The costs for renewable energy technologies dropped to a record low last year, according to the International Renewable Energy Agency (IRENA). The Abu Dhabi-based, multinational organization anticipates that 75 percent of onshore wind and 80 percent of utility-scale solar PV capacity slated for commissioning in 2020 will be cheaper than the cheapest new coal-, oil- or natural gas-fired alternatives.

In a new report, Renewable Power Generation Costs in 2018, IRENA concludes that generating electricity from onshore wind and solar PV will soon be less expensive than that generated by any fossil-fuel option without subsidies or other government incentives. Furthermore, "New solar and wind installations will increasingly undercut even the operating-only costs of coal-fired plants," the report authors state.

The ongoing decline of renewable power generation costs strengthens the role they can play in achieving decarbonization and climate change goals, IRENA points out. “Renewable power is the backbone of any development that aims to be sustainable,” said IRENA’s Director-General Francesco La Camera.

Weighted average renewable power generation costs

IRENA determined that the global weighted-average cost of electricity for all commercially available renewable power generation technologies declined in 2018. In descending order, the cost of installed concentrated solar power (CSP) fell 26 percent, that for bioenergy 14 percent, that for solar PV and onshore wind 13 percent, hydropower 12 percent, and geothermal and offshore wind 1 percent.

Onshore wind energy and solar PV electricity sales at three to four U.S. cents per kilowatt-hour are possible today in area "with good resources and enabling regulatory and institutional frameworks," IRENA notes. Record-low auction prices for solar PV recently have been set, and solar PV projects' levelized cost of electricity (LCOE) dropped as low as USD 0.03 per kWh in Chile, Mexico, Peru, Saudi Arabia, and the United Arab Emirates have seen a levelized cost of electricity as low as three US cents per kilowatt hour (USD 0.03/kWh).

Among the report's key findings, IRENA highlights:

Onshore wind and solar PV power are now, frequently, less expensive than any fossil-fuel option, without financial assistance.

New solar and wind installations will increasingly undercut even the operating-only costs of existing coal-fired plants.

Low and falling technology costs make renewables the competitive backbone of energy decarbonization – a crucial climate goal.

Cost forecasts for solar PV and onshore wind continue to be revised as new data emerges, with renewables consistently beating earlier expectations.

Able to compete head-to-head with fossil-fuel generation

All forms of renewable power generation commercially available today will be able to compete head-to-head with conventional, fossil-fuel or nuclear alternatives without subsidies or other government incentives by 2020-2022, according to IRENA's analysis of data from its auction and Auction and power purchase agreement (PPA) database.

IRENA expects that new solar PV and onshore wind power generation capacity will cost less than the marginal operating cost of existing coal-fired power plants globally by 2020-2022. That's quite an achievement, especially within the context of the time it has taken to do so.

According to IRENA, the weighted average PPA or auction price for solar PV was USD 0.048/kWh in 2020, less than the marginal operating costs for around 700 gigawatts (GW) of existing coal-fired capacity. At USD 0.045/kWh, the weighted average PPA or auction prices of onshore wind power generation should drop below that marginal operating costs of nearly 900 GW of projected, online coal power capacity.

Continuing growth of renewable power capacity poses technical challenges and calls for capital to be spent on grid modernization, however. The variable, intermittent nature of wind and solar, increases the importance of looking beyond generation costs to total systems costs, IRENA points out.

"Integration costs could be minimal if a systemic approach to the power system transformation is applied, but could rise if opportunities for flexibility options are confined narrowly to the electricity sector," according to the report.

“We must do everything we can to accelerate renewables if we are to meet the climate objectives of the Paris Agreement. Today’s report sends a clear signal to the international community: Renewable energy provides countries with a low-cost climate solution that allows for scaling up action.