Renewable Energy Market Expected to Reach $2.5 Trillion by 2033

According to a new report published by Allied Market Research, titled, “renewable energy market" was valued at $1.1 trillion in 2023, and is projected to reach $2.5 trillion by 2033, growing at a CAGR of 8.5% from 2024 to 2033.

Renewable energy refers to energy derived from natural sources that are replenished on a human timescale and are not depleted when used. These sources include sunlight, wind, rain, tides, geothermal heat, and biomass. Solar power, derived from sunlight using photovoltaic cells or solar thermal systems, is increasingly used in residential, commercial, and utility-scale applications. Wind energy, harnessed through wind turbines, is another renewable energy that is particularly utilized in regions with strong and consistent wind patterns. Hydropower, which utilizes the flow of water to generate electricity, remains one of the oldest and most reliable forms of renewable energy. In addition, geothermal energy, obtained from the Earth's internal heat, is used in geothermal power plants to produce electricity. These technologies are environmentally friendly, help diversify the energy mix and enhance energy security.

Renewable energy is extensively used for heating and cooling applications. Solar thermal systems are widely employed to provide hot water for residential, commercial, and industrial purposes. In colder climates, geothermal heat pumps use the stable temperatures of the Earth's crust to provide efficient heating and cooling for buildings. Biomass systems, which burn organic materials such as wood pellets or agricultural residues, are used for space heating. These renewable heating solutions help reduce dependence on fossil fuels and lower greenhouse gas emissions.

The transportation sector has gradually shifted toward renewable energy sources to mitigate its environmental impact. According to the International Energy Agency (IEA), the share of electric cars in total sales has increased from around 4% in 2020 to 18% in 2023. Electric vehicles (EVs) powered by renewable electricity have become more popular, reducing reliance on gasoline and diesel. Biofuels, produced from organic materials such as crops or waste, offer an alternative to traditional fossil fuels for vehicles. In addition, hydrogen fuel cells, which generate electricity through a chemical reaction between hydrogen and oxygen, are explored as a zero-emission solution for several types of transport, including buses and trains. These advancements in renewable energy for transportation contribute to lower emissions and a reduction in fossil fuel consumption.

In the industrial sector, renewable energy is utilized to power machinery, processes, and facilities. According to the International Energy Agency (IEA), solar PV and wind account for 95% of the expansion, with renewables overtaking coal to become the largest source of global electricity generation by early 2025. Industries are increasingly adopting renewable energy sources to reduce operational costs and meet sustainability targets. For instance, solar and wind energy is used to power industrial operations, reducing dependence on grid electricity and lowering carbon footprints. In addition, renewable energy drives innovations in industrial processes, such as the use of renewable hydrogen in high-temperature manufacturing processes or the integration of biomass for producing industrial steam.

Increase in energy demand is expected to drive the growth of the renewable energy market during the forecast period.  Renewable energy, including solar, wind, hydro, and geothermal power, provides an inexhaustible supply of energy that is harnessed to meet rise in consumption needs. These sources produce energy with minimal environmental impact compared to fossil fuels, which release significant amounts of greenhouse gases and other pollutants. By investing in and expanding renewable energy infrastructure, societies address the increase in energy demand while simultaneously working toward reducing their carbon footprint and mitigating climate change. The transition to renewable energy supports energy security and diversification. As countries and regions seek to stabilize their energy supply and reduce dependency on imported fossil fuels, renewable energy offers a pathway to greater energy independence. This shift helps to meet the immediate energy needs of the growing population and contributes to long-term sustainability & environmental stewardship.

However, high initial investment is expected to hamper the growth of the renewable energy market during the forecast period. The high initial investment required for establishing renewable energy infrastructure is a significant challenge in this sector. Facilities such as wind farms, solar arrays, or geothermal plants involve substantial capital expenditures. These costs include a wide range of expenses, including the acquisition of land, purchasing & installing equipment, and constructing the necessary infrastructure to support energy generation. For instance, the installation of wind turbines or solar panels requires purchase of technology and extensive groundwork, such as site preparation, grid connection, and maintenance facilities. These upfront costs are prohibitive for many potential investors, particularly in regions where financial resources are limited or where renewable energy projects are still emerging.

Segment Highlights

The renewable energy market is segmented into type, end use, and region. By type, the market is classified into hydroelectric power, wind power, bioenergy, solar energy, and geothermal energy. By end use, the market is divided into residential, commercial, industrial, and utilities. Region-wise the market is analyzed across North America, Europe, Asia-Pacific, and LAMEA.

The major players operating in the renewable energy market include Xcel Energy Inc., General Electric, ACCIONA, Tata Power, National Grid Renewables, Invenergy, ABB, Enel Green Power S.p.A., EDF Renewables, and Innergex.