Wind and solar power costs continue to tumble despite supply chain crisis and volatile commodity markets, with almost two-thirds of newly installed renewables capacity, some 163GW, in 2021 being brought online at a lower price than the cheapest coal-fired plants in the group of G20 countries, according to new figures from the International Renewable Energy Agency (Irena).
The agency, in its latest Renewable Power Generation Costs report, calculated the average levellised cost of energy for onshore wind fell by 15% year-on-year to $33/MWh, offshore by 13% to $75/MWh and PV by 13% to $48/MWh, noting that current high fossil fuel prices meant renewables added to international grid in 2021 will save around $55bn from global energy generation costs in 2022.
“Renewables are by far the cheapest form of power today,” said Irena director-general Francesco La Camera. “2022 is a stark example of just how economically viable new renewable power generation has become. Renewable power frees economies from volatile fossil fuel prices and imports, curbs energy costs and enhances market resilience – even more so if [the current] energy crunch continues.”
“While a temporary crisis response might be necessary in the current situation, excuses to soften climate goals will not hold mid-to-long-term. Today’s situation is a devastating reminder that renewables and energy saving are the future. With the COP27 in Egypt and COP28 in the UAE ahead, renewables provide governments with affordable energy to align with net zero and turn their climate promises into concrete action with real benefits for people on the ground.”
The report, La Camera said, confirms the “critical role that cost-competitive renewables play in addressing today’s energy and climate emergencies” by accelerating the energy transition toward meeting the 1.5°C Paris Agreement goals.
“Solar and wind energy, with their relatively short project lead times, represent vital planks in countries’ efforts to swiftly reduce, and eventually phase out, fossil fuels and limit the macroeconomic damages they cause in pursuit of net-zero.
Renewables investment continues to return “huge” dividends in 2022, highlighted the Irena report, with 109GW of additions last year in non-OECD countries costing less than the least expensive fossil fuel-fired newbuild, and having the potential to save at least $5.7bn annually for the next 25-30 years.
“High coal and fossil gas prices in 2021 and 2022 will also profoundly deteriorate the competitiveness of fossil fuels and make solar and wind even more attractive,” said the Irena report authors.
“With an unprecedented surge in European fossil gas prices for example, new fossil gas generation in Europe will increasingly become uneconomic over its lifetime, increasing the risk of stranded assets,” they said, pointing to calculus that suggests fuel and CO2 costs for existing gas plants could average four to six times more in 2022 than the lifetime cost of new solar PV and onshore wind commissioned in 2021.
“Between January and May 2022, the generation of solar and wind power may have saved Europe fossil fuel imports in the magnitude of no less than $50bn, predominantly fossil gas.”
Irena flagged concern over pressures on the renewable energy industry supply chains that could come as materials cost increases eventually percolate through into equipment prices and total project development capital expenditure.
“If material costs remain elevated, the price pressures in 2022 will be more pronounced. Increases might however be dwarfed by the overall gains of cost-competitive renewables in comparison to higher fossil fuel prices,” said the agency.