Renewable Energy Replaces Coal as Cheapest Energy Source

The International Renewable Energy Agency (IRENA) reports that renewable energy technologies added 162 GW, or 62 percent of power generation capacity in 2020, effectively displacing the cheapest fossil fuel option, coal.

This feat was possible due to the continued year-to-year improvement of solar and wind technologies, economies of scale, and competitive supply chains. In just a year, costs in concentrated solar energy (CSP) decreased by 16 percent, onshore wind energy decreased by 13 percent, offshore wind by 9 percent and solar photovoltaic by 7 percent. Utility-scale solar technology in particular has seen the greatest reduction in costs, falling a dramatic 85 percent in a decade. Now, in most major countries, this technology is cheaper than coal and gas as represented by falling global prices in levelized cost of electricity (LCOE), which fell an additional 13 percent in 2020.

By this account, it should be no surprise that new solar and wind technologies are now more cost efficient than existing 800 GW coal power plants. For emerging economies, it is in their best interest to retire these facilities not only from an ecological standpoint which would remove 3 gigatons of carbon emissions, it would also accelerate their energy transition efforts encompassing an estimated financial savings of US$156 billion. This actually mirrors efforts being led by Mexico which has reduced the use of coal for power generation by 60 percent over the past five years according to thinktank, Ember. Unfortunately, these efforts have been thwarted by the current administration which has allocated funds to upgrade coal and other fossil-fueled plants.

“Today, renewables are the cheapest source of power,” said IRENA’s Director-General Francesco La Camera. “Renewables present countries tied to coal with an economically attractive phase-out agenda that ensures they meet growing energy demand, while saving costs, adding jobs, boosting growth and meeting climate ambition. I am encouraged that more and more countries opt to power their economies with renewables and follow IRENA’s pathway to reach net zero emissions by 2050.”

As alluded by Mr. La Camera, aside from added capacity IRENAs report gives emerging economies an unequivocal reason to phase out coal definitively. Thereby giving added optimism to meeting Net Zero commitments by 2050. With these technologies economies no longer have to choose between meeting growing energy demand and sustainability. Going forward, in Mexico, this initiative will meet resistance from the current administration that is committed to centering the energy sector around its state-owned industries PEMEX and CFE, however, the math is clear: it is time to move past fossil fuels and continue investing in renewable technologies.