowby4.1GWbetween2022and2027,ledbyonshorewindandfollowedbysolarPV.Forutility-scaleprojects,mostoftheexpansionwillbesettledthroughunsolicitedbilateralIPPcontractsnegotiatedwiththestateutility,asdeploymentunderotherschemeshasslowedorevenstalledcompletely.Uncertaintyoverthegovernment’splansforstate-ownedutilityprojectsanddelaysinthecompetitiveauctionschemehavecausedthisyear’sforecasttobereviseddownwards.Only26MWoutof1GWofplannedstate-ownedprojectshavebeencommissionedsincetheywereannouncedin2017.DespiteplanstoorganisemorecompetitiveIPPauctions,thegovernmenthasnotheldcompetitivetenderingsince2013forsolarPVand2015forwind.Overcapacityandfinancingchallengeshamperrenewableenergydevelopmentoverall.Forthe2020-2021financialyear,peakloadreached32GWcompared10StatisticaldataforIsraelaresuppliedbyandundertheresponsibilityoftherelevantIsraeliauthorities.TheuseofsuchdatabytheOECDiswithoutprejudicetothestatusoftheGolanHeights,EastJerusalemandIsraelisettlementsintheWestBankunderthetermsofinternationallaw.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE80IEA.CCBY4.0.with59GWinstalled,andmostprojectsrelyonconcessionalfinancing.Nonetheless,thenet-meteringschemeshouldcontinuetoencouragedistributedPVgrowth,especiallylargeutility-scaleprojectsforonsiteself-consumptioninagricultureandthecementindustry,andforcommercialcentres.MiddleEastandNorthAfricarenewablecapacityadditionsdedicatedtohydrogenproduction,2010-2027(left)andprojectstatusforelectrolysersusingdedicatedrenewableswithcommissioningplannedby2027(right)IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.UAE=UnitedArabEmirates.FID=finalinvestmentdecision.Concept=generallyreferstoprojectsthatareannounced.Feasibility=projectswherefeasibilitystudiesareunderwaytoassesstheviabilityofproject.Source:(right)IEA(2022),HydrogenProjectsDatabase.Inthemaincase,weexpect14%(6GW)ofMENA’srenewablecapacitygrowthtocomefromplantsdedicatedtohydrogenproduction.Almost80%ofthisgrowthisinOmanandSaudiArabia,asbothcountriesaspiretobecomeexportersofrenewables-basedammonia.Otherusesofadditionalrenewableelectricitycapacityincludeproducingammoniaforshippingfuelandrenewablehydrogenforlocalindustriessuchaspetrochemicalproductionandsteelmaking.Almost75%ofdedicatedcapacityisexpectedtobesolarPVbecauseofitseconomicattractiveness,whichisoneofthemainmotivationsforhydrogendevelopmentintheregion.Since2015,solarPV-awardedbidpriceshavefallenfromUSD56/MWhinDubaitoUSD10.4/MWhin2021inSaudiArabiaowingtotheabundanceofsolarresources,investmentcostreductionsandbeneficialfinancingconditions.Theforecastisconservativecomparedwiththecurrentpipelineofelectrolyserprojectsannouncedtobebuiltby2027.Owingtotheregion’slargeamountofavailablespace,itsideallocationalonginternationalshippingroutesanditsexistinghydrogenuseandinfrastructure,MENAhasannounced4.5GWof0%4%8%12%16%20%048121620MaincaseAcc.caseGWOmanSaudiArabiaEgyptMoroccoUAE%ofrenewablecapacitygrowth(right-axis)Concept7%Feasibility43%FIDandunderconstruction50%Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE81IEA.CCBY4.0.electrolyserprojectspoweredbydedicatedrenewableelectricity.However,onlyhalfofelectrolysercapacityhasreachedfinalinvestmentdecisionorstartedconstruction.Whileourmaincasedoesassumesomeprojectsinthefeasibilitystagewillbefinancedthankstostate-backedsupport,securingfinancingandoff-takersarethemainchallengestobringingprojectstofruition.Intheacceleratedcase,renewablecapacityforhydrogenproductioncouldbetwiceashigh(16%oftotalrenewablecapacity)iffinancialclosewerereachedforsomeoftheplannedprojects.Furthermore,theacceleratedcasedemonstratesthatMENA’stotalrenewablecapacitygrowthcouldbealmosttwiceashigh(77GW)ifauctionsproceededmorequickly,PPAsweresignedinatimeliermanner,andconstructionwasbegunonawardedprojects.ClarityoverregulatoryreformsallowingdistributedsolarPVproductionandconsumption,cost-reflectiveend-userelectricitypricesandremunerationofexcessgenerationwouldalsoacceleratecommercialandresidentialPVdeployment.Sub-SaharanAfricaFinancialguaranteesfacilitateutility-scalegrowthwhilenewgovernmentprogrammesboostdistributedsolarPVSub-SaharanAfrica’srenewablepowercapacityisexpectedtoalmostdoublewiththeadditionofover40GWfrom2022to2027.Fivecountries–SouthAfrica,Ethiopia,Tanzania,AngolaandKenya–accountforover60%ofallrenewablecapacityadditions.SolarPVandwindmakeupthemajorityofcapacitygrowthintheregion,markingatechnologyshiftashydropoweraccountedfornearly55%ofadditionsfrom2016to2021.However,hydropowerstillcontinuestoexpand,enlargingelectricityaccesscost-effectivelyinmanycountries.Wehaverevisedourforecastupwards25%totakeaccountofnewandadditionalwindandPVauctioncapacityandadditionalprojectsreachingfinancialclosureinsomemarkets.Electricitypurchaseguaranteesfromstate-ownedutilitiesorinternationaldevelopmentorganisations,andconcessionalfinancingbyinternational,regionalorcountry-leveldevelopmentbanks,facilitatecapacitygrowthintheregion.Renewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE82IEA.CCBY4.0.Sub-SaharanAfricarenewablecapacityadditions,2010-2027(left)andrenewableadditionsbytechnologyandcountry,2016-2027(right)IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.SSA=sub-SaharanAfrica.SouthAfrica’srenewableenergycapacityisforecasttoexpandmorethan13GWfrom2022to2027.Government-ledauctionsenabledevelopmentofover7GWofnewutility-scalesolarPVandmorethan3GWofonshorewind.Additionaldriversoutsideofauctionsforutility-scaleuptakeincludemunicipalitiescontractingrenewablepowerfromIPPstoreducetheimpactofloadshedding.Inaddition,Eskomisrepurposingretiringcoalplantsashubsforrenewablecapacity.Meanwhile,twopoliciesaiddistributedsolarPVdeployment:thefirstisthegovernment’sincreasetothelicensingcapacitythresholdforsmall-scale(embeddedgeneration)powerstationsupto100MW,enablingdevelopmentoflargerinstallations,especiallybyminingcompanies.Thesecondisaproposedfeed-intariffforcommercialandresidentialPVsystems.WhilethedetailsoftheFIThaveyettobeconfirmed,heightenedloadsheddingandaproposedelectricitypriceincreaseareexpectedtoacceleratedistributedPVdeploymentthroughouttheforecastperiodasconsumersincreasinglyviewself-consumptionasameanstomaintainpowerandavoidhighbills.MarketchallengesincludedelaysinthesigningofPPAsforawardedauctionprojectsandlowgridavailability,asbothhinderthetimelydevelopmentofnewcapacity.Ethiopia’srenewablecapacitywillexpandmorethan125%(+6GW)from2022to2027.WithcommissioningoftheGrandEthiopianRenaissanceDam,hydropowerprovidesover80%ofadditions.Atthesametime,thesolarPVandwindforecasthasbeenreviseddownwards25%duetoprojectcancellations.Governmentagreementswithprivatefirmswillleadtoutility-scalesolarPVadditionslaterintheforecastperiod,supportedbyconcessionalfinancing,buta-10%-5%0%5%10%15%20%25%30%35%40%01020304050602010-152016-212022-272022-27HistoricalMaincaseAcc.caseGWWindHydropowerBioenergyPV-utilityPV-commercialPV-residentialOtherrenewablesForecastrevision%05101520252016-212022-272016-212022-272016-212022-272016-212022-27HydropowerSolarPVWindOthersGWSouthAfricaEthiopiaKenyaTanzaniaNigeriaOtherSSARenewables2022Chapter1:RenewableelectricityAnalysisandforecaststo2027PAGE83IEA.CCBY4.0.lackofadditionaltendersandongoingsocialandpoliticalissuesarebarrierstofurtherdevelopment.Kenya’srenewablecapacityexpandsnearly90%(+2GW)from2022to2027.PPAssignedunderthecountry’spreviousFITpolicydriveover1GWofwindandutility-scalesolarPVexpansion.Meanwhile,growthintheresidentialPVsegmentisspurredbyarecentlyannouncednet-meteringprogrammeforupto100MWoftotalcapacity,althoughcustomerfeesmayhinderuptake.Additionally,theexpansionofexistinggeothermalresourcesandnewdevelopmentsprovideover500MWofnewcapacity.Nevertheless,land-rightsissues,interconnectiondelays,stop-and-gopolicyandPPArenegotiationsleadtoprojectdelaysandcancellations,loweringinvestorconfidence.Nigeriaisforecasttoaddover1GWofrenewablecapacityfrom2022to2027,halffromhydropower.PPAsenableutility-scalesolarPVdevelopment,andprivatecapitalanddevelopmentbankfinancingsupportthecountry’sprioritisationofsolarPVmini-gridsforuniversities,hospitalsandruralelectrification.DistributedsolarPVdeploymentincreasesasconsumersinstallsolarPVsystemstosupplementorreplacefossilfuel-firedbackupgeneratorstooffsetrisingdieselcosts.Thelackofenablingpolicyforlarge-scalerenewables,alongwithpoweroutagescausedbyageinginfrastructure,hindersmoreextensivedevelopment.Hydropowerwillmakeup70%ofTanzania’s3GWofadditionsthrough2027,whileagreementswiththenationalutility(TANESCO)enablenearly500MWofnewutility-scalesolarandwinddevelopment.Althoughlowinstalledcapacityandlimitedtransmissionanddistributioninfrastructurechallengeadditionalgrowth,proposedprojectswillbebuiltnearexistingtransmissioninfrastructure,helpingeasegridaccessandincreasingutility-scalesolarPVcapacityduringtheforecastperiod.Acombinationofgrantsandgovernmentprogrammesdriveoff-gridsolarPVgrowth,bringingpowertohomesandcriticalinfrastructure.Nevertheless,alackofpoliciessupportingthecountry’stargetof6GWofrenewableenergyby2025preventshighergrowth.Assub-SaharanAfricahassomeoftheworld’shighestrenewableresourcepotential,theacceleratedcaseforecastsnearly30%greateradditions,ledbysolarPV,onshorewindandhydropower.AchievinghigherdeploymentwillrequirefirmauctionandtenderingscheduleswiththetimelysigningofPPAsforawardedprojects.Plus,additionalpartnershipsbetweenIPPsandgovernmentsordevelopmentbanksforcreditenhancementmechanismstoaddressprojectfinancingandoff-takerriskcouldincreaseinvestorconfidence.Finally,gridupgradescouldhelpfacilitateprojectinterconnectionandintegration,whichcansometimestakeaslongasoneyear.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE84IEA.CCBY4.0.Chapter2.TransportBiofuelsForecastsummaryBiofueluseexpandsin2022despiterisingcostsGlobalbiofueldemandisexpectedtobe6%or9100millionlitresperyear(MLPY)higherin2022thanin2021.Renewabledieselmakesupthelargestshareofthisyear-on-yearexpansion,thankstoattractivepoliciesintheUnitedStatesandEurope.BlendingrequirementsandfinancialincentivessupportdemandgrowthinIndiaandBrazil,andIndonesia’s30%biodieselblendingrequirementalsoboostsbiodieseluseinthatcountry.Nevertheless,wehaverevisedyear-on-yeargrowthdownwards25%fromour2021forecast,withpriceandmarketdevelopmentsinBrazil,FinlandandSwedenresponsiblefor80%ofthisdownwardrevision.WhilehighbiodieselpricesledtheBraziliangovernmenttoreduceitsbiodieselblendingrequirementsfor2021/22,inFinlandhighfuelpricespromptedthegovernmenttotemporarilyloweritsrenewabledistributionobligationfor2022/23.Swedenfroze2023greenhousegastargetsfortransportfuelsat2022levels.However,2030targetsremainunchanged.Biofueldemandgrowthbyfuelandregion,2021-2022IEA.CCBY4.0.Note:RoW=Restofworld.Renewabledieseldemandexpanded3800MLPYor40%over2021-2022.TheUnitedStatesaccountedformostofthisgrowth,withstate-levellow-carbonfuel-1000-500050010001500200025003000350040004500EthanolBiodieselRenewabledieselBiojetVolume(millionlitresperyear)RoWIndiaIndonesiaEuropeBrazilUnitedStates0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%010002000300040005000600070008000900010000TotaldemandgrowthVolume(millionlitresperyear)%growth(rightgraph)Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE85IEA.CCBY4.0.standards,thefederalRenewableFuelStandardandthebiodieselproductionandblendingtaxcreditdrivingconsumption.Domesticproductionthusexpanded2800MLPYtohelpmeetrisingdemand.InEurope,existingpoliciesinGermany,SpainandFrancehelpedboostrenewabledieseluptake.Ethanoldemandrose3100MLPYor3%during2021-2022,withIndiaaccountingformorethanone-thirdofthisgrowth.In2022,Indiacontinuedtoprovideguaranteedpricingforethanolinpursuitofits20%ethanolblendingtarget.Meanwhile,consumerethanolpurchasessupporteda4%demandincreaseinBrazil,wherethelargeflex-fuelvehiclefleetallowsconsumerstochooseethanolovergasolinewhenpricesareadvantageous.Todatein2022,theconsumerpriceforethanolhasbeen30%lowerthanforgasolineonaverage.Indonesiaaccountsforalmostallthe1800MLPYofnewbiodieseldemand.Its30%blendingtargetforbiodieselin2022andanoverall4%increaseindieseldemandhavebeendrivinggrowth.Ethanolandgasolineprices(left),andbiodieselanddieselprices(right),2019-2022IEA.CCBY4.0.Sources:IEAanalysisbasedonArgusAmericaBiofuelsandArgusBiofuels(accessedSeptember2022);IHSMarkits,FoodandAgriculturalCommodities(accessedSeptember2022);andBloombergNewEnergyFinance(accessedSeptember2022).Pricesarebeforetaxesandaveragedannuallyandquarterly.Nonetheless,whilestrongerpoliciesareencouragingdemandgrowth,highpricesareslowingitspace.Wehavethereforereducedthisyear’sdemandforecastby3100MLPYcomparedwithlastyear’s.Inthefirsthalfof2022,dieselpricesmorethandoubled,raisingconsumerpricesandputtingpressureongovernmentstoreducecosts.Atthesametime,biodieselpriceswentupintheUnitedStates,EuropeandBrazil,makingitincreasinglymoreexpensivethanregulardiesel.0.00.20.40.60.81.01.21.41.61.82.0201920202021Q12022Q22022Q32022Price(USD/litre)UnitedStatesEuropeBrazilUnitedStates-gasolineEurope-gasoline0.00.20.40.60.81.01.21.41.61.82.0201920202021Q12022Q22022Q32022UnitedStates-dieselEurope-dieselRenewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE86IEA.CCBY4.0.BiodieselpriceincreasesresultedfromvegetableoilexportlossesfromUkraine,weather-relatedsupplydisruptions,highenergyprices,highfertilisercostsandexportrestrictionsthatpushedagriculturalcommoditypricestorecordhighsin2022.Inresponse,Brazil,FinlandandSwedenreducedtheirblendingmandates.Thisevolutionaccountsfora2600MLPYdownwardrevisiontoourforecast.Finlandplanstoreinstateascendingblendingrequirementsin2023andSwedenin2024.Brazilhasnotannouncedwhenitwillre-establishhigherbiodieselblending.Ithadinitiallytargeted14%blendingin2022.RobustgrowthoverthenextfiveyearswillhelpmeetclimateandenergysecuritygoalsTotalglobalbiofueldemandexpandsby35000MLPYor20%over2022-2027inthemain-caseforecast.Growthinrenewabledieselandbiojetfuelconsumptionisalmostentirelyinadvancedeconomies.Here,policiesdesignedtoreduceGHGemissionsaredrivingdemandbecausethesefuelscanbeproducedwithlowGHGemissions,blendedathighlevelsandmadefromwastesandresidues.Infact,nearly70%ofrenewabledieselandbiojetfuelcamefromwastesandresiduesin2021.Meanwhile,risingethanolandbiodieseluseoccursalmostentirelyinemergingeconomiesaimingtoreduceoilimportswhilealsomaximisingtheuseofindigenousresourcestobenefitthelocaleconomy.Plus,biofuelusehelpsreduceGHGemissionsinthesecountries.Globalbiofueldemand(left)andgrowthforadvancedandemergingeconomies(right),maincase,2021-2027IEA.CCBY4.0.Notes:“Advancedeconomies”coversallOECDmembernationsplusBulgaria,Croatia,Cyprus,MaltaandRomania.“Emergingeconomies”encompassesallothercountriesandregions.0.000.501.001.502.002.503.0002000040000600008000010000012000020212027202120272021202720212027VolumeEnergyEnergy(EJ)Volume(millionlitresperyear)EthanolBiodieselRenewabledieselBiojetfuel-10000-5000050001000015000200002500030000AdvancedEconomiesEmergingEconomiesVolume(millionlitresperyear)RenewabledieselEthanolBiodieselBiojetfuelRenewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE87IEA.CCBY4.0.Whiledemandforethanolishigherthanforbiodiesel,renewabledieselandbiojetonavolumebasis,totalenergydemandmetbyethanolissimilarin2021becausetheenergycontentofthethreeotherbiofuels,are60%higherthanthatofethanol.By2027,biodiesel,renewabledieselandbiojetfueldemandisexpectedtoreach2.5EJ,aheadof2.4EJforethanol.TheUnitedStates,Canada,Brazil,IndonesiaandIndiamakeup80%ofglobalexpansioninbiofueluse,asallfivecountrieshavecomprehensivepolicypackagesthatsupportgrowth.InBrazil,IndonesiaandIndia,risinggasolineanddieselusealsoacceleratesdemandforbiofuels,whileintheUnitedStatesandCanadadeclininggasolineanddieseldemandslowbiofuelgrowthandevenreducetheuseofsomefuels.InEurope,fallingtransportfueldemandnearlystallsvolumegrowtheventhoughstate-levelpoliciesareincreasinglystringent.Globally,thebiofuelshareintransportfuelconsumptionclimbsfrom4.3%to5.4%during2022-2027.Forecastgrowthbycountry(left)andbiofuelshareoftransportdemand(right),maincase,2021-2027IEA.CCBY4.0.Notes:RoW=Restofworld.Renewablediesel,biodieselandethanolsharesofgasolineanddieselareonanenergybasis.GasolineanddieseldemandfigurestakenfromtheIEAOilInformationdatabase.BiofueldemandacrossBrazil,IndonesiaandIndiaexpandsby19000MLPYover2022-2027,asallthreecountriesintendtoraiseblendingrequirementsduringthisperiod.InBrazil,wealsoexpecttheRenovaBioprogrammetohelpreducethepriceofethanolrelativetogasoline,promptinggreaterconsumeruse.Furthermore,overallgasolineanddieseldemandisalsoexpandinginallthreecountries,acceleratingbiofuelconsumptiongrowth.TheUnitedStatesandCanadahaveintroducednewnationalpoliciestosupport9500MLPYofnewbiofueldemandin2022-2027.IntheUnitedStates,the-10000-5000050001000015000Demand(millionlitresperyear)EthanolBiodieselRenewabledieselBiojetfuel0%5%10%15%20%25%Shareoftransportdemand20212027Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE88IEA.CCBY4.0.InflationReductionActincludesanestimatedUSD9.4billionintaxcreditsandfinancialsupportfornewproductioncapacityandbiofuelinfrastructuregenerally.Thetaxcreditshavenofinancialcap,andweexpecttheseincentivestoboostbiojetandrenewabledieselfueluseovertheforecastperiod.Forethanol,however,anexpected8%declineingasolinedemandover2022-2027andstaticblendinglevelswillcauseitsusetodropby4200millionlitres.Overall,thebiofuelshareintransportenergydemandclimbsfrom6%to8%.CanadapublisheditsCleanFuelRegulationsinJuly2022,requiringsuppliersofliquidroadtransportfueltoprogressivelyreducetheirfuelcarbonintensityby14gCO2-eq/MJby2030.Weexpectgreaterbiofuelusewillberequiredfortheregulationstobemet.Thus,thetotalshareofbiofuelsintransportenergydemandincreasesfromnear4%to7%overtheforecastperiod.Meanwhile,biofueldemandinEuropeexpands1400MLPYor5%during2022-2027,drivenbytheincreasingstringencyofexistingcountry-levelpolicies.Forinstance,blendingrequirementsinFrance,Finland,Italy,theUnitedKingdomandSpain–aswellasGHGemissionsreductiontargetsinGermany–propelmostoftheexpansion.However,asgasolineanddieselsalesdeclineacrossEurope,lessbiofuelwillbeneededtomeetblendingmandatesandGHGemissionsreductionrequirements.Still,thebiofuelshareintransportenergydemandexpandsfrom5.9%to6.5%overtheforecastperiod.Thismain-caseforecastdoesnotincludetheFitfor55programmeortheEuropeanCommission’sREPowerEUproposal.Biojetfueltomakeup1-2%ofjetfuelgloballyby2027Biojetfueldemandexpandsto3900MLPYinourmain-caseforecast–37timesthe2021level–toaccountfornearly1%oftotaljetfuelconsumption.RecentUSandEUpoliciespromptmostofthisgrowth.IntheUnitedStates,taxcreditsincludedintheIRAandmeasuresintheSustainableAviationFuelGrandChallengeRoadmapboostconsumption,whileinEuropeweexpecttheReFuelEUtargetof2%by2025tocomeintoforceduringtheforecastperiod.PlannedcapacityadditionsinEuropeandtheUnitedStatesmeetmostofthisincreaseddemand,withadditionalsuppliescomingprimarilyfromSingapore.Biojetfuelproductiondependsprimarilyontheavailabilityofwasteandresidueoilsandfats(52%)andvegetableoils(36%).Ethanol,woodyresiduesandwastesprovidetheremainder.InEurope,theEuropeanCommissionislikelytolimittheamountofeligiblefeedstocksavailabletoproducesustainableaviationfuel(SAF),whilevegetableoilssuchassoybeanoilwillsupportSAFmanufacturingintheUnitedStates.Inouracceleratedcase,demandswellsto8100MLPY(2%ofglobaljetfueluse)ifexistingpoliciesaswellasthoseunderdiscussiondrivefastergrowth.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE89IEA.CCBY4.0.BiojetfueldemandintheUnitedStatesexpandsto2000MLPYover2022-2027,bringingblendinglevelsto2%fordomesticjetfuelinthemaincase.ThisforecastincludesplanstoprovideUSD3.3billionduring2023-2031forSAFsupport,asoutlinedintheIRA.SAFsincludearangeofnon-fossilfuelssuchasbiojetandnon-fossilsyntheticfuelsmadefromhydrogenandCO2.Themajorityofthisfunding(anestimatedUSD3billion)supportsadedicatedSAFtaxcreditthattransitionsintoacleanfueltaxcredit,whichSAFsarealsoeligiblefor.Globalbiojetfueldemandandsupplygrowth,2022-2027IEA.CCBY4.0.Notes:Acc.=acceleratedcase.UCO=usedcookingoil.