The Big Picture

The global electricity system is transforming – but not yet fast enough

Wind and solar are the new energy superpowers. They are pushing us towards a new era of falling fossil generation, which will mean not only a phasedown of coal power but also of gas power. But we’re not there yet. Keeping global heating to 1.5 degrees means delivering on the huge expectations set for wind and solar, and picking up speed on other clean electricity sources (including nuclear and hydro) that are currently being built too slowly. There remains much work to be done to achieve the rapid falls in power sector emissions needed this decade.

Wind and solar emerge as the world’s future superpowers

Wind and solar are the new energy superpowers. They are pushing us towards a new era of falling fossil generation, which will mean not only a phasedown of coal power but also of gas power. But we’re not there yet. Keeping global heating to 1.5 degrees means delivering on the huge expectations set for wind and solar, and picking up speed on other clean electricity sources (including nuclear and hydro) that are currently being built too slowly. There remains much work to be done to achieve the rapid falls in power sector emissions needed this decade.

Same journey, different speeds

Solar and wind are changing the electricity mix in every region of the world. Europe started that shift earliest, and has been leading throughout this century. However, recently Europe has been overtaken by Oceania, mostly due to rapid growth in Australia. North America also started wind and solar deployment early and has been ahead of the global average. Asia started later, but is catching up fast, and is now almost at the world average. Latin America’s wind and solar surged from 2014 to 2021, but then slowed in 2022. Africa has slowed in the last few years. The Middle East stands out as the only region that is still at the start of its journey, with poor data transparency that also makes it difficult to estimate changes in 2022.

Leaders and laggards

The EU generated 22% of its electricity from wind and solar in 2022. Seven EU countries generated around a third or more of their electricity from wind and solar in 2022, including Germany (32%), Spain (33%) and the Netherlands (32%). Poland and Hungary are now above the global average of 12%. At the edge of Europe the picture is varied: Türkiye is above the global average, at 15%, Russia is at 1%.

In North America, the US (15%) is above the global average; Canada is behind at 7%.

Three of the world’s top five absolute generators of wind and solar are in Asia. China is above the global average, at 14% (1241 TWh); Japan is just under the global average at 11% (107 TWh) India, is just under, at 9% (165 TWh). Most other countries in Asia are at the start of their solar and wind journey: South Korea (5%), Pakistan (4%), Thailand (4%), the Philippines (2%), Singapore (2%), Bangladesh (1%) and Malaysia (1%). All Eurasian countries, except for Kazakhstan, have almost zero.

In Latin America, many countries are at or above the global average: Uruguay (36%), Chile (28%), Brazil (15%), Argentina (12%). However, some countries—for example, Cuba (1.4%), Colombia (0.7%), Ecuador (0.3%), Venezuela (0.1%) and Paraguay (0.0%)—have built little so far. Apart from Cuba, however, they do all have a high clean share because of large hydro resources.

In Africa, Namibia (25%), Morocco (17%) and Kenya (16%) lead for wind and solar share. But elsewhere reliance on solar and wind is mostly far below the global average. 

In the Middle East, solar and wind have yet to establish themselves. Many countries have under 1% in the mix. This includes Bahrain, Iran, Iraq, Kuwait, Lebanon, Oman, Qatar, and Saudi Arabia. Saudi Arabia has published big plans for renewables, however with little demonstrable progress towards those so far. 

Lessons learned from two decades of solar and wind deployment

The wide variation in wind and solar uptake is a reflection of diverging approaches to energy transition and power system reform across countries. Case studies of wind and solar rollout show the enormous patchwork of policy decisions, market forces and national momentum that feed into what makes a national energy transition successful or not. Here we look at three case studies in more detail. First, China’s innovative rooftop policy that pushed solar to new levels in 2022. Second, Chile’s rise in solar and wind, and how it has rapidly cut its coal use and power sector emissions. And third, lessons from Europe’s stop-start policies on onshore wind that have prevented more rapid and cheaper growth of wind.

Innovative rooftop solar policy: China case study

About a fifth (55 GW of 268 GW) of all the solar panels installed globally in 2022 were on China’s rooftops. This was largely driven by an innovative policy called Whole-County Rooftop Solar. The project is a three-year scheme. 2022 was the second year, with installations doubling from the 29 GW added in 2021.

