New Report Confirms Renewable Power Costs Less — But It’s Not What You Think

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Oil price crash or no, renewable energy is still highly competitive in the global market, according to the new Renewable Power Generation Costs report from IRENA, the International Renewable Energy Agency. However, there’s an interesting twist to the new report. If you’re guessing a lot of the competition is coming from solar, guess again. Despite a huge drop in the cost of solar energy, solar is still not your best bet for beating fossil fuels on cost. So, where exactly does IRENA see renewables coming out ahead?

renewable energy cost drops
Photo (cropped) by MoneyBlogNewz via, cc license.

Renewable Energy Costs And Energy Poverty

Before we get into the new report, let’s note that the fossil fuel lobby has been promoting the idea that its products are the best solution for the problem of “energy inequality.” You might also be familiar with the energy inequality pitch through its corollary, “climate bullies.”

Whatever you call it, the fossil lobby is trying to promote the idea that fossil fuels offer developing nations the quickest, cheapest pathway to reducing poverty. In effect, it’s a moral case for fossil fuels.


We’re wondering why the fossil industry hasn’t already made much more headway in that regard, given that it’s had a clear field for the past 100 years and more, but it’s a moot point now that there is stiff competition from new technology. IRENA’s Renewable Power Generation report is perfectly clear on that score:

For 1.3 billion people worldwide without electricity, renewables are the cheapest source of energy. Renewables also offer massive gains in cost and security for islands and other isolated areas reliant on diesel.

So, there goes your moral case for fossil fuels.

Renewable Power Costs

You can download the full report here, but for those of you on the go, here’s a brief summary, keeping in mind that the report deals with averages and the cost of renewable power generation can vary widely from one region to another.

According to IRENA’s figures, the big winner is onshore wind power, along with biomass for power, hydropower, and geothermal.

As for solar, check out the chart below. The peach-colored bar indicates the cost range for fossil fuels, and you can see that a good deal of solar power generation is still floating above the high end of that range (power generation projects are represented by color coded spheres, with the larger spheres indicating larger projects).

On the bright side, solar is in a much better position than it was just a few years ago. Last fall IRENA issued report called REthinking Energy,  which reported that the cost of solar power had dropped 80 percent since 2008.

The darker yellow indicates concentrating solar power (CSP). As you can see, the picture doesn’t look so good for CSP right now, but keep in mind that it’s a new technology compared to photovoltaic cells. Offshore wind power is in a similar situation compared to onshore wind, and in both cases IRENA foresees continued cost declines leading to the potential for equaling or beating fossil fuels.

renewable power costs IRENA chart
Courtesy of IRENA (screenshot).

IRENA notes, by the way, that biomass, geothermal, and hydropower have gotten a head start, since these forms of renewable energy have been in use for many years in some instances (Hoover Dam, much?).

That makes the gains for onshore wind all the more impressive. Although primitive windmills have been in use for hundreds of years, modern wind turbines have only been on the scene for a relatively short time and they’ve already managed to largely beat fossil fuels at their own game:

…Onshore wind is now one of the most competitive sources of electricity available. Technology improvements, occurring at the same time as installed costs have continued to decline, mean that the LCOE [levelized cost of energy] of onshore wind is now within the same cost range, or even lower, than for fossil fuels. The best wind projects around the world are consistently delivering electricity for USD 0.05/kWh [5 cents per kilowatt hour]without financial support.

As if the oil industry isn’t already having enough nightmares, IRENA also predicts that costs for onshore wind power will continue to drop.

So, if anybody out there thought that the oil price crash could put a damper on renewable energy investment, guess again. Here in the US, the fossil fuel sector has been cutting back on operations and slashing payrolls, which already sets the stage for the inevitable oil price rise, so you’re going to see renewables in an even better position sooner rather than later.

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Tina Casey

Tina specializes in advanced energy technology, military sustainability, emerging materials, biofuels, ESG and related policy and political matters. Views expressed are her own. Follow her on LinkedIn, Threads, or Bluesky.

Tina Casey has 3152 posts and counting. See all posts by Tina Casey

34 thoughts on “New Report Confirms Renewable Power Costs Less — But It’s Not What You Think

  • At least as interesting as the actual costs is the variance in the graph.

    Big hydro and onshore wind have a remarkably low variance; costs are highly predictable and largely similar across the study area. Solar, on the other hand, has an incredibly high variance. This would indicate that a lot of solar is being built in areas ill suited to it, perhaps as a result as poor policy (i.e. excessive subsidies or overly strict domestic content requirements).

