IRENA: Wind and solar costs will continue to fall

Solar and wind costs will keep getting lower
Image: Elizaveta Galitckaia ©

The latest studies from IRENA show how the costs of renewables are set to continue declining dramatically through to 2030. We all know how those costs declined in the last ten years. Going forward, the weighted average cost of electricity in the G20 countries from offshore wind could fall by almost 50% by 2030 from 2019 levels, onshore wind by around 45%, utility-scale solar PV by up to 55% and concentrated solar power by 62%. 

The main drivers ” technology improvements, economies of scale, competition, and growing experience ” are well embedded and should raise global ambitions for rapid and clean electrification. IRENA emphasises that these trends will depend significantly on the rate of acceleration in deployment in China, given the existing and future size of that market.

The cost of electricity from solar PV, concentrated solar power (CSP), and onshore and offshore wind is not just falling but at historically low levels. Indeed, not only are renewables the cheapest source of new electricity in the majority of the world’s countries but the prices are increasingly so low, that they are undercutting even the operating costs of a growing proportion of the world’s existing coal-fired power fleet.

Electricity costs from renewables have fallen sharply over the past decade, driven by improving technologies, economies of scale, increasingly competitive supply chains and growing developer experience. As a result, renewable power generation technologies have become the least-cost option for new capacity in almost all parts of the world.

Have you read?
A fine balancing act
Berkeley Lab study finds wind energy costs could fall by 49%
Analysis: How offshore wind impacts the electricity market design

Cheap utility-scale renewables

In 2019, 56% of all newly commissioned utility-scale renewable power generation capacity provided electricity at a lower cost than the cheapest new fossil fuel-fired option. Nine-tenths of the newly commissioned hydropower capacity in 2019 cost less than the cheapest new fossil fuel-fired option, as did three-quarters of onshore wind capacity and two-fifths of utility-scale solar PV. The latter value is remarkable considering that in 2010, solar PV electricity cost 7.6 times the cheapest fossil fuel-fired option.

Auction and tender results tell us that costs for solar and wind technologies are going to continue to fall out to 2021/23 and beyond. For instance, data in the IRENA Auction and PPA Database indicate that solar PV projects that have won recent auction and power purchase agreements (PPAs) processes ” and that will be commissioned in 2021 ” could have an average price of just USD 0.039/kWh. This is more than one-fifth less than the cheapest fossil-fuel competitor, namely coal-fired plants.

With the auction data suggesting the global weighted-average LCOE (levelised cost of electricity) of utility-scale solar PV and onshore wind potentially set to fall to USD 0.039/kWh and USD 0.043/kWh in 2021, new renewable power projects are also cheaper than the marginal operating costs of an increasing number of existing coal-fired power plants. Comparing these costs to Carbon Tracker (Carbon Tracker, 2018) data on marginal operating costs for over 2,000 GW of coal-fired power plants suggests 1,200 GW of coal-fired power plants may have higher operating costs than the average price of new utility-scale solar PV in 2021, while for the slightly higher average electricity price for onshore wind, it would be 850 GW of coal capacity.

Cost reductions to continue unabated to 2030 and beyond

IRENA is in the process of updating its analysis of the cost reduction potential to 2030 for solar and wind technologies. This analysis is an update of the analysis IRENA conducted in 2016, and the global trend of this new analysis has already been discussed in IRENA’s reports on the “Future of Wind” and “Future of Solar” report.

However, the analysis is based on detailed analysis for each of the G20 countries using a mix of techno-economic and learning curve analysis to shine a light on the cost reduction potential by market out to 2030.

The results are stark, the weighted average cost of electricity from offshore wind in the G20 countries could fall by just under half by 2030 from 2019 levels, that of onshore wind by just around 45%, that of utility-scale solar PV by up to 55% and CSP by 62% (Figure 1). The weighted average trends will depend significantly on the rate of acceleration in deployment in China, given they are the largest individual country market for solar PV and onshore wind today.