The scheme was implemented with a top-down structure, but carried out at the city or county level. By late 2021, there were 676 counties from 31 provinces that had enrolled into the scheme. A single developer (often a state owned enterprise) administers the entire county-wide application. The developer works in conjunction with a network of smaller ‘village-level’ or ‘town-level’ developers, who take on the work of identifying the rooftops and securing project development rights. In some instances, the panels are owned by the individual, and the individual sells surplus power back to the developer. In other instances, the panels are owned by the developer, and instead of earning rent, the rooftop owner receives discounted electricity.

This total county-scale approach enables a fast roll-out and cheap prices. The speed and coverage of roll-out is unprecedented: by the end of 2023 each county developer needs to have commissioned installations to cover 50% of the available area at government buildings, 40% at schools and hospitals, 30% for industrial buildings and 20% for rural households. It also means cheap prices: cheap financing can be secured to keep costs down, and all components can be bought at wholesale prices.

How wind and solar have cut power sector emissions: Chile case study

Chile has seen a significant increase in its wind and solar generation. Combined, wind and solar have gone from generating just 0.6% of total power in 2012 to 28% in 2022, becoming the largest source of electricity in Chile and overtaking coal. The rise of wind and solar generation over the last ten years has driven a 27% decline in coal power generation, reducing emissions from the power sector by 15%, despite overall demand growing by more than a quarter in the same period.

The ten years prior to 2012 told a very different story. Chile relied on coal to meet its growing electricity demand. As demand rose by nearly 50%, coal generation increased fourfold, prompting emissions to rise by 159%, or 20 MtCO2, more than the annual power sector emissions of Chile’s neighbour Peru.

The year 2022 was particularly remarkable for Chile’s power sector. Solar generation expanded by a third, while wind and hydro power each increased by more than 22%. The overall increase in renewable electricity of 9.2 TWh far exceeded the overall demand increase of 1.7 TWh (+2.1%), allowing a 30% drop in coal generation. Ultimately, this caused power sector emissions to fall by an impressive 18% compared to 2021.

Chile is now planning for the phase-out of coal. In September, it joined the Powering Past Coal Alliance, where the country pledged to phase out coal by 2030. That brought the date forward by ten years, where it had previously planned for a 2040 phase out date. It is clear that wind and solar will be the driving forces to help phase out coal and continue to cut Chile’s power sector emissions. 

Bumpy road for onshore wind: Europe case study

Some of the biggest wind countries in Europe have seen stop-start policies. This resulted in years of lost opportunity, not only slowing down growth, but creating a huge impact on companies and employees. It is one of the reasons that there is still underinvestment in the supply chain today. 

Germany had been a world leader in onshore wind, but during 2017-2021, it only installed around a third of the capacity that it achieved in the four years before that (1.4 GW average per year, compared to 4.3 GW per year). The main causes for this slowdown were a lack of land for construction, investor uncertainty and slow licensing procedures. Germany has now swung back to a faster pace of rollout: in 2023 auction volumes were raised to 23 GW. The change in government and Russia’s war in Ukraine prompted this, with new legislation including setting aside 2% of total land area for onshore wind.

Spain’s onshore wind was a victim of its own success. There was no pass-through of the costs to customers, leading to an overall “tariff deficit” of €25bn, which was impossible to increase as the financial crisis hit Spain in 2012. This created a pause, with only 600 MW installed in the following six years. Spain’s build rate has now increased again.

The UK government put an effective moratorium on new onshore wind farms in 2015 in England because of concerns over the visual impact of wind farms. It is still in place seven years later. However, in December 2022, the government began consultations to lift the block, while maintaining the ability for local communities to oppose projects. It is not clear how or if this will be implemented, and thus how quickly build-rates will pick up as a result. 

Solar and wind are the new superpowers, but how much will they grow?

A lot is expected from solar and wind in order to achieve climate targets. The IEA Net Zero Emissions scenario shows that solar and wind need to rise from 12% of global electricity supply in 2022 to 41% by 2030. A similar starring role for wind and solar is set out in the IPCC synthesis report, released in April 2022. The median of all the scenarios assessed by the IPCC shows the same as the IEA: wind and solar are expected to rise to 41% of global electricity by 2030.

