The Renewable Revolution Continues

While 2023 was a challenging year for clean energy, we highlight six points that prove the revolution marched on.

By some measures, 2023 was a challenging year for clean energy. Interest rates rose, supply chains remained stressed, Western wind players struggled, interconnection queues grew, and clean energy stocks underperformed.

Yet, the renewable revolution marched on. In 2023, the costs of clean technologies started falling again; the growth in clean technologies continued up S-curves; fossil fuel demand remained on a plateau; the geopolitical race to lead the renewable era sped up; clean tech manufacturing surged; and policy action continued to ratchet higher. Below we describe six reasons 2023 was a year of success and continuity for the renewable revolution.

1. Costs fell

After the bounce in prices in 2022, this past year clean tech prices continued falling on learning curves. Relative to the first half of last year, the LCOE of utility solar PV fell by 9 percent to $41/MWh and the LCOE of onshore wind is down 13 percent to $40/MWh. Solar panel module prices fell 50 percent this year to 12 cents/W — as of December. Battery cell costs are down 16 percent, now at $107/kWh.

2. Volumes rose

According to BloombergNEF, the world is expected to deploy an astonishing 413 GW of solar this year, representing a 64 percent year-on-year growth in additions. Despite the travails of wind in the West, global wind additions are up 18 percent, exceeding 100 GW. Electric vehicle car sales are set to surpass 14 million, capturing 20 percent of the global market. Electric vans and trucks are taking off in China, gaining an 11 percent and 3 percent market share, respectively, in the first 10 months of the year. Globally, battery storage sales are expected to triple. Electrolyzer shipments are expected to roughly double. Solar, batteries, and EV sales continue to follow their well-established S-curves.

3. The plateau in fossil fuel demand continued

As clean tech volumes continue to rise, it is becoming ever clearer that global fossil fuel demand and emissions have hit a peak and are bouncing along a plateau. For the first time, the IEA expects fossil fuel demand to peak this decade in all their scenarios. Most significantly, it is likely that 2023 will be the year China’s emissions peak. Meanwhile, in the OECD, emissions continue their longstanding structural decline that began 16 years ago. In the power sector, initial estimates from Ember show global fossil-fueled electricity generation remains on its plateau, with solar and wind supplying 85 percent of new electricity demand in 2023. As financial markets recognize that fossil fuel demand faces terminal decline, they are reducing capital flows into the sector and hunting down the weakest players at the top end of the cost curve.

4. Change sped up in Europe and the United States

China continues to lead the renewable race. In a single year, China installed more solar (240 GW) and sold more electric vehicles (8.2 million) than the United States has cumulatively over the past two decades. This year China became the largest auto exporter in the world. CREA estimates that in 2023 clean tech investments will make up 10 percent of China’s fixed asset investment, up approximately 40 percent relative to 2022.

But the United States and Europe are joining the race. In the EU, Putin’s War and the US’s IRA have been powerful accelerants, promoting legislative change first with REPowerEU (2022) and then the Green Deal Industrial Plan (2023). This year, the EU is expected to see emissions fall by 7 percent, its fastest year-on-year reduction excluding the global financial crisis and the COVID-19 pandemic. The IEA expects annual energy intensity gains of an impressive 5 percent in the EU this year.

In the United States, clean tech surges as the IRA takes effect. EV sales are expected to grow this year by around 50 percent to about 1.4 million; energy storage additions are up around 250 percent; and battery manufacturing capacity has doubled in less than a year, going from 4 percent to 8 percent of the global market, according to BloombergNEF.

5. Clean tech manufacturing boomed

The announced solar, EVs, and battery manufacturing capacity now exceeds what is needed under the most aggressive net-zero scenarios. Rystad Energy estimates that the solar industry has 2,400 GW of announced manufacturing capacity in the pipeline to 2026 and the auto industry has production plans for 80 million EVs by 2030. BloombergNEF tracks 12.5 TWh of announced battery manufacturing capacity in the pipeline to 2030.

6. Policy ratcheted higher

Around the world, policy has progressed, from EU’s Green Industrial Plan to Australia’s Rewiring the Nation to India’s Green Hydrogen Mission. Energy productivity measures have gained a heightened focus. Since the start of the energy crisis in early 2022, countries representing 70 percent of global energy demand introduced or strengthened efficiency policy packages, according to the IEA.

At COP28, around 130 countries committed to triple renewable capacity and double energy efficiency.  Tripling renewable capacity is an exponential goal: a commitment to maintain the 17 percent average annual growth rate renewables have enjoyed over the past seven years into the next seven. Doubling energy efficiency represents a recognition of the enormous efficiency upside renewables and electrification will inevitably bring, and that the way to “phase out” fossil fuels is to squeeze fossil fuel demand from both sides. For these commitments to come out of the “Oil COP” illustrates a new reality: fast interests are increasingly outmuscling slow interests. If policy helped change the economics of clean energy, now the new economics are changing the politics.

The race between tipping points is on

While the renewable revolution is moving faster than many thought possible, this year has provided ample evidence that so too is climate change. Records in clean energy deployment have met record air and ocean temperatures. The Global Tipping Points report highlights five Earth System tipping points that we risk crossing at present warming levels. The renewable revolution is coming fast, but it can’t come fast enough.