First Annual Slowdown in Five Years for Renewable Energy Expansion
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Global expansions in renewable energy capacity are projected to contract in 2026, marking the first annual decrease in half a decade. This downturn is primarily driven by mounting trade obstacles and severe electricity grid limitations, as cautioned by Francesco La Camera, Director-General of the International Renewable Energy Agency (IRENA), during the Singapore International Energy Week.
The anticipated dip follows a milestone year in 2025, where global renewable installations—including hydroelectric power—grew by 692 gigawatts (GW). This brought the total global capacity to roughly 5,149 GW, representing roughly 50% of the world’s total power generating capacity, though actual output remains lower due to variable resource utilization rates.
China, the leading market for green energy, serves as a primary driver of this decelerating growth. In the first six months of 2026, grid bottlenecks forced China to curtail a volume of renewable power equivalent to Mexico’s total annual electricity consumption. Curtailment happens when grid infrastructure or local demand cannot absorb available supply, forcing operators to shut down production. Similar grid strain is currently affecting markets in Japan and Australia.
According to La Camera, growth in other international markets will likely fail to compensate for the deceleration in China.
This infrastructure bottleneck coincides with a surge in global electricity demand, fueled by the expansion of data centers, artificial intelligence workloads, industrial electrification, and increased cooling needs. Consequently, utilities face the dual challenge of scaling capacity while ensuring power reliability and managing costs.
For project developers, grid delays and curtailment reduce revenues and diminish investment returns. Conversely, these challenges present growth prospects for grid equipment suppliers, battery storage developers, high-voltage transmission builders, and engineering firms. However, these grid projects frequently encounter complex permitting, supply chain delays, and heavy capital costs.
As a result, dispatchable energy sources like natural gas will continue to play a critical role in meeting demand while transmission networks catch up. For market investors, the key focus has shifted from expanding raw generation capacity to ensuring the supporting infrastructure exists to deliver that power reliably.
