The firm’s latest analysis predicts developers will put more than 5.4 terawatts (TWac) of new solar and wind capacity online over the next decade, increasing the cumulative global total to 8 TWac.

Energy storage capacity (excluding pumped hydro) will grow by more than 600%, Wood Mackenzie predicts, as nearly 1 TW of new capacity is expected to come online from 2024-2033.

“Global demand for renewables has reached unprecedented levels, driven by country-level policy targets, technology innovation, and concerns over energy security,” stated Luke Lewandowski, vice president of global renewables research at Wood Mackenzie. “Integrated power technology solutions will continue to evolve, evidenced by a significant increase in storage-paired capacity growth, despite inflation, grid constraints, and permitting challenges.”

Annual capacity will increase from approximately 500 GW of new solar and wind capacity installed in 2023, and average 560 GW annually over the 10-year outlook. China will continue to dominate solar, energy storage, and wind uptake, with 3.5 TWac forecast to be grid-connected between 2024 and 2033, notes WoodMac’s analysis.

“Solar PV leads the deployment race, accounting for 59% of global capacity due to come online between 2024 and 2033. Energy storage will have the most balanced geographic footprint over the outlook due in part to its important role in helping to make renewable power available,” Lewandowski added.

Solar: Cumulative installed global solar PV capacity to nearly quadruple from 2024 to 2033

“Ultra-low module prices intensified the rate of solar deployments last year in Europe and China and will continue to do so in the near-term. But grid constraints and a return to lower power prices and subsequently lower capture rates will impact markets and other regions,” said Juan Monge, the principal analyst of distributed solar PV at Wood Mackenzie.

Wood Mackenzie’s global solar PV forecast projects 4.7 terawatts direct current (TWdc) will be built between 2024 and 2033, with China accounting for 50% of that capacity growth.

Monge added: “Ultimately, maximizing solar PV capacity, and wind power capacity for that matter, in the next 10 years will depend on additional technology developments: from expanding grid infrastructure to incentivizing flexibility solutions, transportation, and heating electrification.”

In 2023, drastic drops in Chinese module prices and tight deadlines to interconnect tendered projects triggered 150% annual growth for installations across all solar PV segments, the analysis explains. Year-on-year increases in annual installed capacity will continue until 2026, when Wood Mackenzie forecasts a two-year slowdown due to an expected pause in development activity before the next round of planned procurement drives higher deployment.

For installations in the first quarter, developers in the US installed more solar in the first quarter of 2024 than in all of 2019, installations in China were up 36% year-on-year, and new capacity in India through Q1 amounted to 85% total capacity installed in 2023. However, Europe’s distributed PV boom has started to weaken, with first quarter residential installations contracting more than 30% in Germany and over 50% in the Netherlands as retail rates come down.

Energy storage: Global cumulative capacity will increase sixfold by the end of 2033, passing 1 TW/3 TWh

“Global energy storage deployment in 2023 achieved record-breaking growth of 162% compared to 2022, installing 45 GW/100 GWh. While impressive, the growth represents just the start for a multi-TW market as policy support in terms of tax exemption and capacity and hybrid auctions accelerate storage buildout across all regions,” said Anna Darmani, principal analyst of energy storage at Wood Mackenzie.

The global energy storage market is on track to reach 159 GW/358 GWh by the end of 2024, according to Wood Mackenzie’s Q2 global energy storage market outlook update. Looking ahead, 926 GW/2789 GWh will be added between 2024 and 2033, marking a 636% increase.

China remains the global leader in energy storage due to its booming solar market, with an average of 42 GW/120 GWh annual capacity additions forecasted in the next 10 years.

In Europe, grid-scale projects are booming as developers aim to seize opportunities from emerging contracted revenues. Demand from the distributed segment has decreased by 23% in 2024 as retail rates stabilize. With lower system costs and regulatory changes, however, distributed market growth is expected to resume from 2026.