“Energy”istheenergyvalueofthefuelsmadefromdifferentfeedstocks.ThededicatedSAFcreditprovidesuptoUSD1.75pergallonoffuelproducedandsoldintheUnitedStatesin2023and2024,dependingontheGHGemissionsintensityofthefuel.From2025to2027,SAFswillbeeligibleforacleanfuelcreditofupto1.75pergallon–a75%premiumrelativetootherfuels–iftheyfallbelowthemaximumGHGemissionsintensity.Plus,afurtherUSD0.3billionisavailabletofundnewprojectsandinfrastructure,suchasblendingandstoragefacilities.TheUSSustainableAviationGrandChallengeRoadmapaimstoremovebarrierstoSAFdeploymentbyco-ordinatinggovernmentactions,supportingthecollectionofagricultural,wasteandresiduefeedstocks,promotingproductioninnovation,andstrengtheningsupplychains.InEurope,biojetfueldemandgrowsto1300MLPYby2027tomeetexistingSAFblendingtargetsinFranceandNorway,plannedtargetsintheUnitedKingdom(plannedfor2025)andaGHGemissionsintensityreductiontargetinSweden(seePolicyandAssumptiontablebelow).However,themajorityofgrowthdependsontheEuropeanUnionimplementingitsReFuelEUtargetsof2%SAFuseby20250.0%1.0%2.0%3.0%4.0%5.0%020004000600080001000016-2122-2722-2716-2122-2722-27MainAcc.MainAcc.DemandSupplyVolume(millionlitresperyear)UnitedStatesEuropeBrazilJapanSingaporeOtherShare(rightaxis)01000200030000100020003000400020212027Energy(Ktoe)Volume(millionlitresperyear)UCOandfatsVegetableoilsOtherRenewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE90IEA.CCBY4.0.and5%by2030(theproposaldisallowstheuseoffoodandfeedcropsasfeedstock).BiojetfuelisalreadybeingproducedinFinland,FranceandSpain,andproductionisexpectednextintheNetherlandsandItaly.Elsewhere,JapanaimsforSAFstomakeup10%oftheaviationfuelusedbyitsairlinesby2030,andinChinatheCivilAviationAdministrationofChinatargetsSAFuseof65MLPYandlowerGHGemissionsintensityin2025.Beyondgovernmentprogrammes,airlineshavesignedagreementstousenearly35000MLPYofSAFsoverthenext20years.TheInternationalCivilAviationOrganisation(ICAO)hasalsoestablishedaCarbonOffsettingandReductionSchemeforInternationalAviation(CORSIA),andinOctober2022itadoptedanaspirationalgoalofnetzeroemissionsby2050.Althoughairlinecommitments,theCORSIAinitiativeandtheICAOpledgearenotconsidereddirectdriversandthusdonotaffectourforecast,theseactionsdoenablebroaderSAFdevelopment.Forinstance,airlinecommitmentstopurchaseSAFsreinforcethebusinesscasefornewfacilitiesbyguaranteeingsales.Atthesametime,CORSIAaimstoestablishaglobalmarkettoreduceGHGemissionsfromaviation,andSAFuseisaneffectiveoption.WhileSAFproductionisrapidlyexpanding,highcosts,limitedpolicysupportandlowfeedstockavailabilitymayslowgrowth.Biojetfuelproductioncostsremainmorethandoublethoseoffossiljetfuel,restrictingexpansiontojustahandfulofcountriesthathavetaxincentivesormandates.MostSAFproductionto2027willrelyonwasteandresidueoilsandfatsandvegetableoils.Demandfortheseproductsforthemanufactureofallbiofuelsisthusexpectedtoincrease50%over2022-2027,whichwilllikelykeepfeedstockcostshigh(seeChapter4,Question4,formoreonfeedstockavailability).Intheacceleratedcase,demandexpandsto8000MLPY,bringingthebiojetfuelsharetonearly2%ofglobaljetfueluse.TheUnitedStateshasthemostsignificantgrowthpotentialintheacceleratedcase,asweassumeexistingpolicieswillfavourbiojetfueloverrenewablediesel,enlarginggrowthprospects.Infact,biojetfuelmakesup4%ofUSdomesticjetfueluseby2027inthiscase.Meanwhile,developmentinChinaisuncertain.TheNationalDevelopmentandReformCommissionsaysitwill“promotethedemonstrationandapplicationofbio-aviationfuel”,butithasnotreleasedtargetsorpoliciesbeyondthe65-million-litretargetfor2025.NewpoliciesinBrazilandIndonesia,andmorestringentpoliciesinEurope,wouldalsohelpaccelerateproduction,asplannedcapacityissufficienttosupportgrowth.Althoughannouncedbiojetfuelplantswouldraiseproductioncapacityto17000MLPYby2027,thislevelofexpansioniscontingentonallfacilitiesbeingbuiltandfeedstockbeingavailable.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE91IEA.CCBY4.0.TheUnitedStates,China,EuropeandIndiaaccountfor80%ofbiofuelconsumptiongrowthintheacceleratedcaseTotalbiofueldemandreaches240000MLPYintheacceleratedcase,up25%fromthemaincase.ThislevelofgrowthispremisedonChina,Europe,IndiaandtheUnitedStatesimplementingmorestringentpoliciestodrivedemand,andalsoassumesthateffortstoincreaseethanolblendingintheUnitedStatesandIndiaaresuccessful.Furthermore,allfourcountriesmustenlargetheirsuppliesoffeedstocks,especiallywastesandresidues,toexpandrenewablediesel,biojetfuelandbiodieselproduction.Demandgrowthbycountry(left)andtotaldemand(right),acceleratedcase,2021-2027IEA.CCBY4.0.Note:RoW=Restofworld.FortheUnitedStates,demandgrowthintheacceleratedcaseismorethanthreetimesthatofthemaincase,withincreasestotheRenewableFuelStandard’sblendingrequirementsandstrengtheningofCalifornia’sLow-CarbonFuelStandardboostingbiofuelconsumptionandprovidingbroadsupportforhigherdemand.Wealsoassumethat15%ethanolblendingisallowedyear-roundandthatfueldispensersmakeuseofIRAgrantstomakehigherbiofuelblendsmoreavailable.Additionally,greateraccesstovegetable,wasteandresidueoilsmeansrenewabledieselandbiojetfuelproductioncanexpandwithoutreducingbiodieselproduction.TheforecastforChinaincludesnewblendingrequirementstohelpthecountrymeetitsnetzerotarget.However,theNationalDevelopmentandReformCommissionhascommittedto“activelypromotetheuseofadvancedbiofuels”buthasyettoreleasetargetedmeasures.Evenmodestaimsfor2027wouldproduce0500010000150002000025000UnitedStatesChinaEuropeIndiaBrazilRoWVolume(millionlitresperyear)MaincaseEthanolBiodieselRenewabledieselBiojetfuel1000001200001400001600001800002000002200002400002600002021202220232024202520262027Volume(millionlitresperyear)Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE92IEA.CCBY4.0.significantlyhigherbiofuelconsumption,givenChina’ssizeablegasolineanddieseldemand.WithChinafocusedonadvancedfuels,mostproductiongrowthwilllikelybebasedonwastesandresidues,oronenergycropsthatdonotcompetewithfoodandfeedcrops.Meanwhile,EuropeanbiofueldemandgrowthintheacceleratedcaseissixtimeshigherthaninthemaincasebecausetheacceleratedcaseincludestheEU-levelFitfor55targetofcuttingtransportGHGemissions13%acrossallcountries.Memberstatesareassumedtomodifytheirtransportpoliciestoachievethisgoal,andtheEuropeanCommissionestimatesthattheseactionswouldsurpassexistingtransportsectorrenewableenergytargetsbytwo,raisingtheshareofrenewablesto28%by2030.11Inthiscase,biofuelproducerswouldalsoachievetheEUtargetof2.2%advancedfuelsintotalfuelconsumptionby2030.Producingthesefuelsrequiresfeedstocksthatarelittleusedtoday,includingwastesandresiduesotherthanusedcookingoilandanimalfats.IntheacceleratedcaseforIndia,a3.5%blendingtargetforbiodieselisassumed,leadinguptoitsgoalof5%by2030,butachievingthisaimwillrequirethecollectionofusedcookingoilsforfeedstock.Ethanolblendsalsoreach20%inthiscase,assumingIndiaexpandsitsfleetofcompatiblevehiclesandretrofitsthosethatarecurrentlyincompatible.TheIndiangovernmentissupportingflex-fuelvehicles(forexamplethosethatrunon85%ethanolblends)throughincentiveprogrammessuchasitsProduction-LinkedIncentivescheme.Brazil’sbiofueldemandis30%higherintheacceleratedcase,owingtoa1%GHGemissionsreductiontargetforaviationandasmallincreaseinthecountry’sbiodieseltarget.Basedonthenumberoffacilitiescurrentlyplanned,renewabledieselwouldsupplymostoftheadditionalbiofuelsblendedwithdiesel.Ethanoldemandincreasesslightly,assumingBrazil’sRenovaBioprogrammemakesethanolmoreaffordablethangasoline.Demand,supplyandtradeUnitedStatesUSbiofuelconsumptionexpands11%to70600MLPYinthemaincase.Greaterrenewabledieselandbiojetfueldemandaccountforthisrise,withtheIRA,theSustainableAviationFuelGrandChallenge,theRenewableFuelStandardandstate-levellow-carbonfuelstandardsspurringgrowth.However,renewabledieselandbiojetfueldisplacebiodiesel,causingitsconsumptiontodropduringtheforecastperiod.Ethanoldemandalsodeclinesbecausegasolinedemandfallsand11ThisprojectionisbasedonthecurrentRenewableEnergyDirective’scalculationmethodologyforrenewableenergysources,whichincludesmultipliersforelectricityandadvancedbiofuels.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE93IEA.CCBY4.0.blendingratesremainstatic.Overall,themain-caseforecastisdown8%fromlastyearbecauseoflowerethanolandbiodieseldemand,counteredbyastrongerforecastforrenewabledieselandbiojetfuel.UnitedStatesfive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027IEA.CCBY4.0.Note:Acc.case=acceleratedcase.OwingtoIRAprovisions,therenewabledieselforecastisup7%andbiojetfuelup130%fromlastyear.TheIRAoffersanestimatedUSD9.4billionofdedicatedbiofuelsupportto2032,12withthemajority(anestimatedUSD8.6billion)allocatedtobiofuelPTCs(theirtotalfinancialvalueisnotcapped).TheremainingUSD0.8billionisforcompetitivegrantstosupportblendinginfrastructure,SAFproductionandbiofueldistribution.Renewabledieselandbiojetfuelwillalsocontinuetobenefitfromstate-levellow-carbonfuelstandardsandthefederalRenewableFuelStandard.Additionally,theUnitedStateshasanSAFproductiongoalof11000MLPYby2030.12TotalestimatedbythecongressionalbudgetofficeforSections13201,13202,13203,13404,13704,22003and40007.Thefuelinfrastructuretaxcredit(Sec.13404),taxcreditforcarbondioxidesequestration(Sec.13104)andtheextensionoftheadvancedenergyprojectcredit(Sec.13501)arenotincludedinthetotal,althoughbiofuelproducerswilllikelyaccesssomeportionofthesetaxcredits(CongressionalBudgetOffice[2022],EstimatedBudgetaryEffectsofH.R.5376,theInflationReductionActof2022,https://www.cbo.gov/system/files/2022-08/hr5376_IR_Act_8-3-22.pdf).-25%-20%-15%-10%-5%0%5%-10,000-5,00005,00010,00015,00020,00025,00030,0002016-212022-272022-272016-212022-272022-272016-212022-272022-27MaincaseAcc.caseMaincaseAcc.caseMaincaseAcc.caseDemandSupplyNetTradeVolume(millionlitresperyear)EthanolBiodieselRenewableDieselBiojetForecastrevision%Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE94IEA.CCBY4.0.SummaryofInflationReductionActprovisionsforbiofuelsTaxcredit/grantTimeperiodValueEligiblefuelsGHGrequirementsExtensionoftheBiodieselandRenewableDieselCredit2022–2024USD0.26perlitre(USD1pergallon)BiodieselandrenewabledieselAtleast50%lessthanaveragedieselGHGemissionsintensityonalifecyclebasisNewSustainableAviationFuelCredit2023-2024MinimumUSD0.33perlitre(USD1.25pergallon).UptoUSD0.46perlitre(USD1.75pergallon)forlowerGHGintensitySAFsNewCleanFuelProductionCredit2025-2027QualifiedfacilitiesUSD0.26perlitre(USD1pergallon)timesthefuelemissionfactorAnyfuelNewCleanFuelProductionCredit–SAFs2025–2027QualifiedfacilitiesuptoUSD0.46perlitre(1.75pergallon)timesthefuelemissionfactorSAFsExtensionoftheSecond-GenerationBiofuelIncentive2022–2025USD0.27perlitre(USD1.01pergallon)Second-generationbiofuels13ExtensionoftheAlternativeFuelInfrastructureTaxCredit2022–2032A30%credituptoUSD100000forfuellingpumpsAtleast85%ethanolblendsand20%biodieselblendsNoneNewBiofuelInfrastructureandAgricultureProductMarketExpansionGrant2022–2031USD500milliontotalavailableforcompetitivegrantsforinfrastructureprojectsthatsupporthigherblendingEthanolblendsgreaterthan10%andbiodieselblendsgreaterthan5%NoneNewAlternativeFuelandLow-EmissionAviationTechnologyProgram2022–2026USD297millionforcompetitivegrantsforprojectsthatproduce,blendorstoreSAFsordeveloplow-emissionaviationtechnologiesSAFsMustleadtolowerGHGemissionsExtensionandModificationofTaxCreditforCarbonSequestration2022-2033USD60-180permetrictonne,dependingoncarbonsequestrationapproachanduseAnybiofuelfacilitywithlabourrequirements,butlimitswithdouble-countingwithothercreditsNoneExtensionoftheAdvancedEnergyProjectCredit2023–203130%ofthequalifiedinvestmentforagivenyear.TotalavailablecreditsUSD10billionAnybiofuelfacility,butlimitswithdouble-countingwithothercreditsNoneTheextenttowhichthismixofincentivesfavoursrenewabledieseloverbiojetfuelisunclear,however.Biofuelproducersusinghydroprocessedestersandfattyacids(HEFA),theprimaryrenewabledieselandSAFproductconsideredinthisforecast,canoptimiseitsproductionforuseaseitherrenewabledieselorbiojetfuel,dependingonrevenueprospects.Producerdecisionswillhingeonseveralfactors,includingtaxcreditvalues,feedstockcosts,GHGemissionsintensity,13Lignocellulosicorhemicellulosicandcultivatedalgae,cyanobacteriaorlemna.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE95IEA.CCBY4.0.biofuelplantdesign,interactionswithotherpoliciesandthevalueofdieselandjetfuelrelativetorenewabledieselandbiojetfuel.Regardingethanol,demandisexpectedtofall8%(by4200MLPY)followingan8%declineingasolinedemandover2022-2027.Thisdownwardrevisionfromourpreviousforecastreflectsthisyear’slowerestimatedgasolinedemand.Asgasolinedemandfalls,sodoesthatofethanol,andproductionthereforedeclines.TheIRAdoesoffersupportforinfrastructuretohelpraiseblendingrates,butlong-termapprovalforyear-round15%ethanolblendingremainsuncertain.Nevertheless,ethanolproducerscanstillbenefitfromtheIRAbyaccessingthecarbonsequestrationcredittohelpreducetheiremissions,orbyclaimingthecleanfuelproductioncreditforthosefuelsalreadyassociatedwithrelativelylowemissions.Weexpecta24%declineinbiodieseldemandandproductionovertheforecastperiod.Consumptionwasalreadydown8%asofJune2022comparedwiththesameperiodlastyear,anda6%declinefrom2020hadalreadybeenregisteredin2021.Thesedropsaretheresultoffeedstockrestrictions,unfavourablepolicydesignandless-than-optimalfuelproperties.Asrenewablediesel,biojetfuelandbiodieselareallcompetingforthesamefeedstocks,includingvegetableandwasteandresidueoils,ourmain-caseforecastwouldrequirea12-million-tonneincreaseinbio-oilsandfatavailabilityforbiofuelproduction–amorethan100%increaseinjustsixyears.TheUSDAalreadyexpectsadeclineinsoybeanoilexportstoaccommodategrowthin2022-2023,andbiofueldemandhasbeenkeepingpriceshighin2022.USenergypoliciesaremoresupportiveofrenewabledieselandbiojetfuelthanofbiodiesel.Forexample,renewabledieselreceivesahighercredit(1.7creditspergallon)intheRenewableFuelStandardcomparedwithbiodiesel(1.5creditspergallon).Biojetfuelwillalsoreceiveahighertaxcredit(USD0.46perlitre)thanbiodiesel(USD0.26perlitre)undertheIRA.Furthermore,renewabledieselcanbeblendedathigherlevelsthanbiodieseland,likebiojetfuel,bemadeinretrofittedrefineries.Thissituationisalreadyreducingbiodieseldemand.However,otherpolicydecisionswilllikelybemadeduringtheforecastperiodthatcouldincreasedemand.Forinstance,CaliforniaisreviewingitsLowCarbonFuelStandardandconsideringmorestringentGHGemissionsintensitytargetsfor2030.WhilethefederalgovernmenthasnotyetannounceditsRenewableFuelStandardobjectivesfor2023,highertargetswouldleadtoadditionalbiodieseldemand.Intheacceleratedcase,biofueldemandgrowthisthreetimeshigherthaninthemaincase,totalling23300MLPY.AstrongerRenewableFuelStandard,amorestringentLow-CarbonFuelStandardinCaliforniaandfewerfeedstockconstraintsRenewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE96IEA.CCBY4.0.wouldhelpsupportthislevelofgrowth.Ethanolaccountsfor30%ofthisincrease,assuminginfrastructureprovisionsforhigherblendingintheIRAallowethanolblendingtoincreaseto12.5%.Renewabledieselandbiojetfueldemandandproductionexpandaswell,providedthatalargershareofannouncedprojectscomeonlineandfeedstockconstraintslighten.Biojetfueldemandandproductionaretwiceasmuchasinthemaincase,bringingblendingto4%inaviation,one-thirdofthewaytoachievingtheUSSustainableAviationGrandChallengegoal.Renewabledieseldemandexpandsanadditional10%andbiodieselremainsconstant,insteadofdeclining.BrazilBrazil’sbiofueldemandgrows40%to47000MLPY,andproductionclimbsto49000MLPYover2022-2027.Ethanolaccountsfor70%ofthisexpansion,withtherestcomingfrombiodieselandrenewablediesel.Brazil’sethanolandbiodieselmandates,discretionaryblending,theRenovaBiomechanism(acarbonintensityreductionscheme),andincreasingdieselandgasolinedemanddrivebiofuelexpansion.Brazilfive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Weexpectethanoldemandtoexpand8500MLPYovertheforecastperiod.Brazil’s27%compulsoryethanolblendingmandate,a3%increaseingasolineconsumption,theRenovaBioprogrammeanddiscretionaryblendingsupportthisgrowth.Weestimatediscretionaryethanolpurchaseswillaccountfor23%ofgasolineandethanolsalesbyvolumein2022and34%by2027.Brazilhasalarge0%5%10%15%20%25%30%35%-2,00002,0004,0006,0008,00010,00012,00014,00016,00018,0002016-212022-272022-272016-212022-272022-272016-212022-272022-27MaincaseAcc.caseMaincaseAcc.caseMaincaseAcc.caseDemandSupplyNetTradeVolume(millionlitresperyear)EthanolBiodieselRenewableDieselBiojetfuelForecastrevision%Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE97IEA.CCBY4.0.flex-fuelvehiclefleet,whichallowsdriverstochoosehigh-orlow-ethanol-blendedgasolinedependingontheprice.In2022,ethanolpriceshoveredaroundthelevelatwhichconsumerswouldchooseethanolovergasoline.Overtheforecastperiod,weexpectmorediscretionaryblendingtoresultfromcontinuedtaxincentivesandrisingGHGemissionsintensitytargetsundertheRenovaBioprogramme.Existingandplannedethanolproductioncapacitywillbemorethansufficienttomeetexpecteddemand.WealsoanticipateadeclineinethanolexportsasBrazilianconsumptionincreasesanddemandgrowthoutsideofBrazilismetbydomesticproduction.ThehighercostofbiodieselrelativetodieselledBraziltoreduceitsblendingmandatefrom13%to10%in2021,andtomaintainitat10%in2022.Assumingthepricedifferentialnarrows,weexpectBraziltoachieve15%blendingin2024andthereafter,oneyearbehinditsinitialschedule.Renewabledieselandbiojetfuelconsumptionexpandlittleinthemaincasesincetherearenospecifictargetsorsupportprogrammes.Tohelpaddressthisissue,BrazilannounceditsFueloftheFutureProgramlastyeartoexpandbiofuelblendinginaviationfuelsanddiesel.Italsoreleasedtechnicalspecificationsforrenewablediesel,butfurthersupportpolicieshaveyettobeannounced.TheacceleratedcaseassumesBrazilsupportsbothbiojetfuelandrenewablediesel,achieving2%biojetblendingandexpandingitsbiodieselblendingto18%by2027.ThisisconsistentwithstatementsthatBrazilisconsideringmandatinga1%cuttoaviationGHGemissionsin2027.14WealsoassumeBrazil’sownproductionwillsatisfydomesticdemand,givenitssoybeanandpalmoilfeedstockpotentialanditsfocusoninternalethanolandbiodieseldevelopmentinthepast.Ethanolconsumptionrisesslightly,basedona3-percentage-pointincreaseindiscretionaryblending,andproductionoutpacesdomesticdemandtotakeadvantageofgrowingexportopportunities.EuropeBiofueldemandacrossEuropeexpands5%to29200MLPYover2022-2027.Renewabledieselandbiojetfuelleadgrowthwhilebiodieseldemanddeclines.Ethanolconsumptionremainsnearthe2021level,asstate-levelpoliciesencourageexpansioneventhoughgasolineanddieseldemandfall13%overtheforecastperiod.Thisyear’sdemandgrowthforecastremainsnearlastyear.AlthoughthereareregionalandfuelchangesbecauseofmodificationstoGermany’sfeedstockeligibilityrulesandlowerestimatedtransportfueluseovertheforecastperiod.In14MinistryofMinesandEnergy(2022),StatementfromRenatoDutra,headofbiodieselandotherbiofuels.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE98IEA.CCBY4.0.theacceleratedcase,demandrisesmorestronglybecauseweassumethatEUmemberstatesincorporatetheFitfor55transporttargetsintotheirdomesticpolicies.Europefive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Europe’srenewabledieseldemandexpandsby1800MLPYover2022-2027,withFrance,FinlandandGermanyaccountingfor80%ofthisgrowth.Francetargets8%biodieselblending(includingrenewablediesel)by2027,Finlandaimsfor30%renewableenergysourcesintransportby2027andGermanytargetsa14.5%GHGemissionsintensityreductionintransportby2027.RenewabledieselproductionexpandsinFrance,Sweden,theNetherlands,FinlandandSpaintosupplythevolumesrequiredforproposedprojectsinthesecountries.Biojetfuelconsumptionexpandsto1200MLPYby2027,astheReFuelEUAviationproposalrequires2%SAFblendingby2025and5%by2030.Weexpectthispolicytobeimplementedovertheforecastperiod,supportingtheSAFforecast.SAFtargetsintheUnitedKingdomandNorwayalsoindicaterisingbiojetfueldemand.Meanwhile,ethanoldemandremainssteadyovertheforecastperiod.ThemostsignificantgrowthisintheUnitedKingdom,whereconsumptionexpands55%or400MLPYduring2022-2027tomeettheUKRenewableTransportFuelObligationsupportedby10%ethanol-blendedgasolineavailabilityacrossthecountry.EthanoldemandrisesinFranceaswell,thanksgrowthofitsflex-fuelvehiclefleet.