A report released by the International Renewable Energy Agency (IRENA) reveals that an impressive 86 percent (equivalent to 187 gigawatts) of newly commissioned renewable capacity in 2022 boasted lower costs compared to fossil fuel-fired electricity.
The report titled “Renewable Power Generation Costs in 2022” emphasizes that the expansion of renewable power during 2022 played a pivotal role in reducing the fuel expenses for the global electricity sector. The cumulative effect of the new renewable capacity added since the year 2000 translated into a staggering reduction of at least USD 520 billion in the electricity sector’s fuel costs for 2022. Notably, non-OECD countries are expected to experience a cost reduction of up to USD 580 billion over the lifespan of the new capacity added in 2022.
Aside from the immediate cost savings, the transition to renewables also brings about substantial economic advantages by curbing CO2 emissions and local air pollutants. The report underscores that without the widespread adoption of renewables over the past two decades, the economic turmoil induced by the 2022 fossil fuel price shock could have been far more severe, possibly exceeding the mitigation capabilities of many governments through public funding.
Francesco La Camera, the Director-General of IRENA, highlighted the transformative impact of renewables on the energy landscape, especially in light of the increasing costs associated with commodities and equipment worldwide. He noted, “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 report underscores that this shift is crucial for addressing the pressing energy and climate challenges, aligning with the goal of limiting global warming to the 1.5°C target. Renewable power sources are deemed essential components of countries’ strategies to quickly phase out fossil fuels and mitigate the economic repercussions associated with them on the path to achieving net-zero emissions.
La Camera stressed the urgency of further action, stating, “Today, the business case for renewables is compelling, but the world must add 1,000 GW of renewable power annually on average every year until 2030 to keep 1.5°C within reach, more than three times 2022 levels.” This level of expansion is required to ensure that the transition to renewables is rapid enough to meet climate goals.
While commodity and equipment cost inflation led to varying trends in costs in 2022 across different countries, the global average cost of electricity demonstrated notable reductions for various renewable technologies. For instance, utility-scale solar PV costs fell by 3 percent, onshore wind costs decreased by 5 percent, and bioenergy costs saw a reduction of 13 percent. In contrast, offshore wind and hydropower costs experienced marginal increases due to specific regional factors.
The report ultimately affirms the trajectory of renewables becoming the least-cost source of new energy generation, capable of protecting consumers from fossil fuel price shocks and bolstering energy security. As the world navigates the energy transition, the momentum gained by renewable power offers a promising path towards a sustainable and resilient energy future.