Myth: Clean Power Costs Too Much

Fact: In many places, clean power is already the least-cost source of electricity generation. Elsewhere, it is quickly becoming the cheapest source of power.

Some believe clean power is too expensive and not cost-competitive with other sources of power.

In fact, the cost of generating clean power has decreased significantly in recent years, particularly for onshore wind and solar photovoltaics (PV). These clean power technologies are now the least-cost option for power generation in many places around the world.

This lesson focuses on the cost to generate clean power. However, even when additional costs associated with the integration of clean power into the grid are included, clean power is still often the least-cost option. As greater amounts of clean power are added to systems, there may be a need for additional transmission infrastructure or distribution system upgrades, but these upgrades can unlock additional benefits of clean power including improved power system resilience.

First, Read This

The declining costs of renewable power generation can be attributed to technological, production process, and supply chain improvements.

“Electricity costs from renewables have fallen sharply over the past decade, driven by improving technologies, economies of scale, increasingly competitive supply chains and growing developer experience. As a result, renewable power generation technologies have become the least-cost option for new capacity in almost all parts of the world. This new reality has been increasingly reflected in deployment, with 2019 seeing renewables account for 72% of all new capacity additions worldwide.”

Text excerpt from IRENA: Renewable Power Generation Costs in 2019 (link)

Next, Look At This

The levelized cost of electricity (LCOE) for all major renewable power technologies has substantially decreased in recent years including for solar photovoltaics (PV), concentrated solar power (CSP), onshore wind, and offshore wind.

Now, Read This

Renewables are increasingly cost-competitive and in many jurisdictions represent the most economic solution for new generation capacity.

“The cost competitiveness is reflected in deployments in 2019 where renewables accounted for 72% of new capacity additions worldwide and have been between 173 GW – 178 GW in 2017, 2018 and 2019. The new installations in 2019 included 97 GW of solar photovoltaics (PV); 54 GW of onshore wind; 12 GW of hydropower; 6 GW of bioenergy for power; up to 5 GW of offshore wind; 0.7 GW of geothermal power; and 0.6 GW of concentrating solar power (CSP).

The cost competitiveness of renewable power has reached historic levels, with 56% of utility-scale capacity of renewables added in 2019 costing less than the cheapest new coal option. Utility-scale solar PV, biomass for power, hydropower, geothermal and onshore wind can all now provide electricity competitively compared to fossil fuels. Concentrating solar power and onshore wind are the much less deployed, but already auction results show they will also be competitive in the coming 2-4 years. Cost reductions for solar and wind power technologies will continue into the future, as further equipment and balance of plant cost reductions and performance improvements can be expected, which will lower the weighted-average levelized cost of electricity (LCOE) of renewables.

Consequently, renewable energy technologies now represent the most economical solution for new capacity in a growing number of countries and regions and are typically the most economical solution for new grid connected capacity, where suitable resources are available.”

Text excerpt from IRENA website: Power Generation Costs (link)

Next, Read This

While onshore wind and solar PV are currently cost-competitive with other generation sources, the cost of other renewable power sources, including offshore wind, will also continue to decline in the years ahead. Policy will continue to remain a critical driver for continued growth of renewable power.

“Cost reductions and sustained policy support are expected to drive strong renewables growth beyond 2022. Despite the challenges emerging from the Covid crisis, the fundamentals of renewable energy expansion have not changed.

Solar PV and onshore wind are already the cheapest ways of adding new electricity-generating plants in most countries today. In countries where good resources and cheap financing are available, wind and solar PV plants will challenge existing fossil fuel plants. Solar projects now offer some of the lowest-cost electricity in history. Overall, renewables are set to account for 95% of the net increase in global power capacity through 2025. Total installed wind and solar PV capacity is on course to surpass natural gas in 2023 and coal in 2024. Solar PV alone accounts for 60% of all renewable capacity additions through 2025, and wind provides another 30%.

