New analysis from IRENA has found that 162GW or 62% of new renewable generation added in 2020 had lower costs than the cheapest new fossil fuel option.
The study found that the cost declines of the various technologies varied, with concentrated solar power the largest with a 16% decline.
Onshore wind fell by 13%, offshore wind by 9% and utility-scale solar PV by 7%.
These cost declines continue the downward trend of the past decade – for example, that of utility scale solar PV by 85% and onshore wind by 56% since 2010 – driven by improving technologies, economies of scale, competitive supply chains and improving developer experience.
With costs at these low levels, renewables also are increasingly undercutting existing coal’s operational costs. IRENA says it estimates that 800GW of existing coal-fired capacity now has operating costs higher than new utility-scale solar PV and onshore wind.
These low costs give both developed and developing countries a strong business case to power past coal in pursuit of a net zero economy, according to IRENA. For example, just 2020’s new renewable project additions should save emerging economies up to US$156 billion over their lifespan with two-thirds from onshore wind, followed by hydropower and solar PV.
“We are far beyond the tipping point of coal,” said IRENA’s Director-General Francesco La Camera.
“Today, renewables are the cheapest source of power. 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.”
IRENA estimates the 534GW of renewable capacity added in emerging countries since 2010 at lower costs than the cheapest coal option are reducing electricity costs by around US$32 billion every year.
Moreover, retiring the over 800GW of existing higher cost coal power would reduce power generation costs by up to US$32.3 billion annually. They also would avoid around 3Gt of CO2 per year, which corresponds to 9% of global energy-related CO2 emissions in 2020 or 20% of the emissions reduction needed by 2030 for IRENA’s 1.5oC climate pathway.
IRENA’s outlook to 2022 sees global renewable power costs falling further, with onshore wind becoming 20-27% lower than the cheapest new coal-fired generation option. Further, 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 organisation says the trend confirms that low cost renewables are not only the backbone of the electricity system, but that they will also enable electrification in end-uses like transport, buildings and industry.
Notably also it opens the way for the production of low cost renewable hydrogen at scale, lowering the two key barriers of the input energy production costs and the electrolyser costs with their high load factor requirement.