New wind and solar projects saved countries US$82 billion in fossil fuel costs and will continue to provide badly-needed relief from rising electricity bills, the International Renewable Energy Agency (IRENA) concludes in a report issued last Thursday.
“Almost two-thirds or 163 gigawatts (GW) of newly-installed renewable power in 2021 had lower costs than the world’s cheapest coal-fired option in the G20,” the Abu Dhabi-based agency says in a release. Although supply chain problems and rising component costs are still factoring into the numbers, electricity costs fell 15% for onshore wind, 13% for offshore wind, and 13% for solar photovoltaics.
“Renewables are by far the cheapest form of power today,” said IRENA Director-General Francesco La Camera. “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.”
Even if supply chain woes continue, the industry could see its competitive position improve, IRENA adds. The data so far “suggests that not all materials cost increases have been passed through into equipment prices and project costs yet,” the report states. “If material costs remain elevated, the price pressures in 2022 will be more pronounced. Increases might however be dwarfed by the overall gains of cost-competitive renewables in comparison to higher fossil fuel prices.”
IRENA adds that solar and wind, “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.”
Over the last year, European countries showed the largest price gap between renewable energy and fossil fuels. For the longer term, the analysis shows that “high European gas prices will make new gas-fired generation in Europe increasingly uneconomic over its lifetime,” Reuters writes, citing the report. “Fuel and carbon permit costs for existing gas plants might average four to six times more this year than the lifetime cost of new solar PV and onshore wind commissioned in 2021.”
Even if governments are ramping up fossil fuels to deal with the short-term crisis brought on by Russia’s invasion of Ukraine, IRENA says long-term energy planning has to focus on cleaner sources.
“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 next two United Nations climate summits coming up in Egypt and the United Arab Emirates, he added, “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.”
In a separate analysis last week, the International Energy Agency said renewable energy costs have indeed increased over the last year—by 14% for solar, 7% for onshore wind, and more than 8% for battery storage—but fossil fuels are going up even faster.
The net result is that “renewable power could provide some relief from rising power prices,” Bloomberg writes. “Absolute cost figures are important, but perhaps more important are the details of the power markets in which new wind and solar projects operate.”
While renewables costs are up, “the cost of power from coal and gas have risen even more,” the news agency adds. “The result is that the gap in between wind and solar (generally the lowest-cost options in most developed grids) and coal and gas has widened, not closed.”