For example, analysts note that the United States and Europe (which includes EU member states, as well as Norway, Switzerland and the UK) will need to have around 1.6 TW of solar and wind capacity operational or financed by 2030.
The report notes that final investment decisions (FIDs) have been made on just over 705 GW of solar PV capacity, 3% above McKinsey's 2030 target, while the United States and Europe need to FID on an additional 195 GW of wind capacity to meet their 2030 targets.
With record capital already flowing into the renewable energy sector, especially solar power, there is a growing need for more investment. According to a report by the International Energy Agency (IEA), solar power investment is expected to reach more than $500 billion this year, more than any other power generation technology. Attracting more investment into the industry is difficult. Such investments are fraught with risk. The solar power industry is filled with buyers and sellers with extensive experience in these transactions.
Deployment, Training, and Other Barriers
Moreover, McKinsey reports that adoption in the clean energy industry remains insufficient: While Europe and the United States have added around 180 GW and 120 GW of solar capacity, respectively, since 2015, Europe is currently on track to install just 390 GW of capacity by the end of the decade, well below its 600 GW target, the report notes.
Meanwhile in the United States, about 60 percent of the announced capacity additions expected to come online by 2030 are still awaiting final investment approval (FID), putting pressure on companies and investors to close financing agreements quickly.
The report notes that “the nature of solar PV installations” allows such projects to move from financing to construction and operation more quickly than other technologies such as wind power, but the speed at which new final investment decisions (FIDs) are signed needs to increase dramatically.
The report's authors cite several barriers to greater renewable energy adoption, including a shortage of skilled clean energy workers that are slowing the adoption and maintenance of technologies like solar. This echoes numerous calls for better training across the global solar industry and follows the launch of the European Solar Academy at this summer's Intersolar 2024 conference in Germany to address the issue.
The authors also suggest that a “challenging macroeconomic and volatile investment environment” caused by external factors such as the COVID-19 pandemic, as well as “lengthy permitting processes, grid reform challenges, and volatile carbon prices” are contributing to delays in the launch of new projects around the world.
The need for policy support
The report also noted that while regulatory implementation such as the Inflation Reduction Act (IRA) in the US and the Net Zero Industry Act (NZIA) in Europe have already encouraged greater investment in clean energy, “further efforts will be needed” from policymakers to encourage greater adoption of renewable energy.
Earlier this year, Sulaiman Ilyas-Jarrett, head of renewable energy supply policy and strategy at the UK Department of Energy Security and Net Zero, said at Solar Media's Renewable Energy Revenue Summit in London that policy plays a “critical” role in increasing the adoption of renewable energy. This is particularly important because, as the McKinsey report shows, there is a widening gap between what is delivered and what is needed.
“Despite the widening gap, governments and businesses still have a window of opportunity to deliver the growth needed while still achieving net-zero targets,” said Thomas Hundertmark, a senior partner at McKinsey and one of the report's authors. “This will require a re-evaluation of existing strategies and regulatory regimes, many of which were designed for a different economic and policy environment than the current one.”
“Now that the gap with reality has become clear, it is time for players across the energy value chain to rethink their decarbonization plans and pave the way for the next wave of progress.”