According to the latest IEA’s short-term forecasts from December 2022, solar and wind are lagging behind on this trajectory, rising to “only” 20% of global electricity share by 2027. Without doubt, this is a conservative estimate, the under-forecasting of wind and solar by the IEA is well documented. Regardless, it is still far from clear whether we can achieve the 41% market share needed by 2030.

Considering growth rates offers an alternative and perhaps more encouraging perspective. According to the IEA Net Zero Emissions scenario, annual growth rates of 25% for solar and 17% for wind need to be maintained from 2021 to 2030. These were almost exactly achieved in 2022: 24% for solar and 17% for wind. From 2015 to 2021, growth rates were near those levels: 26% and 14%. 

Consistently achieving such high growth rates gets harder as market share rises. Still, there are reasons to believe that wind and solar may grow much faster than the conservative IEA forecast from December 2022 sets out.

Solar is relatively new as a key player in the global power mix: it lagged seven years behind wind in reaching the critical milestone of generating 1% of the world’s electricity. Wind achieved this in 2008, but solar only passed that mark in 2015. However, solar is catching up: it has been the fastest growing electricity source for each of the last 18 years. Global solar capacity already exceeds wind capacity, although with lower load factor, it produces less electricity than wind. 2023 is likely to be the first year where solar adds more generation than wind. 

One major advantage of solar is the speed of deployment. Wind requires complex supply chains, permissions and offtake contracts. The time it takes to buy a solar panel and install it on a roof can be measured in days, rather than months or years. This means that new-build wind in the next few years can be forecasted with a fair degree of accuracy. Predicting solar growth is much harder.

In the short term, there is a huge opportunity for solar to grow even faster than forecast. Major new solar manufacturing plants came online in China in 2022, reportedly increasing annual manufacturing capacity by 66%, from 361 GW at the end of 2021 to 600 GW at the end of 2022. This rise in China’s solar manufacturing capacity far exceeds the expectations for solar panel demand in 2023. Compared to 2022, the number of solar panels installed during 2023 is expected to increase between 27% (BNEF) and 5% (IEA). The 66% rise in supply might, however, drive more demand. Against this backdrop, it is understandably difficult to predict just how quickly solar might grow in 2023—let alone in 2030. Researchers are likely to err on the cautious side, meaning it is very possible that solar growth will exceed those expectations.

What is clear is that solar and wind are on track to have a massive presence in the global power mix. They will without question fundamentally change the global electricity system. As with any rapid change, problems and opportunities abound. 

For wind, many countries have ambitious targets that are held back by implementation. For solar, the opposite is true. Far more solar panels are being installed—or could easily be installed—than are currently planned for. Policymakers must harness the influx of solar power. That means understanding what it means for skills needed, changes to market design and tariffs (given the solar generation profile is quite specific), unlocking rooftop access, auction design for utility scale, power system flexibility, solar manufacturing supply chains and trade policy.

The world’s largest clean electricity sources are underperforming

Despite their rapid growth and place in the future global power mix, the world’s largest sources of clean electricity are neither solar nor wind, at least not yet. Instead, hydro and nuclear are currently the largest clean sources, generating 15% and 9% of the world’s electricity respectively in 2022. Although the growth expectations for these technologies are smaller compared to solar and wind, they are not currently being expanded at the rate needed to limit global warming to 1.5C. Hence their slowdown could have big implications for the electricity transition.

The falling market share of nuclear and hydro

In 2022, clean electricity sources (excluding solar and wind) saw their first year-on-year fall in generation since the Fukushima nuclear disaster in 2011. This grouping includes the two largest sources, hydro and nuclear, and also other technologies that currently contribute a smaller proportion of low-carbon electricity: bioenergy, CCUS, hydrogen, geothermal and marine. The fall in 2022 was predominantly due to the nuclear plant outages in France, while the small rises in hydro and bioenergy only partly offset this. Whilst it is unlikely this fall will continue in future years, it is clear that growth is slowing: in both 2020 and 2021, clean electricity (excluding wind and solar) grew at half the average annual growth since 2000.

Already, nuclear and hydro’s market share had been falling throughout this century, because growth rates were below that for global electricity demand. Nuclear’s share of global electricity production fell from 17% in 2000 to 9% in 2022, while hydro fell from 18% to 15%.

