This is an extract from a recent report “Renewables 2024 Analysis and forecast to 2030” by IEA. In this extract, we specifically focus on Europe.
Distributed solar PV becomes the largest renewable capacity source by 2030, while utility-scale growth hinges upon auction design and permitting reforms
Europe’s cumulative renewable capacity is forecast to increase 700 GW (78%), from 894 GW in 2023 to almost 1,600 GW by 2030. The majority (70%) of the expansion is concentrated in just seven countries, led by Germany, followed by the United Kingdom, Italy, Türkiye, France, Spain and the Netherlands. Solar PV makes up the largest share by far, at almost 70% of the region’s capacity growth during 2024-2030. Over the forecast period, 478 GW of solar PV is forecast to come online, more than three times onshore wind and eight times more than offshore.
Distributed solar PV leads European growth and is set to become the technology with the most installed renewable capacity by 2026 surpassing hydropower and onshore wind. Several policy drivers underpin this expansion, most notably generous financial incentives such as net metering, remuneration for excess electricity in self-consumption systems, feed-in tariffs and tax rebates. While some of these policies were already in place prior to 2022, governments increased and extended incentives (and introduced new ones) after Russia’s invasion of Ukraine to dampen the impact of higher electricity prices on consumers. These actions, combined with a relatively high retail price environment in most markets, led to the installation of a record 41 GW of capacity in 2023, 15% more than we had anticipated. For utility-scale systems, competitive auctions are the main growth driver, covering 76% of expansion.
Certain countries (e.g. Germany and France) have taken steps to improve the design of their auctions and have experienced increased participation, especially for utility-scale solar PV. However, others such as Spain, Italy and the United Kingdom are still in the revamping process and it remains to be seen whether the new designs will result in higher subscription rates. The forecast for auctioned capacity also depends on how member states modify their auction designs to implement the required non-price pre-qualification from the Net Zero Industry Act and if it has an impact on subscription rates. After competitive auctions, the second-largest stimulant of utility-scale growth is corporate PPAs, which account for almost one-fifth of the expansion, mostly in Spain, Italy, Poland, Sweden, Germany, France, the United Kingdom and Denmark. PPAs are attractive mainly because they offer long-term visibility over power prices for large industrial consumers looking to hedge against high or fluctuating retail rates or utilities seeking protection from volatile wholesale prices. Also facilitating corporate PPA uptake is the April 2024 Electricity Market Reform, which includes a number of measures to facilitate access for smaller consumers.
Additional demand for corporate PPAs is expected from existing renewable projects for which support is expiring, but the ability of these projects to drive new capacity additions will depend on whether projects are repowered with higher capacity. Growth from green certificates is concentrated in Belgium, while merchant revenues have an influence mostly in Spain, though price cannibalisation is increasingly posing a risk to growth. Overall, the forecast for total renewable capacity in Europe is in line with last year however there are differences at the country and technology levels. For distributed solar PV, higher-than-expected expansion in 2023 and the first half of 2024 is the reason for stronger growth prospects in Italy and Sweden. The forecast is also higher for the Netherlands because the anticipated end to full net metering has been pushed back from 2024 to 2027. In France, the removal of electricity subsidies temporarily introduced during the energy crisis to protect consumers from high bills is expected to sustain demand. However, the distributed PV forecast is less optimistic for Poland and Spain, where growth slowed unexpectedly in 2023 as consumer appetite weakened due to inflation, economic uncertainty and less urgent energy security concerns. We also expect less residential solar PV growth in Germany due to increasing concerns over system flexibility at the distribution network level.