-10%0%10%20%30%40%50%-4,000-2,00002,0004,0006,0008,00010,0002016-212022-272022-272016-212022-272022-272016-212022-272022-27MaincaseAcc.caseMaincaseAcc.caseMaincaseAcc.caseDemandSupplyNetTradeVolume(millionlitresperyear)EthanolBiodieselRenewabledieselBiojetfuelForecastrevision%Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE99IEA.CCBY4.0.AcrosstheEuropeanUnionoverall,however,ethanoldemandpeaksmid-forecastandthenfallsto2027.Thisdeclineresultsfroma10%dropingasolineconsumptionovertheforecastperiodasvehiclesbecomemoreefficientandelectricvehiclesareadopted.Lowergasolinedemandthusmeanslessethanolisneededtomeetblendingtargets.EUbiodieselconsumptiondeclines3%to13900MLPYover2022-2027asdemandforregulardieseldrops14%.Additionalbiodieselblendingisnotanoptionformanycountries,sincetheyarealreadynearthe7%blendinglimitsetintheEUFuelQualityDirective.France,Germany,theNetherlandsandSpainallreachthislimitovertheforecastperiod,butItalyhasconsiderablegrowthpotentialbecauseitachievedjust2.2%biodieselblendingin2021.Thecombinationofdeclininggasolineanddieseldemandaswellasfeedstocklimitationsputadditionaldownwardpressureontheforecast.Forinstance,inSeptember2021Germanyreduceditscaponcrop-basedfuelsfrom6.5%to4.4%andlimitedtheemploymentofusedcookingoilandanimalfatsto1.9%onanenergybasis.Thesefeedstockcapswilllikelybereachedduringtheforecastperiodwhengasolineanddieseldemanddeclines.Volumegrowthwouldthereforebelimitedtofuelsmadefromwastesandresidues,whichrelyonnon-commercialconversiontechnologiesorfeedstocksavailableinjustsmallquantitiestoday.TheEURenewableEnergyDirectivealsolimitscrop-basedfuelstoaone-percentage-pointincreaseabove2020levelsandtonomorethan7%onanenergybasis.Usedcookingoilandcertainanimalfatsarecappedat1.7%,15andIEAanalysisindicatesthislimitwilllikelybereachedacrosstheEuropeanUnionduringtheforecastperiod.Intheacceleratedcase,biofueldemandgrowsby8500MLPY(sixtimesthemaincase),assumingtheEuropeanUnionimplementsitsrevisedRenewableEnergyDirectiveasoutlinedintheFitfor55package.Thereviseddirectivecallsfora13%declineintransportGHGemissionsintensityby2030,2.2%advancedfueluseand2.6%useofrenewablefuelsfromnon-biologicalsources.16AstherevisedRenewableEnergyDirectiveisstillundernegotiation,thereispotentialforhighertargetsasproposedbytheEuropeanParliamentandCouncil.TheEuropeanCommissionestimatestherevisedRenewableEnergyDirectivewouldachieve28%renewablecontentintransportfuelsby2030,doublethecurrenttarget.17Thisdoesnotmeanthatbiofueldemandandproductionwill15ThisreferstofeedstocksintheRenewableEnergyDirectiveAnnexIX,PartB.16ThiscanincludesyntheticfuelsmadefromCO2andhydrogen.17Boththecurrent14%targetandthe28%goalarebasedontheRenewableEnergyDirective’scalculationmethodology,whichincludesmultipliersforspecificfuels.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE100IEA.CCBY4.0.double,however.Thesameblendinglimits,feedstockconstraintsanddeclininggasolineanddieseldemandwillstilllimitgrowthpotential.Nevertheless,ifallplannedfacilitiesarebuilt,therewouldbeanadditional1700MLPYofproductionfromplantsusingadvancedfeedstocks.Biofuelsarealsoonlyoneoptionforpolicycompliance.Electricity,biogasandrenewablefuelsfromnon-biologicalsourcessuchashydrogenwillalsocontribute.Additionally,thetransporttargetsofGermany,FinlandandSwedenarealreadymoreambitiousthaninthereviseddirective,reducingpotentialforadditionalgrowth.IndonesiaIndonesia’sbiofuelconsumptionandproductionareexpectedtoexpand50%during2022-2027inthemain-caseforecast.Biodieselaccountsfor70%ofthisincreaseandrenewabledieselmakesuptheremaining30%,whilenewrenewabledieselcapacitywillalsoaddasmallamountofbiojetfuelproduction.Combined,bio-baseddiesels18accountfora35%shareoftransportdieseldemandinIndonesiaby2027,upfrom30%in2021.Weexpectnoadditionalethanolproductiondespiteexistingtargets,asnoincentivesorotherregulationsareinplaceorplannedtosupportit.Thecountry’sbiodieselblendingtarget,combinedwithfinancialincentives,remainstheprimarydriverofbiodieselproductionanddemand.Indonesiaprovidessubsidiestoensureamarketforpalmoilproducers,reducedieselimportdependenceandcurbGHGemissions.Althoughin2022thegovernmentintendstokeepbiodieselblendingatthesamerateasin2021(30%),weexpectvolumestoincreaserelativeto2021becausedieseldemandisrisingandIndonesiahasexpandedtheshareofbiodieselusedfornon-transportpurposes.Thisexpansionofbiodieselblendingfornon-transportuseisthebasisofourupwardforecastrevision.Blendinglevelsinnon-transportsectorssuchaselectricityandindustryarecurrentlyat20%,andtheIndonesiangovernmenttargets30%blendingfortheseusesby2025.Totalbiodieselproductionin2022isthusexpectedtobenear11000MLPY,a20%increasefrom2021.18Bio-baseddieselsincluderenewablediesel,biodieselandbiojetfuel.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE101IEA.CCBY4.0.Indonesiafive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Indonesia’sultimategoalof40%biodieselblendingintransportfuelsisexpectedtobeimplementedinsomeregionsin2025.However,meetingthistargetacrossthecountrywillbechallengingoverall,andtechnicaltrialscarriedoutbytheIndonesiangovernmenthaverevealedthat40%biodieselblendingcouldcompromiseengineperformance.Renewabledieselisaviablealternative,sinceitcanbeusedathigherblendlevelswithoutthreateningengineintegrity,butplannedcapacitywouldexpandblendingbyonlyanadditional3percentagepoints.Exportsofferanothergrowthpath,butweexpectlittleexpansioninthisdomainbecauseoftheEuropeanUnion’splannedphaseoutofpalmoilforbiofuelproductionandincompatibilitywiththeUSRenewableFuelStandard.Importsarealsolikelytoremainlimited,asIndonesia’sproductioncapacityissufficienttomeetinternaldemand.Wealsoexpectlittlegrowthinethanolorbiojetfuelproductionwithoutgovernmentsupportprogrammes.Intheacceleratedcase,productionanddemandincrease90%during2022-2027,assumingIndonesiasupportsethanolandbiojetfueldemandandproductionandexpandsrenewabledieselconsumptiontomeetits40%blendingtarget.However,forecastgrowthisdown30%forbothproductionanddemandbecauseofahigher2021baselinethisyear(werevisedthe2021baselineupwardstoincorporatenewdataonbiodieselblendinginnon-transportsectors).Nearly20%ofIndonesia’sbiodieseldemandin2021camefromnon-transportsectors.-35%-30%-25%-20%-15%-10%-5%0%5%10%15%20%-1,00001,0002,0003,0004,0005,0006,0007,0008,0009,0002016-212022-272022-272016-212022-272022-272016-212022-272022-27MaincaseAcc.caseMaincaseAcc.caseMaincaseAcc.caseDemandSupplyNetTradeVolume(millionlitresperyear)EthanolBiodieselRenewabledieselBiojetfuelForecastrevision%Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE102IEA.CCBY4.0.IndiaIndia’sbiofueldemandandproductionincrease70%or2400MLPYover2022-2027inthemaincase,thanksprimarilytoitsgoalofreaching20%ethanolblendingby2025andbuoyedbyrisinggasolinedemand.Thegovernmentrequiresthatethanoldemandbemetwithdomesticproduction,andinitsupdatedNationalBiofuelPolicyithasreiterateditsaimtoblendbiodieselatarateof5%by2030.Itisalsoexploringbiojetfuelopportunitiesbuthasintroducednospecificrequirementsorincentivestostimulatedemandandproduction,limitinggrowthprospects.Overall,thisyear’smain-caseforecastissimilartolastyear’s.Indiafive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Ethanoldemandandproductionincreaseby70%or2360MLPY,withIndiasupportingits20%-by-2025ethanolblendingtargetwithguaranteedethanolpricingperfeedstockandofferingfinancialsupportfornewethanolproduction(thesepoliciesalreadyboostedblendingfrom4%in2017tomorethan9%in2021).Gasolineconsumptionalsorises8%overtheforecastperiod,contributingtoethanoldemandgrowth.Already,in2022weexpectethanoldemandandproductiontoincreaseby35%,or1200MLPY.India’sethanolpriceshaveremainedlowrelativetootherregionsbecauseitmakesethanolprimarilyfromsurplussugarandmolasses.Whiletheaveragesugarpricein2022was50%higherthan2019,thecostofcornrose80%.1919BasedonUSDAdataforworldrawsugarpricesandUScornprices.-10%-5%0%5%10%15%20%25%30%35%40%-2,00002,0004,0006,0008,00010,0002016-212022-272022-272016-212022-272022-272016-212022-272022-27MaincaseAcc.caseMaincaseAcc.caseMaincaseAcc.caseDemandSupplyNetTradeVolume(millionlitresperyear)EthanolBiodieselRenewabledieselBiojetfuelForecastrevision%Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE103IEA.CCBY4.0.Nevertheless,severalchallengesmayimpairethanoluptakeinIndia.Forinstance,asignificantportionofIndia’svehiclefleet,especiallytwo-wheelers,maybeincompatiblewithE20blends.AlthoughIndiaisworkingtoexpanditsnumberofnewcompatiblevehicles,replacementtimeisaforecastuncertainty.Furthermore,whilethecountryhasamplefeedstockstosupportthelevelofethanolexpansionenvisioned,grain-basedproductioncapacityhasyettobeenlargedtosupplementsugar-basedethanolmanufacturing.Indiaestimatesgrain-basedethanolwillprovide46%ofitssupplies.Forbiodiesel,renewabledieselandbiojetfuel,alackofpolicysupportlimitsgrowthinourmaincase.Wethereforeassumebiodieselblendingremainsbelow1%,followingthehistoricalaverage,andnouseorproductionofrenewabledieselorbiojetfuelisplanned.WhileIndiadoesendorse5%biodieselblendingby2030initsupdatedNationalBiofuelPolicy,ithasyettoannouncespecificpoliciestoachievethistarget.Shoulditpursuethisgoal,itcoulddrawonitspotentiallyconsiderablesupplyofcollectableusedcookingoil,whichcouldsupport2.5%blending.20Intheacceleratedcase,biofueldemandexpandsby8500MLPY,morethantriplethemaincase.Inthisscenario,ethanolblendingreaches20%becauseIndiaexpandsitsgrain-basedethanolproductioncapacity,allowssomeimportsandovercomesvehiclecompatibilityissues.Biodieselblendingreaches3.5%withtheuseofusedcookingoil,andbiojetfueldemandreaches0.5%thankstoblending.OthermarketsDemandinothermarkets21grows35%to26700MLPYover2022-2027inthemaincase,withCanada’sCleanFuelStandardandstrengthenedblendingrequirementsinMalaysia,ThailandandArgentinadrivingexpansion.Inemergingmarkets,growingdemandforgasolineanddieselalsoacceleratesbiofueluse.Whileproductionexpandsinthesecountriestosatisfydomesticdemand,importsarealsonecessaryinsome.Forinstance,Canada’simportsnearlydoubleovertheforecastperiodwhilegreaterproductioninSingaporeandChinapermitsexportstoEuropeanandNorthAmericanmarkets.20Indiahasanestimated1.5milliontonnesofusedcookingoilcollectionpotential,whichcouldmeet2.5%ofIndia’sdieseldemandin2027.21Remainingcountriesaccountfor15%ofglobalsupplyanddemand.Thetopfiveindemandin2021wereChina,Canada,Thailand,ArgentinaandMalaysia.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE104IEA.CCBY4.0.Othermarketsfive-yearbiofuelgrowth,mainandacceleratedcases,2016-2027IEA.CCBY4.0.Note:Acc.=acceleratedcase.InJuly2022,CanadareleasedthefinalversionofitsCleanFuelRegulations,requiringfuelproducersandimporterstoreducethecarbonintensityoftheirfuelsby14gCO2-eq/MJby2030.Thispolicyalonewillpromptaround2300MLPYofnewdemand.Meanwhile,Malaysiaplanstorolloutits20%biodieselblendingtargetfortransportattheendof2022.Thismandate,combinedwithgrowingdieseldemand,doublesbiodieseluseby2027.InThailand,pursuitofits20%ethanoltargetand10%biodieseltarget,combinedwithincreasinggasolineanddieseldemand,drivea30%increaseinbiofueldemand.In2022,Argentinatemporarilyallowedbiodieselblendingofupto12.5%tohelpguardagainstdieselshortagesinthecountry,whichcreatedasharpdoublinginbiodieseldemandthisyear.Wethereforeassumea10%blendingratefortheremainderoftheforecastperiod.InChina,biofuelconsumptionincreases10%to5400MLPY,primarilybecauseofhighergasolineanddieseldemand.Meanwhile,biojetfueldemandexpandstomeettheChineseCivilAviationAdministration’s50000-tonne(62.5-million-litre)biojetfueltarget.ChinaalsoreiterateditscommitmenttodevelopadvancedfuelsintheNationalDevelopmentandReformCommission’sMay2022bioenergyplan.Althoughbiofuelproductioninallthesecountriesexpandstosupplygrowingdomesticuse,bothSingaporeandChinaraiserenewabledieselandbiojetfuelproductionby60%toalsosatisfyexportmarketdemandsinthemaincase.MostofthesefuelsaremadeusingwastesandresiduestomeetEuropeanpolicy-500005000100001500020000250002016-212022-272022-272016-212022-272022-272016-212022-272022-27MainAcc.MainAcc.MainAcc.DemandSupplyNettradeVolume(millionlitresperyear)CanadaMalaysiaThailandArgentinaChinaOtherRenewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE105IEA.CCBY4.0.stipulationsaswellasthelowGHGemissionsrequirementsofCalifornia’sLow-CarbonFuelStandardandCanada’sCleanFuelRegulations.Intheacceleratedcase,demandandproductiongrowtharethreetimeshigherthaninthemaincase.Chinaaloneaccountsformorethanhalfofthispotential:ifitsblendingrequirementsareconsistentwiththeIEA’sNetZeroEmissionsby2050Scenario,growthjumpsto11300MLPYovertheforecastperiod.ThereisalsoscopeforgreaterdemandgrowthinMalaysia,ArgentinaandThailandifthesecountriespursuemorestringentpolicies(seePolicyandAssumptiontablebelow).Productioninthesecountrieswouldalsoexpandtosatisfydomesticusage.Atthesametime,renewabledieselandbiojetfuelproductionalsoincrease,especiallyinSingaporeandParaguay,assumingglobalconsumptionincreasesenoughtojustifynewprojectstoserveexportmarketsinEuropeandNorthAmerica.Policyandassumptionsummary,mainandacceleratedcasesCountryorregionMain-andaccelerated-casepolicies,assumptionsandblendinglevelsUnitedStatesMaincase:NosignificantchangestotheRenewableFuelStandardorotherexistingpolicies.IncludesIRAprovisionsasoutlinedinthetableabove.Ethanolblendingstaysnear10%andexportsremainaround2021levelsfortheforecastperiod.Renewabledieselexpandsaccordingtoplannedcapacityadditionsforprojectsinadvanceddevelopmentstages.Renewabledieselblendingreaches8.5%in2027.Biodieselblendingdeclinesto2.7%whilebiojetfuelsupplyanddemandreach2%blendingfordomesticjetuse.Biojetfuelmakesupalmost15%ofrenewabledieselproductionin2027.Acceleratedcase:AnacceleratedversionoftheRenewableFuelStandardboostsdomesticbiofueldemand,withethanolreaching12.5%blendingandbiodieselexpandingto4%.Renewabledieselblendingincreasesto9.5%,requiringadditionalproductioncapacitybeyondprojectsinadvanceddevelopmentstages.Biojetfuelblendingexpandsto4%,justoverone-quarterofthewaytomeetingtheSustainableAviationGrandChallengegoal.Ethanolproductionincreasestomeetbothdomesticandnetexportdemandusingexistingethanol-manufacturingcapacity.BrazilMaincase:Brazilmaintainsmandatoryethanolblending,andhydrousethanolpurchasesexpandsothattotalblendingreaches57%by2027.BiodieselremainsatB10for2022,climbingtoB15by2024andonwards.Thereisasmallamount(0.8%)ofrenewabledieselblendingby2027basedonplannedprojectadditions.Theforecastassumessoybeanoilpricesdeclinefrom2021/22highs.Acceleratedcase:BrazilachievesitsB15blendingtargetasinthemaincasebutalsoacceptsrenewabledieselandco-processingsothatadditionalgrowthflowstorenewabledieselfor3%blendingin2027.Ethanolblendingexpandsmarginallymorequickly,to59%in2027.Partoftotalethanolblendingisacontinuationofblendingrequirementsof25%(premiumgasoline)and27%(regulargasoline).Hydrousethanolsales(100%ethanol)makeuptheremainderofethanoldemand.Brazilproducesenoughethanol,biodiesel,renewabledieselandbiojetfueltoservedomesticconsumption.Ethanolproductionincreasesfurthertomeetexportdemand.IndiaMaincase:Indiaachieves12%ethanolblendingonaverageacrossthecountryby2027andallfuelethanolisproduceddomestically.E20isavailablestartingin2023.Theforecastassumesvehicleincompatibilitylimitsethanoluptake.Biodieselblendingremainsnear0.4%.Acceleratedcase:Indiaachievesits20%ethanolblendingmandatein2025andmakesprogresstowardsits5%biodieselblendingambitions,reaching3.5%by2027.ThisassumesIndiaaddressesvehiclecompatibilityconcernsandestablishesusedcookingoilcollection.Itcontinuestosupportdomesticproductionandallowsfuelethanolimportsofupto20%ofdemand.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE106IEA.CCBY4.0.CountryorregionMain-andaccelerated-casepolicies,assumptionsandblendinglevelsChinaMaincase:Nosignificantchangestoethanolorbiodieselpolicy.Ethanolblendingremainsnear2%andbiodieselat0.5%.Ethanolimportsstayaround2020/21levels.Biodieselexportsarecloseto2020levelsandrenewabledieselexportsexpandaccordingtoplannedprojectadditionsinadvanceddevelopmentstages.Acceleratedcase:Chinaimplementspoliciesalignedwithitsbioeconomyplan,includingblendingtargetsof4%forethanol,3%forbiodieselandhydrotreatedvegetableoil(HVO),and1%forSAFsindomesticaviationby2026.Chinacontinuestoallowethanolimportsofupto10%ofdemandfromtheUnitedStatesandothercountries.Exportscontinueforbiodieselbutdroptozeroforrenewabledieselandbiojetfuel.Productionofbothfuelsisusedtosatisfydomesticdemand.IndonesiaMaincase:Biodieselblendingincreasesto35%by2027fortransportandto30%fornon-transportuses.Themainblendingsourceisbiodieselat32%,followedbyrenewabledieselat3%blending.Biodieseluseremainsat30%becauseofcompatibilityissues,andrenewabledieselislimitedtoplannedprojects.Thereisnoethanolorbiojetfuelproductionoruse.Exportsremainnear2020levels.Acceleratedcase:IndonesiameetstheB40mandatefortransportandnon-transportfuelconsumption,withthe40%blendbrokendownas32%biodieseland8%renewablediesel.Thisrequiresadditionalrenewabledieselmanufacturingcapacity.IndonesiaalsoenforcesSAFblendingof2%by2025and3%by2027.Exportsdeclineby2027,asnearlyallproductionisdirectedtowardsdomesticdemand.EuropeMaincase:EUmembercountriesimplementtheRenewableEnergyDirectiveIIorachievedomestictargetsifmorestringent,andnon-EUcountriesachievedomestictargets.BiojetfueluseexpandstomeettheReFuelEU’s2%-by-2025target.AspertheReFuelproposal,feedandfoodcrop-basedfuelsarenoteligibleandfuelsmustotherwisemeettherequirementsofRenewableEnergyDirectiveIIAnnexIX,PartAorPartB.•Germany’sGHGemissionsreductiontargetclimbsto14.5%by2027,upfrom6%.Biodieselandethanolblendingremainsteady,whilerenewabledieselexpandsto3%.•Francemeetsits8.6%ethanolandbiodieselblendingtargets.Ethanolblendingincreasesto12.7%,biodieselblendingremainsflat,renewabledieselblendingexpandsto3%andbiojetfuelreaches2.3%by2027.•InSpain,ethanolandbiodieselblendingremainflatbutrenewabledieselblendingexpandsto3%andbiojetfuelto2.7%.•Finland,theNetherlandsandtheUnitedKingdomallachievenear-10%ethanolblending.Swedenreaches3%biojetfuelblending.InItalyrenewabledieselblendingexpandsto5%.