Their pace of growth has been eclipsed by the rise in solar and wind. In 2022, solar and wind added 557 TWh; this was five times the average amount added by nuclear, hydro and bioenergy (105 TWh yearly average 2000-2022).

Capacity data offers some insight into this stalling in nuclear and hydro generation. Net nuclear capacity actually fell from 2019 to 2021, as more plants closed than opened. 

Hydropower capacity growth has slowed in recent years. From 2017 to 2021, an average of 20 GW per year was added, compared to 33 GW in the five years before that. That was largely due to the slowdown in China, which had been building around half of the world’s hydro capacity.

Did 2022 kickstart a nuclear renaissance?

There are 440 nuclear power reactors online today, providing 9% of the world’s electricity. An additional 48 are planned to come online from 2023 to 2027, according to the World Nuclear Association. Nineteen are in China, eight in India, six in South Korea, four in Türkiye and three in Russia. That’s reasonable progress: they will provide 60 GW of capacity and generate around 420 TWh every year, which would add a third of the net nuclear generation increase required in the IEA Net Zero Emissions scenario from 2021 to 2030, not taking into account the decommissioned plants coming offline. 

However, 2022 brought new momentum in nuclear power that may see even more nuclear plants come online. With long timelines for construction, they will have limited impact in the next few years, but could provide substantial amounts of clean power after that. 

In the United States, the Inflation Reduction Act has provisions to substantially help boost nuclear power by keeping older plants online, building supply chains for new build plants using current technology, and expanding R&D budget for new small modular reactors (SMRs). The closure of the Diablo Canyon nuclear plant in California was also postponed.

Japan has seen a major shift, not just by restarting existing nuclear plants (with record support from the Japanese public), but also proposing new plants. In south east Asia, the Philippines, Indonesia and Vietnam progressed discussions on nuclear power. South Korea announced plans to build four more nuclear reactors by 2030 and extend the life of ten older units, increasing nuclear market share from 27% in 2021 to 30% in 2030, and then to 35% by 2036. 

China is planning to increase nuclear power capacity from 50 GW in 2021 to 70 GW in 2025, following the announcement of its 14th Five-Year Plan in 2021. Russia set a 2045 target to increase nuclear power from 20% of electricity today to 25%, with plans to build 16 reactors by 2035. 

In Europe, there was momentum too. Poland progressed the first of six new planned nuclear plants, the UK proposed to build eight new reactors and allocated R&D funding for modular reactors, France’s EDF has brought forward the construction start date of its six planned reactors, Romania announced plans to build two new plants, one of two new plants in Hungary began construction, and Slovakia brought one unit online and is considering future growth. Construction woes also hit in Europe: commercial operation of Finland’s new nuclear power plant has been postponed, France’s new Flamanville plant has been postponed again, and the UK’s Hinkley C plant has seen costs spiral.

Wake up call for 1.5C

The recent slowdown in nuclear and hydro generation growth shows the importance of maintaining sufficient focus on deploying all clean electricity sources. 

Solar and wind will undoubtedly dominate growth in clean electricity. Since 2015, 76% of the growth in clean electricity generation has been from solar and wind, and the IEA Net Zero Emissions scenario anticipates that they will account for 75% of all clean electricity growth to 2040. 

However, these technologies alone are not enough. Growth in other clean electricity sources will be very helpful, if not essential, for the world to reach fully clean electricity by 2040. A larger toolkit of options lowers the risk that the world fails to decarbonise electricity at the required pace. They also provide some of the flexibility essential to integrating variable renewable sources.

Hydro needs a fivefold rise in investment, according to IRENA’s 2023 report The changing role of hydropower. The report highlights the need to double hydro capacity by 2050, the lack of policy mechanisms to make that happen, and the importance of a sustainable approach that avoids severe ecological damage. This investment in hydro needs to maximise flexibility to help integrate more solar and wind, with an emphasis on electrical capacity and storage. IRENA’s report also identifies the huge potential of floating solar on hydro reservoirs to increase generation and reduce evaporation.

Nuclear also needs increased attention to meet climate targets, with the IEA’s 2022 report Nuclear Power and Secure Energy Transition calling for a renaissance. The report highlights the importance of life extensions for ageing plants, diversification away from Chinese and Russian designs, bringing down costs and delivering on time, as well as the future potential of small modular reactors. 

