By Anders Lorenzen
New research from the International Renewable Energy Agency (IRENA) confirms renewables are continuing to outpace fossil fuels on cost.
They found that the share of renewable energy that achieved lower costs than the most competitive fossil fuel option doubled in 2020. 162 gigawatts (GW) or 62 per cent of total renewable power generation added last year had lower costs than the cheapest new fossil fuel option.
Of the different renewable energy technologies concentrating solar power (CSP) fell by 16 per cent, onshore wind by 13 per cent, offshore wind by 9 per cent and solar PV by 7 per cent. This means that with costs at these low levels, renewables increasingly undercut existing coal’s operational costs too. IRENA says that low-cost renewables give developed and developing countries a strong business case to power past coal in pursuit of a net-zero economy. Just 2020’s new renewable project additions will save emerging economies up to $156 billion over their lifespan.
Beyond the tipping point of coal
IRENA’s Director-General, Francesco La Camera, said about the research: “Today, renewables are the cheapest source of power. 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. We are far beyond the tipping point of coal. Following the latest commitment by G7 to net-zero and to stop global coal funding abroad, it is now for the G20 and emerging economies to match these measures’’.
The research further found that the renewable projects added last year will reduce costs in the electricity sector by at least $6 billion per 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. The 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.
Dramatic improvements of renewable energy technologies
During the period 2010-2020 a dramatic improvement in the competitiveness of solar and wind technologies were achieved. CSP, offshore wind and solar PV all joined onshore wind in the range of costs for new fossil fuels capacity, and increasingly out-competed them. Within ten years, the cost of electricity from utility-scale solar PV fell by 85 per cent, that of CSP by 68 per cent, onshore wind by 56 per cent and 48 per cent for offshore wind. With record-low auction prices of $1.1 to 3 cents per kWh today, solar PV and onshore wind continuously undercut even the cheapest new coal option without any financial support.
The report also showed that new renewables beat existing coal plants on operating costs too, stranding coal power as increasingly uneconomic. For instance, in the US, 149GW or 61 per cent 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 per year and save 332 million tonnes of CO2, reducing 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.
For the global picture, over 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 gigatons of CO2 per year. These figures correspond to 9 per cent of global energy-related CO2 emissions in 2020 or 20 per cent of the emissions reduction needed by 2030 for a 1.5°C climate pathway.
The cost of renewables will continue to outpace fossil fuels
The outlook till 2022 sees global renewable power costs falling further, with onshore wind becoming 20-27 per cent lower than the cheapest new coal-fired generation option. 74 per cent 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. IRENA says this 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 also unlock competitive indirect electrification with renewable hydrogen.
IRENA will be hoping countries heavily reliant on coal will look at this data and rapidly transition to renewables.