•TheUnitedKingdommakesprogresstowardsitstargetof10%SAFblendingby2030,withthemandatestartingin2025.Norwaycontinuesworkingtowardsits0.5%SAFtarget.Acceleratedcase:TheEuropeanUnionmovesmorequicklytowardsits20306%biojetfuel-usetarget.Germanyfocusesonnon-biogenicrenewablefuelsinaviationinsteadofbiojetfuel.TheEuropeanCommissionalsoimplementsproposedchangestotheRenewableEnergyDirectiveIItoreducethetransportsector’sGHGemissionsintensityby13%,asproposedbytheFitfor55package.Memberstatesimplementthisstandard.TheEuropeanUnionmaintainsandstrengthenssustainabilityrequirementsforbiofuels,whichlimitssomeimports.TheUnitedKingdomestablishesa1%-by-2025SAFtarget.Renewables2022Chapter2:BiofuelsAnalysisandforecaststo2027PAGE107IEA.CCBY4.0.CountryorregionMain-andaccelerated-casepolicies,assumptionsandblendinglevelsOthercountriesMaincase:CanadaimplementsitsCleanFuelStandardin2023.Malaysia’sB20mandateisdelayeduntil2023.ThailandmakesprogressonitsE20target,reaching15%blendingby2027,whilebiodieseluseexpandsto10%basedongovernmentsupportplans.Singapore’srenewabledieselandbiojetfuelproductionexpandtofilldomesticshortfallsintherestoftheworld.Argentina’sbiodieselblendingclimbsto10%,andethanolto12%.Colombiareturnsto10%ethanolblendingby2022,whilebiodieselblendingrisesto12%overtheforecastperiod.Japanpursues10%SAFuseby2030.Acceleratedcase:CanadafollowstheUnitedStatesinsupportingSAFs.USSAFblendingreaches4%.Malaysiaexpandsbiodieselblendingfortheindustrialsectorto20%.Colombiapursues13%biodieselblending.Thailandachieves20%ethanolblendingby2026andallows10%ethanolimports.Renewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE108IEA.CCBY4.0.Chapter3.RenewableheatHeatingistheworld’slargestenergyenduse,accountingforalmosthalfofglobalfinalenergyconsumption.Industrialprocessesareresponsiblefor53%ofthefinalenergyconsumedforheat,whileanother44%isusedinbuildingsforspaceandwaterheatingand,toalesserextent,cooking.Theremainderisusedinagriculture,primarilyforgreenhouseheating.Theheatingsectorislargelydominatedbyfossilfuels,withrenewableenergysourcesmeetinglessthanone-quarterofglobalheatdemandin2021(andthetraditionaluseofbiomassmakesuphalfthisamount).RecenttrendsandpolicyupdateWiththeglobaleconomyreboundingin2021,heatconsumptionincreasedby4%year-on-year,exceedingthepre-pandemiclevelandreachingarecord-high219EJ.Excludingthetraditionaluseofbiomass,modernrenewables22fuelledjust13%ofthisgrowth,leavingtheshareofmodernrenewablesinglobalheatconsumptionalmostunchangedfromthepreviousyear’s11%.Modernbioenergymadethelargestcontributiontotheincreaseinrenewableheatconsumption,owingessentiallytoreboundingactivityinindustry,followedbyrenewableelectricityasheatpumpdeploymentinthebuildingsandindustrysectorsaccelerated.Annualheat-relatedCO2emissionsrosebyalmost0.6GtCO2to14.1GtCO2,representing39%ofglobalenergy-relatedCO2emissions.Theriseinpolicyattentionrenewableheatisgainingworldwideisduenotonlytoenvironmentalconsiderationsbuttoacuteenergysecurityconcernsinthecontextofthecurrentglobalenergycrisis.Majorrecentheat-relatedpolicyupdatesincludetheUSInflationReductionActpassedinAugust2022,whichallocatesanestimatedUSD22billion(outofanestimatedUSD369billionforoverallenergyandclimatechangespending)forhomeenergysupplyimprovements.Thebillincludessubstantialrebates(ofuptoUSD8000foraspaceheatingheatpumpforlow-andmoderate-incomehouseholds)andtenyearsofconsumertaxcredit22Inthisreport,“modernrenewableenergy”excludestraditionalusesofbiomass.Modernrenewableheatcoversthedirectandindirect(e.g.throughdistrictheating)finalconsumptionofbioenergy,solarthermalandgeothermalenergy,aswellasrenewableelectricityforheatbasedonanestimateoftheamountofelectricityusedforheatproduction(includingthroughheatpumps)andontheshareofrenewablesinelectricitygeneration.Althoughcreditedasarenewableheatsource,ambientheatharnessedbyheatpumpsisnotconsideredinthisreportduetodatainsufficiency,especiallyfortheindustrysector.Forthesakeofsimplicity,“modernrenewables”isshortenedto“renewables”intheremainderofthisreport.Renewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE109IEA.CCBY4.0.(30%,oruptoUSD2000)forheatpumps,geothermalheatingandelectricheatingappliances(e.g.stovesandclothesdryers)aswellashigh-efficiencybiomassstovesandboilers.TheREPowerEUplan,communicatedinMarchandpublishedinMay2022,aimstoreduceEUdependencyonRussiangasandproposestorevisetheEUtargetforrenewablesintotalfinalconsumptionfrom40%to45%by2030undertheFitfor55package.InadditiontoasolarPVstrategy,itcontainsprovisionsforindustrysectordecarbonisationthrough(amongothermeasures)electrification,theuseoflarge-scaleheatpumpsandrenewables-basedhydrogen,andthedeploymentofotherrenewableenergysources,includingbyintegratingsolarthermalandgeothermaltechnologiesintodistrictheatingsystems.Theplanalsoproposesthecumulativeinstallationof10millionnewhydronicheatpumpsinthenextfiveyearsand30millionunitsinthebuildingssectorby2030.Thiswouldmeanamorethan20%annualincreaseinhydronicheatpumpinstallationsintheEuropeanUnionthroughoutthisdecade,fromastartingpointof1.1millionunitsin2021.ToalignwiththeambitionsoftheREPowerEUplan,ongoingnegotiationsontherevisionoftheEuropeanRenewableEnergyDirectiveincludeproposalstostrengthenmemberstate’stargetsforrenewableheatdeploymentinthebuildings,industryanddistrictheatingsectors.InNovember2022,theEuropeanCommissionproposedanewtemporaryemergencyregulationtoacceleratepermit-grantingforheatpumpsbyintroducingathree-monthdeadlineandsimplifyingthegridconnectionprocedureforsmallerunits.Meanwhile,thetargetsofChina’s14thfive-yearenergyplanto2025,releasedinMarch2022,includea20%non-fossil-fuelshareintheenergymixby2025and60milliontonnesofcoalequivalent(about1.8EJ)ofnon-electricuseofrenewables(i.e.forheatingandtransport).AtotalbudgetofRMB27.5billionwillbeallocatedtocleanheatingandairpollutioncontrolmeasures.InChile,theNationalHeatandColdStrategyof2021targets40%GHGemissionsreductionsintheheatingandcoolingsectorby2030and65%by2050,andaimsfor45%sustainableenergyinheatingandcoolingby2030and80%by2050.Theplanpromotesrenewableenergysources,particularlysolarthermalandbiomass,aswellasdistrictheatingprojects.Severalothercountries,includingFrance,Denmark,Canada,theUnitedKingdom,Luxembourg,AustriaandMalta,havealsoimplementednewfinancialincentivesforrenewableheatingandcoolingorhaveextendedorenhancedexistingonessince2021.Heatpumpshavereceivedparticularattention,withmostsupportintheformoftaxincentivesandgrants.Renewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE110IEA.CCBY4.0.Outlookto2027GiventhepolicylandscapeasofSeptember2022,globalheatconsumption–excludingambientheatharnessedbyheatpumps–isprojectedtogrowalmost14EJ(+6%)during2022-2027.Increasingindustrialactivitydrivesthistrend,withChinaandIndiatogetherrepresenting60%ofindustrialheatdemandgrowth,whileenergyefficiencyimprovementsallowbuildingheatconsumptiontodecline4%globally.Thetraditionaluseofbiomassisanticipatedtodeclinebymorethan3EJ(-13%)overtheoutlookperiod,mostlyinChinaandIndia,owinginparttothedeploymentofimprovedbiomasscookstoves.Modernrenewableheatconsumptionisexpectedtoincreasebyalmostone-thirdduring2022-2027,raisingthemodernuseofrenewablesinheatfrom11.4%to14%by2027.Inboththeindustryandbuildingssectors,usingrenewableelectricityforheatingcontributesthemosttorenewableheatuptakeovertheoutlookperiod,owingtothecombinationofgreateruseofelectricityforheating,includingthroughheatpumps,andrisingsharesofrenewablesinthepowersector.Nevertheless,renewableheatdevelopmentsareinsufficienttocontainfossilfuel-basedheatconsumption,whichexpandsinindustryandleadstoa7%(+1GtCO2)growthintotalannualheat-relatedCO2emissionsby2027.Forcomparison,toalignwiththeIEANetZeroEmissionsby2050Scenario,renewableheatconsumptionwouldhavetoadvance2.4timesmorequickly,andwide-scalebehaviouralchangeandmuchlargerenergyandmaterialefficiencyimprovementswouldberequiredtoreduceheatdemandinbothbuildingsandindustry.Globalincreaseinrenewableenergyconsumptionandshareoftotalheatdemandinbuildingsandindustry,2010-2027IEA.CCBY4.0.Note:NZE=NetZeroEmissionsby2050Scenario.Source:IEA(2022),WorldEnergyOutlook2022..0%5%10%15%20%25%30%0123456789102010-152016-212022-272022-27HistoricalOutlookNZEEJRenewableelectricityModernuseofbioenergySolarthermalGeothermalRenewabledistrictheatShareofmodernrenewablesatperiodend(rightaxis)Buildings0%5%10%15%20%25%30%0123456789102010-152016-212022-272022-27HistoricalOutlookNZEEJIndustryRenewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE111IEA.CCBY4.0.IndustryElectrificationofthermalprocessesgainstraction,butdemandgrowthoutpacesrenewableheatprogressAnnualindustrialheatconsumptionisprojectedtorise17EJduring2022-2027,withchemicalmanufacturingcontributingthemosttothisincrease.Renewableenergysourcesareexpectedtofuelonlyone-quarterofthisgrowth,withtheirshareinindustrialheatdemandrisingto13%by2027,lessthanatwo-percentage-pointincreasefrom2022.Thus,decarbonisingindustrywillrequiregreaterrenewableheatuptakeandsignificantlyfasterenergyandmaterialefficiencyimprovements.China,whichaccountsformorethan40%ofindustrialheatdemandgrowth,alsomakesthemostprogressinrenewableheatconsumption,followedbytheEuropeanUnion,IndiaandtheUnitedStates.Together,theseregionsareresponsiblefortwo-thirdsofrenewableheatdevelopmentsinindustryovertheoutlookperiod.Increaseinrenewableheatconsumptioninindustryandshareofrenewablesinindustrialheatdemand,selectedregions,2016-2027IEA.CCBY4.0.Source:IEA(2022),WorldEnergyOutlook2022.Renewableelectricitybecomesthelargestcontributortorenewableheatprogressinindustryglobally,accountingforthree-quartersofgrowth.Theaccelerationofprocessheatelectrificationisthemaindriverglobally,withelectricitybeingusedtoproduce9%ofindustrialheatconsumedby2027,upfromlessthan4%in2021.Mostelectricitydemandgrowthcomesfrombothgreaterrelianceonheatpumpsanddirectelectricityuseinnon-energy-intensiveindustriesandchemicalproduction,andtoalesserextentfromtheexpansionofscrapsteelrecyclingusingelectricarcfurnaces.AfterChina,thelargestincreasesinrenewableelectricity0%10%20%30%40%50%60%0200400600800100012001400160018002016-212022-272016-212022-272016-212022-272016-212022-272016-212022-272016-212022-27ChinaEuropeanUnionIndiaUnitedStatesBrazilRestofworldPJRenewableelectricityRenewabledistrictheatGeothermalSolarthermalBioenergy%renewablesinheatatendofperiod(rightaxis)Renewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE112IEA.CCBY4.0.useforprocessheatareexpectedintheEuropeanUnion,theUnitedStatesandIndia.Together,thesefourregionsaccountforthree-quartersofglobaldevelopments.Bioenergyisexpectedtoremaintheforemostrenewableheatsourceinindustry,withitsconsumptionexpandingbyalmost1EJovertheoutlookperiod–thesecond-largestabsoluteincreaseafterrenewableelectricity.Morethanone-thirdofthisgrowthtakesplaceinIndiaandBrazil–thetwolargestindustrialbioenergyconsumers–owingprimarilytogreateruseofbagasseinthesugarandethanolindustriesaswellasbiomassinthefoodandbeveragesubsectors.Inthelatter,thetrendispartlydrivenbyafewlargemultinationalcompaniesseekingtoreducetheirfossilfuelconsumptiontomeettheirvoluntarycarbonreductiontargets.AnotherquarterofthegrowthtakesplaceinWest-,middle-andEasternAfricancountries,duepartlytoexpandingwasteuseinthecementsubsector.Biogasinjectedintothegasgridordirectlyconsumedrepresentsonlyamarginalshareofbioenergyuse,butdevelopmentscontinuetogathermomentum.Meanwhile,solarheatforindustrialprocesses(SHIP)remainsanichemarket,accountingforlessthan0.02%ofglobalindustrialheatconsumption.Afewlarge-scaleprojectsdominatethesectorintermsofinstalledcapacity,withtheworld’slargestSHIPplant–theMiraahinOman,dedicatedtoenhancedoilrecovery–onitsownaccountingformorethanone-thirdofglobalcapacity.Yet,interestinSHIPcontinuestogrow,withatleast71newprojectsinstalledworldwidein2021,raisingtotaloperationalcapacityby5%tonearly826MWth.France,ChinaandSpainledcapacityadditionsin2021,whileMexico,theNetherlandsandAustriawerethemostdynamicmarketsintermsofnumberofnewplants.WhilethemainSHIPapplicationsectorsarecurrentlymining,foodandtextiles,large-scaledevelopmentsarealsoenvisagedinthealuminiumsubsector.“Heat-as-a-service”businessmodelsforSHIParealsoemerging,withFranceandMexicohavinglaunchedthefirstlargesystemswithheatpurchaseagreementsin2021.Theuseofconcentratingsolarheatforindustrialapplicationsisalsoexpandingstrongly,withSpainintheleadthankstograntsavailableundertheThermalEnergyProductionscheme.By2027,theindustrialuseofsolarheatisprojectedtoincreasemorethantwofoldglobally.Wellsuitedtoavarietyofindustrialapplicationswithlow-tomedium-temperatureheatrequirements,theglobalpotentialforsolarheatinindustrialprocessesisstilllargelyuntapped,owingpartlytolackofawarenessandlowpolicysupport.Renewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE113IEA.CCBY4.0.Contributionofdifferentfactorstorenewableelectricityconsumptiongrowthinindustryandbuildings,selectedregions,2022-2027IEA.CCBY4.0.Note:RoW=restofworld.Source:IEA(2022),WorldEnergyOutlook2022.BuildingsHeatpumpmarketexpansionandtherolloutofimprovedbiomassstovesboostmodernrenewableheatuseinbuildingsAlthoughbuildingstocksareexpandingworldwide,globalconsumptionofheatinbuildings(excludingambientheat)isprojectedtodrop3.6EJduring2022-2027.Thisdeclineresultsmostlyfromadecreaseintheinefficienttraditionaluseofbiomass(especiallyinChinaandIndia),efficiencyimprovementstobuildingsandheatingappliances,andthedeploymentofheatpumps.ChinaandtheEuropeanUniondemonstratethelargestabsolutereductioninbuildingheatconsumption,togetheraccountingformorethan80%ofthetotal,followedbyRussia,theUnitedStatesandIndia.Overthesameperiod,themodernuseofrenewableheatinbuildingsisanticipatedtogrowalmost30%(+3.2EJ)globally,withitsshareintotalheatconsumptionrisingfrom12%in2021tonear16%by2027–excludingambientheat.Chinaaloneisresponsibleforone-thirdofthisgrowth,whilesub-SaharanAfrica,theEuropeanUnionandtheUnitedStatestogethercontributealmost40%.040080012001600ChinaEUUSIndiaRoWPJIndustryChangeintheshareofrenewablesinelectricitygenerationChangeintheshareofelectricityintotalheatsupplyChangeintotalheatdemand-1000100200300400500ChinaEUUSIndiaRoWPJBuildingsRenewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE114IEA.CCBY4.0.Buildingssectorincreaseinrenewableheatconsumptionandshareofrenewablesinheatdemand,selectedregions,2016-2027IEA.CCBY4.0Source:IEA(2022),WorldEnergyOutlook2022.Almosthalfthegrowthinrenewableheatuseinbuildingsgloballyisexpectedtoresultfromastrongerrenewableelectricitypresenceastheshareofrenewablesinpowergenerationexpandsandelectricheatpumpdeploymentaccelerates.China,theEuropeanUnionandtheUnitedStatestogetheraccountfortwo-thirdsofthe1.6-EJincreaseintheuseofrenewableelectricityforthermalpurposesinbuildingsovertheoutlookperiod.In2021,theEuropeanUnionregisteredrecord34%growthinheatpumpsales,withFrance,Italy,Germany,SpainandSwedenleadinginunitsales,bringingtotalunitsinoperationinEuropebytheendoftheyeartoanestimated17million.Heatpumpuptakegainedfurthertractioninthefirsthalfof2022,withsalesupone-quarterinGermany,80%inFinland,96%inPolandand114%inItaly(forhydronicheatpumps).InadditiontohighgaspricesandgrowingconsumerwillingnesstoreducedependencyonRussiangas,policysupportforelectricheatpumpsintheEuropeanUnionandtheUnitedStatesisexpectedtosignificantlyboostdeploymentinthesemarkets.However,strategicco-ordinationandrobust,diversifiedsupplychainsforcomponents,aswellasjob-trainingprogrammes,willbeneededtoavoidbottlenecksandsecuretheskilledmanufacturingandinstallationlabourersneededtoenablerapidmarketexpansion.Thesecond-largestincreaseinrenewableheatconsumptioninbuildingscomesfrommodernbioenergyuse,whichrepresentsnearlyone-quarterofgrowthintheoutlookperiod.MostdevelopmentsinthisdomainareexpectedinChina,Indiaandsub-SaharanAfrica,whereimprovedbiomassstovesdisplacethetraditionaluseofbiomass.Incontrast,eventhoughwoodpelletheatingappliancessales-20%0%20%40%60%80%100%-3000300600900120015002016-212022-272016-212022-272016-212022-272016-212022-272016-212022-272016-212022-27ChinaSub-SaharanAfricaEuropeanUnionUnitedStatesIndiaRestofworldPJRenewableelectricityRenewabledistrictheatGeothermalSolarthermalBioenergy%modernrenewablesinheatatendofperiod(rightaxis)%traditionaluseofbiomassatendofperiod(rightaxis)Renewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE115IEA.CCBY4.0.expand,bioenergyconsumptioninhistoricallylargemarketssuchasEuropeandtheUnitedStatesstagnatesorevendeclinesslightlyowingtobuildingefficiencyimprovementsandfallingheatdemand.Followingsevenconsecutiveyearsofdecline,theglobalsolarthermalmarketreboundedin2021witha3%increaseininstalledcollectorarea,representing25.6GWthofnewinstallationsand21GWthofnetcapacityadditions.GrowthwasmadepossiblebythestabilisationandslightupturnoftheChinesemarket,whichisbyfarthelargestone,representing83%ofglobaladditions,withIndia,TürkiyeandBrazilprimarilyresponsiblefortheremainingfraction.Inrelativeterms,Italy,theUnitedStates,GreeceandPolandalsoexperiencedremarkableyear-on-yearmarketgrowth.Small-scaledomesticwaterheatersarethemostcommonsolarthermalapplicationsglobally,followedbysolarcombisystems.However,thesetechnologiesarefacingincreasingcompetitionfromheatpumpsandsolarPVsystemsinlargepartsofEuropeandChina.By2027,solarthermalheatconsumptioninthebuildingssectorisprojectedtoincreasenearly40%(+0.6EJ).One-thirdofthisgrowthoccursinChinaalone,whiletheMiddleEast,theEuropeanUnionandtheUnitedStatestogetheraccountforhalf.Meanwhile,aone-quarterincrease(+0.3EJ)ingeothermalheatconsumptioninbuildingsisexpectedduring2022-2027,withChinaaccountingformorethanthree-quartersofnewdevelopments.Whiletheupfrontexpensesofgeothermalheatingsystemsaregenerallyhigh,recentinnovativetechniquesforinstallingundergroundheatexchangerscouldreducetheircostwhilelimitingdisruptionforcustomers.Togetherwiththedevelopmentofalternativebusinessmodels(e.g.heat-as-a-service),thesenewmethodscouldaccelerateexpansioningeothermalheatuse.DistrictheatingIn2021,districtheatingnetworkssupplied3%moreheatthaninthepreviousyear,furnishing6%oftotalheatconsumedglobally.However,thedecarbonisationpotentialofdistrictheatingnetworksremainslargelyuntappedbecausefossilfuelsstilldominatedistrictheatproduction,especiallyinChinaandRussia,theworld’slargestmarkets.Renewables(mostlybioenergy,includingbiogenicwaste)wereusedtoproduce8%ofdistrictheatsuppliesgloballyin2021,andtheuseofsolarthermalresources,thoughstilllimited,continuestoprogress,withalmost300solardistrictsystems(totalcapacityof1.6GWth)inoperationworldwideattheendof2021(+10%year-on-year).ChinahasledsolardistrictsystemdevelopmentssincetheDanishmarket–historicallythelargest–collapsedin2020followingashiftinRenewables2022Chapter3:RenewableheatAnalysisandforecaststo2027PAGE116IEA.CCBY4.0.policy.BeyondChina,solarthermaldistrictsystemsaregarneringincreasinginterestinGermany,Sweden,Austria,PolandandFrance.Otherinnovativetechnologicalcombinationsarealsobeingdeveloped,basedontheintegrationandcouplingofdistributedreversibleheatpumps,thermalstorageandvariablerenewablesinefficientlow-temperaturenetworks.Thesesystemsofferpromisingoptionstooptimallysupplyheatingandcoolingtobuildingsacrossanentireneighbourhoodindenselypopulatedareas.Theshareofrenewablesindistrictheatingisexpectedtoremainstablegloballyduring2022-2027,whiledistrictheatconsumptionexpands4%.Two-thirdsofprojectedgrowthinrenewabledistrictheatconsumptionisintheEuropeanUnion,asgreaterbioenergyuseandtheintegrationoflarge-scaleheatpumpsraisetheshareofrenewablesbytwopercentagepointsto37%.MostoftheremaininggrowthisexpectedtotakeplaceinChina,wheredistrictheatconsumption–mostofwhichisintheindustrysector–expands13%overtheoutlookperiod.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE117IEA.CCBY4.0.Chapter4.TrendstowatchQuestion1:IstheEuropeanUnionontracktomeetitsREPowerEUgoals?TheREPowerEUplan’saimistorapidlyreducedependenceonRussianfossilfuelsby2027,andtheEuropeanCommissionestimatesthatthiswillrequiresignificantexpansionofrenewableenergysharesintheelectricity,transportandheatingsectors.Althoughtheuseofrenewableenergydoesincreaseinallthreeofthesesectorsby2027inourmain-caseforecast,innoneofthemarelevelsconsistentwiththeREPowerEUplan.Whiletheshareofrenewablesinelectricityexpandstoalmost55%by2027inourmaincase,thisiswellbelowthe69%sharetheEuropeanCommissionestimatesisneededtosupporttheREPowerEUplan.Toenablefurtherincreases,governmentsacrosstheEuropeanUnionwillneedtominimisepolicyuncertainty,simplifypermittingproceduresandacceleratetransmissionanddistributionnetworkupgrades.Rampinguprenewables-basedpowergenerationisalsoessentialtoexpandrenewableenergyuptakeinthetransportandheatingsectors,asrenewableelectricitycanpowerelectricvehiclesandheatpumpsandbeusedtoproducegreenhydrogen.Fortransport,arenewableenergyshareof16%by2027inourmaincaseislessthanhalftheestimatedREPowerEUrequirement.Memberstateswillneedtoaligntheirdomesticpolicies,acceleratebiofueldeploymentandreinforceconservationandefficiencyprogrammestocontainorreduceenergydemandandenlargetheshareofrenewablesinfinalenergyconsumption.Meanwhile,renewableenergysharesinheatingandcoolingexpand0.9percentagepointsannuallyupto2027–one-thirdfasterthanduringthelastdecade,butwellbelowthe2.3-percentage-pointannualincreasesneededtomatchREPowerEUambitions.Toacceleratedeployment,moreaggressivepolicieswillbeneededtostrengthenheatpumpsupplychains;increaselabouravailabilityforinstallations;integraterenewableenergysourcesindistrictheatingnetworks;scaleupbiomethaneproduction;streamlinepermittingregulationsforlarge-scalerenewableheatprojects;andsupportalternativebusinessmodelsforheating.Shouldgovernmentandindustryovercomedeploymentchallengesintheelectricity,transportandheatingandcoolingsectors,REPowerEUgoalsappeartobewithinreach,atleastintermsofrenewableenergy.