Winds of change: How clean energy is shaping the global future

Posted on 25 Dec 2024

Synopsis

The global clean energy transition is rapidly advancing, with renewable energy deployments, particularly solar power, surging across countries like China, India, and the U.S. Key drivers include falling technology costs, such as solar panels and electric vehicle batteries, making clean energy more accessible. However, challenges remain, including regional disparities, policy inconsistencies, and slower adoption of technologies like heat pumps. While global electric vehicle sales and renewable electricity generation are on the rise, varying market dynamics in different regions highlight the complex nature of the transition. As nations strive to decarbonize, innovation and international cooperation will be crucial to accelerating progress and addressing emerging gaps.

Image courtesy: AI

In the race to curb carbon emissions and tackle climate change, clean energy has emerged as both a beacon of hope and a complex battleground. Across the globe, countries are ramping up renewable energy deployments, but the journey is anything but straightforward. From surging solar power adoption in China to slowing heat pump sales in Europe, the clean energy transition reflects a dynamic interplay of policy, market forces, and societal priorities.

A shifting energy landscape

Recent data underscores the rapid expansion of renewable energy, even in the face of economic and logistical challenges. In the first half of 2024, global solar photovoltaic (PV) capacity additions rose by 36% compared to the previous year. China, the undisputed leader in solar energy, installed nearly 130 GW — a third more than in 2023. The United States followed suit, with capacity additions increasing by an impressive 80%.

This growth is mirrored in India, where solar capacity additions surged by 90%, signalling a broader trend of emerging economies embracing renewables. India’s focus on solar aligns with its ambitious targets to achieve 500 GW of non-fossil fuel capacity by 2030. However, not all regions are keeping pace. Brazil saw a slight decline in distributed solar installations due to policy changes, while European markets posted modest gains, reflecting a plateau in some advanced economies.

The affordability factor

One of the primary drivers of the clean energy boom is the falling cost of renewable technologies. Solar module prices have dropped by nearly two-thirds since their post-pandemic peak in 2021. Similarly, electric vehicle (EV) battery prices have decreased by 20%, making clean technologies more accessible than ever.

These price reductions are particularly significant in developing economies, where affordability often dictates adoption rates. For instance, India’s rapid growth in solar installations is partly attributable to cost competitiveness, enabling large-scale projects to deliver electricity at record-low tariffs. Meanwhile, declining prices also benefit homeowners and small businesses, spurring demand for distributed systems.

However, the financial landscape for clean energy manufacturers paints a more complex picture. Profit margins for Chinese solar PV firms plummeted to -5% in 2024, highlighting challenges such as excess capacity and fierce competition. On the other hand, China’s battery manufacturers saw margins rise to over 11%, buoyed by robust demand and market concentration.

Electric vehicles: a global shift in gear

The electric vehicle sector continues to gain traction, with global sales increasing by 25% in the first half of 2024. EVs now account for nearly 20% of all car sales worldwide. China remains the frontrunner, where nearly half of all vehicles sold are electric. Policies like trade-in schemes and subsidies worth $2,770 for new energy vehicles have incentivized adoption, ensuring that EVs dominate the country’s automotive landscape.

Elsewhere, EV adoption is more nuanced. The United States recorded a steady 10% growth, supported by new model launches and federal incentives. Europe’s growth, however, was limited to 3%, reflecting the phase-out of subsidies in key markets like Germany. Despite this, countries such as the United Kingdom and the Netherlands posted notable gains, underscoring the region’s potential for recovery.

Emerging economies are also catching up. Brazil, Indonesia, and Mexico recorded EV sales growth of 270%, 160%, and 140%, respectively, albeit from a low base. These trends highlight the sector’s global reach and its potential to transform mobility in both developed and developing regions.

The heat pump paradox

While solar and EVs shine, heat pumps tell a more sobering story. Global heat pump sales fell by 10% in the first half of 2024, driven primarily by a 50% decline in Europe. High electricity prices and reduced subsidies have dampened demand, despite the technology’s potential to decarbonize heating and cooling.

China stands as a counterexample, with heat pump sales growing by 13%, thanks to government-backed initiatives and rising awareness. The United States also showed resilience, where heat pumps continue to outpace gas-fired units. Tax credits of up to $2,000 and rebates for low-income households are helping sustain momentum.

Decarbonizing electricity: progress and pitfalls

Electricity generation is a critical front in the fight against climate change. By mid-2024, countries covered by the International Energy Agency’s Real-Time Electricity Tracker reported a 1% reduction in CO2 emissions, despite a 2.5% increase in total generation. This decoupling of emissions from energy production signals progress but also highlights regional disparities.

In the European Union, renewables accounted for nearly 50% of electricity generation, pushing coal and gas to a record-low share of 23%. India, however, saw both electricity demand and emissions rise by 5%, driven by economic growth and record-high temperatures. The United States experienced mixed results, with emissions stabilizing after a challenging start to the year marked by extreme weather.

Policy, perception, and the path ahead

The clean energy transition is as much about policy and perception as it is about technology. Supportive policies like India’s Production Linked Incentive (PLI) scheme for manufacturing and the U.S. Inflation Reduction Act are pivotal in shaping markets. Yet, inconsistent policies in some regions — such as Europe’s retreat from heat pump subsidies — can hinder progress.

Public perception also plays a crucial role. In regions like China and India, clean energy is often framed as a pathway to energy security and economic growth. In contrast, advanced economies grapple with public skepticism around costs and feasibility, particularly in sectors like heating.

Bridging the gap

To truly accelerate the clean energy transition, stakeholders must address critical gaps. Emerging economies require greater access to finance and technology, while advanced economies need to align policies with long-term goals. International cooperation, bolstered by platforms like the COP summits, can facilitate knowledge sharing and resource allocation.

Recent global developments also highlight key innovations driving the industry. The rise of offshore wind capacity, with record auctions in 2024 across 17 markets, demonstrates a significant push toward renewable energy. Battery storage and electrolysis investments are expected to be the fastest-growing areas, underscoring the need for scalable, reliable energy storage solutions to complement intermittent renewables.

A new era for clean energy

The findings from reports and real-world developments reveal a clean energy landscape that is dynamic, multifaceted, and filled with opportunities. As countries navigate this transition, the stakes couldn’t be higher. From mitigating climate change to ensuring energy security, clean energy is not just an option — it’s an imperative.

Kindly follow us for updates on:

LinkedIn