The explosive growth of renewables, including wind, solar and batteries, has been driven in principal part by the rapid decline in the cost of equipment and construction costs.
The effects of falling capital costs for renewable generation on current and forecasted capex spending is clear. According to IHS Markit, global capex spending on renewables is expected to rise 8.5% to $255 billion and to remain at those levels through 2025. The cumulative 2021-2025 renewable capex spend of $1.3 trillion represents a 9% increase over cumulative capex in the 2015 to 2019 period.
IHS Markit was quick to point out that sharply declining capital costs across renewable technologies meant that just a 9% increase in spending will be associated with a 45% increase in cumulative gross renewable capacity additions in 2021 to 2025 compared to 2015 to 2019. IHS Markit forecasts that the global benchmark cost for solar PV, both utility-scale and distributed generation, in 2025 would be about 40% below 2017 levels, while the capital costs for onshore and offshore wind in 2025 would be 20% and 15% below 2017 levels.
The net effect of these cost decreases is that overall growth in renewable energy capacity additions is expected to push global combined wind and solar installed capacity beyond that of global installed natural gas-fired generation in 2023 and installed coal-fired capacity in 2024. In terms of global electricity generation, renewables will rise from 18% in 2025 up from 11% in 2019.
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