The terms renewable energy and renewable energy sources (often abbreviated as RES in the energy sector) are widely used, yet rarely defined with precision. A first attempt might start with the term itself, and that is where things already become tricky. Energy, strictly speaking, is never renewable at all; it merely changes form. A wind turbine, for example, converts the kinetic energy of the wind into electrical energy. Energy is not “consumed” and therefore not “renewed”; it is transformed. This principle is one of the foundations of physics, formalized in the law of conservation of energy.
Despite this conceptual ambiguity, the term renewable energy has become widely accepted because it captures a real distinction: between the use of finite, fossil resources to generate useful energy and the use of sources that are continuously replenished. These include, in particular, solar, wind, hydropower, biomass, and geothermal energy. Their underlying energy flows are considered effectively inexhaustible. The sun rises (almost) every morning, the wind returns within days, water keeps flowing, and plants grow back.
At this point, critics of the term, who are often also critics of renewable technologies themselves, tend to point out another ambiguity, namly that fossil fuels such as coal, oil, and natural gas are, in a sense, renewable as well, one simply needs enough patience. Anyone willing to wait ten to one hundred million years before their next visit to the gas station, until yesterday’s fallen tree has turned into crude oil under rare geological conditions, is welcome to adopt that broader definition.
A more formal definition can be found in many energy policy frameworks around the world, such as the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, EEG) in Germany or the Code de l’énergie in France. Under these frameworks, electricity generated from wind, solar PV, hydropower, geothermal energy, and biomass is classified as renewable. Sometimes biomass includes not only biogas plants and wood-fired power stations, but also plants that work with biogenic residuals such as landfill gas or sewage gas. In some cases, the biogenic fraction of wate, which is used, for example, in waste-to-energy plants, is included.
Nuclear energy is not considered renewable, neither in common usage nor in most legal definitions, as it relies on finite resources such as uranium and plutonium. However, particularly in Anglo-American contexts, nuclear power is often classified as clean energy or even grouped with renewables, which introduces a geographical dimension to the definition.
Finally, renewable energy does not refer exclusively to electricity generation. It also includes technologies that provide heat directly, such as solar thermal systems, or produce energy carriers like bioethanol from renewable sources.
Understanding the different renewable energy technologies requires a clear distinction between variable and dispatchable sources. Solar photovoltaics and wind power generate electricity depending on weather conditions and time of day, and therefore follow natural fluctuations. They are commonly referred to as variable renewable energy sources (VRE) or intermittent renewable energy sources (IRES).
Hydropower, biomass, and geothermal energy, by contrast, can — within technical and environmental limits — be deployed in a demand-oriented way, effectively “at the push of a button,” and thus play a stabilizing role in the energy system. A future-proof energy system therefore does not rely on any single technology, but on the deliberate combination of weather-dependent generation with controllable sources, complemented by storage, large-scale transmission networks, and flexible demand.
| Technology | Variable or dispatchable? | Energy converted | Electricity generation | Heat generation | Fuel production (liquids, gases) | Installed capacity worldwide (GW, 2024) |
Solar energy (PV + CSP, solar thermal) | Variable | Solar radiation | Yes | Partly (CSP, solar thermal) | No | 1865 |
| Wind energy | Variable | Kinetic energy of wind | Yes | No | No | 1133 |
| Hydropower (excluding pumped storage) | Dispatchable (reservoir) or variable (run-of-river) | Potential and kinetic energy of water | Yes | No | No | 1283 |
| Bio energy | Dispatchable | Chemical energy | Yes | Yes | Yes | 151 |
| Geothermal energy | Dispatchable | Geothermal heat | Yes | Yes | No | 15 |
| Ocean energy | Variable | Kinetic energy of waves and tides | Yes | No | No | 0,5 |
Before the Industrial Revolution, humanity’s total energy demand was negligible by today’s standards and was already entirely met by renewable sources. The 19th century, however, marked the rise of fossil fuels and ushered in a period of exponential economic expansion. It was not until the latter half of the 20th century that a renewed interest in renewable energy began to emerge, driven by a range of different motivations.