The European Union is on track to fulfill its 2030 ambitions for solar PV, but more effort is needed for wind
Almost 80% of Europe’s capacity expansion happens in the European Union, where climate and energy security ambitions for 2030 have resulted in a raft of policy frameworks to accelerate renewable capacity deployment. Total renewable capacity in the main case reaches 1,105 GW by 2030, falling 11% short of the REPowerEU ambition of 1,236 GW due to persistent challenges to faster wind deployment. In May 2022, the European Commission set goals to reach 1,236 GW of total renewable capacity by 2030, with 592 GW of solar and 510 GW of wind. These goals were established to reduce reliance on imported gas following Russia’s invasion of Ukraine. They are in line with the sum of individual member state ambitions (1,235 GW ), as laid out in their draft updated National Energy and Climate Plans (NECPs) – the main policy tool being used to achieve a 55% reduction of GHG emissions by 2030 and climate neutrality by 2050. In parallel, countries had already begun to implement policy changes to support faster renewable capacity expansion. While these policies put solar PV on track to realise the bloc’s 2030 ambition, more effort is needed to achieve the goals for both onshore and offshore wind.
Total installed capacity for wind reaches almost 370 GW in the main case, falling 28% short of the 510 GW target largely because permitting challenges and grid congestion have been impeding deployment. Obtaining permits for both onshore and offshore projects has been a long and not always successful endeavour in many countries due to the complexity of the process; limitations on area available for development; administrative staff shortages; and social opposition. This has prevented developers from participating in auctions, led to project cancellations, and delayed construction and commissioning.
Meanwhile, long grid queues resulting from complicated application processes and inadequate network capacity are lengthening project lead times in many countries and driving up costs for developers as they await licensing. Auction schemes with relatively low price ceilings, uncapped negative bidding, high interest rates and a lack of inflation indexation have also reduced the amount of wind capacity awarded. To address these issues, the European Commission has released several targeted guidelines such as a grid action plan, a wind energy action plan, a communication on delivering on the offshore wind strategy, and provisions for streamlining permitting in the revised Renewable Energy Directive. At the same time, member states have been diligently implementing reforms to accelerate permit granting, improve grid buildout and modify auction designs. They also signed the Wind Energy Charter in December 2023, indicating their commitment to grant permits and design auctions at a faster pace. Thanks to these actions, wind energy deployment has improved, with the number of permits hitting an all-time high in several EU countries in 2023. The most notable case is Germany, where permit grants increased 70% from 2022 to 2023 after the country implemented measures including changes to conservation acts and minimum distances, and imposed state mandates. As a result, the April 2024 auction awarded a record 2.4 GW of onshore wind – the largest amount since the government-initiated auctions in 2017. In France, improved auction design has boosted awarded capacity.
Nevertheless, the main-case forecast falls short of the 2030 targets by 22% for onshore wind and by 46% for offshore despite these efforts. Onshore reaches 310 GW, failing to fulfil the estimated EU ambition of 400 GW because of persistent undersubscription and inadequate grid connection. While auction undersubscription remains an issue in Italy and the Netherlands, auctions are still paused in Spain for redesign purposes, and in Germany awarded capacity is still below targeted volumes. Meanwhile, the number of projects refused grid connection in Poland increased in 2023. Offshore wind is forecast to reach 60 GW by 2030, just over half of the 111 GW target member states recently agreed to in the revised Ten-E Regulation. In the main case, long project lead times, infrastructure delays and supply chain constraints mean that expansion increases just 6 GW/yr – half the 13 GW/yr needed to fulfil ambitions.
At the country level, not all are forecast to realise their individual national NECP ambitions, which are set to be finalised this year. The current updated NECP drafts are ten-year plans that member states are required to submit to outline their contributions for achieving 42.5% renewable energy in final energy consumption, which, together with energy efficiency targets, corresponds to a net GHG emissions reduction of 55% from the 1990 level by 2030. However, for only 10 countries are their current draft ambitions forecast to be within reach in the main case. The remaining 17 fall short due to permitting challenges, grid congestion, economically unattractive auction design and policy uncertainty. In the accelerated case, however, another seven countries could attain their ambitions if these obstacles are addressed, particularly if system flexibility is improved to incorporate higher shares of solar and wind electricity. This would require faster uptake of storage technologies, expanded interconnection infrastructure, demand-side response systems and increased electrification. However, ten countries still fall short of their aims even under accelerated-case conditions. For these countries, new policies and support schemes would be required to drastically improve market prospects.
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