Renewable energy projects that cost less than the most competitive fossil fuel options doubled in 2020, says a new report by the International Renewable Energy Agency (IRENA). 162GW or 62% of total renewable power generation added during 2020 cost less than the cheapest new fossil fuel projects.
The Renewable Power Generation Costs in 2020 report shows that the cost of renewable energy technologies continues to fall significantly year on year. Concentrating solar power (CSP) fell by 16%, onshore wind by 13%, offshore wind by 9% and solar PV by 7%.
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With costs at such low levels, renewable projects consistently undercut existing coal project’s operational costs as well. Low-cost renewables offer developed and developing countries a strong business case to power past coal in pursuit of a net zero economy. Renewable energy projects newly created during 2020 alone will save emerging economies up to $156 billion over their life span.
Francesco La Camera, IRENA executive director said renewables are today the cheapest source of energy. “Renewables present countries tied to coal with an economically attractive phase-out agenda that ensures they meet growing energy demand, while saving costs, adding jobs, boosting growth and meeting climate ambition. I am encouraged that more and more countries opt to power their economies with renewables and follow IRENA’s pathway to reach net zero emissions by 2050.”
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“We are far beyond the tipping point of coal,” La Camera emphasised. “Following the latest commitment by G7 to net zero and stop global coal funding abroad, it is now for G20 and emerging economies to match these measures. We cannot allow having a dual-track for energy transition where some countries rapidly turn green and others remain trapped in the fossil-based system of the past. Global solidarity will be crucial, from technology diffusion to financial strategies and investment support. We must make sure everybody benefits from the energy transition.”
The renewable projects added last year will reduce costs in the electricity sector by at least $6 billion every year in emerging countries, relative to adding the same amount of fossil fuel-fired generation. Two-thirds of these savings will come from onshore wind, followed by hydropower and solar PV. Cost savings come in addition to economic benefits and reduced carbon emissions.
The 534GW of renewable capacity added in emerging countries since 2010 at lower costs than the cheapest coal option is reducing electricity costs by around $32 billion every year.
2010-2020 saw a dramatic improvement in the competitiveness of solar and wind technologies with CSP, offshore wind and solar PV all joining onshore wind in the range of costs for new fossil fuels capacity, and increasingly out-competing them.
Within ten years, the cost of electricity from utility-scale solar PV fell by 85%, that of CSP by 68%, onshore wind by 56% and 48% for offshore wind. With record-low auction prices of 1.1 to 3 USD cents per kWh today, solar PV and onshore wind continuously undercut even the cheapest new coal option without any financial support.
The numbers don’t lie
IRENA’s report also shows that new renewables beat existing coal plants on operating costs as well, stranding coal power as increasingly uneconomic. In the US for example, 149GW or 61% of the total coal capacity costs more than new renewable capacity. Retiring and replacing these plants with renewables would cut expenses by $5.6 billion every year and save 332 million tonnes of CO2.
This would potentially reduce emissions from coal in the US by one-third. In India, 141GW of installed coal is more expensive than new renewable capacity. In Germany, no existing coal plant has lower operating costs than new solar PV or onshore wind capacity.
Globally, more than 800GW of existing coal power costs more than new solar PV or onshore wind projects commissioned in 2021. Retiring these plants would reduce power generation costs by up to $32.3 billion annually and avoid around 3 gigatonnes of CO2 every year, corresponding to 9% of global energy-related CO2 emissions in 2020 or 20% of the emissions reduction needed by 2030 for a 1.5°C climate pathway outlined in IRENA’s World Energy Transitions Outlook.
The outlook till 2022 sees global renewable power costs falling even further, with the onshore wind becoming 20-27% lower than the cheapest new coal-fired generation option. 74 of all new solar PV projects commissioned over the next two years that have been competitively procured through auctions and tenders will have an award price lower than new coal power.
The trend confirms that low-cost renewables are not only the backbone of the electricity system but that they will also enable electrification in end-uses like transport, buildings and industry and unlock competitive indirect electrification with renewable hydrogen.
The Renewable Power Generation Costs in 2020 report is available online.