In a watershed moment for the energy sector, the proliferation of renewable energy sources has contributed to a remarkable $520 billion reduction in fuel expenses within the global power sector in 2022, states a report unveiled by the International Renewable Energy Agency (IRENA). Entitled “Renewable Power Generation Costs in 2022,” the report underscores the mounting pressure caused by soaring fossil fuel prices, which has significantly enhanced the competitiveness of renewable power. The report further indicates that an impressive 86 percent, equivalent to 187 gigawatts, of the recently commissioned renewable energy capacity in 2022 boasted lower costs compared to electricity derived from fossil fuels.
Since the turn of the millennium, the introduction of renewable energy capacity has collectively curtailed the global electricity sector’s fuel expenditure by a substantial $520 billion in 2022, reveals the report’s findings. The economies of non-OECD countries are anticipated to realize potential savings of up to $580 billion over the lifespan of new renewable capacity additions in 2022 alone.
Beyond immediate fiscal benefits, the report accentuates the noteworthy economic gains stemming from reduced carbon dioxide emissions and localized air pollutants. It underscores the pivotal role of cost-competitive renewables in addressing contemporary energy and climate challenges while expediting the transition to align with the 1.5°C warming threshold. This transition is crucial in enabling nations to gradually reduce and ultimately phase out fossil fuels, thus mitigating the macroeconomic repercussions they entail in the pursuit of achieving net-zero emissions.
IRENA’s Director-General, Francesco La Camera, elucidates, “2022 represents a significant inflection point for renewables, as their cost-competitiveness has never been more pronounced, notwithstanding the persistent escalation of commodity and equipment costs globally. Regions most affected by the historic price surge exhibited remarkable resilience, primarily attributed to the substantial upswing in solar and wind energy over the past decade.”
“Today, the economic rationale for renewables is compelling. However, the global community must add 1,000 GW of renewable power annually on average until 2030 to remain on course for the 1.5°C objective, surpassing 2022 levels by over threefold. The evolution of a new energy system cannot be gradual, as witnessed with fossil fuels. As we approach COP28 in Dubai later this year, this report once again demonstrates that renewables offer the most effective climate solution, enabling nations to elevate their ambitions and take decisive cost-competitive actions.”
The report further underscores the impacts of commodity and equipment cost inflation in 2022, leading to diverse trends in cost variations among countries. Nevertheless, at a global scale, the weighted-average electricity cost for various renewable sources notably decreased. The cost of utility-scale solar PV dropped by 3%, onshore wind by 5%, concentrating solar power by 2%, bioenergy by 13%, and geothermal by 22%.
However, the expenses for offshore wind and hydropower experienced marginal increments of 2% and 18% respectively, influenced by factors such as China’s reduced participation in offshore wind initiatives and cost overruns associated with large-scale hydropower projects.
Crucially, the report emphasizes that over the last 13 to 15 years, the expenses tied to renewable power generation from solar and wind sources have consistently dwindled. Between 2010 and 2022, solar and wind energy became economically competitive with fossil fuels, even sans financial backing. The global average cost of solar PV electricity plummeted by a remarkable 89% to $0.049 per kWh, nearly one-third below the least expensive global fossil fuel option. Onshore wind costs plunged by 69% to $0.033 per kWh in 2022, just slightly under half the expense of the most economical fossil fuel-fired alternative for that year.
The report culminates by asserting that anticipated elevated fossil fuel prices will solidify the ongoing shift, positioning renewable power generation as the most cost-effective means of new energy generation, even surpassing existing fossil fuel-based generators. Renewables are poised to shield consumers from the impacts of fossil fuel price shocks, preclude physical supply scarcities, and amplify energy security.