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE118IEA.CCBY4.0.SummaryofrenewableenergybenchmarksbysectorinREPowerEUplanandinmainandacceleratedcasesSegmentRePowerEUbenchmarks,203023Maincase/acceleratedcasebenchmarks,2027Electricity2469%54%/n/aSolarcapacity592GW396GW/471GWWindcapacity510GW290GW/316GWTransport32%16%/20%HeatingandcoolingShareofrenewableenergyinheatingandcoolingShareofrenewableenergyinindustryShareofrenewableenergyinbuildingssectorfinalenergyconsumption2.3-percentage-pointaverageannualincreaseto20301.9-percentage-pointaverageannualincreaseto203060%0.9-percentage-pointaverageannualincreaseto20300.9-percentage-pointaverageannualincreaseto203032%IncludingREDIImultipliers.Excludingambientheatharnessedbyheatpumps.TheREPowerEUplanTheEuropeanCommission’sREPowerEUplan,releasedinMay2022inresponsetoenergymarketdisruptionsfromRussia’sinvasionofUkraine,aimstorapidlyreducedependenceonRussianfossilfuelsby2027.Itbuildsuponexistinginitiatives,includingtheRecoveryandResilienceFacility,andincreasestherenewableenergytargetoftheproposedFitfor55package(launchedin2021)from40%to45%.Thishigheraimforrenewableenergyuse,combinedwithotherREPowerEUprovisionstoreduceenergydemand,impliessignificantincreasesinrenewablecapacitysharesacrosstheelectricity,transportandheatingandcoolingsectors.TheCommissionestimatesthatrenewableenergyinelectricitywouldneedtoclimbto69%by2030,to32%intransport,andinheating/coolingshouldexpandatleast2.3percentagepointsannually.23TheREPowerEUplantargetsa45%renewableenergyshareacrosstheEuropeanUnionaswellasnumerousotherobjectivesandspendingcommitments.TheEuropeanCommissionmodelledtheprogrammepackagetodeterminerenewableenergyshareslikelynecessaryinelectricity,transportandheating(seeImplementingtheREPowerEUActionPlan,p.23).Whilethebenchmarksforelectricityandtransportarebasedonthesemodelledoutcomes,theheatingandcoolingannualgrowthbenchmarksaretargetsintheREPowerEUplan,notjustmodelledoutcomes.24ElectricityandtransportsharesarenotREPowerEUtargets.Rather,theyareEuropeanCommissionestimatesofsharesneededtoachieveREPowerEUgoals.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE119IEA.CCBY4.0.RenewableelectricityInourmain-caseforecast,solarPVandwindcapacityexpansionareinsufficienttoreachtheREPowerEUplan’srenewableelectricityobjectivesfor2030.AccordingtothelatestEuropeanCommissionStaffWorkingDocument,capacitiesof592GW25ofsolarPVand510GWofwindarerequiredby2030toachievethe69%shareofrenewableelectricitymodelledbytheCommission.Thiswouldrequireaverageannualadditionsof48GWforsolarPVand36GWforwind.Incomparison,ourmaincaseforeseesaverageannualnetadditionsofonly39GWforsolarPVand17GWforwindduring2022-2027.Thisresultsina54%shareofrenewables-basedgenerationintheelectricitysector,15percentagepointsbelowthe69%desiredthreeyearslater.Thus,toreachtheinstalledcapacityneededtogenerate69%ofelectricityfromrenewablesby2030,averageannualnetadditionsneedtobe22%higherforsolarPVandmorethantwotimesgreaterforwind.Renewableelectricitysharesinmaincase(left),andaverageannualadditionsforsolarPV(middle)andwind(right)inthemainandacceleratedcases(2022-2027)IEA.CCBY4.0.Note:Acc.case=acceleratedcase.Europe’srenewablecapacityexpansionislimitedbythreemainchallenges:inadequatesupportschemes;lengthyandcomplexpermittingprocedures;andtheslowpaceoftransmissionanddistributionnetworkupgrades.Insufficientorlimitedpolicysupport–Forutility-scaleprojects,theuncertaintycreatedbyanabsenceofcompetitiveauctionsorlimitedvisibilityoverfutureonesinsomecountriesconstrainsthelevelofannualadditionsin25Referstoalternatingcurrent(AC)asoutlinedintheEUSolarEnergyStrategy.0%10%20%30%40%50%60%70%80%202020252030TWhRenewableshareingenerationMaincaseREPower2030Target0102030405060MaincaseAcc.case2030capacityneedsGWSolarPVannualadditionsAverageannualadditions0102030405060MaincaseAcc.case2030capacityneedsWindannualadditionsAverageannualadditionsRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE120IEA.CCBY4.0.themaincase.Moreover,mostcurrentEUauctiondesignsusebidpriceastheonlyselectioncriterion,whichhasledtoverylowornegativebidsreducingprofitabilityforbothdevelopersandmanufacturers.FordistributedPV,ambiguityregardingtheextensionofcurrentsupportschemeschallengesgrowthinsomecountries.Insufficientremunerationalsopreventsfasteruptakeforself-consumptioninsomesegments.Permittingchallenges–PermittingdifficultiesaretheprimaryreasonauctionshavebeenundersubscribedinEuropeforbothsolarPVandonshorewind.Developersoftenneedapermittoenteranauction,butobtainingitisnotalwaysaguarantee.Furthermore,regulationsforbidinstallingrenewableenergysystemsoncertaintypesofland(e.g.agricultural)orsetdistancelimitationsforsitingturbinesnearbuildings,andsocialoppositionandlitigationalsolengthenpermittingwaittimes.Inadditiontobuildingpermits,somejurisdictionsrequirepermitsfortransportandforbuildingroadsclosetoconstructionsites.Inmanymarkets,permittingistime-intensivebecausethecomplexprocessinvolvesseveralstepsandinstitutions(whichsometimeslackdigitalisation),theresponsedeadlinefortheapprovingauthoritycanbelongorevenunlimited,andunderstaffingatpermittingofficescreatesbacklogs.Thesechallengeslengthenprojectleadtimes,driveupcosts,andlimitthepaceofdeploymentinthemain-caseforecast.Gridcongestion–ManytransmissionanddistributionnetworkshaveinsufficientcapacitytoconnectnewsolarPVandwindplants.Systemoperatorsthereforeneedtoreinforceexistinginfrastructureand,insomecases,installnewlines.However,permittingcomplexity,alackofskilledlabour,socialoppositionandhighcostslimitthepaceofupgrades.Localpopulationsoftenopposetheconstructionofoverheadlines,andpermittingnewlinesacrossmultiplejurisdictionsisalengthyprocess.Becauseitcantakeyearstocompletegridimprovementprojects,developersfacelongwaittimesforgridconnectionapprovals,whichslowsprojectdevelopment.AddressingsomeofthesechallengescouldincreasethepaceofsolarandwinddeploymentintheEuropeanUnionby30%between2022and2027.Infact,ouracceleratedcaseassumesthatincreasedpolicysupport,regulatoryreformsandfasterinfrastructuredevelopmentboostaverageannualsolarPVadditionsto52GW,inlinewithwhatisneededtoreachtheREPowerEUtarget.Forutility-scalesolarPV,reachingthislevelwouldrequirecountrieslackingauctionschemes(i.e.SwedenandBelgium)toimplementthem.Countriesalreadyusingcompetitiveauctionswouldhavetoextendtheircurrentscheme(theNetherlands),provideschedulesforplannedauctions(ItalyandDenmark),allocatehighervolumes(SpainandPoland)andimproveauctiondesigntoensurefullsubscription(France).Furthermore,countriescouldconsidermodifyingtheirauctionrulestoreflecthigherinvestmentcostsandongoingsupplychainRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE121IEA.CCBY4.0.challenges,improvingthebusinesscaseforsolarPVandwinddevelopers.Theycouldalsoincludenon-pricecriteria(e.g.thesecuritybenefitsofrenewableenergy)intheselectionprocess.FordistributedsolarPV,ifexpiringsupportschemesareextendedandremunerationlevelsraisedtomakethebusinesscaseforself-consumptionmoreattractive,annualgrowthcouldreach35GWby2027,apacethatwouldbesufficienttomeetthe2030target.TheacceleratedcaseforsolarPValsoassumeslocalmanufacturingandjob-trainingprogrammeswouldeasethelogisticalandlabourconstraintscurrentlypreventingfastersolarPVprojectdevelopment.Equipmentdelaysandhigherfreightcostsonsolarcellandmoduleimportshavestifledcompetitioninauctions,resultinginundersubscriptionsandpricehikes,whiletheshortageofskilledworkershasslowedtheinstallationpacefordistributedPVsystems.Forwind,however,averageannualadditionsstillfallbelowtheREPowerEUmodellingexercise’s2030installedcapacityobjectivesdespitestrongerpolicysupport,regulatoryreformsandgridexpansion.Intheacceleratedcase,averageannualwindadditionsincreasetoonly21GWby2027,40%lessthanthe36GWneededtoachievethe2030goals.Foronshorewind,persistentpermittingchallengeshinderfastergrowthintheacceleratedcase.Whilesomecountrieshaveannouncedplanstostreamlineprocessesandhaveformedinstitutionalworkinggroupstoproposereforms,theonlyonestoimplementsubstantiallegislativechangesforonshorewindpermittingoverthelastyearareGermanyandSpain.MorewidespreadregulatorychangeswouldbeneededtoadvanceonshorewinddevelopmentsuchasthetemporaryemergencyregulationsproposedbytheEuropeanCommissiontoaddresspermittingbottlenecks.InNovember2022,theCommissionproposedthedesignationofrenewablesasamatterofpublicinteresttobenefitfromsimplifiedproceduresfornewpermits,anditintroducedcapsonpermittingresponsetimesundercertainconditions.IfthesewereformallypassedbytheEuropeanCouncil26andimplementedrapidlyatthemember-statelevel,onshorewinddevelopmenttimeswouldbesignificantlyshortened.Uncertaintyoverthebusinesscaseforrepoweringalsolimitsthepaceofgrowthintheacceleratedcase.Foroffshorewind,longleadtimesandgridconnectiondifficultiescontinuetobethemainimpedimentstoachievingfastergrowthby2027.Whilemanycountrieshaveraisedtheirambitionsforoffshorewindexpansionandannouncedauctionplans,thepaceofimplementationhingesuponnewsiteselectionandincreasingtransmissioncapacity.Excessiveprerequisitesforgridconnectionandfor26In29November2022,EUenergyministersinformallyagreedtodesignaterenewableenergyprojectsaspartofthe“over-ridingpublicinterest”thatwouldbevalidfor18months.However,thisregulationproposalisexpectedtobeformallyapprovedbytheEuropeanCouncilafterthepublicationoftheRenewables2022report.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE122IEA.CCBY4.0.expandingtransmissionnetworkslengthenprojectleadtimesandlimitthepaceofdeploymentintheacceleratedcase.Inadditiontothetechnology-specificchallengesthathamperfasterexpansionofrenewables,protectingvulnerableconsumersthroughcurrentandproposedmarketinterventions(suchaswholesalemarketcapsandwindfall-profittaxes)willaffectrenewableenergyinvestmentsintheupcomingmonths.Moreover,theongoingenergycrisishasalsosparkednewdiscussionswithintheEuropeanUnionconcerningfutureelectricitymarketdesign.Whilereformscould,inprinciple,boostmarket-drivenrenewableenergydeployment,ensureenergysecurityandencourageinvestmentinflexibilityresources,itisimportantthatanyreformproposalbecarefullyandtransparentlyprepared,involvingallrelevantstakeholders.Failureinthisregardcouldincreaseinvestoruncertaintyandslowexpansion.TransportTheshareofrenewableenergyconsumedintransportinourmaincasedoesnotmeettheleveltheEuropeanCommissionestimatesisnecessarytoachievetheREPowerEUtarget.WhiletheREPowerEUplanrequiresa32%27shareofrenewableenergyintransportby2030,ourmaincasemodels16%by2027,puttingtheEuropeanUnionontrackfor20%by2030.Biofuelsmakeupthelargestportionoftherenewableenergyshareintransport,butgrowingEVsalesandrenewablecapacityexpansionmeanrenewableelectricityexpandsmorequickly.Toaccelerategrowth,theEuropeanUnionwouldneedtoadoptmorestringenttargets,withmostmemberstatesaligningtheirdomesticpoliciesaccordingly.Policieswouldneedtofocusonraisingbiofueluse,boostingEVsalesandexpandinginfrastructureandrenewableelectricityshares,aswellasreducingenergydemandthroughconservationandefficiencymeasures.IncludingtheseactionsintheacceleratedcaseputstheEuropeanUnionontrackfora29%renewableshareby2030,butthisstillfallsshortoftheREPowerEUrequirement.27BasedonRenewableEnergyDirective(Directive2018/2001/EU)calculationmethodology,whichincludesmultipliersfordifferentfuels.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE123IEA.CCBY4.0.EuropeanUnionrenewableenergyshareintransport,maincase(left)andacceleratedcase(right),2020-2030IEA.CCBY4.0.Notes:CalculationsarebasedonREDIImethodology,withmultipliersforadvancedbiofuels(2x),electricityforroadtransport(5x)andelectricityforrailtransport(2.5x).Fossilfueldemandincludegasoline,dieselandjetfuelbasedontheIEAOilInformationDatabase.Inourmaincase,therenewableshareintransportenergyconsumptionexpandsfrom9%in2020to16%in2027,withbiofueluseincreasing1billionlitresduring2022-2027.Member-statepoliciesthatrequireminimumsharesofbiofuelsorrenewablefuels(andGHGreductions,inGermany’scase)drivethisgrowth.Inmostcountries,policiesaredesignedtobecomemorestringentovertimetomeetEU-widedirectives,includingtherevisedRenewableEnergyDirective(REDII).TheREDIItargets14%renewableenergyintransportby2030,includingmultipliers,andtheshareofelectricvansandcarsontheroadrisesfrom2.3%to15%acrossEurope(althougheverycountry’suptakewillbedifferent).Electricvehiclesareincreasinglypoweredbyrenewableelectricity,asitsshareintotalgenerationclimbsfrom37%toalmost55%during2022-2027.Main-casemodellingisbasedonexistingmemberstateEVpoliciesandEU-levelCO2emissionsstandardsfornewcarsandtrucks.Growthislimitedinthemaincasebecausestate-andEU-levelpoliciestomeethighertargetsarenotinplaceinmostcases.Toincreasetherenewableenergyshare,memberstateswouldneedtomaketransportpoliciesmoreambitious,expandbiofuelproduction(particularlyofadvancedbiofuels),accelerateelectricvehicledeploymentandraiserenewableelectricitysharesmorequickly.Vehicleefficiencyandconservationmeasureswouldalsoreducegasolineanddieseldemand,whichcouldhelpachievehigherrenewablesharesinthetransportsector.0%5%10%15%20%25%30%35%20202021202220232024202520262027RenewableshareintransportBiofuelsRenewableelectricityRePowerEU0%5%10%15%20%25%30%35%2021202220232024202520262027Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE124IEA.CCBY4.0.Transportrenewableenergyshareswithandwithoutmultipliers,mainandacceleratedcasesYearandcaseRenewablesharewithmultipliersRenewablesharewithoutmultipliers2020maincase9%6%2027maincase16%8%2027acceleratedcase20%10%Intheacceleratedcase,renewableenergyintransportclimbsto20%by2027,puttingtheEuropeanUnionontrackfora29%shareby2030.ThisboostresultsfrompolicychangestomeettheEUFitfor55objectiveofa13%declineinGHGemissionsintensityinthetransportsectorby2030,whichtheEuropeanCommissionestimateswouldleadtoa28%shareofrenewableenergyinthetransportsector.Inalignmentwiththisgoal,biofueluseexpandsbyanadditional6billionlitres,theelectriccarandvanshareofvehiclesontheroadclimbsto18%andrenewableelectricityproductionrisesto59%by2027.Toachievethisgrowth,memberstateswouldneedmoreambitioustransportationprogrammes.OnlyGermany,SwedenandFinlandhavepoliciesinplacethatexceedtheFitfor55targets.Evenintheacceleratedcase,however,theEUtransportsectorrenewableenergysharefallsshortoftheREPowerEUestimate.Toclosethisgap,theEuropeanUnionisconsideringa3-percentage-pointincreaseinitsrequirementforrenewablefuelsfromnon-biologicalsources(suchassyntheticfuelsmadefromCO2andhydrogen),butithasonlyonecommercial-scalefacilityunderconstructionsofar.RenewableheatIn2020,heatingandcoolingaccountedforoverhalfoftheEuropeanUnion’stotalfinalenergyconsumption,withrenewablesrepresentingonly23%ofit.DecarbonisingtheheatingandcoolingsectorwillthusbecrucialforalignmentwiththeoverallEUtargetofatleast55%GHGemissionsreductionsby2030.However,ouroutlookforrenewableheatdevelopmentsintheEuropeanUnionfallssignificantlyshortofREPowerEUrequirements.The2018RenewableEnergyDirective(REDII)introducedanindicativetargetforeachmembercountrytoincreasetheshareofrenewablesinheatingandcoolingby1.1percentagepointsannuallythrough2030,withasimilartargetfordistrictheatingandcooling.Theproposed2021revisionoftheREDIIstrengthensthesetargetsandintroducesnewonesforintegratingrenewablesinthebuildingsandindustrysectors.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE125IEA.CCBY4.0.Morerecently,EuropeanCommissionmodellingoftheREPowerEUplan,publishedinMay2022,suggestsapathwaytomeetthetargeted45%renewableenergyshareinoveralltotalfinalenergyconsumption.Inthisscenario,theshareofrenewablesinheatingandcoolingandindistrictheatingandcoolingincreasesanaverageof2.3percentagepointsannuallyto2030andby1.9percentagepointsinindustry,whiletheshareofrenewablesinthebuildingssectorclimbsto60%by2030.28Nevertheless,inJune2022theEuropeanCouncilannounceditsnegotiationposition,whichincludeslessambitiousminimalbindingtargetsofan0.8-percentage-pointannualincreaseintheshareofrenewablesinheatingandcoolingupto2025,anda1.1-percentage-pointannualincreaseover2026-2030.Itisalsoconsideringtheindicativetargetofa1.1-percentage-pointannualincreasefortheshareofrenewablesinindustry,aswellasa49%indicativetargetforrenewablesinbuildingssectorfinalenergyconsumptionby2030.InSeptember2022,theEuropeanParliamentadoptedaseriesofamendmentsthatdefineitsstartingpositionfortheongoingtriloguenegotiationsontheREDIIrevisionproposal.Theyincludetheindicativetargetofa2.3-percentage-pointaverageannualincreaseintheshareofrenewablesinheatingandcoolingduringtheperiods2021-2025and2026-2030(andthesametargetfordistrictheatingandcooling);anindicativeaverageannualincreaseof1.9percentagepointsinindustryduringtheperiods2024-2027and2027-2030;andanindicativetargetof49%renewablesinbuildingsby2030.EuropeanUnionproposedtargetsforrenewableheatingandcooling28ThefirstfiguresfromtheEUSolarEnergyStrategywerealsoannouncedinMay2022.Accordingtothisstrategy,thejointcontributionofsolarthermalandgeothermalwouldneedtoatleasttripleby2030.REDII–2018(EC2018/2001)Article23–Mainstreamingrenewableenergyinheatingandcooling:•Indicativetargetfortheshareofrenewablesinheatingandcooling:averageannualincreaseof1.1percentagepointsover2021-2025and2026-2030(1.3percentagepointsforstateswherewasteheatandcoldareused)oTargetreducedbyhalfforcountrieswithshareofrenewablesinheatingandcoolingbetween50%and60%oTargetdoesnotapplytocountrieswitharenewableshareabove60%•Indicativetargetfortheshareofrenewablesindistrictheatingandcooling:averageannualincreaseof1percentagepointover2021-2025and2026-2030REDIIrevisionproposal–July2021•Minimalbindingtargetforallmemberstatesfortheshareofrenewablesinheatingandcooling:averageannualincreaseof1.1percentagepointsover2021-2025and2026-2030(1.5percentagepointsforstateswherewasteheatandcoldareused)oTargetreducedbyhalfforcountrieswiththeshareofrenewablesinheatingandcoolingbetween50%and60%oTargetdoesnotapplytocountrieswitharenewableshareabove60%oIndicativecountry-specifictop-uptargetsRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE126IEA.CCBY4.0.Over2010-2020,theEUshareofrenewablesinheatingandcoolingincreasedbyjust0.6percentagepointsannuallyonaverage,withtheindustrysectoronitsownperformingsimilarly.Only13membercountriesrecordedaverageannualincreasesofmorethan0.8percentagepoints,andonly8exceededtheindicativetop-upsproposedinJuly2021fortheperiodto2030.WhilethisprogresswassufficienttomeettheEU-wideoveralltargetof20%renewablesintotalfinalenergyconsumptionby2020,itfellshortofREPowerEUtargets.Thus,achievingREPowerEUambitionsfor2030willrequireconsiderablyfasterrenewableheatuptakeinmostmembercountries.