Broadly speaking, three main drivers can be identified behind the renewed expansion of renewable energy. First, the 1973 oil crisis exposed the vulnerability of many countries to fossil fuel imports, highlighting the extent to which their energy systems were dependent on external suppliers and therefore susceptible to geopolitical, economic, and security risks. Around the same time, the 1972 report The Limits to Growth by the Club of Rome raised awareness of the finite nature of fossil resources and their environmental consequences, including air pollution. Finally, from the 1990s onward, the growing recognition of human-induced climate change linked to the use of fossil fuels became a central driver in public and political discourse.
Since the 1980s, a number of countries, including the United States, Japan, Germany, and some Scandinavian nations, have been making targeted investments in the fundamental research that forms the basis of modern renewable energy systems. During this period, the technological foundations of what is now referred to as the energy transition were laid, including early solar cells, larger and more robust wind turbines, and advances in power electronics.
The results of this technological progress clearly illustrate the potential of renewable energy. The efficiency of solar cells alone has increased from around 10–12 percent in the 1980s to 20–22 percent today, effectively doubling over the past decades. While a typical solar module at the time delivered no more than 100 Wp, commercially available modules today can reach 800 Wp, at a fraction of the original cost, a point we will return to later.
Wind energy has also seen dramatic advances, although less through improvements in conversion efficiency and more through materials and engineering. In the 1980s, a typical wind turbine had a rotor diameter of around 20 metres; today, thanks to improved materials, diameters of 150 metres or more are common. The result is a substantial increase in electricity generation per turbine. Repowering is a key example of this. By replacing older turbines with modern ones, the installed capaity at around 15,000 existing wind sites in Germany could increase from around 21.5 GW today to approximately 64.5 GW. More broadly, studies suggest that even a doubling of repowering rates could deliver up to one-third of the additional wind capacity required by 2030.
Bioenergy and geothermal energy have also seen significant efficiency improvements over the past four decades. Hydropower, by contrast, had already reached a high level of technical maturity by the end of the 20th century and has seen no comparable step changes since.
In the second phase, renewable energy moved from the laboratory into the power system. Supported by policy incentives and market introduction schemes, its share in electricity generation began to rise steadily in some countries from the 1990s onward. Arguably the most influential model was Germany’s system of fixed feed-in tariffs, first introduced under the Electricity Feed-in Act (1991) and later expanded in the Renewable Energy Sources Act (EEG, 2000). By guaranteeing grid access, fixed payments over 20 years, and priority dispatch, these policies enabled emerging technologies such as wind, solar, and bioenergy to enter the market. Other European countries, including Denmark and Spain, adopted similar approaches, while the United States primarily relied on tax credits to incentivize investment in new generation capacity.
From around 2005 onward, China entered the scene with a strong focus on industrial policy, driving the large-scale manufacturing of solar panels — and later wind turbines and battery storage. Combined with continuous efficiency improvements in research and development, this led to a dramatic decline in the cost of solar power and batteries. In turn, falling costs enabled a rapid global expansion of renewable energy. The interaction of market support schemes, technological progress, and scaling mass production accelerated the growth of renewables in the electricity mix. In Europe, for example, wind, solar, and other renewables accounted for around 10 percent of gross electricity consumption in 2005, compared to 24.6 percent in 2023.
Looking at the global expansion of renewable energy to date, two interpretations emerge. Optimists point to the strong and increasingly exponential growth of renewables, particularly in relative terms, as evidence that the energy transition is happening. Critics, however, emphasize that renewables still account for only a relatively small share of total global energy demand beyond the electricity sector.
In 2024, renewables accounted for 31.83 percent of global electricity generation, up from 18.08 percent in 1990. However, their share in total final energy consumption stood at only 14.8 percent, compared to roughly 7 percent in 1990. In other words, renewables have rapidly established themselves as a central pillar of the power sector and are likely to dominate electricity generation in most countries in the foreseeable future. At the same time, they still have a long way to go in sectors such as transport, heating, industry, and agriculture.
The costs of renewable energy are among the most frequently misunderstood aspects of the energy transition. Public debates often focus on the generation costs of individual technologies — such as the sharply declining costs of wind and solar power — and then draw conclusions about the economics of the system as a whole. For a meaningful assessment, however, a clear distinction is required: between the levelized cost of electricity (LCOE) of individual assets and the system costs that arise from the interaction of multiple technologies, grids, storage, and flexibility options.
