Is renewable energy really more expensive?
According to the latest IRENA report, published in May 2019 and entitled "Renewable power generation costs in 2018", renewable energy is the cheapest source of energy to produce electricity for most countries in the world today. In addition, the report shows that since 2010, the global weighted-average levelised cost of electricity (LCOE) from renewable energy projects has decreased significantly and is all in the range of fossil fuel electricity production costs today. On the graph below, we can see the evolution of the costs from 2010 to 2018 of electricity produced from bioenergy, hydropower, geothermal, solar (PV and CSP), onshore wind and offshore wind energy.
Actualised total cost of electricity produced from large low-carbon electricity generation projects, 2010-2018 (in $/kWh)
We can see the cost trends from 2010 to 2018 and we notice that only the costs of production from geothermal and hydropower energy increased over this period. Indeed, the cost of energy produced from solar energy (PV and CSP) has decreased on average by more than 50%, that of wind energy (offshore and onshore) has decreased on average by 30% over this period while that of bioenergy has decreased by about 20%. The report also indicates that compared to 2017, the cost of electricity produced by CSP fell by 26% year-on-year in 2018, followed by bioenergy (-14%), solar photovoltaics and onshore wind, both down by 13%, hydropower (-11%), geothermal and offshore (-1%). Individual projects for bioenergy, hydropower, onshore wind energy and solar photovoltaic energy are now far below the production costs of electricity from fossil fuels, without financial support.
However, it should be noted that offshore wind and concentrated solar power (CSP) technologies are less widely deployed, and their weighted average global electricity costs are in the upper half of the fossil fuel cost range. Nevertheless the results of auctions and power purchase agreements (PPAs) suggest that by 2020 or 2022, they will also be very competitive. According to the report's forecasts, the cost of offshore wind energy would approach $0.1/kWh by 2022 and the cost of CSP would fall below this level to reach $0.073/kWh at the same period.
The overall phenomenon of the global weighted average cost decline of renewable energy installations could be explained by, among other things, increasingly mature technologies, scaling effects in manufacturing and deployment, persistently low interest rates favoring capital-intensive projects, as well as strong competition between China, the United States and the EU, resulting inoverall cost competitiveness, which is an important driver for these sectors.
Félix Fouret, Carbon/Climate Analyst
Source: Beyond Ratings, IRENA