What Is The Impact Factor Of Renewable Energy In 2023?
Renewable energy, including wind, solar, hydropower, geothermal, and bioenergy, provides clean and sustainable electricity generation with little to no greenhouse gas emissions. The growth and impact of renewables has expanded rapidly over the past decade as costs have declined dramatically and policies have promoted adoption worldwide. Renewable energy is now the fastest-growing energy source, accounting for over a quarter of global electricity generation.
The impact factor of renewable energy examines its growth, investment, costs, capacity additions, and overall role in energy systems globally. In 2023, renewables are having a major impact as costs reach record lows, new capacity is installed at record highs, and the sector employs millions worldwide. Strong policy support and favorable economics are driving rapid growth in renewable electricity generation across the globe.
The International Energy Agency projects renewable capacity additions will soar by over 107 gigawatts in 2023 to more than 440 GW, the largest absolute increase ever. This growth is led by solar PV, which is expected to account for over 60% of new installations. Countries around the world are setting ambitious renewable energy targets, signaling the growing role renewables will play in energy transitions.
Global Investments
Renewable energy investments continued to rise in 2023. Total global investment in renewable power came in at around $380 billion, up from $366 billion in 2022.[1] The key countries leading renewable energy investments included China, the United States, Europe, and India. These regions accounted for over 70% of total investments.[2]
Government policies have been a major driver of renewable energy investments globally. Countries have implemented policies like renewable portfolio standards, feed-in tariffs, tax credits, and tenders to incentivize renewable energy deployment.[3] The Inflation Reduction Act passed in the U.S. in 2022, for example, contained over $370 billion in climate and energy provisions which are expected to spur further growth in renewable energy capacity over the next decade.[4]
Cost Competitiveness
The costs of renewable energy, especially solar and wind, have declined dramatically in recent years and are now competitive or even cheaper than fossil fuels in many markets around the world. According to a 2023 Lazard report, the global levelized cost of energy (LCOE) for utility-scale solar PV is now 29% lower than coal and 27% lower than the cheapest gas option.
The average LCOE for onshore wind is also competitive, coming in 18% lower than coal. The declining technology costs for solar, wind, and batteries have enabled renewable energy to achieve grid parity in many regions. This means that the LCOE of renewables has fallen below the cost of electricity from the grid network based on fossil fuels.
Countries like India, China, parts of the U.S., Germany, Spain and more now have areas where the LCOE of newly built renewable energy projects is at or below the variable cost of operating conventional power plants. The global weighted average LCOE for solar PV has now reached $37 per MWh, establishing it as the cheapest source of new electricity generation in many markets.
Electricity Generation
Renewable energy sources accounted for over 27% of global electricity generation in 2023, according to the International Energy Agency (IEA) Electricity – Renewables 2023 – Analysis. This represents a 5% increase from 2022 levels. The IEA reports that solar and wind capacity additions reached new records in 2023, driven by favorable policies in major markets like China, the United States, and Europe.
The share of renewables in electricity generation varied significantly by country and region in 2023. Europe led with over 40% of its electricity coming from renewables, followed by Latin America at 29%. The United States generated 25% of its electricity from renewables in the first half of 2023, up from 22% in 2022, according to Electrek In a new milestone, renewables generated 25% of US. Major emerging economies like India and Brazil also saw strong growth, with renewables meeting over 25% of electricity demand.
Global investments in renewable electricity capacity are expected to break another record in 2023, topping $500 billion according to projections by the IEA. With costs continuing to fall for solar, wind, batteries and other technologies, renewables are positioned for strong continued growth in the electricity sector.
Capacity Additions
Global renewable energy capacity additions reached nearly 510 gigawatts (GW) in 2023, an increase of almost 50% from the previous year according to the International Energy Agency. This represents the fastest annual growth rate for renewable capacity in history. The IEA projects renewable capacity additions will exceed 700 GW in 2027.
Solar power accounted for over 60% of renewable capacity added in 2023 at 314 GW. Onshore wind saw the second largest growth at 127 GW of new capacity. Other sources like hydropower and geothermal saw more modest capacity additions in 2023.
The growth in solar capacity was driven by the United States, India, and China. The U.S. alone added over 50 GW of utility-scale solar in 2023. Cost declines, policy support, and favorable economics compared to fossil fuels underpin the soaring growth in renewable capacity worldwide.