Elsewhere, bioenergy’s growth is slowing, as significant climate risks in the technology are exposed, and many governments are losing faith in subsidising expensive internationally traded wood pellets. Unlike solar and wind, bioenergy also relies on an often expensive fuel, and so has not been able to mature away from subsidies.

New clean power technologies

The clean power toolkit includes not only wind, solar, hydropower, nuclear and bioenergy, but also green hydrogen, carbon capture and storage (CCS) and more niche technologies including geothermal, marine and concentrated solar power. Clean power is in the midst of an innovation revolution, and there will be surprises as different technologies progress at unpredictable speeds. CCS and hydrogen are two of the most contentious in terms of what they might be able to deliver.

Carbon capture and storage of fossil fuels is expected to play a small role in a future clean electricity system. The IEA Net Zero Emissions scenario shows 2% by 2050, and the median of the 1.5 degree IPCC scenarios shows around 1-2% by 2040. The biggest reason for that slow uptake is lack of policy support: there are very few large-scale demonstrations of CCS in the power sector. Although there is currently a lot of interest in CCS, most is outside the utility sector: only the UK, Canada and the US have proposed large CCS projects with gas power. China is developing CCS with coal power and there are also some efforts in the US.

Green hydrogen is essentially a form of electricity storage, the result is no net electricity generated, but rather the flexibility to match demand to variable supply. Surplus clean electricity on windy or sunny days can be converted into hydrogen, stored, then burned when there is limited wind and sun. However, the costs and inefficiencies mean it is far from a panacea. Likewise, importing hydrogen by ship to burn it comes with technical and economic challenges. Hydrogen’s reputation is muddied by the different colours (that is, the sources used to generate it, fossil vs clean), and the end-to-end carbon savings actually produced by these approaches. Regardless, hydrogen will undoubtedly start to be used in gas power plants this decade. Germany alone is proposing to build up to 20 GW of new hydrogen-ready gas power plants. Many gas power plants can be converted to burn hydrogen.

Both CCS and hydrogen are starting from a baseline of almost no generation today. Only time will tell how much they contribute to clean power in the future. What is important is that they do not detract from maximising the growth of solar and wind, which is unquestionably needed. And since the origins of both technologies are rooted in fossil fuels, it is also important that they do not detract from the overall momentum to phase out unabated fossil fuels.

Close to a tipping point where clean sources meet all demand growth

Meeting all growth in electricity demand with clean power is a critical tipping point.

First, this marks the point where power sector emissions stop rising. Clean power can actually go to replacing fossil fuels, instead of just meeting rising demand. When one kilowatt hour of clean power replaces coal or gas, power sector CO2 emissions fall by around 900 grams and 400 grams respectively.

It is also the point at which clean power is meeting the electricity growth needed to decarbonise other sectors. When one kilowatt hour of clean power is used in an electric car to replace oil or in a heat pump to reduce gas, emissions would fall by 700 grams and 600 grams of CO2 respectively. These emission falls happen outside of the power sector.

In the long term, as electrification of the economy picks up, the emissions savings of clean power will be larger outside the power sector than inside the power sector, as long as clean power grows in line with the electric economy.

Getting close to the global tipping point

The gap between the growth in clean electricity generation and the growth in electricity demand has been narrowing in recent years.

In 2022, clean power came close to meeting all the growth in electricity demand. Electricity demand rose by 694 TWh (+2.5%) in 2022, in line with the average growth for 2010-2021. In 2022 growth in wind and solar met 80% of the increase in electricity demand, while all renewables together met 92% of the rise. However, as a result, coal and other fossil fuels still had to rise to meet the remaining gap in demand as well as the shortfalls from nuclear and gas generation. 

Every year, this gap has been closing. For example, the growth in wind and solar in 2018 met 26% of the demand growth, compared to 80% in 2022. 

Clean power growth has met all of the electricity demand rise before: in 2015 and 2019, but only because electricity demand was below average. There is a strong possibility that clean power growth is able to meet all growth in electricity demand as early as 2023 (see A new era of fossil decline: as soon as 2023?).

Continental shift

Since 2015, the growth in clean power has been accelerating, and this is changing the global electricity sector. In North America and Europe, electricity demand has been broadly unchanged in recent years, and so the growth in clean power reduced fossil generation. Fossil generation in the EU and US both peaked in 2007, and then in Australia in 2009, Japan in 2012 and South Korea in 2018. However, none of these countries are also contending with rapid growth in electricity demand.

