A record 295 GW of new renewables capacity was installed globally in 2021 and the International Energy Agency (IEA) is forecasting that installations will rise to about 320 GW this year, despite elevated costs for both solar photovoltaic (PV) and wind.

Solar PV is forecast to account for 60% of the 2022 increase, with the commissioning of 190 GW, which would represent a 25% year-on-year gain. The technology is also on course to reach yearly installations of 200 GW in 2023.

However, the ‘Renewable Energy Market Update’ report warns that the market could plateau in 2023, as continued solar PV growth is offset by a 40% decline in hydropower expansions and little change to wind additions, which are being constrained by permitting delays.

Russia’s invasion of Ukraine is expected to add impetus to the market as European countries turn to renewables to reduce their dependence on Russian gas by 2023. But the IEA expects the impact of these new policies to be limited over the coming two years, especially for large-scale projects that require development timelines of more than 18 months.

Nevertheless, the latest forecast still represents an eight per cent upward revision to the IEA’s December forecasts for both 2022 and 2023, with the higher rate of growth underpinned by strong policy support in China, the European Union and Latin America, which all offset a weaker outlook for the US.

The record 2021 performance was achieved, the report notes, despite supply-chain disruptions, construction delays and high raw material prices and the IEA warns that solar PV and wind costs are likely to remain elevated in 2022 and 2023, owing to elevated commodity and freight prices.

By March 2022, the price of PV-grade polysilicon had more than quadrupled when compared with prices in early 2021, while steel had increased by 50%, copper by 70% and aluminium prices had doubled.

Freight costs rose almost five-fold over the period, the report states.

“The reversal of the long-term trend of decreasing costs is reflected in the higher prices of wind turbines and PV modules as manufacturers pass through increased equipment costs.

“Compared with 2020, we estimate that the overall investment costs of new utility-scale PV and onshore wind plants are from 15% to 25% higher in 2022,” the report adds, warning that higher costs “are here to stay in 2022 and 2023”.

The competitiveness of renewables will improve, however, given the much sharper increases in natural gas and coal prices.