•Indicativetargetfortheshareofrenewablesindistrictheatingandcooling:averageannualincreaseof2.1percentagepointover2021-2025and2026-2030•Indicativetargetfortheshareofrenewablesinindustry:annualaverageincreaseof1.1percentagepointsover2021-2025and2026-2030•Requirementforeachmemberstatetoachieveashareofatleast49%renewablesinbuildingssectorfinalenergyconsumptionby2030CommissionStaffWorkingDocumentImplementingtheREPowerEUActionPlan–May2022REPowerEUscenarioassessedthroughmodelling(modelPRIMES):•2.3-percentage-pointaverageannualincreaseintheshareofrenewablesinheatingandcoolingover2020-2030attheEUlevel•2.3-percentage-pointaverageannualincreaseintheshareofrenewablesindistrictheatingandcoolingover2020-2030attheEUlevel•1.9-percentage-pointaverageannualincreaseintheshareofrenewablesinindustryover2020-2030attheEUlevel•Shareofrenewablesinbuildings:60%in2030attheEUlevelEuropeanCouncilrevisionproposal–June2022NegotiatingpositionsadoptedbytheEuropeanCouncilinJune2022:•Minimalbindingtargetforeachmemberstatefortheshareofrenewablesinheatingandcooling:0.8-percentage-pointannualincreaseuntil2025;1.1-percentage-pointannualincreaseover2026-2030oCountry-specificindicativetop-uptargetsfortheshareofrenewablesinheatingandcooling•Indicativetargetof49%renewablesinbuildingssectorfinalenergyconsumptionby2030•Indicativetargetof1.1-percentage-pointannualincreaseintheshareofrenewablesinindustryEuropeanParliamentrevisionproposal–September2022AmendmentsadoptedbytheEuropeanParliamentinSeptember2022:•Indicativetargetforeachmemberstatefortheshareofrenewablesinheatingandcooling:2.3-percentage-pointaverageannualincreaseuntil2025andover2026-2030(2.8percentagepointsformemberstatesthatusewasteheatandcold)•Indicativetargetof49%renewablesinbuildingssectorfinalenergyconsumptionby2030•Indicativetargetof1.9-percentage-pointannualincreaseintheshareofrenewablesinindustryovertheperiods2024-2027and2027-2030•Indicativetargetof2.3-percentage-pointaverageannualincreaseintheshareofrenewablesindistrictheatingandcoolingovertheperiods2021-2025and2026-2030Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE127IEA.CCBY4.0.Shareofrenewablesinheatingandcooling,historicalaverageannualprogressandproposedtargetsforEUmemberstatesIEA.CCBY4.0.Source:Eurostat(2020),SHARESdatabase.Lookingforward,theEUshareofrenewablesinheatingandcooling–excludingambientheat–isexpectedtoriseanaverageof0.8percentagepointsannuallyover2022-2025andby1.0percentagepointover2026-2027.Includingambientheatharnessedbyheatpumps,theoutlookattheregionalaggregatelevelmayalignwiththeEuropeanCouncil’snegotiationpositionsaswellaswiththeminimalheatingandcoolingtargetsoftheproposed2021REDIIrevision.However,itwouldstillbefarbehindthemuchhigherdevelopmentpacerequiredintheEuropeanCommission’smodellingassessmentoftheREPowerEUscenario(i.e.a2.3-percentage-pointannualincrease).AccordingtotheEuropeanCommission,thedeploymentofrenewableheattechnologies,especiallyheatpumps,wouldneedtoacceleratetremendouslyoverthenextsevenyears.Regardingheatpumps,recentEuropeanmarketevolutionisencouraging:in2021,EUsalestotalledarecord-high2.2millionunits–a34%increaseyear-on-year.InGermany,heatpumpinstallationsinthefirsthalfof2022wereupbyone-quartercomparedwiththesameperiodin2021,andtherewereasmanyapplicationsforfederalfundingtoinstallheatpumpsinAugust2022asduringthewholeof2021.InPoland,theshareofheatpumpsinapplicationsforheatsystemsubsidiesundertheCleanAirProgrammein2022rosefrom28%inJanuaryto60%inJune.Thistrendisexpectedtoendureinthemediumterm,sustainedbyhighenergypricesandsupportedbytheambitiousREPowerEUtargetof10millionhydronicheatpumpinstallationsoverthenextfiveyears.However,suchaccelerationisalreadychallengingthecapabilitiesofsupplychains,whichwillneedtoexpandrapidlytoavoidbottlenecks.Theavailabilityofskilledinstallersisanotheruncertainty.-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%0%10%20%30%40%50%60%70%Shareofrenewablesinheatingandcooling2020shareofrenewablesinheatingandcooling2010-2020averageannualpercentage-pointimprovement(rightaxis)Proposed1.1-percentage-pointannualimprovementto2030(rightaxis)Proposed2.3-percentage-pointannualimprovementinmodelledREPowerEUscenario(rightaxis)Indicativenationaltop-uptargets-July2021proposal(rightaxis)Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE128IEA.CCBY4.0.ProjecteddevelopmentsintheindustrysectoranddistrictheatingarealsoexpectedtofallbelowREPowerEUambitions,withtheshareofrenewables(excludingambientheat)infinalindustrialheatconsumptionanticipatedtorisebylessthan0.9percentagepointsannuallyover2022-2027,andindistrictheatingbyonly0.3percentagepoints.AchievingREPowerEUobjectiveswillrequirestrongpolicyactionalongtwokeyaxes:(i)accelerateddeploymentofrenewableheattechnologiesinbuildings,industryanddistrictheatingandcooling;and(ii)energyconservationanddemandreductionsthroughenergyandmaterialefficiencyandfromlarge-scalebehaviouralchanges.Policystrategiesmayarticulateacombinationofinformationalmeasures,regulatoryinstrumentsandincentives.Theycould,forinstance,focusonovercomingtherelativelyhighupfrontcostsofrenewabletechnologiesthroughspecificloanschemes,investmentgrantsorsupportforthedevelopmentofinnovativebusinessmodels(e.g.heat-as-a-service).Policiescouldalsofocusonmakingthebusinesscaseforrenewabletechnologiesmoreattractivebyofferingspecificenergytariffs.Amongthemanyotherpolicyoptionstoacceleraterenewableheatuptakearebansonfossilfuel-basedappliancesinnewbuildings;tailoredinformationalsupportforhouseholdsandcompanies(e.g.throughauditcampaigns);andsupportforbuildingandheatdistributionsystemretrofitstoenhancecompatibilitywithrenewableheatoptions.Inaddition,industrialpoliciesthatincludejob-trainingprogrammes(e.g.forrenewabletechnologyinstallers),aswellasstronginternationalco-operationamongEUmemberstatesandwithotherregions,willbenecessarytoenablerapidupscalingofinternationalrenewableheattechnologysupplychains,suchasforheatpumps.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE129IEA.CCBY4.0.Question2:IsrenewableenergycapacityintheEuropeanUnionmakingwindfallprofitsfromhighwholesaleprices?Russia’sinvasionofUkrainetriggeredaglobalenergycrisis,leadingtosharpincreasesinoil,naturalgasandcoalprices.Asaresult,electricitypricesinEuropehaverisendrasticallybecausenaturalgas-fuelledplantsremaintheprice-setterinthewholesalemarket.Furthermore,highfossilfuelpriceshaveresultedinwindfallprofitsforsomeenergycompanies.Infact,theprofitsofmajoroil,gas,coalandrefinerycompaniesinthefirsthalfof2022morethandoubledfromthesameperiodlastyear,anddiscussiononwindfallprofitsintheEuropeanUnionhasextendedtoelectricitygenerators(includingrenewables-basedones)thatcanproduceelectricityatlowermarginalcoststhannaturalgas-fuelledpowerplants.InOctober2022,theEuropeanCouncilpassedaregulationonanemergencyinterventiontoaddresshighenergyprices.Theregulationproposeswindfall-profitleviesonfossilfuelproducersthroughatemporarysolidaritycontribution,andonelectricitygenerators(orinframarginalelectricityproducers)thathavelowermarginalcoststhantheprice-settinggasunits.TheCouncilalsointroducedplanstocapthewholesaleelectricitypriceatEUR180/MWhorlower,andexpectsthatmembercountrieswouldraiseEUR117billionannually.Thismarketinterventionaimstoreduceelectricitypricestoprotectandsupportvulnerableenergyconsumers.Astheproposal’sinterpretationandimplementationbyeachmemberstateremainsanuncertainty,itsimplicationsatthecountryandEUlevelaredifficulttoestimate.Inaddition,severalEuropeancountrieshavealreadyintroducednational-levelwindfalltaxesforelectricitygenerationandtradingcompanies.Thedirectanswertowhetherrenewablepowerplantownersaremakingwindfallprofitsishighlycomplex.Whilerenewableenergypoliciescanprovideinsightsonwhetherdevelopersareallowedtoreceivehigherrevenuesfromthemarket,theycanonlypartiallyanswerthequestiononwindfallprofitsbecausedataarelimitedconcerningnon-policyfactors,includinglong-termbilateralpowerpurchasecontracts,developers’hedgingstrategiesandexposureinthewholesaleelectricitymarket.Tounderstandthesenon-policyfactors,weexaminedthebalancesheetsoftheEuropeanutilitieswithlargeoperationalrenewableandfossilfuelcapacities.PolicyschemesIntheEuropeanUnion,policyschemesmakemorethanhalfofutility-andcommercial-scalerenewablepowercapacity(includinglarge-scalehydropower)eligibletoreceivewholesaleenergyprices.Excludinghydropower,wholesalemarketexposureisunder40%forwind,solarPVandbioenergytechnologies.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE130IEA.CCBY4.0.Hydropowerplants,whichaccountforone-quarterofEUinstalledcapacity(builtmostlyduringthe1960sand‘70s),areusuallynotcoveredunderanypolicyschemeunlesstheyaresmall-scaleprojects.Thus,asignificantmajorityoftheselargelyamortisedhydropowerplantscouldreceivehighwholesaleelectricitypricesintheabsenceoflong-termfixed-pricebilateralcontracts.Forinstance,arecentfinancialreportoftheNorwegianutilityStatkraft,whichhasoneofthelargestoperatinghydropowerplantsinEurope,indicatesthatonlyone-thirdofitsgenerationishedgedinthemediumandlongterm.Overthelastdecade,EuropeanrenewablepowerincentiveschemeshaveevolvedfromFITstocompetitiveauctionschemeswithFIPs,exposingrenewabletechnologies(especiallyutility-scalewindandsolarPVplants)tomarketprices.Theclassicalfeed-in-tariffpolicycommonlyimplementedinmostEUmembercountriesuntil2015-2017forutility-scaleandcommercialprojectsisbasedon20-yearfixed-pricecontracts,andthusdoesnotexposerenewablepowerplantstomarketprices.Weestimatethatthesignificantmajorityofonshorewind,solarPVandbioenergyprojects(totallingaround200GWcommissionedbetween2003and2013/14)areunderclassicalfeed-in-tariffschemes,withtheremaindercontractedmostlyunderformergreen-certificatearrangementsexposedtowholesalepricerevenues.EuropeanUnionsharesofinstalledrenewablecapacitybyexposuretowholesalemarketprice,basedonmembercountrypolicyschemesIEA.CCBY4.0.Note:ThesignificantmajorityofEuropeanhydropowerplantsarenotunderapolicyscheme.Since2012/13,EUcountries(ledbyGermany)havebeenintroducingslidingFIPswithafloorpricedefinedthroughcompetitiveauctions.Thepurposeoftheseschemesistofacilitatemarketintegrationofrenewablesbyenablingdeveloperstosellelectricityinthespotmarketwhilereceivingsubsidiestotopuptheir0%20%40%60%80%100%AllrenewablesNon-hydrorenewablesHydropowerOnshorewindOffshorewindUtility-scalesolarPVCommercialsolarPVBioenergyPolicyschemesNOTenablingwholesaleelectricitypriceexposurePolicyschemesenablingwholesalemarketexposureRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE131IEA.CCBY4.0.revenues.However,contractpricesawardedinfeed-in-premiumschemeswerelowerthanaveragewholesalepricesoverthepastdecade,enablingprojectstoreceivesubsidies.Today,theseprojects(onshorewind,offshorewindandutility-scalesolarPV),locatedmostlyinGermany,theNetherlandsandDenmark,couldbenefitfromhighspot-marketprices.InSpain,theRECOREregime,whichcapsthereturnsofmostwindandPVplantscommissionedbefore2019,alsoenablesdeveloperstoreceivemarketrevenuesifprojectshavealreadyachievedregulatedprofits.Recently,moreEUcountrieshaveintroducedCfDauctions.CfDsrequiredeveloperstopaybackadditionalrevenuesifwholesalepricesexceedthestrikeprice.Theyproviderevenuecertaintyandenabledeveloperstoshareriskswithoff-takers,minimisingtheimpactofwholesaleelectricitypricesonprojecteconomics.IntheEuropeanUnion,themajorityofonshoreandoffshorewindcapacityoperationaltodaycouldreceivemarketpricesthroughFIPs,whileutility-scalesolarPVprojectsaremostlyexposedtoeitherclassicFITsorCfDs.ForcommercialsolarPVprojects,FITsorfixedtariffsforremunerationofexcessgenerationremainthecommonincentiveschemes.Thus,almost70%oftheseprojectscannotreceivewholesaleelectricityprices.FinancialsituationofselectedlargeEuropeanutilitiesThefinancialstatementsoflargeEuropeanutilitiesindicatehigherrevenuesresultingfromsteepfossilfuelandelectricitypricesinthefirsthalfof2022comparedwiththesameperiodin2021.However,unlikeforoilandgasmajors,higherrevenuesforEuropeanutilitieshavenotalwaystranslatedintoprofitsinrecentmonthsbecauseutilitycompanieshavediversebusinessprofiles,allowingthemtocompensatelossesinonebusinesssegmentwithprofitsfromanother.Plus,technologicalandgeographicalportfoliosaswellasbusinessstrategieshavebeenimportantdeterminantsforhowcompaniesarenavigatingtheglobalenergycrisis.OuranalysiscannotbegeneralisedtocovertheentireEUmarket,asitassessesjusttenlargeutilities,oraroundone-quarteroftotalinstalledEUelectricitygenerationcapacity.Themajorityofinstalledrenewablecapacityisownedandoperatedbyprivatecompaniesthatarenotobligatedtodisclosetheirfinancialstanding.AllthemajorutilitiesreportedsignificantlyhigherrevenuesbutalsohighercostsinH12022thaninH12021,withhikesrangingfrom30%to170%.HigheraverageelectricityandgaspricessinceNovember2021haveclearlyboostedrevenues.However,eventhoughalllargeutilitiesreportedhigherrevenuesinH12022,theirfinancialperformanceandprofitabilitywithinEuropewerequitedifferentduetoamyriadofvariables,includinggenerationmixdiversity;thesplittingofearningsbeforeinterest,taxes,depreciationandamortisation(EBITDA)intodifferentoperationsinvolvingregulatednetworks,contractedrenewablesandtradingactivities;andexposuretoretailbusiness.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE132IEA.CCBY4.0.RevenueandEBITDAcomparisonofmajorEuropeanutilitiesforthefirsthalvesof2022and2021(left)andtheirsharesininstalledgenerationcapacitymix(right)IEA.CCBY4.0.Mainlywindandsolarresources.Duetoitslargervolumes,hydroisshownseparately.Note:Mostoftheseutilitiesaregeographicallydiversified.Forexample,utilitiessuchasIberdrola,EDPandEnelhaveastrongpresenceinNorthAmericaandLatinAmerica,wherethemarketshavedifferentregulationsanddynamics.SomeEuropeanutilitiesalsooperateintheUnitedKingdomandothershaveaglobalpresence.Mostoftheseutilitiesarealsointegrated,givingthemcashflowsfromactivitiesacrossthevaluechain.Sources:EDF;ENEL;EnBW;Iberdrola;Vattenfall;Endesa;EDP;RWE;Verbund;Orsted;Statkraft.Anincreaseincostlyfossilfuel-basedgenerationiscompensatingforlowerhydropoweroutputinEurope.Indeed,extremedroughtconditionsinItaly,France,SpainandPortugalreducedEUhydropoweroutputbymorethan15%inthefirsthalfof2022.LowerhydropowergenerationreducedtheEuropeanEBIDTAofEnel,IberdrolaandEDP,althoughhigherprofitsfromincreasedfossilfuel-firedgenerationandtradingactivitiesmadeupforthisloss.Inaddition,theseutilitieshadtopurchaseenergyfromthemarketathigherpricestomeettheirretailcustomerobligations,puttingfurtherpressureontheirprofitability.EDF’snuclearpowergenerationdroppedmorethan15%andhydropowerproductionwas23%lowerinthefirsthalfof2022comparedwiththesameperiodin2021,requiringthecompanytopurchaseelectricityfromthespotmarketathighpricesandreducingitsrevenuessignificantly.Insomecases,higherwindandsolarPVgenerationandadditionalinstalledcapacityhavecontributedtoprofitability.Forexample,EnBWregisteredanEBITDAriseof43%relatedtoitsrenewableenergybusiness,andOrsted,autilitywithmajorinvestmentsinrenewablegeneration,increaseditsEBITDA(excludingnewpartnerships)by48%relativetoH12021.Exposuretoretailandcustomerbusinessreducedutilities’profitability.MostmajorEuropeanutilitieshavelargeretailcustomerbusinesses.Whileelectricitygenerationandpurchasecostshaverisendrastically,retailpriceincreasesremainlimitedinmostpartsofEuropeduetoregulated-pricecontracts-120%-100%-80%-60%-40%-20%0%20%40%60%80%100%120%0100002000030000400005000060000EDFEnelEnBWIberdrolaVattenfallEndesaEDPRWEVerbundOrstedStatkraftRevenueinEURmillionH12021H12022%EBITDAchangebetweenH12021toH12022(rightaxis)0%10%20%30%40%50%60%70%80%90%100%EDFEnelEnBWIberdrolaVattenfallEndesaEDPRWEVerbundOrstedStatkraftInstalledcapacitymixFossilfuelRenewablesHydroNuclearRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE133IEA.CCBY4.0.andtoadditionalgovernmentinterventionstoprotectconsumersinthecurrentextraordinarysituation.Forinstance,SpainandPortugalcappedthewholesalegaspriceforpowerplantuseatEUR40/MWh,leadingtorelativelylowerwholesaleelectricitypricesandshieldingIberianelectricityconsumers.Ingeneral,mostutilities’retailbusinessesrecordedalowerEBIDTAinthefirsthalfof2022thanin2021.Forinstance,EDF’sEBITDAdroppedsharplyinFranceduetothegovernment’sregulatorymeasurestolimitsalespriceincreasesforconsumersin2022.Hedgingstrategiesandlong-termcontractsarekeytoolsforutilitiestonavigatethecurrentEuropeanenergycrisis.TheexposureofEuropeanutilitiesonwholesalemarketscanvarysignificantly,impactingtheirprofits.Forinstance,onlyone-thirdofStatkraft’stotalgenerationishedgedthrough2030,resultinginhigherrevenuesfromtheelectricityspotmarket.Atthesametime,however,Orsted’slow10%exposuretothewholesalemarketlimitsthecompany’sabilitytoprofitfromhighmarketprices.ForVerbund,thecompany’shedgingstrategyhasincreaseditsprofits,asitwasabletoobtainanaveragesalepriceofEUR112.5/MWhinH12022,boostingitselectricityrevenueconsiderablyandraisingitsEBITDA,111%fromthepreviousyear.Meanwhile,SpainintroducedaclawbackmechanismforforwardelectricitycontractsofmorethanEUR67/MWh,butIberdrolacontractedunregulatedrenewablegenerationwithitsretailbusinessatEUR66/MWhinJanuary2022,beforeSpainhadintroducedtheclawbackmechanism.Thefixed-pricepolicypartlyshelteredthecompanyfromvolatilewholesalemarketprices.PoliciesandregulationsonwindfallprofitsSeveralEuropeancountrieshaveintroducedregulatorymeasurestotaxenergycompanies’extraordinaryprofitsorrevenues,withtheaimoflimitinginflationincreasesandprotectingsociety’smostvulnerableconsumers.Fortheelectricitysector,governmentsexpecttocollectadditionaltaxationincomeontheprofitsorrevenuesofgenerationunitsthathavelowmarginalcosts,includingrenewableenergyproducersandenergytradingcompaniesthathavebeenselling/tradinggenerationinthewholesalemarket.FiveEuropeancountries(Greece,Hungary,Italy,Spain,andRomania)alreadybeganimplementingnewtaxationandfiscalmeasuresin2022toclawbackwindfallprofitscoveringperiodsofsixmonthstothreeyears,whilediscussiononthistopicisongoinginnineotherEUcountries.Inaddition,GermanyhasannouncedthatitexpectstoraiseaboutEUR10billionbyimposingwindfalltaxesonelectricitygenerators,andBelgiumanticipatesEUR3billion.Whileremunerationpoliciesmayenablerenewableenergygeneratorstotapintothewholesalemarkettoreceivehigherrevenues,hedgingmechanismsandlong-termbilateralcontractsmaketheactualamountgovernmentscouldeventuallycollectlesscertain.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE134IEA.CCBY4.0.SelectedEuropeancountriesthathaveintroducedorannouncedawindfall-profittaxCountryTaxrateStatusPeriodAnnouncedrevenueestimates(EURbillion)Greece90%Implemented2021-20220.6Hungary40%Implemented2022-20232.1Italy25%Implemented2021-20222(collected)10-1150%Announced/Proposed2022-2023SpainVaryingratesImplemented2022-20247Romania80%Implemented2022-2023UnknownGermany90%Announced/ProposedUndecided10Poland80%Announced/Proposed2022-2023UndecidedSlovakia50%Announced/proposedUnknownUnknownCzechRepublic60%Announced/proposed2023-20256Belgium38%Announced/proposed2022-20243.1FranceUndecidedAnnounced/proposedUnknownUndecidedNetherlandsUndecidedAnnounced/proposed2022-20242.8FinlandUndecidedAnnounced/proposed2022-20230.04ImplicationsfortheenergytransitioninEuropeAcceleratingrenewableenergyexpansioniscrucialtoreduceEUrelianceonimportedfossilfuelsfromRussia.LargeutilitiesandindependentpowerproducerscontinuetobethemaininvestorsinrenewablesinEuropeandthushaveapivotalroleinincreasingthepaceofwindandsolarPVexpansion.FollowingtheEuropeanCouncil’sOctober2022regulationofpricecapsforelectricitygenerators,moreEUcountriesareexpectedtointroducenewregulatorymeasures.Thecurrentregulationenablesmembercountriestodefinetheirownpricecapsaswellasclawbackmechanismsforprofitsorrevenues,dependingonnationalcircumstances.However,inconsistenciesamongregulatoryregimescouldcreateuncertaintyforinvestors,especiallyiftheymakethebusinesscaseforrenewableslessappealing.Thus,itisimportantforregulationstotaxprofitsfromenergysalesinthewholesalemarketandnotrevenues.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE135IEA.CCBY4.0.Question3:WillnewPVmanufacturingpoliciesintheUnitedStates,IndiaandtheEuropeanUnioncreateglobalPVsupplydiversification?ThehighlevelofgeographicalconcentrationintheglobalPVsupplychainhasledtheEuropeanUnion,IndiaandtheUnitedStatestointroducepolicyincentivestosupportdomesticPVproduction.ThiscouldresultinanunprecedentedexpansionofPVmanufacturingoutsideofChinainthenextfiveyears.However,diversifyingmanufacturingwillbepossibleonlyifproductioncostsfalltoensurecompetitivenesswiththelowest-costproducers(e.g.inChinaandASEANcountries)inboththeshortandlongterm.PVmanufacturingcost-competitivenessInthepastyear,risingglobalcommoditypriceshaveledtohighermaterialcostsforsolarPVmanufacturing.Today,ChinaandASEANcountries(VietNam,ThailandandMalaysia)havethelowestsolarPVmodulemanufacturingcostsforallsegmentsofthesupplychain.Economiesofscale,supplychainintegration,relativelylowenergycostsandlabourproductivitymakeChinathemostcompetitivesolarmodulemanufacturerworldwide.HigherinvestmentcostsinIndiaaretheprimaryreasonforthecostdifferentialwithChina,whilehigheroverheadandlabourcostsmakesUSPVmanufacturingnotascompetitive.InEurope,risingenergypricesfollowingRussia’sinvasionofUkrainewidenedthecostgapwithChina.Today,EUindustrialenergypricesaremorethantriplethoseofChina,IndiaandtheUnitedStates.