The rest of the world is generally still seeing fast-rising electricity demand. Encouragingly, more and more of that rise is being met with clean power.

Over half of the electricity demand rise in Asia (52%) was met with clean electricity in the seven years from 2015 to 2022, double the 26% achieved in the seven years before that. That’s important, since 84% of the global electricity demand rise from 2015 to 2022 happened in Asia.

Africa’s proportion of electricity demand growth met by clean sources also roughly doubled, from 23% during 2008-2015 to 61% during 2015-2022. The rise in clean power in the Middle East was only enough to meet 14% of the electricity demand rise during 2015-2021, although in the previous seven years there was no net growth in clean power generation. 

Latin America was unique in being the only region over the last seven years that increased clean power fast enough to meet rising electricity demand and to reduce fossil generation.

China and India: are they close?

In the last ten years, three-quarters of the global electricity demand growth was in China and India (61% and 12% respectively). The IEA estimates that for the next three years, these two countries will continue to account for most of the rise in global demand: China will account for 54% while India for 9%. Hence, the outlook for these two countries is critical to understanding the global transition.

In China, clean generation growth is coming closer to meeting all electricity demand growth. In 2022, wind and solar generation increased by 259 TWh meeting 69% of the growth in the electricity demand while all clean sources met 77%. 

However, China’s average electricity demand growth rate during the last ten years was 6%, substantially higher than the 4.4% increase in 2022. If electricity demand rises back to that trend, then clean power isn’t so close. With China’s electricity demand per capita already in line with the EU’s, the impact of energy efficiency savings on electricity demand may be even more important than the growth in clean power in determining when fossil generation begins to fall.

With the growth in China’s wind and solar generation, alongside the continued build of nuclear, hydro and bioenergy, China will likely reach peak power sector emissions and therefore peak coal in line with its 2025 target, or potentially earlier. However, it is less clear how quickly coal power will fall in the second half of this decade, which is critical to the climate since China generated 53% of the world’s coal-fired electricity generation in 2022.

In India, clean electricity growth is still a way off meeting all electricity demand growth. In 2022, electricity demand rose significantly (+124 TWh, +7.2%) as the economy bounced back after a slowdown in 2021 amid a second wave of the Covid-19 pandemic. India’s wind and solar rose only by 29 TWh, meeting 23% of the demand growth, while all clean sources rose by 47 TWh, providing 38%. Hence clean power played a relatively small role in slowing India’s rising fossil generation.

Predicting electricity demand growth is a contentious subject within India. The last ten years (2012-2022) have averaged 5.3% annual growth in electricity demand. India’s recent draft National Electricity Plan 14 (NEP14) assumes there will be 6.1% growth on average each year until financial year 2032. As solar and wind build rates increase to meet the government’s target of 450 GW by 2030, the additional solar and wind generation could meet annual demand growth of around 4-5% through to 2030. But if electricity demand grows faster, then coal generation will likely continue to grow.

Electrification means more need for clean power

It is not only rapidly developing economies that will see an increase in demand for electricity. As clean electrification takes off, and the energy system is rebuilt around clean electricity, mature economies will also have to grapple with how to meet rising demand with clean sources.

The share of electrification in the total final energy consumption is increasing. This is predicted to rise from 20% in 2021 to 27% by 2030 as electrification helps to decarbonize different sectors, especially transport and heating, as noted by the IEA. This will mean a notable increase in electricity demand. All economies will therefore need to ensure they are building enough clean power to both meet rising electricity demand and replace fossil fuels.

A new era of declining power sector emissions

2022 may mark the end of growth in fossil fuels, finally reaching a peak for power sector emissions. This would be a step in the right direction, but there remains much work to do to achieve the rapid declines in emissions needed for a pathway aligned with 1.5C.

A new era of fossil decline: as soon as 2023?

As soon as 2023, wind and solar could push the world into a new era of falling fossil generation, and therefore of falling power sector emissions. The fall will be small in 2023, but it will get bigger every year as wind and solar grow further, which could mean power sector emissions will never peak higher than they did in 2022.

Fossil generation has fallen before, but only when electricity demand was below average due to economic woes: in 2009, 2015, 2019 and 2020. 2023 would be the first time for this to happen at a structural, enduring level.