    It also seems clear that across all renewable sources bigger is indeed better; the biggest projects tend to cluster together in the lower cost range, whereas smaller ones are overrepresented in the expensive outliers. Only biomass seems insensitive to scale, probably because small installations can cut costs by using local fuel (waste) rather than expensive wood brought in from afar.

    There’s an important lesson here: distributed generation is nice, but economy of scale still very much applies to renewables. Megaprojects aren’t going anywhere.

    • a mega project is the 6 billione dollar keystone pipeline.
      use that money to install Solar for 1 dollar a KWh.
      you get 6 billion KWh a year. when you install where Solar ray index is 2, you get 12 billion KWh a year. you can sell at 10 cents a KWh you get 1.2 billion dollar a year. these are good numbers, 5 year payback at 10 cents a KWh.
      clean cheap and easy. numbers for Windpower is even more payback in short term.

    • The chart is unusable for judging economies of scale for large projects because it uses a single size of circle for anything over 300 MW. There are only a handful of solar plants above this, while coal, hydro and offshore wind projects are typically much bigger. The chart method also does not show the true distribution, as you can’t tell the number of projects clustering near the median.

      There are many possible explanations for the outlier high-cost solar projects. It may as Larmion suggests be the result of injudicious subsidies, say in Scotland. It may also be that many countries have recently been sticking their toes in the water, like Brazil, Mexico, South Africa, and Turkey. You would expect the first few plants in any country to be expensive; and for costs to drop very quickly with experience. Chile has gone from nothing to unsubsidized gigawatts in a few years.

      • I suspect a large part of the cost variation comes from collecting data from 2010 through 2014, as labeled at the top of the graph. Solar PV is falling fastest and it was much more expensive in 2010 than now.

    • Greatest cost advantage is Solar PV + Storage at end-of-grid, therefore this will dominate.

    • There’s a lot of poor choices in solar installation, and they aren’t all location-related. It turns out that mounting & inverter choices create massive variances in cost *and* in production levels.

  • Here’s some information to take with one molecule of NaCl.

    These studies on economic impact, one way or another, are good and important work products to look at the bigger picture from afar. However, many of the consultants and think tanks producing these studies are doing so for a client. Spreadsheets are one thing. Assumptions and caveats for how those spreadsheets get built are another. The interests and concerns of the client is important.

    Here’s my rule of thumb: when a multi billion ($USD) industry, with extremely well paid executives and managers, hire consultants, billing somewhere between $150 and $700 per hour per person, produce a report on the lives and betterment of the poor – take it with a molecule of salt.

    Remember it all comes down to assumptions and caveats, i.e. a thumb on the scale of justice.

    • Dear Mr Berndtson, I and my colleagues wrote this report at IRENA. We did not use any consultants. Our aim is to bring greater clarity about the true costs and performance of renewable power generation costs by collecting real world project costs (over 9000 utility-scale projects around the world and 740 000 small-scale solar PV projects).

      Yes we require assumptions to make the comparisons across technologies, but they are the same assumptions (boundaries) across the report and fuels to ensure comparability. Our ultimate goal is to make sure our Member States have fact-based information on which to decide what options are best suited for them and help them with deployment.

      On a personal note, I believe that the next phase of renewable power generation deployment will be based on competitiveness. It’s just that it is not happening fast enough to avoid dangerous climate change. SIncerely, Michael Taylor, IRENA

  • I don’t think it has been logic and rational analysis that got us where we are today. Nothing in the study as summarized should surprise anyone here.

    Regardless of what studies say, each country is going to do what makes economic sense in the short term for it’s ruling class. If the rulers are the mass of the people, or want to better the lives of their people, then they will go with the cheapest form of energy – wind, hydro, or sometimes solar. Otherwise, Shell, or BP, or some coal barons will bribe to deforest, and build more expensive polluting power plants.

    Our goal needs to be to change the incentives for the political power elites. We can’t blame corporations while the mass of people in the US and other countries keep electing climate change deniers and coal barons.

    The rush to buy SUVs has been a real eye-opener. I thought people in general were starting to take climate change seriously. Obviously, without a Katrina-type disaster occurring weekly it is “out of sight – out of mind”.

    • I think I read somewhere that our incredible new congress has already fixed global warming without all those icky Democrats mucking things up! Time to trade in that ugly old Prius for the convenience of a big new Hummer.

  • The cost for geothermal are on the lower end, but worldwide geothermal is growing at a rate of only 3-4 % a year as to wind 20% + a year and solar at over 40% a year, why?

    • My guess is not every place has easy access to geo-thermal. But some of it is probably inertia. Japan has a LOT of hot springs, I woudl imagine they could use getothermal more but got into a nuclear binge and are only just starting to look around them.

