IRENA’s Global Renewable Power Generation Costs Study Shows That The Competitiveness of Renewables Continued to Improve Despite Rising Materials and Equipment Costs in 2022
/LONDON, September 22, 2023, 10:00 BST, IRENA, RENEWABLE MARKET WATCHTM/ The International Renewable Energy Agency (IRENA) published a new report, 'Renewable Power Generation Costs in 2022'. In 2022, the global weighted average levelised cost of electricity (LCOE) from newly commissioned utility-scale solar photovoltaics (PV), onshore wind, concentrating solar power (CSP), bioenergy and geothermal energy all fell, despite rising materials and equipment costs.
For newly commissioned onshore wind projects, the global weighted average LCOE fell by 5% between 2021 and 2022, from USD 0.035/kWh to USD 0.033/kWh; whilst for utility‑scale solar PV projects, it decreased by 3% year-on-year in 2022 to USD 0.049/kWh. For offshore wind, the cost of electricity of new projects increased by 2%, in comparison to 2021, rising from USD 0.079/kWh to USD 0.081/kWh in 2022.
China was the key driver of the global decline in costs for solar PV and onshore wind in 2022, with other markets experiencing a much more heterogeneous set of outcomes that saw costs increase in many major markets.
The economic benefits of solar and wind technologies – in addition to their environmental benefits – are now compelling. Owing to soaring fossil fuel prices, the 2021-2022 period saw one of the largest improvements in the competitiveness of renewable power in the last two decades.
In 2010, the global weighted average LCOE of onshore wind was 95% higher than the lowest fossil fuel-fired cost; in 2022, the global weighted average LCOE of new onshore wind projects was 52% lower than the cheapest fossil fuel-fired solutions. Over the same period, the global weighted‑average LCOE of offshore wind went from being 258% more expensive than the cheapest fossil fuel option to being just 17% more expensive, as the cost fell from USD 0.197/kWh to USD 0.081/kWh.
Chart 1: Change in competitiveness of solar and wind by country based on global weighted average LCOE, 2010-2022; Source: IRENA
Note: The global weighted average LCOE data by technology and the fossil fuel LCOE data used to derive this chart are presented in detail in Chapter 1; RE = renewable energy.
However, even this improvement was surpassed by that of solar PV, however. This renewable power source had a global weighted‑average LCOE of USD 0.445/kWh in 2010 – 710% more expensive than the cheapest fossil fuel-fired option. Yet, by 2022, a spectacular decline in costs – to USD 0.049/kWh – made solar PV’s global weighted‑average LCOE 29% lower than the cheapest fossil fuel-fired option.
Chart 2: Global fossil fuel cost savings in the electricity sector in 2022 from renewable power added since 2000; Source: IRENA
Indeed, with fossil fuel-fired power generation costs rising in 2021-2022, primarily because of fossil fuel price increases, around 86%, or 187 gigawatts (GW), of newly commissioned, utility-scale renewable power generation projects commissioned in 2022 had costs of electricity lower than the weighted‑average fossil fuel-fired cost by country/region. This figure was 8% higher than the 174 GW estimated for 2021.
Overall, between 2010 and 2022, 1 120 GW of renewable power generation with a lower LCOE than that of the weighted‑average fossil fuel-fired LCOE by country/region was deployed. Indeed, 2022 was the year that the energy security benefits of renewables were widely ‘rediscovered’.
Chart 3: Global LCOE from newly commissioned, utility-scale renewable power technologies, 2021-2022; Source: IRENA
Unlike energy security policies that focus on the physical supply of fossil fuels, renewable power reduces the economic costs of exposure to inherently volatile fossil fuel prices by reducing the need for fossil fuels and their import. In short, substitutes to fossil fuels that have stable costs over their lifetime, such as renewable power and energy efficiency, and can be deployed rapidly, provide by far the largest energy security benefits. This may seem obvious, but in the scramble to secure additional fossil fuel supplies in 2022, this was often a secondary priority among policymakers.
The fossil fuel price crisis of 2022 was a telling reminder of the powerful economic benefits that renewable power can provide in terms of energy security. In 2022, the renewable power deployed globally since 2000 saved an estimated USD 521 billion in fuel costs in the electricity sector. In Europe, that figure was USD 176 billion. In addition, it is possible that the build-out of renewables since 2010 probably saved the continent from a full-blown economic crisis, as in the absence of renewable power generation, the direct economic costs of the fossil fuel price hikes would have been much higher.
For more information about the cost of financing for renewable energy, you may read here: Renewable Power Generation Costs in 2022 - Executive Summary
For more information about the European solar photovoltaic power market, including full contact details of renewable project owners and developers, you may read here: Europe Solar Photovoltaic (PV) Power Market Outlook 2023 ÷ 2032
To download the executive summary brochure with sample pages, please access from here: Europe Solar Photovoltaic (PV) Power Market Outlook 2023 ÷ 2032
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