Even system costs, however, do not represent a full cost perspective. They typically exclude a range of external factors associated with fossil-based systems, such as environmental damage, climate impacts, and the strategic costs of import dependence, which are difficult to quantify and often remain outside formal cost accounting.
Assessing the true economic cost of renewable energy is therefore inherently complex and subject to ongoing debate, which goes far well beyond simplified pro- or anti-renewables arguments. If there is one point on which most stakeholders in the energy sector now agree, it is precisely this: that no single metric can fully capture the economics of the transition.
The debate is further complicated by the inevitable comparison with fossil energy. Renewable energy is often criticized as being “subsidized,” while fossil fuels have long been treated as the market baseline. This contrast is misleading. While renewables have been supported through policy instruments such as feed-in tariffs or investment incentives, fossil fuels have also benefited — and continue to benefit — from substantial direct public subsidies, even when broader external costs such as environmental damage are excluded.
Over the past decades, the generation costs of renewable energy have fallen dramatically. This trend is particularly visible in solar photovoltaics and wind power. According to data from the International Renewable Energy Agency (IRENA), the global average levelized cost of electricity (LCOE) for solar PV declined by around 90 percent between 2010 and 2024. The LCOE measures the average cost of electricity over the lifetime of a power plant, including investment, operation, and capital costs, and serves as an international benchmark for comparability.
Renewable technologies such as solar, wind, geothermal, and hydropower derive a key advantage from their operating characteristics: they rely on freely available, naturally replenishing resources and therefore do not incur fuel costs, unlike fossil-based generation. This has given rise to a more and more common phrase in the energy sector: “The sun does not send a bill.”
In 2024, the global weighted average LCOE stood at around $0.034 per kWh for onshore wind and approximately $0.043 per kWh for solar PV, making them among the cheapest sources of new electricity generation. While the costs of offshore wind (–59 percent) and bioenergy (–25 percent) have also declined over the past two decades, IRENA data show that geothermal (+6 percent) and hydropower (+47 percent) have experienced cost increases over the same period.
Overall, 92.5 percent of newly installed power generation capacity worldwide in 2024 was based on renewable energy projects — an expression of technological learning curves, economies of scale, and efficiency gains over the past three decades. Put differently: when a new power plant is built anywhere in the world today, more than nine out of ten times it is a renewable energy installation.
A meaningful way to approach the system costs of renewable energy is not through a single metric, but through a shift in perspective: away from individual assets and their costs, and toward the functioning of the system as a whole. System costs refer to the additional expenditures required to ensure the reliable operation of the electricity system. They go beyond the generation costs of individual plants and include, for example, the costs of grid infrastructure, flexibility, and ancillary services.
It is important to recognize that all generation technologies incur system costs. A coal-fired power plant, for instance, requires grid connections, complex fuel supply chains, and supporting capacity for peak demand, which are often provided by gas-fired plants. The transition from a system historically based on a small number of large fossil power stations to a highly decentralized system with millions of generating units, many of them variable, entails a fundamental restructuring, often associated with significant, and in many cases one-off, costs.
A detailed comparison of the system costs of fossil-based and renewable electricity systems would go beyond the scope of this article. However, a number of studies have attempted to estimate and compare the system costs of electricity systems based on 100% renewable energy, including work by the Fraunhofer ISE, Agora Energiewende, and the Lappeenranta-Lahti University of Technology (LUT).
As noted earlier, many countries around the world have supported, and continue to support, the technological and market expansion of renewable energy through subsidies. Direct public subsidies for renewables include financial mechanisms such as feed-in tariffs, investment incentives, tax credits, and grants, all aimed at promoting the deployment of wind, solar, hydropower, and bioenergy projects.
According to an overview by the International Renewable Energy Agency (IRENA), global direct subsidies for renewable energy amounted to around 166 billion US dollars in 2017. A more recent inventory by the International Institute for Sustainable Development (IISD) estimates that, in 2023, G20 countries provided approximately 168 billion US dollars in direct public support for renewable electricity generation and system integration. This broader definition includes not only subsidies for electricity generation itself, but also support for system-related costs.
