Renewable energy i.e., energy derived from replenishable energy sources, such as solar, wind, geothermal and biomass, has gained global prominence in the last decade. The greatest advantage that renewable energy has over fossil fuel-based energy – the dominant form of energy today – is that it does not emit carbon, greenhouse gases and other air polluting gases. This makes renewable energy a favourable option as the world combats the adverse effects of global warming and climate change. There are several other pathways and technologies that aim to curb carbon emissions, such as green hydrogen and electric vehicles, but these pathways are based on the underlying assumption that the power will be procured from renewable sources. The first step in implementing most clean technologies is renewable energy availability and the ease of sourcing it. This makes renewable energy one of the most important links in the energy transition story.
Renewable energy is one of the fastest-growing energy sources globally, increasing from 1,443 GW of installed capacity in 2012 to 3,063 GW in 2021, or a CAGR of ~9% over the period. In 2021, renewable energy accounted for 81% of all new energy capacity additions globally. Solar and wind together made up 88% of the total renewable capacity additions in 2021. Notwithstanding economic, regulatory and geopolitical uncertainties, renewable energy has become one of the fastest-growing energy sources since 2010.
The global share of electricity generated through renewable energy edged up from ~26% in 2012 to ~38% in 2021. Asia represented ~60% of new renewable capacity additions in 2021, led by China, which added 121 GW, followed by India. Capacity additions in Europe totaled 39 GW, followed by North America (38 GW, led by the US). Africa, Latin America, and the Caribbean made up the remaining capacity additions, with the pace in these regions much slower than the global average.
The focus on decarbonization of primary energy sources has led to material investments in the renewable energy sector. Renewable energy investments of ~$367 billion in 2021 were the highest in the entire energy sector. Upstream oil and gas, which has historically accounted for the largest share in energy sector investments, ranked second, at $351 billion. This shift has been possible due to renewed efforts from the oil and gas sector, power utilities, renewable energy project operators, and federal and regional governments. Rising investments in the renewable sector reduced power prices significantly in the last decade. Renewable power prices are now at par (lower in certain geographies) with the prices of power originating from fossil fuels (natural gas and coal, among others). As renewable energy prices fall further, the pace of adoption is expected to pick up the pace.
Although renewable energy results in low-to-no GHG emissions, it has its own set of challenges. One of the biggest operational challenges is intermittent power supply, due to dependence on the sun, wind, etc. This can cause continuity and power quality issues. However, several renewable projects are expected to be paired with batteries and battery management systems in the future, which can solve the intermittency challenges. The other major challenge is the ability of the grid to incorporate intermittent and distributed power sources, such as rooftop solar, without compromising on power quality. This requires significant spending on infrastructure upgrade by utilities. Apart from infrastructure and operational challenges, renewables face economic headwinds. Several renewable projects that depend solely on incentives from the government may get delayed or cancelled owing to increased government spending on healthcare amid the COVID-19 pandemic. Disposal of renewable energy end-of-life equipment also poses a big environmental challenge. A limited number of countries have developed solar photovoltaic or wind turbine disposal policies. This can become a long-term environmental and health hazard.
Despite the steady growth and adoption of renewable energy, the pace of implementation falls short of the global ambitions to achieve carbon neutrality by 2050 and curb global increase in temperature to 1.5º Celsius. A major portion of global energy demand is still met through fossil fuels. In fact, investments in coal projects rose in 2021. Several countries are expected to miss their 2025-2030 renewable energy targets. However, record fossil fuel prices are expected to accelerate and renew the push for renewables. There is a greater need for strong international, regional and local coordination to optimize energy security, electricity markets and energy investment strategies.
