As director general of the International Renewable Energy Agency (IRENA), I was pleased to agree to write about the amazing transformation of the energy sector made possible by the introduction of renewable energy technologies. This topic was suggested by the kind invitation of the UN Chronicle, and we will return to this fact as it says a great deal about the place and perception of renewable energy use right now.
But first, we need to talk about why this area of energy is so important. The world is on the cusp of an unprecedented turning point. Climate change is a real and imminent threat to the prosperity that many people have already achieved and that millions of people are striving and working for. But, of course, it is more than that. The point is that we must ensure the survival of the world’s most vulnerable people and protect ecosystems and biodiversity. Climate change is largely due to emissions from fossil fuels, although there are other important causes as well. To stop climate change, we must reduce our consumption of these carbon-rich fuels. Renewable energy can and should be central to this plan.
Increasing the use of energy from renewable sources will have other positive results. The use of such technologies can create jobs, reduce local air pollution, and reduce water consumption. Renewable energy technologies are almost exclusively based on local resources and therefore help insulate our economies from external shocks to energy security. Importantly, for many of our 173 member and signatory states, renewable energy is also one of the fastest ways to increase access to electricity. The distinctly modular nature of many of these technologies, especially photovoltaics, which is based on solar power, and onshore wind power, also means that for the first time in electricity history, individuals and communities are playing an active role in their own electricity supply. As such, renewable energy technologies mark a transition to a more democratic and equitable energy system.
The benefits of renewable energy are numerous and obvious, but the obstacles to its implementation are just as numerous and obvious. Established market structures, lack of understanding of how new renewable energy technologies work, difficult access to and high cost of financing, inadequate regulatory mechanisms, lack of compensation for fossil fuel pollution (such as carbon emissions and local pollutants), small market capacity and political uncertainty have all played a role in inhibiting renewable energy use. Fortunately, thanks to the hard work of the industry, governments, financial institutions and regulators, many of these obstacles are being overcome.
Every year since 2011, more than half of all new generation capacity brought on line has been from renewable energy technologies. Today, 164 countries have renewable energy targets, compared to only 43 in 2005. In 2014, a record 130 GW (gigawatts) of renewable energy was added to the global energy mix, and investment in the sector grew from $55 billion in 2004 to more than $260 billion in 2014. 2014 was also a record year in terms of the amount of photovoltaic (40 GW) and wind (52 GW) generation capacity put into operation.
The path to competitiveness
The economics of renewable energy are key to understanding its potential role in energy, as well as the pace and cost of putting energy on a truly sustainable path. Unfortunately, most governments have not systematically collected the data needed to track trends in the evolution – or, as many rightly call it, revolution – of the costs of deploying renewable energy technologies. As a result, policy effectiveness has too often been diminished by misunderstanding cost structures or by using outdated data.
To fill this gap and ensure sound policies based on accurate and timely data from a reliable source, IRENA has developed a world-class database that includes about 15,000 renewable energy projects for utility-scale energy and nearly three-quarters of a million small photovoltaic systems.
The trends identified from this database show not only the success of cost-cutting policies, but also the basis for transforming the energy sector in the future.
The price competitiveness of renewable energy has reached an all-time high. With a good resource base and cost structure, biomass, water, geothermal and wind energy can now be converted into electricity on competitive terms compared to the use of fossil fuels.
In 2015, solar panel prices were down 75 to 80 percent from the prices in effect at the end of 2009. From 2010 to 2014, the ranked costs of generating electricity for utilities using photovoltaic technology fell by half. The most competitive solar utility power projects provide regular electricity at just $0.08 per kW∙h (kilowatt-hour) without financial support, compared to $0.045 to $0.14 per kW∙h for fossil fuels. At the same time, for 2017 and beyond, an even lower cost is assumed. A good illustration of this shift is the recent tender in Dubai for electricity at $0.06/kWh, despite the region’s abundance of fossil fuels.
One of the most competitive energy sources today is wind power. Improvements in technology, accompanied by further reductions in equipment installation costs, can reduce the cost of wind energy production to the level of fossil fuel-based production or even lower. Wind energy projects around the world have consistently generated electricity at $0.05 to $0.09 per kWh without financial support, while the most efficient projects have even lower production costs.
Concentrated solar and onshore wind generation are still generally more expensive than fossil fuel generation at this time, with the exception of onshore wind power in tidal areas. However, these technologies are still in their infancy in terms of their applications. Both are based on important renewable energy sources that will play an increasingly important role in the energy mix of the future as the cost of using them continues to fall.
The costs of energy production based on more mature renewable technologies – biomass energy, geothermal energy and water – have remained largely stable since 2010. However, with untapped economic resources, these mature technologies can provide the cheapest electricity from any source.
Considering the costs of installing equipment and the efficiency of modern renewable energy technologies, as well as the cost of using conventional technologies, we can say that energy production from renewable sources can increasingly compete on an equal footing with fossil fuels without any financial support.