Comparing these figures with direct subsidies for fossil fuels is complex and depends heavily on methodology and scope. However, there is broad agreement that fossil fuels continue to receive significantly higher levels of direct public support than renewables. For example in its report “Fossil Fuel Subsidies Data: 2025 Update”, the International Monetary Fund (IMF), estimates that explicit (direct) subsidies for fossil fuels, such as price support and tax breaks, amounted to around 725 billion US dollars in 2024. This figure exlcludes the much larger implicit or external costs. In comparison, the aforementioned IRENA analysis revealed that 447 billion US dollars were spent on direct fossil fuel subsidies in 2017.
As renewable energy continues to gain market share, one simple observation must come first: its implications are profound — and they unfold across multiple dimensions. They arise from the fundamental characteristics of renewable energy, which differ in key ways from fossil fuels and, by extension, from the energy system we have long been accustomed to.
Let us return to what may at first have seemed like a sobering observation: as mentioned earlier in this article, although solar, wind, and other renewables now account for a significant and growing share of global electricity generation, they still meet only around 15 percent of total global energy demand. The intuitive conclusion might be that this share simply needs to be multiplied by roughly seven to reach 100 percent. It is precisely at this point that many observers fall into what is known as the primary energy fallacy: the assumption that all fossil primary energy must be replaced one-to-one by renewable energy. This is a misconception. The transition to renewable energy does not require building seven times as many solar panels or wind turbines. The reason is simple: we do not need to replace the full 85 percent of primary energy currently supplied by fossil fuels. Much of that energy is lost in conversion processes before it ever reaches useful applications.
A simple example illustrates this. If you drive 100 kilometers in a conventional combustion-engine car and consume six liters of gasoline, only about 7 to 10 kilowatt-hours of the roughly 52 kilowatt-hours of energy contained in the fuel actually reach the wheels. The rest is lost essentially as waste heat. It may be enough to fry an egg on the hood, but it does not move the car forward. This fundamental characteristic of fossil energy , whereby large amounts of heat are produced but only a small amount is converted into useful work, plays a crucial role in the transition to an electricity-based energy system. Electric systems are inherently more efficient than combustion-based ones. In effect, electrification delivers a kind of “technology dividend” in the form of higher overall system efficiency.
As a rule of thumb, more than half of the energy in fossil systems is lost before it becomes useful energy, not only in cars, but also in fossil-fired power stations. Renewable energy, by contrast, generates electricity directly, without the intermediate step of combustion. End-use technologies such as electric motors or heat pumps then utilize this electricity directly, again avoiding conversion losses. Modelling exercises suggest that a fully electrified energy system could reduce global final energy demand by up to 40 percent, which would be a substantial efficiency gain. The focus of the energy transition is therefore shifting. It is no longer just about expanding renewable energy supply, but about transforming the entire energy system into an electricity-based one. This broader transformation is often described using terms such as sector coupling, the all-electric society, or, more recently, the “electrotech revolution.”
Let us turn to what is often considered the central challenge of renewable energy: its variability. While not all renewable technologies are affected, the issue primarily concerns the two that now dominate global capacity additions due to their low costs: solar PV and wind power. Global analyses show that solar PV systems typically achieve capacity factors of around 15 percent to 25 percent, depending on location, as they generate electricity only during daylight hours and under sufficient solar radiation. In other words, PV systems operate at full capacity only a fraction of the time. Wind turbines, by contrast, tend to achieve higher capacity factors of roughly 25 percent to 45 percent, since wind is potentially available around the clock and allows for more consistent annual output.
Part of the challenge can be addressed relatively straightforward by building additional generation capacity, ensuring that even under less favorable weather conditions, sufficient electricity is produced by solar and wind. However, the core issue remains: both technologies depend on weather conditions and cannot be dispatched on demand. Put simply, building ten wind turbines instead of one does not help if there is no wind at all; none of them will generate electricity. This is where the previously discussed system costs of renewable energy come into play. While electricity generation from wind and solar has become remarkably inexpensive, ensuring a reliable power supply at all times becomes more complex — and potentially more costly — as the system increasingly relies on variable generation.
That said, this is not a fundamental limitation, but rather a challenge of system design. A fully renewable energy system is entirely feasible, but it cannot operate within the structures, or the mindset, of traditional fossil-based systems. In practice, short-term variability is already being managed through a combination of dispatchable renewable sources, battery storage, flexible demand, and increasingly interconnected power grids across regions. Longer-term balancing, such as during periods of low wind and solar output, is often referred to by another term borrowed from the German language: “Dunkelflaute”, is expected to rely on stored energy accumulated during periods of surplus generation, for example in the form of hydrogen.