      It is truly astounding how much economically available energy or energy savings is wasted or not used because it requires a different way of doing things.

      • Also Wind installs have been flat world wide (when USA 2012/2013 is averaged) for 3-4 years. Also I’m tired of the cost charts leaving out FF externals costs, there should be a red band with FF externals added in. Health(3-5x)+Environment+Military+Climate even low end guesses would push it above 1.0kwh; yea off the chart.

        • Dear Matt, there is indeed a chart in Executive Summary that includes health and climate change cost estimates. Sincerely, Michael Taylor, IRENA

    • Geography and risk.

      Geothermal, at least the traditional non-‘enhanced’ version, is viable in a limited number of locations.

      Of those, most large countries face significant issues. Japan holds its hot springs as almost sacred, so NIMBY opposition is fierce. Indonesia is dominated by coal mining. Market conditions in Italy for all kinds of new generation are challenging. Russia has displayed no interest in renewables at all.

      A few smaller and/or poorer nations are really going for geothermal, Nicaragua, Kenya, Costa Rica chief among them. But capacity additions there are limited.

      However, the biggest obstacle to geothermal of all is risk. Geothermal wells fail often. Without some sort of (government-backed) insurance mechanism, private investors are wary: the chance of losing your cash is very high, whereas other renewables provide a much more steady cash flow.

      At the moment, you need investors willing to swallow a combination of high risk and long payback times (but with good returns). Venture capitalists don’t mind the first but balk at the latter issue. Sovereign wealth funds/pension funds don’t mind long payback but abhor risk.

      Last but not least, geothermal receives very little research money. It’s a trap, really: without better research into geological surveying and drilling techniques, failure rates remain high. But research money isn’t forthcoming because geothermal is such a risky business.

      • Google Iceland

        • What about it? It has exceptional geothermal resources; essentially being a perpetually gently erupting volcano, it has access to very high temperatures close to the surface. It’s not a very good example for other countries, which have a more challenging geology.

          And despite that easy access, geothermal accounts only for 20% of electricity production (though for almost 100% of heating). 80% (and rising) comes from hydro, which is even cheaper.

    • Larmion has great answer to this for geothermal.

      Wind is also looking like a linear growth recently. Siting, i.e. geography is one reason. It has just started to compete with other sources for the grid.

      Solar PV is still 40% exponential growth. The cost is falling fastest of all. It is available nearly every day in places with poor access to other alternative, or with high grid electricity costs. Very importantly, it is available at the end-of-grid where the cost advantage is greatest. With the advent of low cost battery storage Solar PV can compete with grid electricity head on for 24 hour power generation, nearly 365 days a year in many places.

      Solar PV + Storage will dominate.

      • Yep. Hydro remains cheapest where available, but almost all good hydro locations were already built 100 years ago (or more). Solar will dominate.

    • One big reason.

      You can basically stick you finger up in the air and determine if you’ve got a good wind site. With geothermal you have to drill a million dollar hole to see if the resource is there. (A bit of exaggeration, but the point should be clear.)

      We misstate the cost of geothermal because we report only the cost/production of operating plants. We don’t fold in the cost of dry holes.

      We do the same with nuclear. We look only at the cost and production of plants that go into operation and stay there for a while. We don’t include the cost of all the plants which were started but not completed and the cost of the ones that operated only a few months.

    • Geothermal has incredibly high upfront capital costs, way beyond wind or solar. The maintenance and operating costs afterwards are very low (if the right sort of installation was done), but there’s large capital costs — and a fear of a location screwup. If you run into bad geology, you’re completely screwed and out the capital costs.

  • …and for a different spin on the same report:
    “Solar leading falling renewable energy costs, says IRENA” “The cost of solar power is falling faster than any other technology, a new report by the International Renewable Energy Agency (IRENA) has found.”
    “Power from utility-scale PV plants has fallen 50% since 2010 while the cost of installation fell 65% between 2010 and 2014. IRENA noted the recent tender process in Dubai which will see a 200MW plant developed in the emirate at a cost of less than US$0.06/kWh.”

    Thank you Tina for throwing more cold water on the silly idea that low oil prices will derail the growth of renewables. I agree that wind is lower cost than solar at utility scale, but solar is falling faster and has the cost advantage over all others by being easily installed at the end-of-grid. Also, the graph does not show costs for as low as $0.06/kWh, as apparently mentioned in the text of the report. I know, you warned the data was averaged in the graph. Lower cost outliers are often the cost harbingers going forward.

