According to International Energy Agency (IEA) website publication on Renewables 2022 Analysis and Forecast to 2027 report, in the main-case forecast, solar PV and wind capacity expansion are insufficient to reach the REPowerEU plan’s renewable electricity objectives for 2030. According to the latest European Commission Staff Working Document, capacities of 592 GW25 of solar PV and 510 GW of wind are required by 2030 to achieve the 69% share of renewable electricity modelled by the Commission. This would require average annual additions of 48 GW for solar PV and 36 GW for wind. In comparison, our main case foresees average annual net additions of only 39 GW for solar PV and 17 GW for wind during 2022-2027. This results in a 54% share of renewables-based generation in the electricity sector, 15 percentage points below the 69% desired three years later. Thus, to reach the installed capacity needed to generate 69% of electricity from renewables by 2030, average annual net additions need to be 22% higher for solar PV and more than two times greater for wind.
Europe’s renewable capacity expansion is limited by three main challenges: inadequate support schemes; lengthy and complex permitting procedures; and the slow pace of transmission and distribution network upgrades.
- Insufficient or limited policy support – For utility-scale projects, the uncertainty created by an absence of competitive auctions or limited visibility over future ones in some countries constrains the level of annual additions in the main case. Moreover, most current EU auction designs use bid price as the only selection criterion, which has led to very low or negative bids reducing profitability for both developers and manufacturers. For distributed PV, ambiguity regarding the extension of current support schemes challenges growth in some countries. Insufficient remuneration also prevents faster uptake for self-consumption in some segments.
- Permitting challenges – Permitting difficulties are the primary reason auctions have been undersubscribed in Europe for both solar PV and onshore wind. Developers often need a permit to enter an auction, but obtaining it is not always a guarantee. Furthermore, regulations forbid installing renewable energy systems on certain types of land (e.g. agricultural) or set distance limitations for siting turbines near buildings, and social opposition and litigation also lengthen permitting wait times. In addition to building permits, some jurisdictions require permits for transport and for building roads close to construction sites. In many markets, permitting is time-intensive because the complex process involves several steps and institutions (which sometimes lack digitalisation), the response deadline for the approving authority can be long or even unlimited, and understaffing at permitting offices creates backlogs. These challenges lengthen project lead times, drive up costs, and limit the pace of deployment in the main-case forecast.
- Grid congestion – Many transmission and distribution networks have insufficient capacity to connect new solar PV and wind plants. System operators therefore need to reinforce existing infrastructure and, in some cases, install new lines. However, permitting complexity, a lack of skilled labour, social opposition and high costs limit the pace of upgrades. Local populations often oppose the construction of overhead lines, and permitting new lines across multiple jurisdictions is a lengthy process. Because it can take years to complete grid improvement projects, developers face long wait times for grid connection approvals, which slows project development.
Addressing some of these challenges could increase the pace of solar and wind deployment in the European Union by 30% between 2022 and 2027. In fact, our accelerated case assumes that increased policy support, regulatory reforms and faster infrastructure development boost average annual solar PV additions to 52 GW, in line with what is needed to reach the REPowerEU target.
For utility-scale solar PV, reaching this level would require countries lacking auction schemes (i.e. Sweden and Belgium) to implement them. Countries already using competitive auctions would have to extend their current scheme (the Netherlands), provide schedules for planned auctions (Italy and Denmark), allocate higher volumes (Spain and Poland) and improve auction design to ensure full subscription (France). Furthermore, countries could consider modifying their auction rules to reflect higher investment costs and ongoing supply chain challenges, improving the business case for solar PV and wind developers. They could also include non-price criteria (e.g. the security benefits of renewable energy) in the selection process.
For distributed solar PV, if expiring support schemes are extended and remuneration levels raised to make the business case for self-consumption more attractive, annual growth could reach 35 GW by 2027, a pace that would be sufficient to meet the 2030 target. The accelerated case for solar PV also assumes local manufacturing and job-training programmes would ease the logistical and labour constraints currently preventing faster solar PV project development. Equipment delays and higher freight costs on solar cell and module imports have stifled competition in auctions, resulting in under subscriptions and price hikes, while the shortage of skilled workers has slowed the installation pace for distributed PV systems.
For wind, however, average annual additions still fall below the REPowerEU modelling exercise’s 2030 installed capacity objectives despite stronger policy support, regulatory reforms and grid expansion. In the accelerated case, average annual wind additions increase to only 21 GW by 2027, 40% less than the 36 GW needed to achieve the 2030 goals.
For onshore wind, persistent permitting challenges hinder faster growth in the accelerated case. While some countries have announced plans to streamline processes and have formed institutional working groups to propose reforms, the only ones to implement substantial legislative changes for onshore wind permitting over the last year are Germany and Spain. More widespread regulatory changes would be needed to advance onshore wind development such as the temporary emergency regulations proposed by the European Commission to address permitting bottlenecks. In November 2022, the Commission proposed the designation of renewables as a matter of public interest to benefit from simplified procedures for new permits, and it introduced caps on permitting response times under certain conditions. If these were formally passed by the European Council(26) and implemented rapidly at the member-state level, onshore wind development times would be significantly shortened. Uncertainty over the business case for repowering also limits the pace of growth in the accelerated case.
For offshore wind, long lead times and grid connection difficulties continue to be the main impediments to achieving faster growth by 2027. While many countries have raised their ambitions for offshore wind expansion and announced auction plans, the pace of implementation hinges upon new site selection and increasing transmission capacity. Excessive prerequisites for grid connection and for expanding transmission networks lengthen project lead times and limit the pace of deployment in the accelerated case.
In addition to the technology-specific challenges that hamper faster expansion of renewables, protecting vulnerable consumers through current and proposed market interventions (such as wholesale market caps and windfall-profit taxes) will affect renewable energy investments in the upcoming months. Moreover, the ongoing energy crisis has also sparked new discussions within the European Union concerning future electricity market design. While reforms could, in principle, boost market-driven renewable energy deployment, ensure energy security and encourage investment in flexibility resources, it is important that any reform proposal be carefully and transparently prepared, involving all relevant stakeholders. Failure in this regard could increase investor uncertainty and slow expansion.
