Renewable power generation increasingly costs less than the cheapest fossil fuel-based power generation options, according to a new report published by the International Renewable Energy Agency (IRENA).
Investment in renewable energy sector is also becoming highly attractive as countries across the world target economic recovery from COVID-19 and these favourable cost trends for renewables are accelerating, the report finds.
The report says more than half of the renewable capacity, added in 2019, achieved lower electricity costs than new coal-based plants.
IRENA, an official United Nations observer that works to promote the adoption and sustainable use of renewable energy, published the report on June 2 from Abu Dhabi of United Arab Emirates.
The study 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.
“Since 2010, utility-scale solar photovoltaic (PV) power has shown the sharpest cost decline at 82 per cent, followed by solar power (CSP) at 47 per cent, onshore wind at 39 per cent and offshore wind at 29 per cent,” according to the report.
Describing about recent auctions and power purchase agreements (PPAs), the report says, “Solar PV prices based-on competitive procurement could average USD 0.039/kWh for projects commissioned in 2021, down 42 per cent 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 (UAE), Chile, Ethiopia, Mexico, Peru and Saudi Arabia confirm that values as low as USD 0.03/kWh are already possible,” it added.
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, the report says.
“In 2019, twice as much renewable power generation capacity was commissioned than in 2010 but required only 18 per cent more investment,” according to the report.
Next year, up to 1 200 gigawatts (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 USD 23 billion every year and reduce annual emissions by around 1.8 gigatons (Gt) of carbon dioxide (CO2), equivalent to 5 per cent of total global CO2 emissions in 2019," the IRENA says.
It would also yield an investment stimulus of USD 940 billion, which is equal to around 1 per cent 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,” said Francesco La Camera, Director-General of IRENA.
“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.
“A global recovery strategy must be a green strategy,” La Camera added.
“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.”