Energy markets have been a mess due to the supply chain and the Russian invasion of Ukraine. But in a weird twist, the chaos may actually be benefiting renewables.
The energy upheaval in recent months has sent prices climbing for everything from gas to solar panels. An International Energy Agency report published this week found that the cost of building onshore wind and utility-scale solar installations is up between 15% to 25% globally this year compared to 2020. That's not great, but the report shows that the cost of fossil fuels has risen more steeply, making renewables more competitive with their polluting counterparts.
The shift has largely hinged on Russia’s invasion of Ukraine. That's sent gas prices climbing and led Europe — which is heavily dependent on Russian oil and gas — and other countries to seek out alternatives. “In many countries, governments are trying to shelter consumers from higher energy prices, reduce dependence on Russian supplies and are proposing policies to accelerate the transition to clean energy technologies,” the IEA found. (The group has also put out a list of recommendations to further reduce Russian oil dependence.)
Even before Russia started a war in Ukraine, the world was making headway on renewables. The report found more renewable energy was added to the grid in 2021 than ever before, with 295 gigawatts of renewable capacity coming online despite pandemic-related supply chain issues. The IEA expects another 320 gigawatts of capacity to be added this year, an amount roughly equivalent to Germany’s entire power demand. Solar is expected to account for 60% of that growth — a fact which the IEA attributes to “a strong policy environment in China and the European Union" — followed by wind.
Renewables not only undercut the power of petrostates, of course. They're also exactly what the world needs more of if it wants to avert climate catastrophe. While installing a record amount of renewable capacity is great, the recent United Nations climate report found the world needs to invest even more in renewables while simultaneously winding down the use of fossil fuels to get on track.
Looking to 2023, though, the IEA projected that the growth of renewables is likely to stabilize. “Unless new and stronger policies are implemented in 2023, global renewable capacity additions are expected to remain stable compared with 2022,” the report said. Solar installation will likely continue to break records, but hydropower’s share of the growth is expected to decline, in large part because fewer projects are coming down the pipe in China.