The share of renewable energy that achieved lower costs than the most competitive fossil fuel option doubled in 2020, a report by the International Renewable Energy Agency (IRENA) shows.
Renewable Power Generation Costs in 2020 shows that costs for renewable technologies continued to fall significantly year-on-year. Of the total renewable power generation added last year, 162 GW, or 62%, had lower costs than the cheapest new fossil fuel option.
Concentrating solar power fell by 16%, onshore wind by 13%, offshore wind by 9% and solar PV by 7%.
Specific to hydropower, the global weighted-average levelized cost of energy (LCOE) of newly commissioned projects in 2020 was US$0.044/kWh – 10% higher than the US$0.040/kWh recorded in 2019 and 16% higher than the projects commissioned in 2010. The increase in LCOE since 2010 has been driven by rising installed costs, notably in Asia, which has an increased number of projects with more expensive development conditions compared to earlier projects. This is likely due to an increase in projects in locations with more challenging site conditions.
With the cost of newly commissioned fossil-fuel fired capacity ranging between US$0.055/kWh and US$0.148/kWh, 99% of the hydropower projects commissioned in 2020 had an LCOE within or lower than this range. Moreover, 56% of the hydropower projects commissioned in 2020 had an LCOE lower than the cheapest new fossil fuel-fired cost option.
In 2020, the global weighted-average total installed cost of newly commissioned hydro projects increased to US$1,870/kW, 9% higher than in in 2019. Despite the higher share of deployment occurring in China in 2020 – 12 GW compared to 5.5 GW in 2019 – the global weighted-average total installed cost in 2020 was the highest recorded value since 2010. This increase is explained by the higher share of installed capacity deployment in other countries or regions with higher average installed costs. In Turkey, for example, 2.5 GW was added in 2020, while there was also a higher share of deployment in Eurasia and other Asia in 2020 compared to 2019 – all locations with higher than average installed costs.
Low-cost renewables give developed and developing countries a strong business case to power past coal in pursuit of a net zero economy. Just 2020’s new renewable project additions will save emerging economies up to US$156 billion over their lifespan, IRENA said.
“Renewables present countries tied to coal with an economically attractive phase-out agenda that ensures they meet growing energy demand, while saving costs, adding jobs, boosting growth and meeting climate ambition,” said IRENA’s Director-General Francesco La Camera. “I am encouraged that more and more countries opt to power their economies with renewables and follow IRENA’s pathway to reach net zero emissions by 2050.”
“We are far beyond the tipping point of coal. Following the latest commitment by G7 to net-zero and stop global coal funding abroad, it is now for G20 and emerging economies to match these measures. We cannot allow having a dual-track for energy transition where some countries rapidly turn green and others remain trapped in the fossil-based system of the past. Global solidarity will be crucial, from technology diffusion to financial strategies and investment support. We must make sure everybody benefits from the energy transition.”
The renewable projects added last year will reduce costs in the electricity sector by at least US$6 billion per year in emerging countries, relative to adding the same amount of fossil fuel-fired generation. Two-thirds of these savings will come from onshore wind, followed by hydropower and solar PV. Cost savings come in addition to economic benefits and reduced carbon emissions. The 534 GW of renewable capacity added in emerging countries since 2010 at lower costs than the cheapest coal option are reducing electricity costs by around US$32 billion every year.
IRENA’s report also shows that new renewables beat existing coal plants on operating costs. In the U.S. for example, 149 GW or 61% of the total coal capacity costs more than new renewable capacity. Retiring and replacing these plants with renewables would cut expenses by US$5.6 billion per year and save 332 million tonnes of CO2, reducing emissions from coal in the U.S. by one-third. In India, 141 GW of installed coal is more expensive than new renewable capacity. In Germany, no existing coal plant has lower operating costs than new solar PV or onshore wind capacity.
The outlook till 2022 sees global renewable power costs falling further, confirming that low-cost renewables will also enable electrification in end-uses like transport, buildings and industry and unlock competitive indirect electrification with renewable hydrogen.