Renewables Could Compete With Fossil Fuel Prices by 2020

A new report suggests that renewable energy sources like on-shore wind power and some solar energy will be able to compete with the price of fossil fuels by 2020.

The “Renewable Power Generation Costs in 2017“ report, published this month by the International Renewable Energy Agency, examines market trends surrounding renewable energy and related technologies. It also considers existing data on price, and compares those costs to fossil fuels. 

We know that renewable energy costs have steadily decreased over the years as more nations have adopted renewable energy technologies. And despite governments cutting subsidies to renewable energy causes and instead providing significant breaks for fossil fuels, the gap between fossil fuel prices and renewables has closed considerably.

Researchers for the latest IRENA report have found that the energy costs of solar photovoltaic systems – in the form of solar panels — may halve by 2020. Onshore wind and solar PV could, therefore, deliver electricity in the region of $0.03 per kWh.

This comes after a 69 percent fall in the so-called levelized cost between 2010 and 2016. And that puts solar PV well within the competitive range of legacy or fossil fuels. In several regions around the world, solar PV has already reached that price point, with places like Abu Dhabi and Peru reporting solar-derived electricity costs in that region.

The picture is similar for onshore wind. Costs have fallen by 18 percent in the period 2010 to 2016, with prices in the USD 0.04/kWh region.

The main driver for fossil fuels has been a lack of availability for renewables, but renewables are now seeing broad investments–often despite governments emphasizing legacy fuels–and the availability of the supply has increased significantly. In fact, global competition has spurred project development which, in turn, has driven down the perceived risks of investment. This has the benefit of meaning more companies are willing to channel money into developing solar PV, wind farms and other renewable energy technologies because they do not fear losing money in the way they once might. The race to out-compete each other is also starting to pick up momentum.

One other interesting point in this report is that, in many developed countries, solar power generation has now become cheaper than new nuclear power. That means that, while legacy nuclear power stations do still provide electricity at a lower price, governments might want to reconsider commissioning new power stations to replace their older models and instead channel that money toward renewable sources.

“This new dynamic signals a significant shift in the energy paradigm,” Adnan Z. Amin, IRENA director-general, stated in a press release. “These cost declines across technologies are unprecedented and representative of the degree to which renewable energy is disrupting the global energy system.”

Amin explained:

Turning to renewables for new power generation is not simply an environmentally conscious decision, it is now – overwhelmingly – a smart economic one. Governments around the world are recognizing this potential and forging ahead with low-carbon economic agendas underpinned by renewables-based energy systems. We expect the transition to gather further momentum, supporting jobs, growth, improved health, national resilience and climate mitigation around the world in 2018 and beyond.

The report also states that current data points reveal off-shore wind farms and solar thermal energy aren’t yet as competitive as fossil fuels. However, with project auctions and other initiatives, those prices should also fall in the next few years, making renewable energy equal to fossil fuels and, in some cases, undercutting fossil fuel prices.

Obviously the distribution of available energy sources will continue to depend on a variety of factors, including a country’s resources and its ability to trade for energy that it cannot produce domestically. That means that some countries will continue to rely on fossil fuels, particularly those for whom fossil fuels are a primary source of income. But as global demand shifts, those suppliers will likely shift their economies.

This report also stresses that renewables aren’t just an alternative energy source anymore. In fact, they are quickly becoming a financial powerhouse in their own right — and one that doesn’t just rival fossil fuels but, soon, could out-compete them.

Photo Credit: Antonia Garcia/Unsplash

46 comments

Just Human
Just Human23 days ago

We have a fusion reactor hanging in the sky.

SEND
heather g
heather g24 days ago

You should all recall the high import tariffs that your leader has imposed on solar and wind energy parts.

SEND
Ei R
Eileen A25 days ago

Great news

SEND
Mia G
Mia G26 days ago

Very good news. Thank you.

SEND
RONALD Walker
RONALD Walker26 days ago

I believe that PV already cost less. That's just my personal feeling. I don't have the numbers! PV right now cost less than coal and Nuclear energy. Next maybe dams. Small dams are now being removed because of PV. Could large Dams be next?

SEND
Patrice Z
Patrice Z26 days ago

May this come to fruition! Thanks for sharing.

SEND
Colin C
Colin C28 days ago

Just imagine our world if all energy was sourced from renewables

SEND
Kate G
Kate G28 days ago

this is where we need to be investing our money not coal

SEND
One Heart i
One Heart inc28 days ago

Thanks!!!

SEND
Carl R
Carl R28 days ago

Thanks!!!

SEND