Electricity

Wind and solar PV continued to grow strongly in 2022, with record-level additions in several regions, and recent policy developments are projected to further accelerate this growth. Countries and regions making notable progress include: 

• 2022 was a record year for renewable energy capacity growth in the European Union, with total additions exceeding 50 GW for the first time, a 42% increase compared to the previous year. 
• The United States passed the Inflation Reduction Act (IRA) in August 2022, which expands support for renewables through tax credits and other measures and is expected to provide a significant boost to clean electricity investments over the next decade.  
• China continues to lead in terms of net solar PV capacity additions, with around 100 GW added in 2022. Overall, more than 160 GW of renewable electricity were commissioned in 2022, accounting for almost half of global renewable capacity deployment. 
• In 2022, two new Just Energy Transition Partnerships (JETP) were announced in Indonesia (with a budget of USD 20 billion) and Viet Nam (USD 15.5 billion) to support decarbonisation efforts, including a just transition away from coal power. JETP is a programme launched during COP26 in 2021 by France, Germany, the United Kingdom, the United States and the European Union – often called the International Partners Group – to make available the financial resources necessary to accelerate energy transitions and meet climate targets in coal-dependent emerging market and developing economies (EMDEs), while ensuring a just transition. 
  

Global power sector CO₂ emissions (from both electricity and heat production) increased by almost 220 Mt CO₂ in 2022, a 1.5% increase compared to 2021, reaching an all-time high of 14.8 Gt CO₂. This was driven mostly by a strong increase in coal-fired electricity generation, emissions from which grew by nearly 240 Mt (2.2%) compared to the year before, primarily as a result of gas-to-coal switching due to record natural gas prices in many regions. Electricity generation accounts for more than 90% of power sector emissions, far greater than the contribution from heat production. 

Current trends are not on track with Net Zero Scenario milestones, which see power sector emissions fall by nearly 9% per year to 2030, reaching an emissions intensity of around 165 g CO₂/kWh (a 65% reduction relative to 460 g CO₂/kWh today), and the sector then becoming completely decarbonised by 2045. 

Global electricity generation continued to grow in 2022, increasing by 2.4% (nearly 700 TWh) year-over-year, which is similar to the average annual growth observed over the previous 5 years. Record-level natural gas prices in the wake of Russia’s invasion of Ukraine led to natural gas-fired electricity generation stagnating at the global level, while nuclear electricity generation dropped by nearly 5% year-over-year, primarily due to maintenance outages at a large number of French nuclear plants and reduced output from Ukraine’s nuclear fleet. As a result, the increase in generation was shouldered almost exclusively by coal and renewables. 

Global coal-fired electricity generation rose by nearly 2% (185 TWh) in 2022, driven mainly by gas-to-coal switching triggered by very high natural gas prices in many regions. Though the year-on-year percentage change is far less than the 8% growth seen in 2021 following the Covid-19 pandemic-related drop in 2020, in terms of total generation, coal continued its record-breaking streak for the second year in a row, generating more than 10 000 TWh, accounting for 36% of total generation. 

Total renewable electricity generation reached another all-time high in 2022, exceeding 8 500 TWh, over 600 TWh (nearly 8%) more than in 2021. This increase was driven mostly by rising wind and solar PV production, which both grew by nearly 270 TWh. Hydropower output – still the world’s largest source of renewable electricity – increased by 70 TWh, although drought conditions continued to affect hydropower production in several regions including China, Europe and the United States. The share of renewables in global electricity generation reached nearly 30%, 1.5 percentage points higher than in 2021. 

An important indicator of progress in the electricity sector’s clean energy transition is the share of low-emission technologies, including renewables, nuclear, carbon capture and storage and co-firing of ammonia and hydrogen. In 2022, almost 39% of generation came from low-emission technologies – an increase of nearly one percentage point from 2021, although far below the annual 4 percentage point increase needed to 2030 in the Net Zero Scenario.  

Getting on track with the Net Zero Scenario will require profound transformation in the electricity sector to limit CO₂ emissions, reduce air pollution and support energy access, with universal access achieved by 2030. A drastic shift is needed if nearly 75% of generation is to come from low-emission technologies by 2030.  