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE136IEA.CCBY4.0.TotalmanufacturingcostsformonoPERCc-Sisolarcomponentsbyinput,2022IEA.CCBY4.0.Notes:ASEAN=AssociationofSoutheastAsianNations.Valuesexcludesubsidiesaswellasadditionalcostssuchastransportation,companyprofits,taxesandtariffs.Thus,totalcostinputsmaynotmatchfinalmarketsaleprices.Polysiliconpricesincludetheprocessingofmetallurgical-gradesilicon.Industrialelectricitypricesusedinthisanalysis:China,USD88.20/MWh;ASEAN,USD101.27/MWh;India,USD123.79/MWh;UnitedStates,USD79.07/MWh;Korea,USD105.14/MWh;Europe,USD325/MWh.CommoditypricesfromOctober2021-September2022usedinthisanalysis:glass,USD590/Mt;aluminium,USD2779/Mt;polymers,USD6000/Mt;silicasand(quartz),USD100/Mt;copper,USD9160/Mt;silver,USD706/kg;zinc,USD3618/Mt;lead,USD2203/Mt;tin,USD35190/Mt;other,USD18700/Mt.ManufacturingpoliciesinIndiaandtheUnitedStatesRecentpolicyactionsinIndiaandtheUnitedStatesaimtoincreasethecompetitivenessofdomesticmanufacturingthroughsubsidiesandtaxrebates,whiletheEuropeanUnionisconsideringsimilarsteps.India’sPLIschemeandtheUSIRAoffermanufacturerssupportindifferentways.WhilethePLIfurnishesasubsidytoreduceplantinvestmentcoststhroughpaymentslinkedwithachievedproduction,theIRAprovidesaPTCsforthemanufacturingofcertainequipment,includingsolarPVmodules,cells,wafersandpolysiliconthrough2032.29Accordingtoestimates,PLIsupportclosesnearly80%oftheinvestmentcostgapbetweenIndiaandthelowest-costmanufacturersinChina.However,theone-timesubsidymeansthatmanufacturingefficiencieswillneedtobeachievedthrougheconomiesofscaletomaintainlong-termcompetitiveness.Meanwhile,fullymonetisingmanufacturingtaxcreditsintheUnitedStatescouldbringallthecountry’ssegmentsofsolarPVmanufacturingtocostparitywiththelowest-costmanufacturers.29TheIRAprovidestaxcreditsforarangeofproducts,includingbutnotlimitedtosolarPVequipmentandinvertersandwindturbines.0.000.050.100.150.200.250.300.350.40ChinaASEANIndiaUnitedStatesKoreaEuropeUSD/WMaterialsEnergyManufacturinglabourInvestmentOtheroverheadcostsTotalmodulecostwithUSD37/kgpolysiliconpriceRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE137IEA.CCBY4.0.IndiaPLIsubsidiesandinvestmentcostdifferencewithlowestcostmanufacturing(left)andUSc-SimanufacturingcostswithandwithoutIRAManufacturingProductionTaxCredit,comparedwithChinaandASEAN(right)IEA.CCBY4.0.Notes:PLI=Production-LinkedIncentive(India).IRA=InflationReductionAct(UnitedStates).ASEAN=AssociationofSoutheastAsianNations.PLIcostsrepresenttheinvestmentrequiredtoproduce18.85GWofpolysilicon,27.85GWofwafers/ingots,and36.85GWofcellsandmodules.FavourablesolarPVmanufacturingpoliciesinIndiaandtheUnitedStateshavespurredmultiplenewprojectannouncements.InthefirstphaseofIndia’sPLIprogramme,almost9GWofintegratedmanufacturingcapacitywerecontracted,andinthesecondphasethegovernmentisexpectingtosubsidiseanother65GW.IntheUnitedStates,expansionalreadyplannedincludesthemanufacturingofroughly9GWofintegratedcrystallinesilicon(c-Si)modulesand6GWofthin-filmpanels.PlannedsolarPVcomponentmanufacturingexpansionintheUnitedStatesandIndiain2022CountryCompanyComponentNewcapacityUnitedStatesFirstSolarThin-filmmodules3.5GWUnitedStatesQCellsIntegratedc-Simodules9.0GWUnitedStatesSPIEnergyWafers/ingots1.5GWUnitedStatesRECSiliconPolysilicon20000MTUnitedStatesFuyaoGroupGlass-UnitedStatesToledoSolarThin-filmmodules2.7GW0.01.02.03.04.05.06.07.08.09.010.0LowestcostmanufacturingPLIsubsidiesIndiaUSDbillionCaptialexpenditure0.000.050.100.150.200.250.300.350.40PolysiliconWafersandingotsCellsModuleassemblyUSD/wattChinaASEANUSUSwithIRARenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE138IEA.CCBY4.0.CountryCompanyComponentNewcapacityUnitedStatesMeyerBurgerModules1.5GWUnitedStatesPVHardwareTrackers6.0GWUnitedStatesEnduransSolarBacksheets-UnitedStatesQCellsModules1.4GWUnitedStatesGameChangeSolarTrackers6.0GWUnitedStatesMissionSolarModules700MWUnitedStates3Sun(Enel)Modules/cells3.0GWIndiaRelianceNewEnergyIntegratedPV4.0GWIndiaAdaniInfrastructureIntegratedPV737MWIndiaShirdiSaiIntegratedPV4.0GWInadditiontomanufacturingsubsidies,tariffsonimportedPVequipmentandlocal-contentpremiumsencourageprojectdeveloperstopurchasedomesticallymanufacturedproducts.InIndia,importdutieswereincreasedfrom15%to40%forPVmodulesandto25%forcells,makinglocalmanufacturerssignificantlymorecost-competitive.Inaddition,allPVmodulesusedinprojectssubsidisedundernationalsupportprogrammesmustbemanufacturedbycompaniesnamedinthegovernment-maintainedlist,whichcurrentlyhasonlyIndianmanufacturers.IntheUnitedStates,theIRAoffersanadditionalinvestmentorPTCsbonusfortheuseofdomesticallyproducedcontent.Thesetypesofpoliciessignificantlyboostlocalmanufacturers’confidenceaboutdemandfortheirproducts,resultinginmoreambitiousexpansionplans.SolarPVmanufacturingcapacityandproductionforecastto2027PoliciesandplannedPVmanufacturingcapacityinIndia,theUnitedStatesandtheASEANregionwillincreaseproductioncapabilitiesoutsideofChina,especiallyforpolysilicon,waferandingotmanufacturing.Infact,wafermanufacturingcapacityinthesecountriesisforecasttoincreasealmostfivefoldinthenextfiveyears,andpolysiliconandsolarcellmanufacturingcoulddoubleby2027.However,achievingthislevelofgrowthwillrequirealmostUSD30billionofnewinvestment,closetothreetimesmorethanthesecountriescommittedinthepreviousfiveyears.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE139IEA.CCBY4.0.SolarPVmanufacturingcapacityoutsideChinaandtotalinvestmentby5-yearperiods,2017-2027IEA.CCBY4.0.Notes:APAC=AsiaPacificregionexcludingIndiaandChina.RoW=restofworld.Manufacturingcapacityin2027isthevalueexpectedbasedonannouncedpoliciesandprojects.Asaresult,China’sshareofmanufacturingcapacitycoulddecreaseslightly,from80-95%to75-90%dependingonthesegment.Furthermore,ifcountriesmaintaintradepoliciesthatlimitimportsandfavourdomesticallyproducedPVproducts,greatergeographicaldistributionintheglobalsolarPVsupplychaincouldresultinChina’sshareinproductionshrinkingfrom75-90%to60-75%by2027.However,ChinaplanstoexpandmanufacturingthroughouttheentiresupplychainmuchmorequicklythanIndia,theUnitedStatesandothercountriesdo.Thisisexpectedtocauseamajorglutby2027,withsupplysignificantlyexceedingexpectedglobalPVdemandinmostoptimisticforecasts.Theresultwouldbeplantutilisationfactorsofaslowas25-30%inChinaforallmanufacturingsegments,abouthalfoftoday’slevel.ThissupplyglutcouldalsocreatefiercepricecompetitionandcauseinvestorstocancelmanyannouncedmanufacturingexpansionprojectsbothwithinandoutsideofChina.0246810050100150200250201720222027low2027high201720222027low2027high201720222027low2027high201720222027low2027highPolysiliconWafersCellsModulesInvestment(USDbillion)Manufacturingcapacity(GW)APACIndiaEuropeNorthAmericaRoWInvestmentinprevious5yearsRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE140IEA.CCBY4.0.SolarPVmanufacturingcapacityandproductionbycountryandregion,2021-2027IEA.CCBY4.0.Notes:APAC=AsiaPacificregionexcludingIndiaandChina.RoW=Restofworld.Manufacturingcapacityandproductionin2027arethevaluesexpectedbasedonannouncedpoliciesandprojects.0%20%40%60%80%100%Capacityin2021ChinaEuropeNorthAmericaAPACIndiaRoWExpectedcapacityin2027Expectedproductionin2027Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE141IEA.CCBY4.0.Question4:Isthebiofuelindustryapproachingafeedstockcrunch?Biodiesel,renewabledieselandbiojetfuelproducersareheadedforafeedstocksupplycrunchduring2022-2027ifcurrenttrendsdonotchange.Inourmaincase,demandforvegetableoil,wasteandresidueoilsandfatsincreases56%to79milliontonnesovertheforecastperiod.FuelsmadefromwastesandresiduesareinparticularlyhighdemandbecausetheysatisfyGHGandfeedstockpolicyobjectivesintheUnitedStatesandEurope.Infact,wastesandresiduesareexpectedtobeusedfor13%ofbiofuelproductionin2027,upfrom9%in2021.However,demandisapproachingthesupplylimitsofthemost-usedwastesandresidues.Nevertheless,marketsaredynamic.Highpricesareasignaltoseekoutnewsupplies,whichispromptingthedevelopmentofgovernmentprogrammesandindustryinnovationtohelpavoidthecrunch.Comparedwithwastesandresidues,thesugarsandstarchesusedtoproduceethanolareunderlesspressure.Althoughbiofueldemandforthesefeedstocksisgrowing,sugarcaneandmaizeproductionexpandsaswell,keepthesharededicatedtobiofuelproductionnearlyflatovertheforecast.30Totalbiofuelproductionbyfeedstock(left)andgrowthbyregion(right),maincase,2021-2027IEA.CCBY4.0.Notes:“Othercrop”includescornoil,wheat,rice,cassava,camelinaandplantationwood.“Otherwastesandresidues”includesmunicipalsolidwastes,woodwastes,talloilandpalmoilmilleffluent(POME).30AgriculturalgrowthexpectationsbasedontheOECD-FAOAgriculturalOutlook2022-2031.0501001502002502021202220232024202520262027Volume(billionlitresperyear)SugarsMaizeSoybeanoilRapeseedoilPalmoilUsedcookingoilAnimalfatsOthercropOtherwastesandresiduesWasteandresidueshareoftotaldemand20212027-4%0%4%8%12%16%20%24%-4-2024681012Volume(billionlitresperyear)Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE142IEA.CCBY4.0.FourregionsaredrivingdemandTheUnitedStates,Europe,BrazilandIndonesiaareresponsibleforthemajorityofbiodiesel,renewabledieselandbiojetfuelconsumptiongrowth.Combined,demandforthesefuelsincreasesby44%or21billionlitresinourmaincaseover2022-2027.IntheUnitedStates,therenewablefuelstandard,state-levellow-carbonfuelstandardsandtheIRA’staxcreditsboostdemandforrenewabledieselandbiojetfuel.Mostrequirementsaremetwithdomesticproductionfromamixtureoffeedstocks(e.g.soybeanoil,rapeseedoil,cornoil,usedcookingoilandanimalfats).InEuropealso,consumptionofrenewabledieselandbiojetfuelincreasethemost.Totaldemandgrowthisrelativelysmall,buttheEuropeanUnionisphasingouttheuseofpalmoilandhasplacedlimitsonotherfeedstocks,whichisboostingproductionfromwastes,residuesandrapeseedoil.Meanwhile,BrazilandIndonesiabothhavebiodieselblendingmandatesthatwillbecomemorestringentovertheforecastperiod.Indonesianbiofuelmanufacturersprimarilyusepalmoiltoproducebiodiesel,andBrazilianonesrelyonsoybeanoil.Theloomingsupplycrunch…Consumptionofvegetableoilforbiofuelproductionisexpectedtoincrease46%to54milliontonnesover2022-2027,raisingtheshareofvegetableoilproductiondirectedtomeetinggrowingbiofueldemandfrom17%to23%.IntheUnitedStates,thisincreaseindemandisalreadyreducingsoybeanoilexportestimatesandsupportinghigherprices.Usedcookingoilandanimalfatsareunlikelytoproviderelief,astheyareinevenhigherdemandbecausetheyofferlowerGHGemissionsintensityandmeetEUfeedstockrequirements.Infact,theuseofusedcookingoilandanimalfatsnearlyexhausts100%ofestimatedsuppliesovertheforecastperiod.Evenwhenabroaderrangeofwastes(suchaspalmoilmilleffluent,talloilandotheragribusinesswasteoils)isconsidered,demandstillswellstonearly65%ofglobalsupply.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE143IEA.CCBY4.0.Biofueldemandsharesofglobalcropproduction(left)andwastesandresidues(right),maincase,2010-2027IEA.CCBY4.0.Notes:UCO=usedcookingoil.Biofueldemandbyfeedstockiscalculatedbasedonforecastdemand,yieldcoefficients,projectfeedstockstatements,historicalfeedstocksharesandfeedstockpolicy.Ethanolproductionusingmaizeproducesco-productssuchasfeed,cornoil,CO2andelectricity.Maize,vegetableoilandsugarcaneproductionisbasedontheOECD-FAOAgriculturalOutlook2022-2031.CollectionpotentialisbasedontheCleanSkiesforTomorrowCoalition:usedcookingoil,avg.12milliontonnes;animalfats,13milliontonnes;andotherwasteoil,13milliontonnes.Ifthissituationremainsunchangedthroughouttheforecastperiod,thepotentialforbiofuelstocontributetoglobaldecarbonisationeffortscouldbeundermined.Bio-baseddieselandbiokeroseneareessentialcomponentsofnetzeropathwaysbecausetheycanbeusedinmarine,aviationandheavytruckingapplications,forwhichfewotherdecarbonisationoptionsexist.However,attaininganetzerotrajectorywouldrequireamorethanthreetimesproductionincreaseinourmaincase.…andhowitmaybeavoidedOurforecasttakesarelativelystaticviewofagriculturalandwasteoilmarkets.Thisdoesn’tSteeppriceswillpromptcompaniesandgovernmentstoimprovefeedstocksupplychains,seekoutnewsuppliesanddevelopnewtechniques.PoliciesandprogrammesintheUnitedStates,CanadaandEuropewillbehelpful.IntheUnitedStates,theSustainableAviationGrandChallengeRoadmapaimstoimproveunderstandingofthefeedstockchallenge,boostsupplypotentialandsupportnewtechnologydevelopment.Meanwhile,theEuropeanUnionasawhole,andindividualmemberstatessuchasGermany,havededicatedtargetsforfuelsmadefromless-developedwastesandresidues.InCanada,aUSD1.1-billionCleanFuelsFundsupportssupplychaindevelopment.PoliciesfocusedonGHGemissionsreductionscanalsobeuseful,sincetheygivebiofuel0%5%10%15%20%25%30%BiofueldemandshareofglobalproductionMaizeVegetableoilsSugarcaneUCOandanimalfatsUCO,animalfatsandotherwasteoils0%20%40%60%80%100%BiofueldemandshareofglobalsupplyRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE144IEA.CCBY4.0.producersanincentivetoreducetheGHGintensityoftheirfuels,notjustproducemore.ThiscanmeanlowerfeedstockrequirementswiththesameorbetterGHGemissionsbenefit.Biofuelproducersandusersarealsointerestedinexpandingfeedstocksuppliesforcommercialbiofueltechnologies,asadditionalstockscouldsupportuptoanother8.5EJofbiofuelproduction(300billionlitres),comparedwith4EJ(160billionlitres)in2021(seetablebelowforsources).Theindustrysectorisalsoinvestinginnewtechnologiesthatusemorewidelyavailablefeedstocks,offeringupto50EJofsustainablepotential.Infact,expandingcommercialandnewtechnologiescouldsustainablyincreasebio-baseddieselandbiokeroseneproductionmorethanfourtimesby2030.Exploitingthepotentialofconventionalcrop-basedfeedstocksthatmeetsustainabilityrequirementscouldsupportanear-70%increaseinbiofuelproductionby2030fromthe2021level.Althoughtherearelimitstothepaceandscaleofgrowthforcertainfeedstockssuchasvegetableoils,cropsalreadysupporta20%increaseinliquidbiofuelproductionby2027inthemain-caseforecast.However,governmentsandcompanieswillneedtobediligenttodetectfraudulentwastesuppliesandmaintaintheintegrityofsustainabilityframeworks,ashighcostsarealsoanincentivetocircumventpolicies.Biofuelproducersarealsoseekingfeedstocksproducedondegradedlandorfromcropsplantedduringwhatwerepreviouslyfallowperiodstoincreaseacreagewithoutappropriatinglandthatwouldotherwisebeusedforfoodandfeedproduction.InBrazil,forinstance,75%ofcornethanolproductioncomesfromsecond-cropproductioninexistingfields.InEurope,somebiofuelproducersaresourcingoilseedsgrownondegradedterraintomeetREDIIsustainabilitycriteria,andbio-baseddieselfeedstockproducersgloballyareestablishingnewsupplychainsforbio-oilssuchastalloilandfishoil,andexpandingthoseforanimalfatsandusedcookingoil.Redirectingsomeethanolproductiontomakebiojetfuelusingalcohol-to-jetorethanol-to-jetproductionpathwayscouldalsohelprelievepressureonvegetableoildemand.Asgasolineconsumptiondeclinesinadvancedeconomies,someethanolcanberedirectedtowardsbiojetfuelproduction.Biogas,whichismademostlyfromwastesandresidues,canalsobeusedtoproducebiojetfuel.However,onthepathtonetzeroemissions,theseeffortswillneedtobesupplementedwithbiofuelproductionfromfarmoreabundantresources.TheIEAestimatesthatnearly100EJofsustainablebiomasssuppliesareavailable,includingfromwoodyresidues,organicwastes,forestplantationsandshort-rotationwoodycropsplantedonmarginalland.Theseresourcescouldsupportupto50EJofliquidbiofuelproduction,eventhoughbiogasandbioenergyproducerswillcompetefortheuseoftheseresources.Onanetzerotrajectory,biofuelRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE145IEA.CCBY4.0.demandreaches14EJin2040.Whilegasificationandpyrolysistechnologiescanmakeuseofthesemoreavailablefeedstocks,estimatedproductioncostsremainatleast50%higherthanforconventionaltechnologies.Inouracceleratedcase,weassumethatgovernmentsandbiofuelproducersovercometheirfeedstockchallenges,removingonebarriertofastergrowthandacceleratingdecarbonisation.Thus,biodiesel,renewabledieselandbiojetfuelproductionare30%higherinthisscenariothaninthemaincasein2027.Liquidbiofuelproductionpathways,costsandfeedstockpotentialTechnologyProductioncostrange(USD/MJ)FeedstocktypesFeedstockdemand2021/totalpotentialConventionalethanol,biodiesel,renewabledieselandbiojetfuel14–34Conventionalbiofuelcropssuchasmaize,sugarcane,palmoil,soybeanoilandresidualorwasteoilscompatiblewithFAMEandHEFAproduction.(Productionondegradedland,covercropsandintercroppingarepossible.)4EJ/12.5EJCellulosicethanol34–51Agriculturalresidues,woodresidues,dedicatedenergycropsandotherwoodywastes.~0EJ/50EJBio-basedFischer-Tropschsynthesis25–47Woodybiomass,agriculturalresidues,wastessuchasmunicipalsolidwaste.Bio-oilco-processing26–46Woodybiomass,agriculturalresidues,wastessuchasmunicipalsolidwaste.Thisisthemarketpricerangeforcrop-basedfeedstocks.Itdoesnotincludeproductionondegradedland,covercropsandintercropping.Notes:ProductioncostsandpricesarefromIEABioenergyTCP(2019)AdvancedBiofuels–PotentialforCostReduction.2021feedstockdemandisbasedonIEAanalysis.Totalpotentialforconventionalfeedstocksincludescurrentcropdemand(IEAanalysis),2030croppotential(IEAanalysis;IEA[2021],NetZeroby2050),globalusedcookingoil,animalfat,otheragrifoodoils,potentialforvegetableoilproductionondegradedlandandvegetableoilproductionviacovercrops(CleanSkiesforTomorrowCoalition).Otherfeedstocksarebasedonorganicwastes,forestandwoodresidues,short-rotationwoodycropsandforestryplantations.Biogasandsolidbioenergywouldcompeteforthesefeedstocks(IEAanalysis;IEA[2021],NetZeroby2050).Otherfeedstocksareconvertedtofinalliquidbiofuelproductionpotentialusingaverageconversionefficiencyof50%.