Renewable energy costs have decreased in 2023, making clean energy sources more economically viable than fossil fuels. This reflects the broader progress in the global transition toward renewable energy, according to the International Renewable Energy Agency’s (IRENA) 2023 annual report.

According to IRENA’s findings, 86% of new renewable power generation capacity in 2023 was cheaper than the most affordable fossil fuel option, underscoring the rapid advances in the competitiveness of green technologies.

The report found that the economic viability of coal-fired power projects is diminishing rapidly, with 91% of operating coal capacity now more expensive than new utility-scale solar or onshore wind projects.

2023 saw notable cost reductions across the renewable energy sector, with solar and wind power leading the way.

The global weighted-average levelized cost of electricity (LCOE) for utility-scale solar photovoltaics dropped by 3% to $0.048/kWh, while onshore wind saw a 2% reduction, bringing its LCOE to $0.033/kWh.

These trends reflect an industry trajectory toward ever more affordable clean energy, driven by technological advances, economies of scale, and improvements in project management.

Solar Photovoltaics 

• Utility-scale solar remains one of the most cost-competitive energy technologies, with continuous price drops in 2023.
• Solar installations at the residential and commercial levels also benefited from cost reductions, though the pace was more modest compared to utility-scale projects.

Wind Power

• Onshore wind continues to see decreasing costs despite global challenges like supply chain constraints and inflationary pressures.
• Offshore wind, while relatively more expensive than onshore projects, demonstrated significant cost-reduction potential in emerging markets, signaling a bright future for this technology.

Hydropower also experienced a 7% decrease in costs, solidifying its position as a reliable and affordable energy source.

While the IRENA report primarily focuses on solar, wind, and hydropower, bioenergy and geothermal energy play crucial roles in the renewable energy landscape, contributing to energy diversity and stability.

Ocean energy remains less developed than other sources but is recognized for its potential as technology matures.

 

IRENA highlighted the increasingly apparent financial advantage of renewable energy over fossil fuels. Renewables have reached a point where they consistently outcompete fossil fuels, not only in terms of environmental benefits but also in terms of pure cost.

However, the cost reductions observed in 2023 were not uniform across regions.

China, India Set Benchmarks

Certain markets led the way in renewable energy deployment, while others lagged due to infrastructural or policy challenges.

China and India continue to spearhead the global race in low-cost renewable energy, setting benchmarks in solar and wind power costs.

Europe and North America have made strides in improving the cost-competitiveness of their renewable energy sectors, though costs in these regions remain higher than in Asia.

Emerging markets in Africa and Latin America show great promise, though scaling up renewable projects remains challenging due to infrastructure limitations and financing issues.

Outlook and Policy Implications

IRENA’s report paints a promising future for renewable energy, projecting further cost reductions driven by technological advancements, large-scale deployments, and enhanced project efficiency.

However, to realize the full potential of clean energy, the report stresses the importance of supportive policy frameworks. Key policy recommendations include:

• Streamlining permitting processes to accelerate the development of renewable projects.
• Investing in grid infrastructure to accommodate the increasing share of variable renewable energy, such as solar and wind.
• Introducing carbon pricing mechanisms to reflect the true environmental costs of fossil fuel-based power generation, thus leveling the playing field for renewables.

In November 2022, IRENA noted how the collective effort to switch to renewables and make the energy transition is not enough despite the Glasglow Climate Pact.

IRENA also warned back in March that global renewable energy capacity additions are falling short of targets.