New Delhi: Power sectors worldwide saved an astounding $520 billion in fuel costs last year, thanks to the rapid expansion of renewable energy sources, according to a report released today by the International Renewable Energy Agency (IRENA).
The report, titled “Renewable Power Generation Costs in 2022,” underscores how the escalating crisis in fossil fuel prices has significantly bolstered the competitiveness of renewable power. Around 86 percent, equivalent to 187 gigawatts, of the newly commissioned renewable energy capacity in 2022 was found to have lower costs than electricity generated from fossil fuels.
The introduction of renewable energy capacity since the year 2000 has collectively slashed the global electricity sector’s fuel expenses by no less than $520 billion in 2022, the report found. In non-OECD countries, the savings from new renewable capacity additions in 2022 alone are projected to reach up to $580 billion over their lifetime.
Beyond the direct cost savings, the report emphasizes the substantial economic advantages stemming from reduced CO2 emissions and local air pollutants. Without the sustained deployment of renewables over the past two decades, the economic turmoil caused by the fossil fuel price shock of 2022 could have been far more severe, potentially overwhelming the ability of many governments to mitigate it with public funds.
IRENA’s new report confirms the critical role that cost-competitive renewables play in addressing today’s energy and climate crises by accelerating the transition in line with the 1.5°C warming limit. Renewables represent vital planks in countries’ efforts to swiftly reduce, and eventually phase out, fossil fuels and limit the macroeconomic damage they cause in pursuit of net-zero emissions.
IRENA’s Director-General Francesco La Camera said: “IRENA sees 2022 as a veritable turning point in the deployment for renewables as its cost-competitiveness has never been greater despite the lingering commodity and equipment cost inflation around the world. The most affected regions by the historic price shock were remarkably resilient, in large part thanks to the massive increase of solar and wind in the last decade.”
“Today, the business case for renewables is compelling, but the world must add 1 000 GW of renewable power annually on average every year until 2030 to keep 1.5°C within reach, more than three times 2022 levels. There is no time for a new energy system to evolve gradually as was the case for fossil fuels. In preparation of the COP28 in Dubai later this year, today’s report shows once again that with renewables, countries have the best climate solution at hand to raise ambition and take actions in a cost-competitive way.”
The report also highlighted the impacts of commodity and equipment cost inflation in 2022, which led to different trends in costs across countries. Nevertheless, at a global level, the weighted-average cost of electricity dropped significantly for various renewable sources. Utility-scale solar PV costs fell by 3%, onshore wind by 5%, concentrating solar power by 2%, bioenergy by 13 percent, and geothermal by 22%.
Only offshore wind and hydropower costs experienced slight increases, by 2% and 18% respectively, due to various factors, including China’s reduced share in offshore wind deployment and cost overruns in large hydropower projects.
The report underscores that over the past 13 to 15 years, the costs of renewable power generation from solar and wind have been consistently decreasing. Between 2010 and 2022, solar and wind power became cost-competitive with fossil fuels, even without financial support. The global weighted average cost of electricity from solar PV plummeted by an impressive 89% to $0.049 per kWh, nearly one-third less than the cheapest fossil fuel globally. Onshore wind saw costs drop by 69% to $0.033 per kWh in 2022, just slightly below half the cost of the cheapest fossil fuel-fired option for that year.
IRENA’s report concludes that expected high fossil fuel prices will cement the structural shift that has seen renewable power generation become the least cost source of new generation, even undercutting existing fossil fuel generators. Renewables can protect consumers from fossil fuel price shocks, avoid physical supply shortages and enhance energy security.
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Updated: 30 Aug 2023, 05:19 PM IST
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