Europe, US lagging on climate targets as few projects reach FID

Image by U.S. Department of Agriculture.

Europe and the US are falling behind on decarbonisation targets due to a significant gap between project target volumes and the number of projects advancing to final investment decision (FID), according to a recent study by McKinsey & Company.

Despite the rapid solar energy expansion in recent years, McKinsey's analysis shows that Europe is falling short of its 2030 solar capacity goal of 600 GW, with projections indicating that less than 390 GW will be operational by the end of the decade. Additionally, less than 20% of the 114 GW of new solar capacity planned to be installed over the next five years has achieved FID. However, McKinsey sees potential for recovery, as solar projects can be rapidly deployed allowing for an expanded and more secure pipeline before 2030.

In the US, the analysis predicts a slowdown in annual solar PV capacity growth after 2028, with around 60% of the announced capacity for pre-2030 still pending FID, which poses risks to many planned solar projects.

When it comes to onshore wind, Europe has 240 GW of operational capacity and 106 GW in development, potentially exceeding the 314 GW target but only 17 GW of this has secured FID. In contrast, the US expects only 39 GW of new onshore wind capacity after 2025, with 16 GW, or 41% of it, having reached FID.

The study highlights that corporate, public, and private investors are reluctant to invest because of weakening business cases, concerns over the cost-effectiveness of technology, and insufficient policy support. Economic uncertainty, lengthy permitting processes, a shortage of skilled workers, a lack of reference projects, and raw material shortages are additional factors contributing to investor hesitation.

The authors of the research noted that while substantial progress has been made since 2015, Europe and the US could still miss crucial 2030 climate goals if development continues at the current rate without immediate action.

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