Renewables Competitiveness Accelerates, Despite Cost Inflation

The global power sector saved fuel costs of US$520 billion last year thanks to renewables, a new report claims.

According to the latest report from the International Renewable Energy Agency (IRENA), an intergovernmental organisation mandated to promote the adoption and sustainable use of renewable energy, the fossil fuel price crisis has accelerated the competitiveness of renewable power.

IRENA says Around 86% (187 gigawatts) of all the newly commissioned renewable capacity in 2022 had lower costs than fossil fuel-fired electricity.

The IRENA report entitled “Renewable Power Generation Costs in 2022”, shows that the renewable power added in 2022 reduced the fuel bill of the electricity sector worldwide.

New 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 last 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.

Cementing the Structural Shift

Commenting on the report IRENA’s Director-General Francesco La Camera said: “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.”

“Today, the business case for renewables is compelling, but the world must add 1000 GW of renewable power annually on average every year until 2030 to keep 1.5°C within reach, more than three times 2022 levels.”

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.

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. Renewables can protect consumers from fossil fuel price shocks, avoid physical supply shortages, and enhance energy security, the body says.