Wind: Global wind power industry to add more than 1.7 TW over the next 10 years

According to Wood Mackenzie’s Q2 global wind market outlook update, policy support from China’s central government drives the world’s largest wind market, with China forecasted to install 91.5 GW on average annually.

“China’s central government announced a plan in May to promote the energy transition and ensure the country meets carbon-neutral targets,” explained Lucas Stavole, senior research analyst at Wood Mackenzie. “Project development has been accelerated in the short-term and renewable energy investment will be a long-term economic driver.” 

Challenges with permitting, grid access, financing, and supply chain availability impact the 2024 to 2026 outlook, pushing capacity into 2027 to 2033 and beyond the 10-year horizon. These dynamics impacted countries primarily in North America, Western Europe, and Asia.

Outside of China, wind additions globally will average 85 GW per year, a robust increase compared to the prior 10-year average of 37 GW. Additions in the Americas region will total 230 GW through 2033, as the offshore wind sector gains a foothold in the region and government incentives continue to drive growth.

The offshore wind sector, after connecting 11 GW globally in 2023, will average 39 GW of connected capacity annually from 2024 to 2033, (386 GW total), culminating in 54 GW in 2033. More than 50% (199 GW) of the total offshore wind capacity installed over the outlook period will be installed in China.

The performance was driven in large part by supply chain challenges abating and delayed solar projects moving forward.  

Wood Mackenzie said it now expects the solar market to triple in size over the next five years, bringing total installed solar capacity to 378 GW by 2028.   

The strong quarterly report was tempered by news that the community solar segment installed 212 MW, a 13% decrease from Q1 2022. The report blamed the segment’s poor performance to ongoing interconnection challenges.  

The report said the 2022 Inflation Reduction Act spurred a surge of new manufacturing announcements, with domestic module capacity expected to rise from fewer than 9 GW today to more than 60 GW by 2026. At least 16 GW of module manufacturing facilities were under construction as of the end of the first quarter. 

Workforce challenges

An ongoing challenge for the industry is the lack of qualified EPCs to meet booming demand for solar projects. Incentives in the Inflation Reduction Act only stand to magnify the shortfall.

“The first holistic problem is that there are just not enough skilled workers to perform all of the work,” Chris Dunbar, CEO of Blue Ridge Power, a leading utility-scale solar and storage EPC, said on the Factor This! podcast.

Top-tier developers still receive “healthy” competition from the five or so EPCs jockeying to build their projects, Dunbar said, and there’s enough work to go around. These projects have a buildable site, realistic timelines, a clear path to financing, and at least a portion of the feasibility and engineering work completed.

But for projects lacking in one or more of those critical areas, developers likely will have a tough time securing a qualified EPC in today’s solar market.

Tax credit clarity

The Biden administration provided some clarity during the quarter on how the IRA’s adder credits will be applied. The law contains new credits that can be used in conjunction with the solar Investment Tax Credit, like the domestic content, energy communities, and low-income adder credits. In particular, the energy communities and low-income adder guidance will help drive solar and storage investment in underserved communities.  

Even so, the repot said that challenges remain with the implementation guidance for the domestic content adder credits in the near-term.   

Because the rules to comply with the domestic content adder credit are complex and there is currently no crystalline silicon solar cell manufacturing capacity in the United States, it could take a few years before the credit can be widely used. SEIA also said the rules fail to provide specific directions for the residential market, leaving this market segment without clarity. 

Michelle Davis, head of global solar at Wood Mackenzie and lead author of the report, said in a statement that qualifying for the domestic content adder will be a “very complex process for solar project developers.” She said that even after crystalline silicon cell manufacturing is established, many other components will need to be produced domestically before projects can qualify. 

Utility scale rebound

The utility-scale market rebounded from what the report said was a difficult 2022 with a record 3.8 GW of installed solar capacity. More module importers were able to satisfy documentation requirements under the Uyghur Forced Labor Prevention Act (UFLPA). The report said this enabled more solar equipment to make it to project sites and allowed the industry to restart its pipeline of delayed projects. 

