Despite supply chain challenges and inflation, the cost of at least 163 GW out of 257 GW renewable energy capacity added in 2021 was more cost competitive than the cheapest coal fired option in G20, with solar PV's levelized cost of electricity (LCOE) dropping 13%, says the International Renewable Energy Agency (IRENA).
In specific terms, analysts say global weighted average levelized cost of electricity (LCOE) of new utility scale solar PV fell by 13% YoY to $0.048 per kWh, while that of onshore wind it declined 15% to $0.033 per kWh and offshore wind dropped by 13% to $0.075 per kWh. Onshore wind's LCOE lead comes despite solar's capital cost being much lower than wind – at $857 per kW for solar compared to $1,325 per kW for wind.
For utility scale solar PV projects, between 2010 to 2021, the global weighted average LCOE went down by 88%, for onshore wind by 68% and offshore wind by 60%.
There was only 1 concentrated solar power (CSP) plant installed in 2021 which led to its LCOE rising 7% YoY to $0.114 per kWh, and between 2010 to 2021, the average weighted LCOE dropped by 68%.
Geographically, it was China where utility scale LCOE for solar reached $0.034 per kWh going down by 89% between 2010 and 2021 and 29% lower than global weighted average of 2021. It was followed by India with $0.035 per kWh and Australia with $0.042 per kWh.
For the US solar market, the utility scale LCOE dropped 8% YoY to $0.055 per kWh, while for Japan it dropped 17% to $0.086 per kWh. Even markets as Türkiye reported $0.064 per kWh value, and Vietnam $0.046 per kWh. One of the largest and brightest European solar markets, Spain reported $0,048 per kWh LCOE.
Calling renewables 'by far the cheapest form of power today' and their benefits of providing energy independence from volatile fossil fuel prices, IRENA's Director- General Francesco La Camera said, "While a temporary crisis response might be necessary in the current situation, excuses to soften climate goals will not hold mid-to-long-term. Today's situation is a devastating reminder that renewables and energy saving are the future."
According to its Renewable Power Generation Costs in 2021 report, IRENA says renewable power added in 2021 will save around $55 billion from global energy generation costs in 2022 given the current high fossil fuel prices. "Between January and May 2022, the generation of solar and wind power may have saved Europe fossil fuel imports in the magnitude of no less than $50 billion, predominantly fossil gas," states the report.
The report writers believe that not all material cost increases have been passed through into equipment prices and project costs yet, but if these persist at elevated levels the 'price pressures in 2022 will be more pronounced'. Yet, increases may be dwarfed by overall gains cost-competitive renewables bring when faced with higher fossil fuel prices.
Interestingly, IRENA analysts are the only ones seeing the average LCOE for solar at higher levels than wind onshore, at least when compared with the latest analysis on this topic of Lazard Capital, BNEF and IEA.
Nice infographics from the report are available on IRENA website, and so is the full report for free download.