The global renewable energy sector is on the cusp of a transformative shift, with solar photovoltaics (PV) poised to dominate the landscape over the next five years. The International Energy Agency’s (IEA) latest ‘Renewables 2025′ report paints a picture of rapid growth, driven by declining costs and streamlined permitting processes, but also highlights emerging challenges that could reshape the sector’s trajectory.
Solar PV is expected to deliver approximately 80% of the global growth in renewable power capacity, with an anticipated increase of 4,600GW by 2030. This surge is not confined to established markets; economies like Saudi Arabia, Pakistan, and several Southeast Asian countries are set to experience a significant uptick in solar installations. “Solar PV is on course to account for some 80% of the increase in the world’s renewable capacity over the next five years,” said IEA executive director Fatih Birol. However, this growth comes with caveats. Policymakers must grapple with supply chain security and grid integration challenges as renewables’ role in electricity systems expands.
Wind energy, hydropower, bioenergy, and geothermal are also expected to contribute to the growth, with geothermal installations reaching new heights in key markets such as the US, Japan, and Indonesia. Pumped-storage hydropower is experiencing renewed interest due to increasing grid integration challenges, with the sector projected to expand nearly 80% faster over the next five years compared to the preceding period.
Emerging economies in Asia, the Middle East, and Africa are leading the charge in renewable growth, driven by cost competitiveness and stronger policy support. India is set to become the second-largest renewables growth market globally, after China, and is expected to comfortably meet its ambitious 2030 targets. Corporate power purchase agreements, utility contracts, and merchant plants are playing a significant role, contributing to 30% of the global increase in renewable capacity projected by 2030.
However, the forecast for global renewable capacity growth has been slightly adjusted downward from last year’s predictions due to policy shifts in the US and China. Early termination of federal tax incentives and various regulatory changes in the US have significantly reduced growth projections by nearly 50%. Meanwhile, China’s transition from fixed tariffs to auction-based systems is affecting project economics, leading to a decreased forecast for renewable energy growth in the country.
The rapid growth of variable renewables is increasing pressure on electricity systems, with curtailment and negative price events already appearing in more markets. This trend underscores the need for robust grid infrastructure and innovative solutions to manage the intermittency of renewable energy sources.
The sector’s development will likely be shaped by these evolving dynamics. The dominance of solar PV, the resurgence of geothermal and pumped-storage hydropower, and the shifting policy landscapes in key markets like the US and China will influence the trajectory of renewable energy growth. As the sector navigates these challenges, the need for strategic policymaking, investment in grid infrastructure, and innovation in energy storage and management will become increasingly critical. The coming years will be pivotal in determining how the renewable energy sector adapts and evolves to meet the demands of a rapidly changing energy landscape.