    • I doubt that many Cleantechnica readers would have expected low oil prices to put a damper on renewables at this point… But it sure seems like lasting low gas prices will put a damper on EV adoption, which is just as important as transitioning power generation to renewables.

      • EVs are not just as important. It is more important to convert the source of your electricity, since that’s where the power for your EVs is going to come from.

        I can’t argue low-oil prices won’t put a damper EV sales, since we’re already seeing this. I’m not surprised either. It’s about the money. My my people have short memories and short distance eye-sight, wouldn’t you agree? It’s just a damper though. I will argue the transition to EVs has begun and that it will continue. Even with oil at $50/barrel EVs are cheaper to operate. Batteries will improve in performance and drop in cost significantly in the next few years. EVs and EREVs will become available at competitive costs to ICEVs and some will be cheaper. Then it will be game over for ICEVs …and soft hybrids. Bet on it.

        Have you read “The Bottomless Well” before? I don’t agree with their prediction for Solar PV. They missed because they failed to understand exponential growth on that one. They call out the technology transition for EVs/EREVs though. It’s all about the development of high-power solid state electronics. This has been developing more slowly than low-power electronics in computer chips because the later benefit from Moore’s Law. High-power solid state electronics have been developing none the less. The pattern in many areas has been for solid state to replace the incumbent technology. Rotating discs in computers are now being replaced by SSDs (solid state discs). Over and over solid state technologies have proven themselves to be lower cost to manufacture, more reliable, and lower cost to operate. [This may actually extend to solid state batteries from Seeo, QuantumScape, Sakti3, …(others?)] The same is going to happen with automobiles. Smile, ICEVs are dead machines rolling. The future belongs to EVs. This is just a bump in the road. 😉

        Besides oil prices will go up again. $50 is below break-even for many fracking sites and for most oil sands. A spike in prices is very likely, since there is a delay in response between demand and getting new supply on line. Same thing as is causing the drop. Takes a while for the existing fracked wells to stop producing. The money is already invested. They’ll get what they can without starting new ones.

        • Dropoff on fracked wells is about 50% per year for the first five years, then slower (but there’s not much coming out at that point.)

          • Yes, I read somewhere 45% less each year. Leaves only 16% left at the end of the third year. After that we should see price spikes. New wells aren’t being started. Investors are scared off. Some outfits are going bankrupt. May take those high prices to bring some fracking back.

          • Bloomberg ran an article recently in which they argued that US fracking costs would set the ceiling price for oil going forward.

            New fracked wells can come on line in about six months whereas other wells can take two to three years to develop.

            As supply tightens and prices rise rigs will move back into the shale oil fields and create new supply.

      • I don’t think low gas prices will affect Tesla Model S sales. There’s an advantage to starting at the top of the market, the non-price-sensitive part. Electric cars are just *nicer to drive*, and that is the determining factor there. (Also, a model S still cheaper than operating a gas-guzzling luxury car which gets 17 mpg and requires premium gas.)

        Low gas prices also won’t affect the shift to battery-electric buses. In this case, it’s because the economics are spectacularly in favor of electric for city buses due to the stop-start duty cycle and very high miles driven per year. For city buses, diesels and CNG waste spectacular amounts idling and coming to a stop. Even a very small price advantage for electricity vs. gas magnifies to a huge advantage with high miles/year. And regenerative braking and zero energy use when idling add a much larger amount of savings.

        In the bottom of the auto market, more people may buy gasoline cars due to currently low gas prices. This is a bad move, since oil prices are going to go up sometime.

  • China/America Solar Panels
    Did you
    know that American citizens pay huge “tariffs” on Chinese
    solar panels (200+%) because: American industrialists found it
    cheaper to bribe (lobbyists) government officials to impose
    “so-called’ dumping tariffs than to do as the Chinese have done:
    Invest heavily in totally automating their factories, streamlining
    their production systems, spending on research for faster, cheaper,
    better, SMARTer ways to compete on world markets, spend money on
    scientists to make more efficient product.

  • Renewables and EVs are in a price war with fossil fuels. A price war the renewables will eventually win.

    • Will victory in the price war be soon enough to prevent disastrous global warming?

      • We’ve already locked in some consequences from global warming. But victory might just be soon enough for an effective response to what’s coming and a prevention of even worse outcomes than we see now.

        In the end, though, a renewables based economy would be far fairer and far more prosperous than the one we have now. If there is a path to future prosperity, it is through an energy switch.

        • You’re right that a renewables economy would be a vast improvement over the current one. I hope you’re right that we’ll get it. I’m usually fairly hopeful — we’ve come a long way — but sometimes I look at how much further we need to go and get started feeling grim. I am glad I don’t have children.

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