The latest report by the International Renewable Energy Agency (IRENA) shows that the trend of falling cost of solar and wind power continued despite the impact of the pandemic globally. In all, 162 GW or 62% of the total renewable power generation added last year had lower costs than the cheapest new fossil fuel option.

The report – Renewable Power Generation Costs in 2020 – shows that costs for renewable technologies continued to fall significantly, year-on-year concentrating solar power (CSP) fell by 16%, onshore wind by 13%, offshore wind by 9%, and solar photovoltaic (PV) by 7%.

According to the report, India has become the new benchmark for the lowest-cost residential systems.

The decade of 2010-2020 saw a dramatic improvement in the competitiveness of solar and wind technologies, with CSP, offshore wind, and solar PV all joining onshore wind in the range of costs for new fossil fuels capacity and increasingly out-competing them.

Within ten years, the cost of electricity from utility-scale solar PV fell by 85%, that of CSP by 68%, onshore wind by 56%, and 48% for offshore wind. Moreover, with record-low auction prices of $1.1/kWh to $0.03/kWh today, solar PV and onshore wind continuously undercut even the cheapest new coal option without any financial support.

With costs at low levels, renewables increasingly undercut existing coal’s operational costs too. As a result, low-cost renewables give developed and developing countries a strong business case to power past coal to pursue a net-zero economy. Just 2020’s new renewable project additions will save emerging economies up to $156 billion over their lifespan.

IRENA’s report also shows that new renewables beat existing coal plants on operating costs too, stranding coal power as increasingly uneconomic. For example, in the United States, 149 GW, or 61% of the total coal capacity, costs more than new renewable capacity. Retiring and replacing these plants with renewables would cut expenses by $5.6 billion per year and save 332 million tonnes of CO₂, reducing emissions from coal in the United States by one-third. In India, 141 GW of installed coal is more expensive than new renewable capacity. No existing coal plant has lower operating costs in Germany than new solar PV or onshore wind capacity.

Last month, a report published by Energy Innovation noted that 80% of the coal-fired power plants in the United States are already uneconomic compared to new wind and solar projects. Out of the 235 plants in the U.S. coal fleet, 182 plants are uneconomic or already retiring, the report pointed out.

Globally, over 800 GW of existing coal power costs more than new solar PV or onshore wind projects commissioned in 2021. Retiring these plants would reduce power generation costs by up to $32.3 billion annually and avoid around 3 gigatonnes of CO₂ per year, corresponding to 9% of global energy-related CO₂ emissions in 2020 or 20% of the emissions reduction needed by 2030 for a 1.5°C climate pathway outlined in IRENA’s World Energy Transitions Outlook.

The renewable projects added last year will reduce costs in the electricity sector by at least $6 billion per year in emerging countries, relative to adding the same amount of fossil fuel-fired generation. Two-thirds of these savings will come from onshore wind, followed by hydropower and solar PV, the report noted. Cost savings come in addition to economic benefits and reduced carbon emissions. The 534 GW of renewable capacity added in emerging countries since 2010 at lower costs than the cheapest coal option reduces electricity costs by around $32 billion every year.

The outlook till 2022 sees global renewable power costs falling further, with onshore wind becoming 20-27% lower than the cheapest new coal-fired generation option. In addition, 74% of all new solar PV projects commissioned over the next two years that have been competitively procured through auctions and tenders will have an award price lower than new coal power.

The trend confirms that low-cost renewables are the backbone of the electricity system and enable electrification in end-uses like transport, buildings, and industry and unlock competitive indirect electrification with renewable hydrogen.

According to IRENA’s Director-General, Francesco La Camera, renewables are the cheapest source of power today. Renewables present countries tied to coal with an economically attractive phase-out plan that ensures they meet growing energy demand while saving costs, adding jobs, boosting growth, and meeting climate ambition.

He said, “We are far beyond the tipping point of coal. Following the latest commitment by G7 to net-zero and stop global coal funding abroad, it is now for G20 and emerging economies to match these measures. We cannot allow having a dual-track for energy transition where some countries rapidly turn green, while others remain trapped in the fossil-based system of the past. Global solidarity will be crucial, from technology diffusion to financial strategies and investment support. We must make sure everybody benefits from the energy transition.”

Cheaper solar in India

According to an earlier IRENA, India was estimated to have the lowest total installed cost for new utility-scale solar PV projects commissioned in 2018 at $793/kW, 27% lower than for projects commissioned in 2017.

Since 2010, in the residential rooftop solar sector, a declining installation cost trend has been visible in many countries. India has become the new benchmark for the lowest-cost residential rooftop solar systems, although China joined the league in 2019. Residential solar total installed costs in India declined 73% between 2013 and 2020, while the reduction in less competitive markets has been slower.

Meanwhile, the largest reduction in the utility-scale sector could be observed in India, where between 2010 and 2020, costs declined by 85%, to reach $0.038/kWh – 33% lower than the global weighted average for that year.

India provides a good example of a major solar PV market, where competitive procurement has been extensively used, and good project-level cost and performance data is available. As a result, the values for India align quite well with IRENA’s previous assumption of 10% weighted average cost of capital (WACC), at least for projects commissioned in 2017, but are higher for the earliest projects that came online in 2016 and were financed in the first rounds of growth in India’s PV deployment in 2014 and earlier.

Meanwhile, the cost of solar power has declined 90% over the past two decades, and it is expected to go down another 15% to 25% in the upcoming decade, Wood Mackenzie said in a new report.