In 2021, nothing has been able to stop the fall in generation costs in the renewable energy sector; and thus, it is increasingly cheaper to produce a megawatt hour of electricity with the sun or the wind and, therefore, these energy sources are becoming increasingly competitive in more and more areas of the planet. The increase in prices that many raw materials have registered over the last few months in global markets has not been able to stop solar photovoltaic (or wind), and neither has the rise in the price of energy been able to stop renewables (energy is needed to manufacture solar panels or wind turbines, and indeed this has become extraordinarily expensive over the last year and a half).
Nor have these technologies (with their improvement in generation costs) been affected by logistical problems and/or those related to the supply chain, problems that have affected many economic sectors in many territories, problems derived either from the restrictions and confinements that many countries have suffered (due to Covid), or due to the rebound effect experienced by demand after overcoming the worst of the pandemic.
[Below is a table taken from the Irena report showing graphically the fall in generation costs between 2010 and 2021 and, below, the percentages of the fall.]
Thus, and according to the report Renewable Power Generation Costs in 2021 (renewable electricity generation costs), just published by the International Renewable Energy Agency (Irena), the cost of producing a megawatt hour of electricity in a solar photovoltaic farm has fallen in 2021 thirteen points (-13%), the cost of producing it in an offshore wind farm has fallen another thirteen points and the cost of generating onshore wind electricity, compared to the costs that were recorded a year earlier, in 2020, has fallen fifteen points (-15%).
According to Irena's report, practically two thirds of the new renewable power installed in 2021 (that is, 163,000 of the 257,000 megawatts installed last year) generated electricity at a lower price (served cheaper electricity) than the cheapest fossil alternative (coal-fired power plant) in G20 countries (lower costs than the world's cheapest coal-fired option in the G20). Irena further estimates that, at current fossil fuel prices, the renewable power connected in 2021 will save (in generation costs globally) about $55 billion in 2022.
But if the drop in costs in photovoltaics has been formidable, no less extraordinary is the case of solar thermal, even though the global park of solar thermal installations is much smaller (less than 8,000 MW installed worldwide) compared to wind (55,900 megawatts offshore already installed, 825,000 megawatts on land) or wind power (55,900 megawatts on land).825,000 megawatts on land) or photovoltaic (849,000), so it can be inferred that the learning curve of solar thermal is the steepest of all, since with much less power it has achieved improvements in generation costs in the same period that are very similar to those of its "bigger" sisters.
Francesco La Camera, CEO of Irena: "Renewable energies are by far the cheapest way to generate electricity today. 2022 is an irrefutable example of the obvious economic viability of new renewable electricity generation. Renewable electricity frees economies from volatile fossil fuel prices (...) and strengthens the resilience of markets, even more so in energy crisis situations such as the current one. Although a contingent response to the crisis might be necessary in a situation like the current one, excuses to soften climate targets will not work in the medium and long term. The current situation is unequivocal evidence that renewables and energy savings are the future. With the Egypt climate summit, CoP27, and the United Arab Emirates climate summit, Cop28, in sight, renewables are set to provide governments with affordable energy that will allow them to move closer to their net zero emissions targets and enable them to translate their climate commitments into concrete actions that will have beneficial effects on people across the earth."
The Renewable Power Generation Costs in 2021 report confirms the "critical role" that the competitive cost of renewable energies will play in achieving the planet's energy and climate targets, according to Irena. According to Irena, renewables are key to accelerating the energy transition towards the horizon set by the Paris Agreement, an agreement whose ultimate goal is to prevent the planet's temperature from rising more than one and a half degrees (1.5 ºC) above the average global temperature recorded on Earth in the pre-industrial period (before 1850).
The International Renewable Energy Agency believes that solar and wind energy, with their relatively short installation times, should be the main beams on which all countries (1) should build their efforts to reduce the use of fossil fuels and move towards total decarbonization, and (2) should limit the macroeconomic damage that can be seen in the transition to net zero CO2. Irena estimates that in non-OECD countries, the 109,000 megawatts of new renewable power installed in 2021 whose generation cost is lower than that of the cheapest fossil thermal power plant will lead to savings of at least 5.7 billion euros per year over the next 25-30 years.
The Agency considers that the high prices of both coal and gas recorded in 2021 and 2022 will greatly deteriorate, and are already doing so, the competitiveness of fossil fuels and will make solar and wind two increasingly attractive options.
In its report, Irena finally warns that the unprecedented increase in gas prices in Europe could make gas-fired power generation in the Old Continent completely uneconomical, which could lead to stranding of assets, which would then be rendered unusable.
50 billion savings
Moreover, according to the International Renewable Energy Agency, the European case shows that both the costs of the fuel itself (natural gas) and CO2 could be four to six times higher for existing gas-fired power plants in 2022 than the lifetime costs of new onshore wind and solar capacity installed in 2021. Between January and May 2022, solar and wind power generation - Irena estimates - may have saved Europe fossil fuel imports, especially gas, of no less than $50 billion.
binomial As for supply chains, data collected by the Agency suggest that not all increases in the cost of materials have already been passed on in equipment prices and/or project costs. If material costs remain high - the Agency warns in any case - the pressure on prices in 2022 will be more pronounced. However, the report stresses that this possible increase may be overshadowed by the combination of rising fossil fuel prices and the continuing improvement in the competitiveness of renewable energy generation costs.
The International Renewable Energy Agency (Irena) is defined as "the leading intergovernmental agency for the global energy transformation that supports countries in their transition to a sustainable energy future and acts as the leading platform for international cooperation, center of excellence and repository of knowledge on renewable energy policies, technologies, resources and financing". With 168 members (167 states and the European Union) and 16 other actively participating accession countries, Irena promotes the widespread adoption and sustainable use of all forms of renewable energy to achieve sustainable development, energy access, energy security, and low-carbon growth and prosperity.
Renewable Power Generation Costs in 2021