In 1990, around 800 power plants supplied all electricity needed across Germany. Today, there are more than two million “power plants” in the country — as every solar installation and every wind turbine effectively becomes part of the system. Globally, this shift is even more pronounced. Renewable energy capacity reached more than 4,400 gigawatts in 2024, with hundreds of gigawatts added each year. This expansion is not driven by a few large plants, but by millions of individual installations, ranging from utility-scale wind farms to rooftop solar systems. These installations are fundamentally changing the structure of the energy system. This dramatic shift toward decentralisation brings both advantages and challenges. Systems built on many distributed units rather than a few large ones tend to be significantly more resilient to external shocks, reducing single points of failure within the system. At the same time, a highly decentralised system requires a much greater degree of coordination. Fortunately, the rapid expansion of renewable energy has coincided with the rise of digital technologies. With the effective use of digital tools, even a system consisting of millions of individual generators can be coordinated, just like conducting an orchestra with millions of musicians.
The price-reducing effect of solar and wind power is already visible in wholesale electricity markets. Whenever wind output is high or solar generation is strong, electricity prices tend to fall sharply, sometimes even turning negative. In such situations, consumers may effectively be paid to consume electricity. In a system with a high share of solar and wind, the marginal cost of electricity generation is significantly lower than in fossil-based systems, as there are little to no fuel costs and only limited variable expenses for transport, labour, or operation. At the same time, however, costs shift elsewhere: investments in grid infrastructure, system balancing, and ensuring supply during periods of low wind and solar output increase — these are the system costs. This creates new economic opportunities. Flexible generators, storage operators, and responsive consumers benefit from price volatility, as they help balance periods of surplus and scarcity and are compensated accordingly.
A transition to 100 percent renewable energy would have profound environmental and climate implications, primarily through the near-complete elimination of energy-related greenhouse gas emissions. As wind, solar, and hydropower do not produce any CO₂ during operation, the combustion of fossil fuels, which is the single largest source of global emissions could be eliminated entirely rather than merely reduced. At the same time, many associated environmental pressures would decline significantly. Air pollutants such as particulate matter, nitrogen oxides, and sulfur dioxide would decrease sharply, as would the environmental impacts linked to the extraction, transport, and combustion of coal, oil, and gas. These benefits are accompanied by new environmental considerations, including land use, resource extraction for energy infrastructure and storage, and local impacts on ecosystems. However, compared to the cumulative impacts of fossil energy systems, these effects are generally more spatially limited, more reversible over time, and more amenable to policy and planning. In this sense, the environmental challenge shifts focus from the continuous emission of pollutants to questions of infrastructure design, land use, and trade-offs.
Renewable energy is not only abundant, clean, and increasingly cost-competitive, it is also domestic. This allows countries without significant access to fossil resources to take greater control of their own energy supply. For economies that currently rely heavily on imported fuels, such as the European Union — where around 58 percent of energy consumption is met through imports — or Japan, with import dependencies of around 84 percent, renewable energy offers a pathway to greater geopolitical, economic, and security independence.
These vulnerabilities became particularly evident during the 2021–2023 energy crisis, when the sudden disruption of Russian natural gas supplies caused severe turmoil in energy markets and contributed to rising inflation across many economies.
For economic reasons alone, it is increasingly difficult to imagine that the global rise of renewable energy can be halted. What appears far more likely is a continued acceleration — driven not only by solar and wind power, but also by the broader expansion of clean technologies such as electric mobility, battery storage, and heat pumps.
The historical trajectory of renewables suggests another important lesson: their growth has consistently been underestimated. Even institutions such as the International Energy Agency (IEA) have repeatedly projected lower deployment rates than what ultimately materialised.
Therefore, the central question is no longer whether renewables will dominate global electricity generation, or indeed energy supply broadly following successful electrification. The real question is whether their expansion will proceed quickly enough to mitigate the most severe impacts of climate change.
Disclaimer: Next Kraftwerke does not take any responsibility for the completeness, accuracy and actuality of the information provided. This article is for information purposes only and does not replace individual legal advice.