Thanks to increasingly better technology, panel design, and scaled manufacturing, solar panels have become incredibly cheap. In the last decade alone, the cost per unit of energy they produce has dropped by 85%, with many reports calling solar the cheapest energy ever.
According to the International Renewable Energy Agency (IRENA), two-thirds of all wind, solar and other renewable energy projects that came online in 2020 were cheaper than the cheapest new fossil-fuel power plants. This is more than double the equivalent share for 2019.
This trend will only continue in the future and the cost of renewables is expected to drop significantly.
“In 2021, the global weighted average cost of newly commissioned solar photovoltaic (PV), onshore and offshore wind projects has fallen. This is despite rising commodity and renewable equipment prices in 2021, given that there is a significant lag before these cost increases are reflected in the project’s total installed costs; and significant improvements in performance in 2021 have increased capacity factors, particularly for onshore wind,” the authors write in IRENA’s 2021 Renewable Energy Generation Costs report.
Compared to 2019, the cost of onshore wind decreased by 13%, offshore wind decreased by 9%, and solar photovoltaic projects decreased in cost by 7%. New utility-scale solar PV projects commissioned in 2021 fell another 13% year-over-year to $0.048/kW from $0.055/kW.
IRENA estimates that, given current high energy prices, renewable energy added in 2021 will save at least $55 billion in global energy production costs in 2022.
These findings are echoed in another report by the International Energy Agency (IEA), known as World Energy Outlook 2020, which concludes that “solar power is now the cheapest electricity in history.”
According to the IEA, PV technology is cheaper than coal and gas in most countries. In fact, the sunk cost of solar power surprised even the report’s authors, causing them to revise some of their original predictions.
The IEA presented four pathways, or scenarios, of what the world’s energy production could look like in 2040, all of which predict a massive increase in renewables. The current most likely scenario, which is not overly optimistic, has 43% more solar output by 2040 than the IEA predicted in early 2018.
These developments are good news, of course, but they still don’t go a long way toward averting humanity’s greatest existential threat: climate change.
Despite the decline in coal and other fossil fuels, the IEA and other research institutions are cautious about declaring that we have reached peak global oil use. In addition, gas demand is expected to increase by 30% by 2040, although the war in Ukraine has certainly changed this dynamic, at least in Europe.
We are not out of the woods yet when it comes to our reliance on fossil fuels and more ambitious action is required of us. Keeping global warming below 1.5°C by reaching global net-zero CO2 emissions by 2050 will involve, among other things, individual behavior change such as working from home at least three days a week and consuming less meat.
“Renewable energy is the cheapest form of energy today,” said IRENA CEO Francesco La Camera. “Renewable energy frees economies from volatile fossil fuel prices and imports, curbs energy costs, and improves market stability – even better if today’s energy crisis persists,” he added.
As world leaders prepare for COP27 in Egypt in November, governments will be urged to use increasingly affordable renewable energy and the vulnerabilities of the energy crisis to accelerate their commitments and translate their climate commitments into concrete action.