162 GW, or 62%, of new renewable capacity was cheaper than new fossil fuel-fired generation in 2020
Falling renewables costs mean that up to 800 GW of coal capacity could be replaced by renewables, saving $32bn per year and reducing CO2 emission by up to 3bn tonnes per year.
Falling auctions prices for solar and wind are indicative of falling costs for renewables, making existing coal uncompetitive across the globe
In 2022, the price of onshore wind could be 20-27% lower than the cheapest new coal-fired generation
Two thirds of new renewable capacity proved to be cheaper than new fossil fuel-fired power generation in 2020, with 162 GW, or 62% of the total, of new green capacity undercutting coal or gas.
New figures from the International Renewable Energy Association (IRENA) found that just 2020’s new renewable additions would save emerging economies up to $156bn over their lifespan.
That 62% share, which was cheaper than the most competitive fossil fuel option, was double the percentage posted for 2019.
IRENA’s report, called Renewable Power Generation Costs in 2020, detailed that costs for renewable technologies continued to fall significantly year on year.
Concentrating solar power (CSP) fell by 16%, onshore wind by 13%, offshore wind by 9% and solar PV by 7%.
With costs at low levels, renewables increasingly undercut existing coal’s operational costs too, the report said.
Low-cost renewables give developed and developing countries a strong business case to power past coal in pursuit of a net-zero economy.
The report urged more G20 and emerging economies to follow the example of G7 governments by stopping coal funding.
Phasing out coal is a key element of moves towards net zero that many major governments have signed up to.
The US, the UK, Japan, Germany have already set a date of 2050, while China has committed itself to 2060.
Meeting the Paris Agreement goals of limiting temperature rises to 1.5 degrees, and two degrees by 2100, would require an immediate end to coal investment, and an end to new oil and gas exploration, the IEA said last month.
Beyond the tipping point
“Today, renewables are the cheapest source of power,” said IRENA 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. 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.”
The renewable projects added in 2020 will reduce costs in the electricity sector by at least $6bn 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 a lower cost than the cheapest coal option are reducing electricity costs by around $32bn every year, the report found.
“We are far beyond the tipping point of coal,” La Camera continued. “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 report found that between 2010 and 2020, CSP, offshore wind and solar PV all joined onshore wind in matching or undercutting the price of fossil fuel generation.
In the 10 years, the cost of electricity generated by utility-scale solar PV fell by 85%, that of CSP by 68%, onshore wind by 56% and 48% for offshore wind.
The report also found that solar PV and onshore no longer needed subsidies to undercut cheap coal, as auction prices fell in 2020 to $0.011-0.03 per kWh
Moving on to operating costs, the report warned coal power was no longer a good investment, becoming in many cases an uneconomic stranded asset.
In the US, 149 GW, or 61% of total coal capacity, costs more than new renewable capacity to run. Retiring and replacing these plants with renewables would cut expenses by $5.6bn per year and prevent 332mn tonnes of CO2 emissions, or one third of US emissions.
In India, 141 GW of installed coal is more expensive to run than new renewable capacity, meaning they can be termed stranded assets, acting as an unprofitable and uneconomic millstone for their owners.
The report pointed out that much of coal capacity is cheaper to run in the US and India because there is no carbon price to pay.
In Germany, where there is a carbon price, which adds significantly to running costs, no existing coal plant has lower operating costs than new solar PV or onshore wind capacity.
Globally, over 800 GW of existing coal power costs more to run than new solar PV or onshore wind projects commissioned in 2021.
Retiring these plants would reduce power generation costs by up to $32.3bn per year and avoid around 3bn tonnes per year (tpy) of CO2, corresponding to 9% of global energy-related CO2 emissions in 2020.
This is equivalent to 20% of the emissions reduction needed by 2030 to meet the UN’s 1.5°C temperature goals.
IRENA’s report adds fuel to the argument that cheaper renewables will form a key element of the move towards net zero.
It adds to the International Energy Agency’s Net Zero 2050 roadmap, which said that the road to net zero by 2050 was “narrow but achievable.” The roadmap called for annual global investment in green energy to rise from $2 trillion today to $$5 trillion by 2030
Looking ahead to 2022, the report sees the cost of renewables falling further, with onshore wind becoming 20-27% lower than the cheapest new coal-fired generation option.
74% 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.
What this means is that low-cost renewables are already not only the backbone of the electricity system; they will also enable electrification in end-uses like transport, buildings and industry and unlock competitive indirect electrification with renewable hydrogen.