Driven by further cost declines, annual offshore wind additions are set to surge, accounting for one-fifth of the total wind annual market in 2025. Offshore’s growth moves beyond Europe to new markets such as China and the United States where ample potential remains. The rapid growth of variable renewables around the world calls for increased policy attention to ensure they are securely and cost-effectively integrated into electricity systems. Renewables will overtake coal to become the largest source of electricity generation worldwide in 2025. By that time, they are expected to supply one-third of the world’s electricity. Hydropower will continue to supply almost half of global renewable electricity. It is by far the largest source of renewable electricity worldwide, followed by wind and solar PV.

Renewables’ continued cost declines are changing the investor landscape and the role of policies. The share of renewables’ growth coming from purely market-based settings – outside of policy programmes like auctions and feed-in tariffs – triples from less than 5% today to more than 15% through 2025. This includes corporate power purchase agreements, plants with higher exposure to wholesale power prices or other contracts. While policies and regulatory frameworks remain critically important to provide long-term revenue stability, competition will continue to drive contract prices down. Auctions and green certificate schemes are forecast to cover 60% of renewable capacity expansion globally over the next five years. Major oil and gas companies’ investments in new renewable electricity capacity are expected to increase tenfold from 2020 to 2025.”

Text excerpt from IEA: Renewables 2020 – Analysis and Forecast to 2025 (link)

Now, Read These Quick Facts

• In most parts of the world today, renewables are the lowest-cost source of new power generation. As costs for solar and wind technologies continue falling, this will become the case in even more countries.
• Onshore wind and solar PV are set by 2020 to consistently offer a less expensive source of new electricity than the least-cost fossil fuel alternative, without financial assistance.
• New solar PV and onshore wind are expected to increasingly cost less than the marginal operating cost of existing coal fired power plants.
• The global weighted-average cost of electricity from all commercially available renewable power generation technologies declined in 2018.
• Cost reductions for solar and wind power technologies are set to continue to 2020 and beyond.
• Expectations about future cost reductions for solar PV and onshore wind are once again being continually beaten by lower values as new data becomes available.

Text excerpt from IRENA: Renewable Power Generation Costs in 2018 (link)

Next, Read This

Declining technology costs and policy support contributed to a significant increase in installed capacity of renewables across the globe.

The deployment of renewables will continue to expand in 2021 and beyond, and the installed capacity of wind and solar PV is expected to surpass coal and natural gas in the very near future.

And This

“Cost reductions and sustained policy support are expected to drive strong renewables growth beyond 2022. Despite the challenges emerging from the Covid crisis, the fundamentals of renewable energy expansion have not changed. Solar PV and onshore wind are already the cheapest ways of adding new electricity-generating plants in most countries today. In countries where good resources and cheap financing are available, wind and solar PV plants will challenge existing fossil fuel plants. Solar projects now offer some of the lowest-cost electricity in history. Overall, renewables are set to account for 95% of the net increase in global power capacity through 2025.

Total installed wind and solar PV capacity is on course to surpass natural gas in 2023 and coal in 2024. Solar PV alone accounts for 60% of all renewable capacity additions through 2025, and wind provides another 30%. Driven by further cost declines, annual offshore wind additions are set to surge, accounting for one-fifth of the total wind annual market in 2025. Offshore’s growth moves beyond Europe to new markets such as China and the United States where ample potential remains. The rapid growth of variable renewables around the world calls for increased policy attention to ensure they are securely and cost-effectively integrated into electricity systems.

Renewables will overtake coal to become the largest source of electricity generation worldwide in 2025. By that time, they are expected to supply one-third of the world’s electricity. Hydropower will continue to supply almost half of global renewable electricity. It is by far the largest source of renewable electricity worldwide, followed by wind and solar PV.”

Text excerpts from IEA: Renewables 2020: Analysis and Forecast to 2025 (link)

Ready to Take the Next Step?

• Research: Read more about the cost of renewable power generation in IRENA’s Renewable Power Generation Costs in 2019.
• Sign-Up for a Free Online Course: Learn more about the costs of clean power and LCOE by signing up for Imperial College of London’s free online course Integrating Renewable Energy in Electricity Grids.
• Explore Renewable Power Costs in Your Country: See the declining costs of solar power and wind power generation in your country using IRENA’s data and statistics.
• Share on Social Media: Share the quick facts above from IRENA’s report on your social media pages.