A report by the International Renewable Energy Agency (IRENA) shows that the high costs of fossil fuels have made renewable energy sources more competitive. In 2022, 86% of the newly added renewable power capacity was cheaper than electricity from fossil fuels. This was equivalent to 187 GW of electricity.
IRENA’s report on “Renewable Power Generation Costs” highlights that the new renewable energy systems installed last year have lowered the global electricity sector’s expenses for fuel. The total reduction in fuel costs due to new capacity added since 2000 was over $520 billion. For countries outside the OECD, the savings over the lifespan could decrease the expenses by $580 billion.
Furthermore, there are additional advantages of installing renewable energy systems alongside just the cost savings. This includes cutting down CO2 emissions and decrease in local air pollution. If renewable energy preferably not adopted in the coming years, the economic turmoil caused by the fossil fuel price shock could have been even worse.
Important Year for Renewable Energy Sources:
IRENA considers 2022 an important year for renewable energy resource adoption. Because, renewables have become more cost-effective than ever, despite ongoing increases in commodity and equipment costs globally.
In 2022, the increase in commodities and equipment costs impacted various countries differently. However, the average cost of producing renewable energy is decreasing on a global scale. Solar PV electricity cost has dropped by 3%, onshore wind by 5%, concentrating solar power by 2%, bioenergy by 13%, and geothermal by 22%. The only exceptions were offshore wind and hydropower which increased of 2% and 18% respectively. This happened due to China’s less involvement in offshore wind projects and in major hydropower initiatives.
Over the past 13 to 15 years, the costs of generating renewable energy from solar and wind sources have consistently decreased. From 2010 to 2022, solar and wind power have become competitive in comparison to fossil fuel prices. The worldwide average expense for electricity from solar photovoltaic (PV) dropped by 89% to $0.049/kWh. This is nearly one-third less than the cheapest global fossil fuel option. In the case of onshore wind, the cost reduction was 69% to $0.033/kWh in 2022. This was just under half of the cost of the least expensive fossil fuel-generated electricity that year.
IRENA’s report concluded that anticipated high fossil fuel prices will solidify the ongoing shift. Therefore, making renewable energy sources the most economical choice for new power generation is a need of time. This can even surpass the cost-effectiveness of existing fossil fuel power plants.