In the Net Zero Scenario, solar PV leads in installed capacity by the mid-2020s. The share of unabated coal declines sharply from 36% today to 11% in 2030, with about 4% of coal-fired generation from plants fitted with carbon capture, utilisation and storage (CCUS). The share of natural gas in the Net Zero Scenario generation mix remains stable in the short-term because of its lower CO₂ emissions, staying at around 22% until the mid-2020s and then declining to 15% in 2030. 

Several major energy-consuming countries and regions have stepped up their commitment to renewables:  

• In March 2023, the European Union agreed to raise its binding target for the share of renewable energy in total energy consumption to 42.5% by 2030, with the ambition to reach 45%. This would double the existing share of renewable energy in the European Union.  
• In its 14th Five-Year Plan for Renewable Energy, published in June 2022, China set a target of 33% of electricity generation to be from renewables by 2025, from around 30% today.  
• In August 2022, the IRA was passed in the United States. It expands support for renewables and other clean energy technologies through tax credits and other measures and is expected to provide a significant boost to investments over the next ten years.  
• In November 2021, at COP26, India announced new 2030 targets of 500 GW of total renewable capacity and a 50% renewable electricity generation share (more than double the 23% share in 2022), as well as net zero emissions by 2070.  

Despite progress on promoting renewables, emissions from fossil fuel generation continue to rise. Stronger policies targeting reductions in coal-fired generation are needed to ensure that progress in the deployment of renewables is not counteracted by increases in fossil generation. 

Electricity sector investment grew by 12% in 2022, exceeding USD 1 trillion for the first time. Investment is projected to increase further to USD 1.2 trillion in 2023, with more than USD 1 trillion flowing into renewables and grids alone. 

Developments in 2022 included the following: 

• Despite cost and supply chain pressures, global investment in renewables increased to almost USD 600 billion in 2022, driven in particular by the rapid built-out of solar PV and wind (particularly in China). Investment in new capacity is expected to rise by another 10% in 2023, exceeding USD 650 billion.  
• Investment in fossil fuel-based electricity generation increased marginally in 2022 to almost USD 110 billion, but this was still significantly lower than the annual average of USD 135 billion in the period 2016-2021. Spending on fossil fuel generation with CCUS rose but remains marginal at USD 1 billion.  
• Spending on dispatchable low-emission technologies continued its downward investment trend, with increased spending on nuclear not able to compensate for a drop in hydropower investment.  
• Investments in electricity grids increased a further 8% in 2022, but initial signs suggest that spending will flatten out in 2023. Most of the infrastructure investment is in advanced economies and China, driven by the need to enable greater electrification and to reinforce grids in electricity systems that are characterised by rising shares of variable renewables. Spending on grids in most emerging market and developing economies (EMDEs) is falling behind, a worrying signal given the prospect of rapid increases in electricity demand.  
• Battery storage investment doubled in 2022 and is set for further growth in 2023, encouraged by the United States’ IRA and other incentives in Europe, Australia, China, Japan and Korea. 
• In spite of high expectations for clean electricity, final investment decisions in 2022 show a mixed picture. While solar PV project approvals remained strong, offshore wind lagged behind. Final investment decisions for coal- and gas-fired plants reached their highest level since 2016, driven almost entirely by China, reflecting security of supply concerns.  
  

In April 2023 the Group of 7 (G7) Ministers of Climate, Energy and the Environment released a communiqué recognising the need to end the construction of new unabated coal-fired power generation, as called for in the NZE Scenario. The G7 leaders noted their intention to work with other countries to end new unabated coal-fired power generation projects world wide as soon as possible, in order to accelerate the clean energy transition in a just manner. 

The JETP was launched during COP26 in 2021 by France, Germany, the United Kingdom, the United States and the European Union – often called the International Partners Group – to make available the financial resources necessary to accelerate just energy transitions and meet climate targets in coal-dependent EMDEs. 

During COP26, the International Partners Group announced USD 8.5 billion for a JETP in South Africa, and the programme has since expanded to other countries. In November 2022, Japan, the United States and other partners announced USD 20 billion for a JETP in Indonesia, and in December 2022 the International Partners Group announced USD 15.5 billion for Viet Nam’s JETP.  

An increasingly important factor in decarbonising the power sector is the private sector’s role in developing renewables through corporate power purchase agreements in which they sign a direct, long-term offtake contract with a renewable electricity producer for the generated electricity. In 2022, more than 50 GW of renewable electricity capacity was contracted through such agreements.