Report Sees ‘Seismic’ Shift in Competitiveness of Renewable Energy

ABU DHABI, UAE — The cost of renewable energy continued to fall through 2021, resulting in a “seismic shift in its competitiveness with fossil fuels, despite supply chain bottlenecks and other challenges, the International Renewable Energy Agency says in a new report.

Over the course of the year, the analysis says, the cost of electricity from onshore wind fell by 15%, offshore wind by 13% and solar PV by 13% compared with 2020.

Further, the spillover effect to this year has been profound, the report said.

Thanks to the spike in fuel prices, the lifetime cost per kWh of new solar and wind capacity added in Europe in 2021 will average at least four to six times less than the marginal generating costs of fossil fuels in 2022.

In addition, from a global perspective, new renewable capacity added in 2021 could reduce electricity generation costs in 2022 by at least $55 billion.

And between January and May 2022 in Europe, solar and wind generation, alone, avoided fossil fuel imports of at least $50 billion, the report said.

“Renewables are by far the cheapest form of power today,” said Francesco La Camera, director-general of IRENA. 

“This year, 2022, is a stark example of just how economically viable new renewable power generation has become,” La Camera continued. “Renewable power frees economies from volatile fossil fuel prices and imports, curbs energy costs and enhances market resilience — even more so if today’s energy crunch continues.”

The report, “Renewable Power Generation Costs in 2021,” shows that almost two-thirds or 163 GW of newly installed renewable power in 2021 had lower costs than the world’s cheapest coal-fired option in the G-20.

The G-20 is the intergovernmental forum of 19 countries, including the United States and the European Union, that works to address major issues related to the global economy.

IRENA argues its findings prove that 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.

“While a temporary crisis response might be necessary in the current situation, excuses to soften climate goals will not hold mid- to long-term,” La Camera said. 

“Today’s situation is a devastating reminder that renewables and energy saving are the future. With the [Climate Change Conference] 27 in Egypt and COP 28 in the [United Arab Emirates] 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,” he added.

The report also asserts investments in renewables continue to pay huge dividends in 2022. 

In countries that don’t belong to the Organisation for Economic Co-operation and Development, an intergovernmental organization with 38 member countries that aims to stimulate economic progress and world trade, the 109 GW of renewable energy additions in 2021 that cost less than the cheapest new fossil fuel-fired option will reduce costs by at least $5.7 billion 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,” the report said. “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.”

According to IRENA, the global weighted average “levelized cost of electricity,” a measure defined as the price at which the generated electricity should be sold for the system to break even at the end of its lifetime, newly commissioned utility‑scale solar PV projects declined by 88% between 2010 and 2021, while that of onshore wind fell by 68%, concentrated solar power by 68% and offshore wind by 60%.

IRENA’s cost analysis program has been collecting and reporting the cost and performance data of renewable power generation technologies since 2012. 

The data and latest analysis is based on the IRENA Renewable Cost Database that has data on around 21,000 renewable power generation projects from around the world.

Dan can be reached at [email protected] and @DanMcCue