Historically, much of the rising electricity demand has been met with fossil generation. But all that changed as solar and wind started to take over. Wind and solar generated 3,444 TWh in 2022 globally. If wind and solar had not been built, and instead that was generated with additional fossil fuels, with coal and gas in proportion to the current mix, then power sector emissions would have been 2.4 gigatonnes higher in 2022. Or, to rephrase, power sector emissions could have been 20% higher in 2022 without wind and solar.

Ember predicts that the first fall in fossil generation will happen in 2023. This is based on the assumption that 2023 will see the average percentage growth rate of the last ten years for electricity demand (+2.5%, +726 TWh), wind and solar generation (+19%, +641 TWh), and other clean power (+1.7%, +132 TWh). This would lead fossil generation to a small fall of 47 TWh (-0.3%) in 2023. This small fall is in the range of uncertainty, but if fossil generation doesn’t fall in 2023, it is fairly certain that it will fall from 2024, when wind and solar will have had a further year of growth.

Ember’s perspective is that it is a reasonable assumption to apply these growth rates to 2023. First, electricity demand growing at 2.5% looks reasonable given the macroeconomic forecasts at the moment. Electricity demand rose by 2.5 % last year, and the latest IMF forecast is showing slightly lower global GDP growth in 2023 than 2022, although weighted more towards China. Secondly, solar and wind generation growing at 19% seems reasonable based on market outlooks of solar and wind capacity additions. The most conservative is the IEA, which forecast a rise in wind and solar generation of 16% for 2023. Others show much higher: BNEF forecast that solar capacity will rise by 28% in 2023. Third, other clean electricity growing at 1.7% seems conservative—the IEA forecast a 5% rise in hydro generation and a 4% rise in nuclear generation in 2023. Fossil generation is forecast to fall 20% in the EU in 2023, and 8% in the US, compared to a rise of 3% and 2% respectively in 2022. 

Other research bodies are forecasting this moment happening soon. The view that power sector emissions may fall as soon as 2023 is also shared by Rystad Energy. In February, Rystad Energy forecast that total economy-wide emissions would peak in 2025, with the power sector seeing a fall in emissions in 2023. In January, the IEA forecast that the world is “close to the tipping point” of falling power sector emissions in their analysis to 2025, but they did not state which year this may happen.

Solar and wind take market share from fossil generation

Since 2015, there is a clear trend of solar and wind taking market share from fossil generation. Globally, wind and solar market share has risen by 7 percentage points, whilst fossil market share fell by 5 percentage points.

The graph below shows the change in electricity mix of the ten most CO2 emitting countries, which confirms that it is mostly wind and solar driving the reduction in fossil market share. 

Six of those regions saw a major market share increase in wind and solar in 2022 compared to 2015 and this led mostly to a mirror fall in fossil generation. There were only two exceptions: the EU (which had an exception in 2022 because of record low hydro and nuclear), and Japan (because it returned mothballed nuclear units back into operation since 2015).

Four of those regions saw almost no market share rise in wind and solar. Saudi Arabia and Iran met increased electricity demand with more gas and oil generation, which already dominated, leaving their electricity mix the same in 2022 as it was in 2015. Russia somewhat reduced the market share of fossil generation through an increase in nuclear generation, and Indonesia through a combination of hydro, geothermal and bioenergy generation.

Coal phasedown but without closing coal?

In late 2021, global leaders at COP26 agreed to ‘phase down’ unabated coal power. However, fewer coal power plants were closed in 2022 than in any year since 2014. 

In China, only 0.1% of its coal fleet retired in 2022 (the same as in 2021). This followed power cuts in 2021, which led President Xi Jinping to announce in 2022 to “establish the new before demolishing the old”, pushing coal closures to the back of the political agenda. But China’s appetite for new coal also showed a revival. New coal power plants–announced, permitted, and under construction–accelerated dramatically in China in 2022, with new permits reaching the highest level since 2015, and 50 GW of coal power capacity started construction in China in 2022, a more than 50% increase from 2021. The coal power capacity starting construction in China was six times as large as that in all of the rest of the world combined. This meant the net rise in coal capacity (+2%) was bigger than the rise in coal generation (+1.5%); consequently, utilisation of China’s thermal power plants fell to 4379 hours in 2022, which was below 50% for the first time.

