The fossil fuel price crisis has accelerated the competitiveness of renewable power, according to the International Renewable Energy Agency (IRENA). In 2022, about 86% (187 GW) of all the newly commissioned renewable capacity had lower costs than fossil fuel-fired electricity.
Renewable Power Generation Costs in 2022, published by IRENA, shows that new renewable capacity added since 2000 reduced the electricity sector fuel bill in 2022 by at least US$520 billion. In non-OECD countries, just the saving over the lifetime of new capacity additions in 2022 will reduce costs by up to US$580 billion.
In addition to these direct cost savings, there would be substantial economic benefits from reducing CO2 emissions and local air pollutants. Without the deployment of renewables over the past two decades, the economic disruption from the fossil fuel price shock in 2022 would have been much worse and possibly beyond many governments’ ability to soften with public funding.
“IRENA sees 2022 as a veritable turning point in the deployment for renewables as its cost-competitiveness has never been greater despite the lingering commodity and equipment cost inflation around the world. The most affected regions by the historic price shock were remarkably resilient, in large part thanks to the massive increase of solar and wind in the last decade,” said IRENA’s Director-General Francesco La Camera.
“Today, the business case for renewables is compelling, but the world must add 1,000 GW of renewable power annually on average every year until 2030 to keep 1.5°C within reach, more than three times 2022 levels. There is no time for a new energy system to evolve gradually as was the case for fossil fuels. In preparation of the COP28 in Dubai later this year, today’s report shows once again that with renewables, countries have the best climate solution at hand to raise ambition and take actions in a cost-competitive way.”
At a global level, the weighted-average cost of electricity fell for utility-scale solar PV by 3%, for onshore wind by 5%, for concentrating solar power by 2%, for bioenergy by 13% and for geothermal by 22%. Only the costs for offshore wind and hydropower increased by 2% and 18% respectively, due to the reduced share of China in offshore wind deployment in 2022 and cost overruns in a number of large hydropower projects. As a result, the global weighted average total installed cost of new hydropower projects increased by 25%, from US$2,299/kW in 2021 to US$2,881/kW in 2022.
In addition, the report said total installed costs for hydropower increased 105% from 2010 to 2022. Capacity factor grew by 4% over the same time period, and the levelized cost of electricity increased 47%, reaching $0.061/kWh. This was still lower than the cheapest new fossil fuel-fired electricity option in 2022, IRENA said. Since 2000, hydropower saved US$136 billion globally in fuel costs in the electricity sector, the report said.
IRENA’s report concludes that expected high fossil fuel prices will cement the structural shift that has seen renewable power generation become the least-cost source of new generation, even undercutting existing fossil fuel generators.
IRENA is an intergovernmental organization that supports countries in their transition to a sustainable energy future and promotes the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy.