The residential segment installed 1.6 GW of solar capacity in the first quarter, a 30% increase from a year earlier. The report said the residential market segment is on track to add 36 GW of solar over the next five years, growing at an average annual rate of 6%. Higher interest rates and economic headwinds, however, were causing some buyer hesitancy, the report said.

The commercial market also had a record first quarter, with 391 MW installed, putting the segment on track for 12% growth in 2023.

Florida ranked as the top solar state in during the first quarter thanks to 1.46 GW of utility-scale solar installations. Florida installed over 70% more solar capacity during the quarter than the next highest state, California.  

The solar industry accounted for 54% of all new electricity generating capacity added to the grid in during the quarter.

Those are the key findings in a new report from consultancy Wood Mackenzie. The project pipeline for both CCUS and low-carbon hydrogen saw record growth in 2021. The report said that developers were encouraged by increased net zero targets, new policy support and technology advancements.

More than $66 billion was invested in hydrogen in 2021, with projects looking at every aspect of the value chain from R&D to refueling infrastructure.

The report said the CCUS pipeline of announced projects grew seven-fold, with 50 new hub projects globally. The low-carbon hydrogen pipeline more than doubled, with green hydrogen projects making up 75% of the announcements.

Mhairidh Evans, principal analyst, CCUS and Emerging Technologies, and co-author of the report said, “We don’t believe we will see the same growth rate for the CCUS and hydrogen pipelines in 2022.

She said that the coming year will be about maturing projects and securing funding. Around 75% of the CCUS pipeline is in early development. For hydrogen, almost 40% of the project pipeline does not have an estimated date of operation and 25% lacks even an estimated capacity. Evans said that a mark of success for 2022 “will be more projects in advanced development or under construction.”

Wood Mackenzie said it is tracking 15 CCUS projects aiming for final investment decision (FID) this year. If developed successfully, they will add around 35 million tonnes per annum (Mtpa) of new CO₂ capture or storage capacity and would require investment of around $18 billion. The firm said that large volumes of CCUS capacity are not expected to come online in 2022.

Wood Mackenzie said more capital flow is needed for hydrogen production projects, requiring more offtake agreements. This could mobilize anywhere from $3.5 billion to $22 billion that the firm said is necessary for hydrogen production projects to reach FID in 2022.

In 2022, 33 projects – mainly in Europe and Asia – should begin operation. Those facilities would represent 0.1 Mtpa of low carbon hydrogen and 50 ktpa of green ammonia entering the market.

Wood Mackenzie also looked at the implications of the United States’ Build Back Better Act, which is stalled in the Senate due to opposition by Sen. Joe Manchin (D-WV). The report said that “significant investment hangs on the act passing Congress this year.”

In mid-December, Wood Mackenzie and the Solar Energy Industries Association said that logistical challenges and price increases in the solar supply chain could result in a 7.4 GW (25%) drop in solar installations for 2022 compared to previous forecasts. They said that passage of the Build Back Better legislation would help to mitigate that potential decline.

Flor Lucia De La Cruz, senior research analyst, Hydrogen & Emerging Technologies, said that 2022 likely will be an important year for translating policy into reality.

“It’s a tough political ask in some countries and we expect drawn-out negotiations to mean delays,” she said.

Technology scale-up will be crucial to maintain and build momentum for CCUS and hydrogen, the report said. Green ammonia has been hailed as one of the cheapest pathways to transport green hydrogen around the world but it, and hydrogen carriers in general, have their challenges.

Wood Mackenzie said it expects more technological solutions related to storage and chemical plant design in 2022. Direct Air Capture is expected to move from wildcard to reality, with drivers including $3 billion of funding through the Bipartisan Infrastructure Bill, growing demand for e-fuels and the growing voluntary carbon market.