By 2030, new utility-scale solar PV and onshore wind will be undercutting not only the cost of new fossil fuel-fired projects by substantial margins but will on average be cheaper than operating almost 1,700 GW of existing coal capacity.

Figure 1: Weighted-average G20 levelised cost of electricity reduction potential, 2019-2030; Source: IRENA

Cost reduction drivers will continue

The cost reduction drivers of this decade are set continue into the 2020s, with important cost reductions from continuedࢀ¦

  • Technology improvements: Solar and wind power technologies are constantly evolving from a mature knowledge base that is incorporating incremental innovations that are:
    • Driving down installed costs, by increasing solar PV module efficiency that reduces not only materials inputs to the module, but also reduces costs in categories strongly linked to the area (e.g., cabling, racking, mounting, installation, etc.). Innovations in manufacturing are also reducing costs, by reducing materials inputs, while increasing the scale of wind turbines can drive down specific costs.
    • Reducing O&M costsimproved technology reliability reduces downtime, maintenance interventions and component replacement costs. At the same time digitisation is unlocking performance data that can be used to allow preventative maintenance to reduce forced outages.
    • Improving performance and output: Higher operating temperatures through the use of new heat transfer fluids in CSP plants raise power block efficiency, while larger wind turbines with higher hub-heights and greater swept areas harness more electricity for a given resource onshore or offshore.
  • Economies of scale: These are acting on the manufacturing side and in some cases at the project level. The growth in the scale of regional markets for wind and solar are allowing the growth in regional manufacturing hubs that create localised economies of scale, while minimising transport costs. Growth in project size, or more commonly in recent times, the grouping of projects in successful auction bids or rounds, are allowing developers to improve their purchasing power and operating economies of scale.
  • Continued competition: Competitive procurement of renewables capacity has, and will continue to, sharpen the competition that sees project developers, suppliers and manufacturers of renewable power generation equipment all searching for ways to reduce costs to win the next bid. When combined with increasing economies of scale, the supply chain cost reductions can be an important driver of lower costs.
  • Greater developer experience, mature technologies and increased operational experience: All act in important ways to reduce costs. Greater experience reduces the need for contingency funds, reduces working capital needs and when combined with the increasing technology maturity and operational experience with large asset portfolios can reduce financing costs, so crucial to achieving low electricity costs.

These drivers’ impacts on different technologies and, indeed in different countries, vary, so the importance of the analysis at a G20 country-level takes on significant importance in informing policy makers in IRENA’s different Member States. This becomes clear when looking at how the cost structures of utility-scale solar PV and offshore wind differ by country today and how the different technology and local content drivers will play out over the period to 2030 (Figures 2 and 3).

(Figures 2 and 3).

Figure 2: Weighted-average utility-scale solar PV total installed costs by country, 2018 to 2030

Figure 3: Weighted-average utility-scale offshore wind total installed costs by country, 2018 to 2030 / Deࢀ¦ = Development, Tuࢀ¦ = Turbine, Foࢀ¦ = Foundations, Electࢀ¦ = Electrical connection, Insࢀ¦ = Installation, Continࢀ¦ = Contingency

We should not be surprised

IRENA will release the full analysis in Q1 2021, but in many respects, the detailed analysis of the techno-economic drivers of cost reduction are just an extension of the crystal ball we can already see from the years of cost reductions that have played out in the last decade and we see into the future from auction results for the next three to five years. That renewables can economically decarbonise the electricity sector and open-up electrification of end-uses as a decarbonisation strategy is not now new news.

However, what the analysis does make clear in stark terms is that the continued cost reductions for solar and wind create quite remarkable economic opportunities to retire not just old and inefficient coal-fired power plant, but increasingly even new, relatively efficient coal-fired capacity.

Crucially, within a matter of years ” in areas with excellent solar and wind resources ” existing natural gas-fired plants will also increasingly be able to be retired economically. In doing so, we can not just reduce the environmental harm form the local and global pollutants from burning coal and gas, but save consumers billions of dollars per year on their electricity bills.

About the author

Michael Taylorà‚ is a Senior Analyst atà‚ IRENA

This article was originally published on

No posts to display