Renewables maintain cost advantage as IRENA reports record growth in 2023

Renewable energy remains highly competitive, even as fossil fuel prices return to more typical levels, according to Renewable Power Generation Costs in 2023, a report released by the International Renewable Energy Agency (IRENA) at the Global Renewables Summit during the UN General Assembly in New York.

The report highlights that of the record 473 GW of new capacity added in 2023, 81%—equivalent to 382 GW—of large-scale renewable energy projects were developed at a lower cost than their fossil fuel counterparts.

IRENA’s findings show that after years of falling costs and advancing technologies, particularly in solar and wind, the benefits of renewables—both socio-economic and environmental—are more compelling than ever.

Solar PV costs in 2023 dropped dramatically, averaging just four US cents per kilowatt-hour, making them 56% cheaper than fossil fuel and nuclear alternatives. Since 2000, the deployment of renewable power has saved up to US$409bn in fuel costs in the global power sector.

“Renewable power remains cost-competitive vis-à-vis fossil fuels," said IRENA’s director-general, Francesco La Camera. "The virtuous cycle of long-term support policies has accelerated renewables. In return, growth has led to technology improvements and cost reductions. Prices for renewables are no excuse anymore, on the contrary. The record growth of renewables in 2023 exemplifies this. Low-cost renewables represent a key incentive to significantly increase ambition and triple renewable power capacity by 2030, as modelled by IRENA and set by the UAE Consensus at COP28.”

IRENA projects that meeting the goal of tripling renewable energy capacity by 2030 would require global renewable capacity to reach 11.2 TW, with an average of 1,044 GW of new capacity added each year. Solar PV and onshore wind are expected to contribute 8.5 TW of this growth, according to IRENA’s World Energy Transitions Outlook.

Achieving this target will also rely on key enablers like energy storage. The cost of battery storage projects has dropped by 89% since 2010, helping to address challenges in grid infrastructure and facilitating the integration of higher shares of solar and wind energy.

Asian markets to see more growth

La Camera added, "In the coming years, remarkable growth across all renewable energy sources is expected, giving countries great economic opportunities. Our analysis indicates that solar PV and onshore wind will have the biggest impacts on the tripling of renewables. Thanks to low-cost renewables in the global market, policymakers have an immediate solution at hand to reduce fossil fuels dependency, limit the economic and social damage of carbon-intensive energy use, drive economic development and harness energy security benefits."

In 2023, the global weighted average cost of electricity from new renewable projects saw declines across several technologies: solar PV dropped by 12%, onshore wind by 3%, offshore wind by 7%, concentrating solar power by 4%, and hydropower by 7%.

Non-OECD economies, where electricity demand is growing and new capacity is needed, will benefit significantly from renewable energy projects. These projects, developed at lower costs than fossil fuel-based alternatives, will reduce electricity system costs throughout their operational lifespan.

Asia saw the highest cumulative savings between 2000 and 2023, with an estimated US$212bn, followed by Europe with US$88bn, and South America with US$53bn.

Renewable power generation is now the most cost-effective option for new power projects. Policymakers and stakeholders need to ensure that policies, regulations, market structures, and financing are aligned with the goal of tripling capacity, with updates to Nationally Determined Contributions for the Paris Agreement expected by 2025.