2023 was a record-breaking year for power generation investment, with $840 billion invested in projects globally, up from $611 billion in 2022. Renewable energy dominated investment in 2023; solar PV and wind power combined accounted for $528 billion. Climate commitments and supportive regulations are the mainstays of global growth. China has significantly increased its renewable targets in recent years (in part to support domestic technology companies). The US Inflation Reduction Act passed in 2022 provides a degree of investor certainly never seen before and incentives for investment in domestic supply chains. Russia’s invasion of Ukraine in 2022 has galvanized Europe to take action, as energy security has become a global megatrend.

Inflationary pressures have been a major challenge for the power sector in 2022 and 2023. Solar PV costs increased in 2022 and increased further early in 2023, but they have already started to fall, mainly because of lower module costs reflecting the massive expansion in global supply. Solar PV, already cost competitive with fossil fuels, will continue to gain an advantage. For wind power, the situation is more complex, with plenty still to do in the expansion of the global supply chain, but prices should start to decline in the second half of 2024.

Author: Jonathan Robinson