In the United States, where the wind and solar markets contracted last year due to restrictive trade measures and supply chain constraints, annual additions for both technologies are expected to increase by around 40% in 2023, and solar PV installations will set a new record. 

The Inflation Reduction Act’s impact on renewable energy technology deployment in the U.S. will become evident in 2025, the IEA said. 

“The current forecast is underpinned by existing tax incentives, while the Inflation Reduction Act will show its full effect after 2024, providing unprecedented certainty for renewable energy projects until 2032,” the agency added. 

However, the IEA warned that the rapid expansion of renewables comes with a set of challenges that need to be overcome if current projections for the medium and long term and for a net-zero scenario are to be met. 

The expansion of wind and solar PV needs to be accompanied by policies and market rules supporting grid infrastructure, flexibility investments, and permitting, according to the agency. 

“Inadequate investment in grid infrastructure remains a challenge worldwide not only for faster growth in new wind and solar PV capacity, but also for maximising generation potential from existing power plants,” it said. 

The share of curtailed wind and solar generation is rising in many markets as the share of variable renewable energy (VRE) increases. The increased renewable generation curtailment is particularly evident in areas where major grid infrastructure investments and/or advanced market design and regulation fail to keep pace with renewables deployment, the agency said. 

Costs for renewables are on track to drop, but not as much as to reach the levels from before the energy crisis, supply-chain bottlenecks, and higher interest rates.  

Electricity generation costs from new utility-scale onshore wind and solar are set to remain 10-15% above 2020 levels in 2024, despite the falling commodity prices. The financing costs for developers have increased along with the rise in interest rates. 

The global average levelized costs of energy (LCOEs) for onshore wind and solar PV are set for some declines this year and next, but they will remain higher than in 2020, the IEA said.