Renewables have lower costs than the cheapest fossil fuel

According to a report released by IRENA (International Renewable Energy Agency), 162 GW or 62% of the total renewable energy generation added last year had lower costs than the cheapest fossil fuel option.

The cost of concentrated photovoltaic energy (CSP), for example, fell by 16%, onshore wind saw a reduction of 13%, offshore wind by 9% and solar saw a decline of 7%.

Furthermore, according to the research, the new additions will also enable savings of up to US$ 156 billion for emerging countries over a lifetime.

“Today, renewables are the cheapest energy source while adding jobs, driving growth and meeting climate ambitions,” said Francesco La Camera, director general of IRENA.

“We are well beyond the coal tipping point. Following the G7's latest commitment to net zero and stop global financing of fossil fuels abroad. It is now up to the G20 and emerging economies to match these measures”, he highlighted.

For La Camera, an energy transition cannot be allowed in which some countries quickly become green and others remain stuck in the fossil-based system of the past. “Global solidarity will be crucial, from technology dissemination to financial strategies and investment support.”

IRENA also pointed out that renewable projects added in 2020 will reduce costs in the electricity sector by at least US$6 billion per year in emerging countries, relative to adding the same amount of fossil fuel generation. Two-thirds of these savings will come from onshore wind, followed by hydropower and solar photovoltaics. 

Another point emphasized by the survey is that in ten years the cost of utility scale solar energy fell by 85%, that of CSP by 68%, that of onshore wind by 56% and 48% of offshore wind. 

More data

According to the study, in the United States, for example, 149 GW or 61% of total coal capacity costs more than new renewable capacity. 

Replacing these plants with clean energy would cut expenses by US$ 5.6 billion per year and save 332 million tons of CO₂, reducing the country's coal emissions by a third. 

In India, 141 GW of installed coal is more expensive than new renewable capacity. In Germany, no existing fossil fuel plant has lower operating costs than solar PV or onshore wind.

Charting a global analysis, more than 800 GW of existing coal power costs more than new solar or onshore wind projects commissioned in 2021. 

“Retiring” these plants would reduce generation costs by up to US$ 32.3 billion annually and avoid around 3 gigatons of CO₂ per year, which corresponds to 9% of global energy-related CO₂ emissions in 2020.

Future

IRENA indicated that the outlook to 2022 shows global renewable energy costs falling further, with onshore wind becoming 20-27% lower than the cheapest new coal generation option. 

Furthermore, 74% of all solar PV projects commissioned over the next two years – competitively procured through auctions and tenders – will be priced lower than coal power. 

“The trend confirms that low-cost renewables are not only the backbone of the electricity system, but will also enable electrification in end uses such as transport, buildings and industry and unlock indirect electrification competitive with green hydrogen,” the report concluded .