According to a recent study by the International Renewable Energy Agency (IRENA), the surge in fossil fuel prices last year caused renewable energy sources to be more economically viable. A massive 86% of all newly installed renewable capacity demonstrates lower costs compared to fossil fuel-powered electricity.
The agency has stated that this 86% of newly commissioned renewable capacity equates to 187 GW of power. Renewable energy capacity that has been developed in the last decade has helped reduce the costs of the electricity sector’s fuel by at least $520 billion in just 2022 alone. Looking at the renewable energy sources created in developing countries in the same year, the reduction of costs for energy generation across their lifetime will be over $580BN.
The agency’s Director-General, Francesco La Camera, states, “IRENA sees 2022 as a veritable turning point in the deployment for renewables as its cost-competitiveness has never been greater despite the lingering commodity and equipment cost inflation around the world.”
They go on to add, “the most affected regions by the historic price shock were remarkably resilient, in large part thanks to the massive increase of solar and wind in the last decade.”
This global shift in renewable energy affordability points to the inevitable changeover that the world is currently seeing. As many countries have set net zero targets for the next decade, the phasing out of fossil fuels and implementation of renewables means that all businesses and professionals need to fully understand how to utilise these alternative energy sources.
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Almost every area of renewable energy alternatives saw a reduction in development costs. Solar-PV saw the weighted-average cost of generated electricity fall by 3%, onshore wind by 5%, solar power by 2%, bioenergy by 13% and finally geothermal by 22%.
However, both offshore wind and hydropower saw their costs increase by 2% and 18%, respectively. This is due to the reduced global market share of China in developing offshore wind in favour of other alternatives, as well as costs overrunning in a number of high-profile hydropower projects. Despite this, both remain a popular energy source alternative in 2022.
La Camera goes on to comment on these changes, “while the business case for renewable energy becomes increasingly compelling, the world must more than triple annual capacity installations by 2030 to keep the 1.5-degree Celsius scenario within reach.”
When looking at projections for this year, the International Energy Agency (IEA) stated that global investment in solar power generation is set to eclipse investment in oil production for the first time ever. The IEA predicts that total energy sector investments will reach approximately $2.8 trillion this year. Of this amount, around $1.74 trillion is expected to be allocated to clean energy and technologies, while the remaining $1.05 trillion will be directed towards fossil fuels.