Global renewable energy capacity is projected to expand by 4,600 GW by 2030, roughly equivalent to the combined installed capacity of China, the European Union, and Japan, according to the IEA’s Renewables 2025 report.
While the forecast underscores the resilience and competitiveness of renewables—particularly solar PV—it also highlights mounting systemic challenges in supply chains, grid integration, and financing that could constrain deployment if left unaddressed.
Solar photovoltaic (PV) technology is expected to dominate the next phase of growth, accounting for nearly 80% of all new renewable capacity through the decade. This expansion is driven by rapid cost declines, improved permitting frameworks, and sustained policy support across major economies. Wind, hydropower, bioenergy, and geothermal will complement this growth, though at smaller scales. The report notes a resurgence of interest in pumped-storage hydropower, expected to grow almost 80% faster over the next five years compared with the previous period, as system operators search for flexibility solutions to balance rising variable generation.
Yet the outlook is not uniformly positive. The IEA’s projection marks a slight downgrade from last year, largely due to policy and regulatory shifts in the United States and China—two of the world’s largest renewable markets. In the U.S., the early phase-out of federal tax incentives and shifting regulatory conditions have cut growth expectations for renewables by nearly 50% relative to the previous forecast. In China, the transition from feed-in tariffs to auction-based procurement has introduced economic uncertainty for developers, curbing project pipelines in the near term.
Offsetting these headwinds are stronger-than-anticipated expansions in India, Europe, and emerging markets across Asia, Africa, and the Middle East. India alone is on track to become the second-largest renewables market globally by 2030, bolstered by auction programs, grid modernization, and domestic manufacturing incentives. Europe’s continued acceleration in rooftop solar and distributed generation is similarly lifting regional growth prospects, with corporate power purchase agreements (PPAs) and merchant plants now contributing nearly 30% of global renewable capacity additions, double last year’s share.
Despite rapid technological progress, supply chain concentration remains a critical vulnerability. More than 90% of solar PV manufacturing and rare earth element processing for wind turbines is expected to remain in China through 2030, exposing markets to geopolitical and logistical risks. While diversification efforts—particularly in the U.S., India, and the EU—are underway, they are unlikely to fully displace Chinese dominance in the near term.
Grid constraints are another systemic bottleneck. The rapid rise of intermittent renewables is already producing curtailment and negative pricing events in several markets, signaling inadequate flexibility in transmission infrastructure and market design. The IEA warns that investments in grids, battery storage, and flexible generation must accelerate sharply to accommodate the coming wave of variable generation. Several countries are responding with new capacity and storage auctions, yet the current scale of investment remains insufficient to ensure stability and cost efficiency.
In sectoral terms, the integration of renewables into transport and heating continues to lag. Renewables’ share of transport energy is expected to rise modestly from 4% to 6% by 2030, driven largely by EV adoption in China and Europe and expanded biofuel use in Brazil, Indonesia, and India. In heating, renewables are projected to increase from 14% to 18%, reflecting steady but incremental electrification of building and industrial heat.
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