Wind, solar and other renewable power capacity grew at its strongest ever pace last year and now produces 22% of the world's electricity, the International Energy Agency said on Thursday in a new report.

More than $250bn (£150bn) was invested in "green" generating systems in 2013, although the speed of growth is expected to slacken, partly because politicians are becoming nervous about the cost of subsidies.

Maria van der Hoeven, the executive director of the IEA, said governments should hold their nerve: "Renewables are a necessary part of energy security. However, just when they are becoming a cost-competitive option in an increasing number of cases, policy and regulatory uncertainty is rising in some key markets. This stems from concerns about the costs of deploying renewables."

She added: "Governments must distinguish more clearly between the past, present and future, as costs are falling over time. Many renewables no longer need high incentive levels. Rather, given their capital-intensive nature, renewables require a market context that assures a reasonable and predictable return for investors."

Hydro and other green technologies could be producing 26% of the world's electricity by 2020, the IEA said in its third annual Medium-Term Renewable Energy Market Report. They are already used as much as gas for generating electrical power, it points out.

But the total level of investment in renewables is lower now than a peak of $280bn in 2011 and is expected to average only $230bn annually to the end of the decade unless governments make increasing policy commitments to keep spending higher.

The current growth rate for installing new windfarms and solar arrays is impressive but the IEA believes it is not enough to meet climate change targets, triggering calls in Brussels from green power lobby groups for Europe to adopt tougher, binding targets.

Justin Wilkes, the deputy chief executive of the European Wind Energy Association, said: "The IEA report hits the nail on the head when it comes to ambitious national targets for 2030. Not only is a 27% target too low but it doesn't oblige member states to follow through. Europe's heads of state need to agree in October on a binding 30% renewables target if real progress is going to be made to improve Europe's energy security, competitiveness and climate objectives."

The IEA – a Paris-based agency established to ensure reliable, affordable and clean energy for its 29 member countries – says that in Brazil, Chile and South Africa onshore wind is already a preferred option over new fossil fuel plants such as coal or gas.

Onshore wind, despite being the most economic of the renewable power technologies in Britain, is still opposed by parts of the Conservative party, while offshore wind remains controversial because of its high costs.

New figures released on Thursday by the industry body Energy UK show wind provided a little over 4% of Britain's power generation in July compared with 42% for gas, 24% nuclear and 17% for coal.