The majority of new renewables generation installed around the world last year is delivering power at a lower cost per MWh than new coal-fired production, according to a new report from the International Renewable Energy Agency (Irena)

The study, Renewable Power Generation Costs in 2020, shows that 162GW of the renewables capacity installed in 2020 — about 62% of the total globally — now produce cheaper power than the lowest-cost fossil-fuel-fired option.

Irena also calculates that 810GW of the world’s existing coal-fired plant — 38% of the total global capacity — now have higher operating costs than new utility-scale PV and onshore wind, even when including grid integration costs.

Replacing this expensive coal power with renewables would save operators $32bn a year and reduce annual CO2 emissions by around three billion tonnes, the report explains.

“Today, renewables are the cheapest source of power,” said Irena director-general Francesco La Camera. “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.”

Falling LCOE

In line with long-term trends, the average global levelised cost of energy (LCOE) for wind and solar projects fell significantly in 2020.

Onshore wind registered the cheapest average LCOE in 2020, at $39/MWh — a 13% decline compared to 2019, with PV at $57/MWh (7%) and offshore wind at $84/MWh (9%).

The Irena report shows dramatic cost reductions compared to 2010, with the LCOE of utility-scale PV falling by 85% (from $381/MWh), onshore wind by 56% (from $89/MWh) and offshore wind by 48% (from $162/MWh).

And the study also says that recent competitive procurement processes show that the LCOEs for wind and solar will continue to fall in the coming years, with the global PV average set to reach $40/MWh in 2022 — 30% lower than in 2020.

In particular, the report points to an increasing number of PV projects with costs below $30/MWh, with recent record low auction bids of $13.50/MWh in the United Arab Emirates and $10.40/MWh in Saudi Arabia.

“Surprisingly, values below [$20/MWh] are not impossible, even if they were unthinkable even a few years ago,” the study says.

It adds that low renewable energy prices in Saudi Arabia would mean that green hydrogen could be produced at $1.62/kg today — well within the International Energy Agency’s hypothetical cost range for blue hydrogen (derived from natural gas with carbon capture and storage) of $1.45-2.40/kg.

Capacity growth

Despite the global Covid-19 pandemic, 2020 proved to be a record year for renewables deployment, with a total of 261GW installed — almost 50% higher than the 176GW added in 2019. This represented 82% of all new power capacity around the world.

PV supplied 127GW of this new capacity in 2020, with 115GW of wind power (105GW of which was onshore) — almost twice as much as the 59GW installed in 2019 — and smaller contributions from hydropower (12GW), bioenergy (2GW), geothermal (164MW) and concentrating solar power (150MW).