Most new renewables undercut cheapest fossil fuels on cost

‘Today, renewables are the cheapest source of power,’ says IRENA’s Director-General, Francesco La Camera. ‘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.’

The agency’s report, Renewable Power Generation Costs in 2020, showed that the prices of many renewable technologies continued to drop significantly year-on-year. For instance, concentrating solar power costs fell by 16% and conventional solar PV costs fell by 7%. Meanwhile, the costs associated with onshore and offshore wind projects dropped by 13% and 9%, respectively. 

Last year’s new renewable project additions alone will save emerging economies up to $156bn over their operational lifetimes. They will also reduce costs in these countries’ electricity sectors by at least $6bn, relative to adding the same quantity of fossil fuelled generation, says the report. Two-thirds of these savings will come from onshore wind, followed by hydropower and solar PV. 

The report also shows that new renewables outcompete existing coal plants on operating costs in numerous places. 

For example, in the US 61% (149 GW) of total coal capacity costs more than new renewable capacity. Retiring and replacing these plants with renewables would cut expenses by $5.6bn per year and save 332mn tonnes of CO2 – equivalent to one third of all the country’s coal emissions. 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.

‘We are far beyond the tipping point of coal,’ La Camera continues. ‘Following the latest commitment by G7 to net zero and to 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.’

The outlook through next year sees global renewable power costs falling further, with onshore wind becoming 20–27% lower than the cheapest new coal-fired generation option. Nearly three quarters of all new solar PV projects commissioned over the next two years that have been competitively procured through auctions and tenders will have an award price lower than new coal power, the report claims.

By coincidence, in late June, research group BloombergNEF (BNEF) also revealed that building and operating new utility-scale solar PV is cheaper than running existing coal plants in China, India and across most of Europe. 

In its latest levelised cost of energy update, the firm estimated that the cost of building and operating a solar farm in China is now $34/MWh, cheaper than the cost of operating a typical coal-fired power plant at $35/MWh. Similarly in India, new solar can achieve a levelised cost of $25/MWh, compared to an average cost of running existing coal-fired power plants at $26/MWh.