Like China, India also faced power cuts in 2021, which then continued into 2022. In India, the Central Electricity Authority asked that no coal power plants be closed until 2030, so India–like China–is also positioning itself to keep coal power plants open for now. 

In the EU, old coal plants even reopened. There were 26 old coal units brought back on emergency standby in 2022 during this winter, as Russia cut off almost all pipeline gas into Europe. However, the average utilisation of the 26 units during the winter was just 18% and they added only 1% to Europe’s generation in 2022, and most of the plant reactivations were planned for one or two winters only. Commitments by European countries to phaseout coal are largely unimpacted.

While this trend may unnerve those hoping for rapid coal power plant closures, the ‘coal power phasedown’ needs to be measured on CO2 emission falls, not just on the number of coal power plants closed. Keeping the lights on is more important than closing coal power plants. Coal’s interim role–before it is closed–is to run in more of a back-up mode, but this will increasingly contribute to oversupply. This oversupply must not slow down the rest of investment into the transition and therefore slow down the overall fall in coal generation. 

Plans to phase down coal must therefore consider how to reduce generation, as well as retire capacity. Both Indonesia and Viet Nam have secured commitments for international financing to support them in phasing down coal use and expanding clean energy. India is also considering whether to negotiate a clean energy transition deal; if it does, it may not be as explicit in its commitments to phasedown coal.

A gas power phasedown is coming soon

2022 changed everything for gas. Russia’s invasion of Ukraine triggered record-high gas prices that have forever changed the perception of gas as secure, abundant and cheap.

In the G7, which generated 40% of the world’s gas power in 2022, the rise of clean power will mean the simultaneous phasedown of coal and gas, where previously the focus had first been on a coal power phasedown. It is clear that G7 countries are interested in a gas phasedown: in June 2022, the G7 strengthened their commitment to decarbonise their electricity supplies by 2035. The IEA Net Zero pathway shows only 2% of the G7’s electricity coming from unabated gas in 2035. 

The Middle East, Africa and Latin America accounted for 39% of the growth in global gas generation in the last decade (2012-2022), as gas met most of the rise in electricity demand across those regions. But wind and solar generation is meeting more and more of the electricity demand growth: in 2022 it was enough to meet about 2% electricity demand growth across those regions in total, double the rate of 2018. Some countries may embrace clean electricity even more aggressively to aim for falls in gas power. This is particularly relevant for the Middle East region, which generated 15% of the world’s gas generation in 2022. Because there is very little coal power across most of these countries, wind and solar will impact almost exclusively upon gas.

In Asia, there was five times as much coal power as gas power in 2022. The concern was always that Asia would grow gas power to replace part of its coal generation. But the energy crisis has reduced the risk of gas bridge: most countries in Asia rely on imported gas. The heightened concerns over cost and security mean there is a genuine opportunity for a lasting transition directly from coal to clean electricity. The potential of gas power as a bridge in Asia is smaller than it has ever been. The question is whether the growth in clean power will be enough to cut coal power emissions without a switch to gas.

The amount of new gas power plants built in 2022 was the lowest in 18 years. 31 GW was built in 2022, according to Global Energy Monitor data. With the time lag in building new power plants, it’s unlikely that this is related to the energy crisis of 2022. That impact will be felt in the coming years, and it’s likely that it will lead to even lower build rates.

The capacity changes in 2022–fewer coal plant closures, but fewer new gas plants–suggest that rather than a rapid fall in only coal power, there will likely be a more equal fall in both coal and gas power. Gas power plants will still have a role to play in the mid-term: some running a lower number of hours every hour, and some potentially repowered to run on hydrogen.

The 2020s is the implementation decade. The IEA Net Zero Emissions scenario shows that from 2021 to 2030 we need to raise wind and solar generation around five times (solar seven times and wind four times), other clean electricity needs to rise 54%, and this would halve coal power (-54%) and reduce gas power by 24%. That is the scale of the challenge. And ten years later in 2040, the world needs a net zero power sector. According to the IEA, that means not only an unabated coal power phaseout, but a near phaseout of unabated gas power as well.

A new era of falling fossil power is coming, and that means the gas power phasedown will come soon. This should add further confidence to calls to phase out all fossil fuels ahead of COP28 later in 2023.