Storage and Grid Integration
Advances in energy storage technology such as batteries are enabling greater integration of renewable energy onto electricity grids. Large-scale batteries can store excess renewable energy when supply exceeds demand and discharge it when needed, helping to balance supply and demand. In 2022, the global energy storage market reached 31 gigawatts (GW), with lithium-ion batteries accounting for over 90% of new deployments (IORA, 2023). Further cost reductions and performance improvements in batteries will support the continued growth of renewables.
Managing high renewable energy penetration while maintaining grid reliability and stability is also being addressed through improved forecasting, market design, transmission expansion, demand response, and advanced power electronics. For example, grid operators are using advanced weather forecasting to better predict renewable generation, and adjusting their operational plans accordingly. New transmission lines are being built to reduce congestion and optimize power flows. Overall, ongoing innovation in areas like storage, transmission, and grid management will enable the integration of higher shares of renewables onto power systems.
Policy Support
Major policy developments in the United States have played a significant role in supporting the growth of renewable energy in 2023. The Inflation Reduction Act (IRA), passed in 2022, aims to invest $369 billion into energy security and climate change programs over the next 10 years. The IRA includes tax credits and other financial incentives for renewable energy development and is projected to increase renewable electricity generation by over 40% by 2030, according to the Biden administration [1].
In addition to federal policies, many U.S. states have implemented renewable portfolio standards that require utilities to source a percentage of their electricity from renewables. As of 2023, 30 states and Washington, D.C. have mandatory renewable portfolio standards. These policies have accelerated the growth of renewables by creating demand and providing market certainty for investors [2].
While government policies have played a key role, the declining costs of renewable energy technologies like solar, wind and batteries have also made them increasingly competitive with fossil fuels on market terms. This cost competitiveness is becoming a major driver of continued growth in renewables, in addition to supportive policies.
Employment
The renewable energy sector has become a major source of employment and job creation globally. According to Indeed, there are over 377,000 renewable energy jobs posted in 2023, with roles like solar installers, wind turbine technicians, sustainability managers, and more. Many green jobs require science, technology, engineering and math (STEM) skills that provide workers with stable, well-paying careers.
Investments in renewable power generation and manufacturing have stimulated employment across both direct and indirect positions. The International Renewable Energy Agency (IRENA) estimates that in 2021, the renewable energy sector employed 12.7 million people directly and indirectly. With the continued growth of clean energy, IRENA projects the workforce could reach 38.2 million by 2030. The expansion of renewable energy is creating new skilled trade and professional roles worldwide.
Workers are gaining specialized skills in solar, wind, hydropower, biofuels and other technologies through vocational programs, apprenticeships, on-the-job training and college degrees. Renewable energy jobs provide hands-on training and experience that allow employees to advance along promising career pathways. The transition to clean energy is enabling a just, inclusive energy workforce of the future.
Challenges
As renewable energy increases its share of electricity generation, several challenges arise related to its intermittent supply nature and integration with the wider energy system. Wind and solar power are weather-dependent, generating electricity only when the wind blows or sun shines. This intermittency can make balancing electricity supply and demand more complex, requiring greater grid flexibility through storage, interconnection, and demand response ([World Energy Café North America & LAC](https://www.worldenergy.org/experiences-events/past-events/entry/world-energy-cafe-north-america-lac)).
Large amounts of renewable energy also require investments in transmission infrastructure to move electricity from generation sites to load centers. Congestion on existing grids can hinder the integration of new renewable capacity ([Resource planning – Page 3 of 5 – E3](https://www.ethree.com/category/resource-planning/page/3/)). As renewable penetration increases, fossil fuel plants may be forced to cycle on and off more frequently to provide backup power, raising their costs.
Fossil fuel assets could face early retirement or stranded asset risk. The falling costs of renewables coupled with carbon pricing may make it uneconomical to continue operating many existing coal and natural gas plants.
Future Outlook
The world is expected to see tremendous growth in renewable energy capacity by 2030. According to the International Energy Agency (IEA), renewable energy capacity could grow by over 250% from 2020 levels under current policy settings, with solar power alone accounting for nearly 60% of all renewable capacity additions1. The IEA projects that renewables will make up almost 95% of the increase in global power capacity through 2026, with solar PV alone providing more than half2.
This accelerated deployment of renewable energy will play a crucial role in climate change mitigation. According to the IEA, achieving net zero emissions globally by 2050 will require renewable energy capacity to triple by 2030 compared to 2020 levels2. With ambitious climate targets in place across many countries, renewables are positioned to ramp up dramatically to displace fossil fuel generation and enable deep decarbonization of the power sector in line with 1.5°C pathways.
