Renewable electricity capacity additions broke a new record in 2021 and demand for biofuels has almost returned to pre-Covid levels, despite continuing logistical challenges and rising prices. However, the invasion of Ukraine by the Russian Federation (hereafter, “Russia”) sends shock waves through the energy and agricultural markets, resulting in an unprecedented global energy crisis. In many countries, governments are trying to protect consumers from rising energy prices, reduce dependence on Russian supplies, and come up with policies to accelerate the transition to clean energy technologies.
Renewables have great potential to reduce prices and dependence on fossil fuels in the short and long term. Although the costs of new solar PV and wind installations have increased, reversing a decade of cost reduction, the prices of natural gas, oil and coal have risen much faster, further improving the competitiveness of renewable electricity. However, how quickly renewables can replace fossil fuels is subject to several uncertainties and will depend on many factors. Will renewable electricity sources challenge this global energy crisis and continue to grow rapidly despite emerging political and macroeconomic challenges? At the same time, growth in biofuel demand is facing significant headwinds from both weaker transport demand growth and high biofuel prices. Will demand growth resume at historic rates?
By exploring the most recent market and policy developments as of April 2022, our Renewable Energy Market Update projects new global renewable energy capacity additions and biofuel demand for 2022 and 2023. It also discusses key uncertainties and policy implications that may affect projections for 2023 and beyond.