The cost of renewable energy is increasingly undercutting fossils

Jun 23, 2020

the-cost-of-renewable-energy-installations-is-increasingly-getting-cheaper-than-fossil-fuels

The cost of renewable energy projects fell over the last decade Image: REUTERS/Mike Hutchings

Harry Kretchmer

Senior Writer, Formative Content

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Climate Crisis

The International Renewable Energy Agency says half of new solar and wind installations undercut fossil fuels in 2019.
Since 2010, the cost of new solar photovoltaic projects has fallen by 82%.
Governments are debating whether to stimulate economic recoveries with “green growth” policies, including investment in renewables.

The cost of renewable energy projects is now cheaper than even the cheapest coal-fired power plants.

That’s the striking finding of the International Renewable Energy Agency (IRENA), which has been crunching the data on 17,000 renewable power projects and more than 10,000 power deals signed in 2019.

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In a series of graphics and charts, it shows how auction prices – which set the cost of renewable power – are continuing to fall, and predicts the trend will significantly strengthen the case for phasing out coal entirely.

The report comes as the World Economic Forum calls for The Great Reset, using the recovery from the coronavirus crisis as an opportunity to create a more sustainable economy.

cost-of-renewable-energy-especially-wind-and-solar-power-on-decline

Declining cost of renewable energy in 2019. Image: International Renewable Energy Agency

Dramatic fall in cost of renewable energy

Some of the falls in the costs of renewable energy are dramatic. Between 2010 and 2019, the cost of large, utility-scale solar photovoltaic projects – where energy is converted directly into electricity – fell by 82%.

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What’s the World Economic Forum doing about climate change?

Climate change poses an urgent threat demanding decisive action. Communities around the world are already experiencing increased climate impacts, from droughts to floods to rising seas. The World Economic Forum's Global Risks Report continues to rank these environmental threats at the top of the list.

To limit global temperature rise to well below 2°C and as close as possible to 1.5°C above pre-industrial levels, it is essential that businesses, policy-makers, and civil society advance comprehensive near- and long-term climate actions in line with the goals of the Paris Agreement on climate change.

The World Economic Forum's Climate Initiative supports the scaling and acceleration of global climate action through public and private-sector collaboration. The Initiative works across several workstreams to develop and implement inclusive and ambitious solutions.

This includes the Alliance of CEO Climate Leaders, a global network of business leaders from various industries developing cost-effective solutions to transitioning to a low-carbon, climate-resilient economy. CEOs use their position and influence with policy-makers and corporate partners to accelerate the transition and realize the economic benefits of delivering a safer climate.

Over the same period, the other main type of solar, concentrating solar power – which uses mirrors or lenses to create power through heat – fell by 47%. Falls in wind power costs are also significant: 39% for onshore wind and 29% for offshore.

The costs have fallen for a combination of reasons, including better technologies and production at scale, and more experienced renewable developers.

Are fossil fuels in trouble?

Not quite yet. What the falling cost of renewable energy means for plans for fossil fuel-powered plants – and their CO2 – depends in part on decisions governments are making right now.

Around the world, nations are being urged to consider “green growth” as a way of stimulating locked-down economies – by the Prince of Wales and many others who support initiatives including the Forum’s Great Reset.

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Falling cost of renewable energy projects Image: International Renewable Energy Agency

However, while investments in fossil fuels have fallen 30% during the pandemic, the International Energy Agency forecasts this is likely to rebound as COVID-19 restrictions ease. They had still been growing, pre-crisis – although at an almost flat rate of 2%.

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What is the World Economic Forum doing to manage emerging risks from COVID-19?

The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.

As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.

To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications - a companion for decision-makers, building on the Forum’s annual Global Risks Report.

The report reveals that the economic impact of COVID-19 is dominating companies’ risks perceptions.

Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.

Renewables, although a growing share, still account for less than half of energy generation.

“We have reached an important turning point in the energy transition,” says Francesco La Camera, Director-General of IRENA.

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