Renewable power is increasingly cheaper than any new electricity capacity based on fossil fuels. More than half of the renewable capacity added in 2019 achieved lower power costs than the cheapest new coal plants, according to a new report published by the International Renewable Energy Agency (IRENA).
The “Renewable Power Generation Costs in 2019” report, highlights that new renewable power generation projects now increasingly undercut existing coal-fired plants. Along with reviewing overall cost trends and their drivers, the report analyses cost components in detail.
The analysis spans around 17 000 renewable power generation projects from around the world, along with data from 10 700 auctions and power purchase agreements for renewables.
Coal power gen “environmentally and economically unjustifiable”
On average, new solar photovoltaic (PV) and onshore wind power cost less than keeping many existing coal plants in operation, and auction results show this trend accelerating – reinforcing the case to phase-out coal entirely.
Next year, up to 1 200 GW of existing coal capacity could cost more to operate than the cost of new utility-scale solar PV, the report shows.
Replacing the costliest 500 GW of coal with solar PV and onshore wind next year would cut power system costs by up to US$23 billion annually and reduce annual emissions by around 1.8 gigatons (Gt) of carbon dioxide (CO2), equivalent to 5 percent of total global CO2 emissions in 2019.
It would also yield an investment stimulus of US$940 billion, which is equal to around 1 percent of global GDP.
We have reached an important turning point in the energy transition. The case for new and much of the existing coal power generation, is both environmentally and economically unjustifiable. Renewable energy is increasingly the cheapest source of new electricity, offering tremendous potential to stimulate the global economy and get people back to work. Renewable investments are stable, cost-effective and attractive offering consistent and predictable returns while delivering benefits to the wider economy, said Francesco La Camera, Director-General of IRENA.
The report notes that boosting investment in renewables can align short-term post-COVID-19 recovery measures with medium- and long-term energy and climate sustainability goals. Solar PV and onshore wind offer easy, rapid roll-out possibilities, while offshore wind, hydropower, bioenergy, and geothermal technologies provide complementary and cost-effective medium-term investment options.
A global recovery strategy must be a green strategy. Renewables offer a way to align short-term policy action with medium- and long-term energy and climate goals. Renewables must be the backbone of national efforts to restart economies in the wake of the COVID-19 outbreak. With the right policies in place, falling renewable power costs, can shift markets and contribute greatly towards a green recovery, Francesco La Camera added.
Technology improvements and scale-economy driving down costs
Renewable electricity costs have fallen sharply over the past decade, driven by improving technologies, economies of scale, increasingly competitive supply chains, and growing developer experience.
Since 2010, utility-scale solar PV power has shown the sharpest cost decline at 82 percent, followed by concentrating solar power (CSP) at 47 percent, onshore wind at 39 percent, and offshore wind at 29 percent.
Electricity costs from utility-scale solar PV fell 13 percent in 2019, reaching a global average of 6.8 cents (US$0.068) per kilowatt-hour (kWh). Onshore and offshore wind both declined by about 9 percent, reaching US$0.053/kWh and US$0.115/kWh, respectively.
Recent auctions and power purchase agreements (PPAs) show the downward trend continuing for new projects are commissioned in 2020 and beyond. Solar PV prices based on competitive procurement could average US$0.039/kWh for projects commissioned in 2021, down 42 percent compared to 2019 and more than one-fifth less than the cheapest fossil-fuel competitor namely coal-fired plants.
Record-low auction prices for solar PV in Abu Dhabi and Dubai, United Arab Emirates (UAE), Chile, Ethiopia, Mexico, Peru, and Saudi Arabia confirm that values as low as US$0.03/kWh are already possible.
For the first time, IRENA’s annual report also looks at investment value in relation to falling generation costs. The same amount of money invested in renewable power today produces more new capacity than it would have a decade ago. In 2019, twice as much renewable power generation capacity was commissioned than in 2010 but required only 18 percent more investment.