Electricity from renewables will soon be systematically cheaper than from fossil fuels
“By 2020, all the renewable power generation technologies that are now in commercial use are expected to fall within the fossil fuel-fired cost range, with most at the lower end or undercutting fossil fuels.”
A report published by International Renewable Energy Agency (IRENA) in January shows that electricity costs of renewable power generation are equal or in some cases even lower than those of fossil-based electricity. Costs of bioenergy-for-power, hydropower, geothermal and onshore wind projects commissioned in 2017 have continued to decrease, global weighted average electricity prices now being USD 0.05/kWh from new hydropower projects, USD 0.06/kWh for onshore wind and USD 0.07/kWh for bioenergy and geothermal projects. What comes to solar power, electricity costs from utility-scale solar photovoltaic projects have fallen 73% between 2010 and 2017, and it is thus now competing with conventional power sources at a price of USD 0.10/kWh.
The report identifies three main drivers that have reduced the costs of renewable energy. First, improvements in technology and continuous innovation increase the performance and unlock efficiencies in manufacturing, resulting in important cost reductions. Second, competitive procurement has opened the renewable power market to bids and tenders to obtain the best value. Finally, globalisation of the market has led into the emergence of experienced and internationally active medium-to-large project developers.
According to the results of recent renewable power auctions for future projects, cost reductions will continue to 2020 and beyond. Concentrating solar and offshore wind power costs in 2020 are predicted to be the lowest yet seen, and this can be deployed globally. However, access to low-cost finance, a promotive policy environment and good auction design are needed to achieve these lower costs.
The report confirms what has been on the table for a quite some time now: fossil fuels are history. It is becoming more and more profitable to invest in renewable energy, and Europe should support this transition by creating investor security and setting high targets for renewables. As the markets continue to develop, low ambition will only reflect the business-as-usual scenario and will not help Europe to become the leader in future green technology.
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