The cost of renewable energy is now falling so fast that it should be a consistently cheaper source of electricity generation than traditional fossil fuels within just a few years, according to a new report from the International Renewable Energy Agency (IRENA).
The organization – which has more than 150 member countries – says the cost of generating power from onshore wind has fallen by around 23% since 2010 while the cost of solar photovoltaic (PV) electricity has fallen by 73% in that time. With further price falls expected for these and other green energy options, IRENA says all renewable energy technologies should be competitive on price with fossil fuels by 2020.
Globally, onshore wind schemes are now costing an average of $0.06 per kilowatt-hour (kWh), although some schemes are coming in at $0.04 per KwH, while the cost of solar PV is down to $0.10 per KwH. In comparison, the cost of electricity generation based on fossil fuels typically falls in a range of $0.05 to $0.17 per KwH.
The figures are contained in IRENA’s Renewable Power Generation Costs in 2017 report, which was released on January 13, the first day of the 8th IRENA Assembly in Abu Dhabi, the capital city of the UAE. The report predicts that solar costs will fall even further in the next few years, with a further halving of typical costs by 2020. That means onshore wind and solar PV projects could be consistently delivering electricity for as little as $0.03 per kWh within two years.
Adnan Amin, director-general of IRENA, says a significant shift is underway in the energy sector. “These cost declines across technologies are unprecedented and representative of the degree to which renewable energy is disrupting the global energy system,” he said.
The expected price falls for green energy will provide a fresh challenge to the market position of legacy fuels and to the countries that rely on them for export earnings, such as many Middle East states which have long looked to oil and gas sales as the bedrock of their economies. It also provides a challenge for some Western countries including the United States, where President Donald Trump has made a point of championing the coal industry and has taken steps to increase oil output.
If renewable energy is indeed able to undercut the cost of legacy fuels, then governments and large corporations building new power plants will almost certainly turn to green energy for any new capacity, which will reduce demand for oil, natural gas, and coal.
There are several reasons for the fast-improving cost performance of the key renewable energy technologies. One is the growing preference among governments for competitive bidding processes when handing out contracts to develop new power plants, which is helping to force down the tariffs that project developers can demand. Alongside that, there is a growing base of experienced developers competing for project opportunities around the world. Thirdly, continued advances are being made in the technologies themselves.
While onshore wind and PV solar are leading the way, other sister technologies are also becoming more competitive. IRENA estimates that offshore wind and concentrating solar power should cost in a range of $0.06-$0.10 per KwH by 2020-22.
And although solar and wind power are the main drivers of a shift to renewable energy, other green energy sources are also becoming more competitive. The report points to bioenergy, geothermal and hydropower which, it says, have all been able to compete directly on cost with fossil fuels in some cases over the past year.
The falls in costs is leading to some big investments. IRENA says that since 2013 more than $1 trillion has been invested in renewable energy around the world and the industry now provides nearly 10 million jobs.
“Turning to renewables for new power generation is not simply an environmentally conscious decision, it is now – overwhelmingly – a smart economic one,” said Amin. “We expect the transition to gather further momentum around the world in 2018.”