February 29, 2024

At the United Nations climate conference that concluded last month in Dubai, the world’s countries pledged to triple global renewable energy capacity by 2030. The renewable energy target has received less attention than other, more controversial goals pursued at the conference, such as scaling back fossil fuel production and funding repairs for the nations suffering the worst climate impacts. After all, the cost of renewable technologies such as solar has fallen in recent years, making them cheaper than coal and natural gas in the vast majority of cases.

But a new report from the International Energy Agency lays bare the challenges ahead as the world tries to accelerate this trend. If countries implement current policies, the agency projects that global renewable capacity will increase by a factor of 2.5, falling short of the 11,000-gigawatt tripling target set at the so-called COP28 conference in Dubai. This is partly because high interest rates and supply chain disruptions in rich countries such as the US are suppressing the growth of renewable energy – particularly offshore wind.

“The target of tripling renewable energy will by no means be easy,” says Maria Pastukhova, a senior policy advisor at the climate think tank E3G’s office in Berlin, Germany. “It is not simple, but it was considered absolutely urgent and economically beneficial for most countries. It’s a race against time that we know we have to win.”

The report is the first to conduct a country-by-country analysis of renewable energy expansion since COP28. Overall, it found countries have so far installed more than 3,600 gigawatts of renewable energy capacity. Under current policies, that number is expected to reach a little more than 9,000 gigawatts by 2030, leaving a gap of about 2,000 gigawatts to meet the 11,000 gigawatt target.

China is expected to account for about half of the growth in the coming years. The country, long a leader in solar installations, last year deployed as much solar energy as the entire world in 2022. The United States, the European Union, Brazil and India are also expected to expand their renewable portfolios by 2028 will double.

Yet, despite these bright spots, achieving the COP28 target requires significant additional policy interventions, according to the energy agency. The challenges are particularly acute in the wind industry, which has been hit hard by inflation, high interest rates and supply chain disruptions. Over the past two years, central bank interest rates have risen from less than 1 percent to more than 5 percent, making it harder for renewable developers to finance projects. Inflation has driven up the cost of wind turbines and other components, adding to the crisis facing developers. Additionally, many wind developers signed contracts to install wind turbines before the COVID-19 pandemic, at a time when interest rates were stable and equipment was readily available. In recent years, expectations that those economic tailwinds would continue have increased.

As a result, wind turbine manufacturers in North America and Europe have suffered financial losses for almost the last two years. In 2023, wind developers have postponed or canceled about 15 gigawatts of installations in the US and UK. Auctions for wind projects receive few or no bids in Rhode Island and the Gulf of Mexico. In New York, state regulators plan to accept new bids for canceled projects and are now trying to link prices to inflation.

Even if more favorable economic conditions for renewable energy emerge in the coming years, developers face another major challenge, especially in the US and Europe: long permitting timelines. To build solar and wind projects and the enabling infrastructure needed to connect their power to the grid, developers must work with regulators to receive a variety of operating and environmental permits. In Europe, these permits can take anywhere from 5 to 15 years, Pastukhova said.

“The bureaucratic procedures hinder development,” she said. “It doesn’t help the business.”

Pastukhova said that even as rich countries solve domestic challenges to accelerate the deployment of renewable energy, they also need to finance projects in developing countries. Parts of Africa and South Asia have tremendous potential for solar energy, but without financing to invest in the infrastructure needed to support renewable energy and access to technology, some countries may be left behind in the energy transition.

“The most important challenge for the international community is to rapidly scale up the financing and deployment of renewable energy in most emerging and developing economies,” Fatih Birol, the International Energy Agency’s executive director, said in a press release. “Success in achieving the triple target will depend on this.”

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