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE146IEA.CCBY4.0.Question5:Howmuchwillrenewablehydrogenproductiondrivedemandfornewrenewableenergycapacityby2027?Hydrogenproductionfromrenewableelectricityisexpectedtoplayanimportantroleinreachinglong-termdecarbonisationgoalsandimprovingenergysecurity.Whilelessthan1%ofglobalhydrogenproductioncomesfromrenewableenergysourcestoday,renewablehydrogenisreceivingincreasingpolicyattention.Atotalof25countries,plustheEuropeanCommission,haveannouncedplansthatincludehydrogenasasourceofcleanenergy,andseveralhavebeguntointroducefinancialsupportschemes.Asaresult,projectpipelinesforusingelectrolyserstoproducehydrogenfromrenewableelectricityhaveswelledinrecentyears,withprojectsatvariousstagesofdevelopment.Thismomentumisexpectedtoincreaserenewablecapacityneeds,butthequestionis:Byhowmuch?Totalrenewablecapacitydedicatedtohydrogenproductioninthemainandacceleratedcaseglobally(left)andformaincasebyregion(right),2021-2027IEA.CCBY4.0.Notes:Acc.case=acceleratedcase.N.Africa=NorthAfrica.For2022-2027,themaincaseforecastsaround50GWofrenewablecapacitytobededicatedtohydrogenproduction,accountingfor2%oftotalrenewablecapacitygrowth.Chinaleadsexpansion,followedbyAustralia,ChileandtheUnitedStates.Together,thesefourmarketsaccountforroughlytwo-thirdsofdedicatedrenewablecapacityforhydrogenproduction.0%2%4%6%8%10%12%14%16%0102030405060708090100MaincaseAcc.caseGWOnshorewindSolarPVOffshorewind%totalrenewablecapacitygrowth(rightaxis)0%5%10%15%20%25%02468101214161820ChinaEuropeAustraliaMiddleEast&N.AfricaChileUnitedStatesOtherGWRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE147IEA.CCBY4.0.Globally,newcapacityissplitevenlybetweenPVandonshorewind,althoughregionalsharesvarydependingonresourceavailability.Forinstance,solarPVmakesupmostofthegrowthintheMENA,whileinLatinAmericatheelectrolyserprojectpipelineisexpectedtobemostlyfilledbyonshorewindprojectsinChile.Giventheirlongleadtimes,offshorewindprojectsaccountforlessthan1%ofnewrenewablecapacitybuiltforelectrolyserplantsbetween2022and2027.Chinaisexpectedtodeployover18GWofdedicatedrenewablecapacityby2027,promptedbythecentralgovernment’sgoalstodecarboniseindustryandtransportaswellasanindustrialpolicyonelectrolysermanufacturing.Whilethecentralgovernmentannouncedrenewablehydrogenproductiontargetsinits14thFive-YearPlan,themaincatalystsforgrowthareprovincialandlocal-levelpolicies.Thus,expansionisexpectedtobeconcentratedinprovinceswithgoodsolarandwindresourcesandspecifictargetsforrenewablehydrogenproduction,suchasInnerMongolia,whichaimstoproduce500000tonnes/yrofrenewablehydrogen–morethantwicethenationaltarget.Otherkeydriversareaccesstoaffordablefinancingthroughstate-ownedenterprisesandtoindustrialclustersfornewprojectdevelopment.Manynewelectrolyserprojectsarelargedemonstrationplantslocatedinindustrialhubsthatcanoffereconomy-of-scalesavings,lowerunitmanufacturingcostsandaccesstolocaloff-takers.Demandforrenewablehydrogen,whichisaforecastuncertainty,willdeterminethepaceofdedicatedrenewablecapacityexpansion.Whilemanyprovincesincludehydrogenintheirindustrialdevelopmentstrategiesandidentifyproductiontargets,notallspecifythatproductionmustbefromrenewablesources.Furthermore,demand-sidepoliciessuchfuel-cellvehicletargetsareemissions-agnosticandthereforedonotguaranteenewdemandcreationspecificallyforrenewablehydrogen,especiallyifitcostsmorethanhydrogenmadefromnon-renewableresources.Transportinfrastructurelimitationsmayalsoslowthepaceofhydrogenindustrydevelopment,asprovincesrichinrenewableresourcesarelocatedfarfromnewdemandcentres.Alsoaddinguncertaintytothesizeoffuturerenewablecapacityprojectsishowmuchelectricityfromthegridwillbeusedandwhetheritcanbecertifiedasrenewabletomeetprovincialtargets.Meanwhile,Europeisexpectedtodeploy7GWofdedicatedrenewablecapacityforhydrogenproductionduring2022-2027,encouragedbydecarbonisationgoalsand,morerecently,theneedtostrengthenenergysecuritybydisplacingRussiangas.Spainisinthelead,accountingforhalfofEurope’sgrowth,followedbyGermany,Sweden,DenmarkandtheNetherlands.Themaindriversareambitiouselectrolysergoals,supportedbyfinancialincentives.WhiletheEuropeanUnionisRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE148IEA.CCBY4.0.consideringsettinganelectrolysertargetof44GWby2030,REPowerEUmodellingscenariossuggestthat65-80GWwouldberequiredtodecreaseRussiangasimports.Inthemeantime,severalmemberstateshavealreadyformulatedtheirownhydrogenstrategieswithelectrolysergoalsfor2030(e.g.GermanyandSpain).Projectsthatarefinancedareatleastpartiallyfundedbypublicsupport,forinstancethroughtheImportantProjectsofCommonEuropeanInterest(IPECI)programme,orbyotherstate-specificfunds.Forexample,SpainisprovidingfinancialsupportfromfundsallocatedtoCovid-19crisisrecoveryinitsNationalRecoveryandResiliencePlan.Europededicatedrenewablecapacityinthemaincasebycountry,2021-2027(left),andproposedEUtargetsforrenewablesofnon-biologicaloriginintransportandreplacingnon-renewablewithrenewablehydrogenuseinindustry(right)IEA.CCBY4.0.Notes:“Other”referstoFrance,theUnitedKingdom,ItalyandPoland.TheEuropeanCommission’sFitfor55andREPowerEUproposalsarecurrentlyunderconsiderationbytheEuropeanCouncilandParliament.TherearetwokeyuncertaintiesintheforecastfordedicatedrenewablecapacityexpansioninEurope.Thefirstisregulatory,concerninghowhydrogenwillbedefinedasrenewableandhowadditionalitywillbeimplemented.31Developersareawaitingclarityonhowelectricityfromthegridwillbemonitoredtoqualifyhydrogenproductionasrenewable.ThiswillultimatelyaffectsizeandlocationdecisionsfordedicatedonsitesolarandPVwindcapacity.31The“additionality”requirement,oneofthesustainabilitycriteriaproposedtoqualifyhydrogenasrenewable,demandsthattherenewableelectricityusedtoproducehydrogencomefromrenewablecapacityinstalledspecificallyforhydrogenproductionandnotbetakenfromexistingprojectsgeneratingelectricitytomeetpowerdemand.Discussionsonifitwillbeimplementedandhowitwillbemeasuredareongoing.Spain51%Germany12%Sweden12%Denmark9%Netherlands8%Other8%2.6%50%2.6%35%5.7%50%0%10%20%30%40%50%60%TransportIndustryCommissionproposalCouncilapprovalParliamentapprovalRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE149IEA.CCBY4.0.Second,policyuncertaintyoverindustryandtransportmandatesmakesitchallengingtoassessrenewablehydrogendemandpotentialandplannewelectrolyserinvestments.TheEuropeanUnionisconsideringthreedifferentproposalsforbindingtargetsforrenewablesinexistinghydrogenuseinindustry(rangingfrom35%to50%)andrenewablesofnon-biologicaloriginintransport(2.6%to5.7%),butafinaldecisionhasyettobetaken.Whetherdeveloperswillbeabletosecureoff-takersandbringprojectstofinancialclosealsoposesarisktotheforecast.ProducingammoniaforexportisthemainimpetusfordedicatedrenewablecapacityexpansionintheAsiaPacific,LatinAmericaandMENAregions.Dedicatedrenewablecapacityisexpectedtoreachacombined19GW,ledbyAustralia,Chile,OmanandSaudiArabia.Largeelectrolyserprojectpipelineshaveemergedinthesecountriesowingtotheavailabilityofspace,thepresenceofshippingportsalongstrategictraderoutes,andaccesstolow-costrenewableelectricitythankstoamplesolarandwindresources.Theshareofrenewablecapacitydedicatedtohydrogeninthesemarketsishigherthaninotherregions,accountingfor14%oftotalrenewabledeploymentinMENA,17%inAustralia,and19%inChile,comparedwith2%globally.Whilemostprojectsarestillatthefeasibilitystage,ourforecastassumesthatgovernmentsupportwillhelpmoveprojectstofinancialclose,asthesecountriesallaimtoobtainmarketsharesoflow-carbonfuelexports.Infact,theAustralianandChileangovernmentshavealreadyfundeddevelopers,andstate-ownedenterprisesareinvolvedinplannedprojectsinOmanandSaudiArabia.Forrenewablehydrogenexporters,securingoff-takerstofinanceplannedprojectsisakeyforecastuncertainty,butpoliciesofimportingcountriestostimulatedemandcanhelpaddressthischallenge.Forinstance,theEuropeanUnionproposestoimport10Mt/yrofrenewablehydrogenby2030.GermanyannouncedfundingofEUR4billionwillbeawardedthroughcompetitivetendersthroughtheH2Globalinitiativetospecificallybridgethecostgapbetweenrenewablehydrogenimportsfromnon-EUcountriesanddomesticbuyers.However,importercountries’decisionsontheemissionsintensitylevelsrequiredforhydrogenimportstoqualifyfortargetsandsupportremainsanuncertaintyforexportingmarkets.Rulesandregulationsdefiningthresholdlevelswillaffectprojectviabilityandinfluencedecisionsontechnologychoiceandoversizing.Unprecedentedfederalpolicysupportforlow-carbonhydrogenintheUnitedStatesisexpectedtoberesponsiblefor4GWofdedicatedrenewablecapacityadditions,or1.5%oftotalrenewablecapacityexpansionexpectedover2022-2027.In2022,theIRAintroducedtaxcreditsbasedontheemissionsintensityofhydrogenproduction.RenewablehydrogencouldbeeligibleforuptoUSD3.0/kgRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE150IEA.CCBY4.0.iflabourandwagecriteriaaremet.Thisincentive,coupledwithstate-specificsupportintheformofgrants,loansandtaxbreaks,isexpectedtodrivegrowth.However,dedicatedrenewablecapacityexpansionwillalsodependonthebusinessmodelchosenfornewelectrolyserprojects.Someprojectsinthepipelinearebeingdevelopedthroughlong-termcontractswithexistingsolarPVprojectsoroperatinghydropowerplants.Themainthreattoforecastgrowthisthepotentialforlongprojectdevelopmentperiods,dependingonequipmentavailabilityandpermittingandregulatoryapprovalwaittimes.Projectdesignandbusinessmodelstronglyinfluenceforecastsforrenewablecapacitydedicatedtohydrogenproduction.Electricitycanbesuppliedfromthegridorgeneratedonsitebydedicatedrenewableplants,oracombinationofboth.Thesupplychoicewilldependmostlyonthebusinessmodelusedbythedeveloper,theregulatoryrequirementsforhydrogentoqualifyasrenewable,andthestabilityofhydrogensupplyneededbytheoff-taker.Whennewrenewablecapacityisbuilt,sizingishighlyproject-specificanddependsoncostoptimisationbasedonmultiplefactors,includinglocation,thenumberoffull-loadhoursexpected,regulatoryrequirementstomeetrenewablethresholds,andwhetheradditionalcapexneedstoberecuperatedtoprovideastablesupplyorconversiontootherfuels.Giventheconsiderablenumberofpolicyuncertainties,marketchallengesandproject-specificvariablesaffectingdedicatedrenewablecapacitygrowth,wetookaconservativeapproachinourmain-caseforecast.Thus,growthcouldbe80%higher(90GW)inouracceleratedcaseifcertainchallengesareaddressed.Securingoff-takerstobringprojectstofinancialcloseandobtainingregulatoryclarityoverdefinitionsoflow-emissionshydrogencouldbethemostimportantfactorstounlockdevelopmentoftheprojectpipeline.Forexample,policyactionstosupportdemandcreationforlow-emissionhydrogen,particularlyintheindustryandtransportsectors(e.g.throughmandates,publicprocurementandauctions)couldincreasethenumberofwillingbuyers;andfinancialincentivestohelpreduceproductioncostscouldimprovethecompetitivenessofrenewablehydrogenwithotherfuelsandraisethelikelihoodofsecuringoff-takers.Investorswouldbeabletomoveforwardwithplannedprojectsoncetheyhaveregulatoryclarityoverwhatqualifiesasrenewablehydrogenandhowelectricityisaccountedfor.Policiesthathelplowercostsassociatedwithtransportandreconversionofammoniaandotherhydrogen-basedfuelswouldencouragethedevelopmentofinternationalmarketsforrenewablehydrogen.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE151IEA.CCBY4.0.Question6:Istheenergycrisisreallymakingthebusinesscaseforheatpumps?Asthecurrentenergycrisisisrevivingenergysecurityconcerns,heatpumpshavebenefitedrecentlyfromgrowingpolicymomentuminanumberofcountries,particularlytheUnitedStatesandEuropeanones.HeatpumpsareexpectedtobepivotaltoreducefossilfueldependencyandCO2emissionsintheheatingsectorbyenablingenergysavingsandsupplydiversification.Manyheatpumpmarketsarecurrentlyexperiencingunprecedentedgrowth.Whiletherecentenergypricehikesfavourthemostenergy-efficienttechnologies,thusenhancingthebusinesscaseforheatpumps,publicinitiativestosupportinvestmentinheatpumpsaremostoftentheprimaryenablingfactorforthismarketacceleration.Severalobstaclesstillimpedelarge-scaleheatpumpdeployment.Chiefamongthemisthecost-competitivenessofheatpumpsinplaceswherelower-costfossilfuelalternativeshavenotyetbeenbanned.Cost-competitivenessisdeterminedbyacombinationofparameters,includinginitialinvestmentcosts,operatingandmaintenancecosts(includingfuelcosts),equipmentdurabilityandeconomicincentives.Likemostothertechnologiesthatexploitrenewableenergysources,upfrontcostsforheatpumpsarerelativelyhigh,butrunningcostsaregenerallylowerthanforfossilfuel-basedoptions.Soaringenergypricessince2021haveaccentuatedtherunning-costadvantageofheatpumps,especiallyasresidentialconsumertariffsfornaturalgashaverisenmorequicklythanforelectricityinmostmajorheatingmarkets.32ThisisparticularlytrueforcountriessuchasDenmarkandSweden,wherethecompetitivenessofgas-firedboilersdeterioratedsubstantiallywhengaspricesroseduringthefirsthalfof2022.However,inmostcountriestheoverallcost-competitivenessofheatpumpswithgasboilersisstilldeterminedmainlybythesignificantinvestmentcostdifferencebetweenthetwo.32HouseholdelectricitypriceswerehigherinallbutfiveEUmemberstatesinthefirsthalfof2022thaninthefirsthalfof2021.Manycountrieshaveimplementedorareconsideringimplementingdifferentiatedtariffcapsforelectricityandgastoprotectconsumersfromhighmarketprices.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE152IEA.CCBY4.0.ChangeinresidentialconsumerpricesforelectricityandgasbetweenH12021andH12022(left)andmarginalcostofheatingwithresidentialheatpumpsandgasboilersunderdifferentenergycostassumptions(right),selectedcountriesIEA.CCBY4.0.Notes:AAHP=air-to-airheatpump.AWHP=air-to-waterheatpump.Gas=condensinggasboiler.Themarginalcostofheatingestimatesthecostofprovidinganadditional1MWhofheatingwithdifferentheatingtechnologies,basedondeviceefficiencyandonenergyprices.Itdoesnotaccountforcapitalandfixedoperatingandmaintenancecosts.Energypricesusedherecorrespondtoaverageresidentialconsumerpricesforelectricityandnaturalgas,includingtaxes,forthefirstsemestersof2021andof2022.Sources:IEA(2022),EnergyPricesdatabase(non-EUcountries);Eurostat(EUmemberstates).Investmentcostsforresidentialheatpumps(includinginstallation)aregenerallyhigherthanforfossilfuel-firedboilers,thoughtheextentofthecostgapvarieswidelywithinandacrosscountries,evenforthesametechnology,dependingonmarketmaturity.Inonlyafewmaturemarkets(e.g.Denmark,SwedenandJapan)aretheupfrontcostsforlower-costair-to-airheatpumpscomparablewithorlowerthanforgasboilers.Hydronic(air-to-water)heatpumpstypicallyentailhigherinvestmentcoststhanair-to-airheatpumps,whileground-sourceheatpumpsarethemostexpensive,owingpartlytoinstallationoftheundergroundheatexchanger,whichcanrepresentmorethanhalfofthetotalsystemcosts.Plus,switchingtoaheatpumpinanoldbuildingcaninvolveadditionalexpense,astheelectricalsystemmayneedtobeupgradedtoaccommodateahigherpowerload,orexistingradiatorsmayhavetobereplacedwithlargeronesorwithunderfloorheatingoraforced-airsystemtoallowmoreefficientheatpumpoperation.Suchancillarycostscanmakeupasmuchasone-thirdofthetotalcostofswitchingtoaheatpump.However,someoftheseupgradescanalsoimprovethermalcomfortandreduceheatdemand.Highinvestmentcostsareamajorbarriertoheatpumpadoptionintheresidentialsector,asfinancingisachallengeformanyhouseholds.Inthepastyear,manycountrieshavestrengthenedinvestmentsupportforheatpumpsorintroduced0%10%20%30%40%50%60%70%80%90%ChangeinaverageconsumerfuelpricesfromH12021toH22022ElectricityGas050100150200250300AAHPAWHPGasAAHPAWHPGasAAHPAWHPGasAAHPAWHPGasAAHPAWHPGasAAHPAWHPGasAAHPAWHPGasDenmarkFranceGermanyItalyUnitedKingdomUnitedStatesSwedenMarginalcostofheating(USD/MWh)H12021energypricesH12022energypricesRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE153IEA.CCBY4.0.newmeasuresintheformofgrants,taxcredits,reducedtaxratesandspecificloanschemes.Someofthesemeasuresweretakeninresponsetotheenergycrisisand,intheEuropeanUnion,toreducedependenceonRussiangas.Grantsarethemostcommonpolicytoolandarecurrentlyavailableinatleast30countriesthattogetherrepresent70%ofglobalspaceheatingdemand.Taxcreditsarealsowidelyavailable,butincontrastwithdirectgrantsandsubsidies,theygenerallyreachconsumersonlyafteradelay,sometimesofasmuchastwoyears.Prevalentpublicinvestmentsupportforheatpumpsbypolicytype,selectedcountries,2022PolicytypeExamplesofsupportingcountriesin2022SubsidyAustralia,Austria,Belgium,Canada,China,Croatia,CzechRepublic,Denmark,Finland,France,Germany,Greece,Hungary,Ireland,Italy,Japan,Korea,Latvia,Lithuania,Luxembourg,Netherlands,NewZealand,Norway,Poland,Romania,Slovakia,Slovenia,Spain,UnitedKingdom,UnitedStatesTaxreductionAustralia,Belgium,Bulgaria,Canada,Finland,France,Germany,Greece,Hungary,Italy,Luxembourg,NewZealand,Poland,Portugal,UnitedKingdom,UnitedStates,Slovenia,SwedenLoanAustralia,Belgium,Bulgaria,Canada,CzechRepublic,Denmark,France,Greece,Hungary,Ireland,Japan,Korea,Latvia,Lithuania,Luxembourg,Netherlands,NewZealand,Poland,Portugal,Slovakia,Slovenia,UnitedKingdomThelevelofsupportsometimesdependsonhouseholdrevenue(e.g.inFranceandtheUnitedStates),andforlow-incomehouseholdsitcan(insomecountries)covermost–ifnotall–ofthepurchaseandinstallationcosts.Inmanycountries,investmentsubsidiesforheatpumpscansubstantiallyreduceorevenoffsettheupfrontcostgapwithgasboilers,sometimesmakingheatpumpsmoreeconomicalforconsumersthangasboilersovertheirlifetime.Renewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE154IEA.CCBY4.0.Levelisedcostofheatingforair-to-waterheatpumpsandgasboilersforselectedcountries,andfuel-pricesensitivityIEA.CCBY4.0.Notes:AWHP=air-to-waterheatpump.Thelevelisedcostofheatingestimatestheaveragecostofproviding1MWhofheatingoverthelifetimeoftheequipment,consideringcapitalcosts,basicinstallationcostsandoperatingexpenditures,whichincludefuelandregularmaintenancecosts.Estimatesarebasedonmediummarketpricesforequipment.Alifetimeof17yearsisassumedforgasboilersand18yearsforair-waterheatpumps.Fuelpricescorrespondtoaverageresidentialconsumerpricesforelectricityandnaturalgas,includingtaxes,forthefirstsemestersof2021and2022.Calculationsuseadiscountrateof3%andassumenationalhouseholdaverageheatdemandforItalyandSweden,andheatdemandcorrespondingtotheheatingdegreedaysofParis,Berlin,EdinburghandDetroit(colderclimatethanthenationalaverage)forFrance,Germany,theUnitedKingdomandtheUnitedStates.Subsidescorrespondtominimumavailablesubsidiesforahouseholdwithmedianincome.Theyreflectavailablegrants,taxcreditsandreducedtaxrates.Inpractice,highersubsidiesmaybeavailableforlow-incomehouseholdsorforhigherinvestmentcostsorhigh-efficiencyheatpumps,dependingonthecountry.Inadditiontodirectpublicinvestmentsupport,alternativebusinessmodels(e.g.on-billfinancing,leasing,energyperformancecontractsandheat-as-a-service)canalsoplayapivotalroleinreducingoreliminatinginvestmentchallengesforhouseholds.Thetwolatteroptionscanalsohelpovercomesplit-incentivebarriers.Investmentcostsforheatpumpsareexpectedtodeclinegraduallyoverthisdecadeasmarketsexpand,suppliersbenefitfromeconomiesofscale,andgreatercompetitionputspressureonprices.Automationandstandardisationofpartscouldfurtherreducecomponent,installationandrepairandmaintenancecosts,whilethedevelopmentofplug-and-playdesignscouldmakeinstallationfasterandmoreaffordable.However,clear,stablepolicysignalsareneededformanufacturerstocommittoinvestmentsinprocessupgrades.Targetingserialinstallationsacrosssimilarbuildingsinthesameneighbourhoodcouldalsohelpmutualiselogisticalcosts.Beyondcost-competitivenesschallenges,anumberofnon-costobstaclesmustalsobeaddressedtomainstreamheatpumpadoption.Forinstance,informationcampaignsaswellasindependentandfreeauditstoinformheatingsystemreplacementdecisionscanraiseawarenessandconfidenceinthetechnology’spotentialbenefits,whileregulatorychangescanmakedecisionmakingandpermittingforcollectivebuildingssimpler.Finally,dependingonthebuilding,050100150200250AWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerAWHPGasboilerH12021pricesH12022pricesH12021pricesH12022pricesH12021pricesH12022pricesH12021pricesH12022pricesH12021pricesH12022pricesH12021pricesH12022pricesH12021pricesH12022pricesUSD/MWhCAPEXsubsidisedCAPEXOPEXFranceGermanyItalyUnitedKingdomUnitedStatesSwedenDenmarkRenewables2022Chapter4:TrendstowatchAnalysisandforecaststo2027PAGE155IEA.CCBY4.0.applicationspecificities,andlocalenergysourceavailability,otherrenewableheatoptionssuchassolarthermalandbioenergymaysometimesbeeasierormoreeconomicaltoimplement.Renewables2022AnnexesAnalysisandforecaststo2027PAGE156IEA.CCBY4.0.GeneralannexAbbreviationsandacronymsACPAAmericanCleanPowerAssociationAEMOAustralianEnergyMarketOperatorANEELAgenciaNacionaldeEnergiaElectricaAWEAAmericanWindEnergyAssociationBCDBasicCustomsDutyCEEWCouncilonEnergy,EnvironmentandWaterCfDContractfordifferenceCNMCComisónNacionaldelosMercadosyLaCompetenciaCORSIACarbonOffsettingandReductionSchemeforInternationalAviationCSPConcentratedsolarpowerDISCOMDistributioncompaniesDRHIDomesticRenewableHeatIncentiveEBRDEuropeanBankforReconstructionandDevelopmentEHIEuropeanheatingindustryEHPAEuropeanHeatPumpAssociationEPAEnvironmentalProtectionAgencyEREFEuropeanRenewableEnergyFoundationESTIFEuropeanSolarThermalIndustryFederationFIPFeed-inpremiumFITFeed-intariffGCGreenCertificateGEGeneralElectricGSEGestoredeiServiziEnergeticiHEFAHydroprocessedestersandfattyacidsHVOHydrogenatedvegetableoilIATAInternationalAirTransportAssociationICAOInternationalCivilAviationOrganizationIEEJInstituteofEnergyEconomicsJapanIHAInternationalHydropowerAssociationIMOInternationalMaritimeOrganizationIRENAInternationalRenewableEnergyAgencyITCInvestmenttaxcreditMENAMiddleEastandNorthAfricaMODSMonthlyOilDataServiceNECPNationalEnergyandClimatePlansNRELNationalRenewableEnergyLaboratoryPPAPowerpurchaseagreementsPSHPumpedstoragehydropowerPTCProductiontaxcreditREZRenewableEnergyZonesRFSRenewableFuelStandardRIABRenewableIndustryAdvisoryBoardRINRenewableIdentificationNumberRPSRenewableportfoliostandardRRFRecoveryandResilienceFacilitySAFSustainableaviationfuelRenewables2022AnnexesAnalysisandforecaststo2027PAGE157IEA.CCBY4.0.SMPSystemmarginalpriceTCPTechnologyCollaborationProgrammeTRNCTurkishRepublicofNorthernCyprusVATValueaddedtaxVREVariablerenewableenergyWTPIWindTurbinePriceIndexUnitsofmeasurebblbarrelbbl/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/contactTypesetinFrancebyIEA-December2022Coverdesign:IEAPhotocredits:©Shutterstock
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