Panorama – Renewable energies are postulated as a critical response to a critical energy and climate situation

Nothing was possible in 2021 with the drop in production costs in the renewable energy sector; and, thus, it is increasingly cheaper to produce a megawatt hour of electricity with the wind or with the sun and, for this reason, these energy sources are becoming more and more competitive in more and more territories of the planet. The price increases that many commodities have seen in world markets over the past few months have not been able to beat wind or solar power, and the escalation in the price of energy has not nor has it been able to beat renewable energies: it has increased both the price of a barrel of oil and, extraordinarily, the price of natural gas on all the markets of the world. Logistical and/or supply chain issues, issues that have affected many economic sectors in many territories, issues arising from the restrictions and lockdowns that many countries have experienced (due to Covid), pray for the rebound effect that demand experienced after overcoming the most difficult part of the pandemic.

So, according to the report Renewable energy production costs in 2021 (renewable electricity production costs), which has just been published by the International Renewable Energy Agency (Irena), the production cost of onshore wind electricity fell by fifteen points (-15%) in 2021, the cost of producing one megawatt hour of electrical energy in an offshore wind farm has fallen by thirteen points (-13%) and the cost of its production in a photovoltaic solar park has also fallen by an additional thirteen points compared to at the costs recorded a year earlier, in 2020. According to the Irena report, almost two-thirds of the new renewable energy installed in 2021 (or 163,000 of the 257,000 megawatts installed last year) generated electricity at a lower price (they served cheaper electricity) than that which was able to generate the cheapest fossil alternative (coal power plant) in the G20 countries (lower costs than the cheapest coal option in the world in the G20). Irena estimates that with current fossil fuel prices, connected renewable energy in 2021 will save (in production costs globally) some $55 trillion in 2022.

Below these lines, the image shows how the cost of generating electricity with renewable technologies has dropped dramatically over the past decade. The fall in the case of solar thermal is extraordinary, since the global fleet of solar thermal installations is much smaller (less than 8,000 MW installed worldwide) compared to wind power (55,900 marine megabytes already installed, 825 000 terrestrial megabytes) or photovoltaic (849,000 megabytes), it can therefore be deduced that the learning curve of solar thermal is the steepest of all, since with much less power it has achieved improvements in terms of the costs of production during the same period, very similar to those of its renewable sisters.

Francesco La Camera CEO of Irena“Renewables are by far the cheapest way to generate electricity today. 2022 is a compelling example of the clear economic viability of new renewable electricity generation. Renewable electricity unleashes the economies of the volatility of fossil fuel prices (…) and strengthens the resilience of the markets, even more in situations of energy crisis like the current one Although a contingent response to the crisis may be necessary in a situation like the current one, the excuses to relax the targets will not work in the medium and long term. The current situation is unequivocal proof that renewable energy and energy saving are the future. With the climate summit in Egypt, CoP27, and the climate summit in the United Arab Emirates, COP28, renewable energy is called to provide governments with affordable energy that will enable them to recover. close to their net zero ion emission goals and will allow them to translate their climate commitments into concrete actions that will have beneficial effects on people all over the world”

With these lines, overall averages against three elements: installation cost, capacity factor (see data) and production cost, by technology

The Renewable Power Generation Costs in 2021 report confirms the “critical role” -they explain from Irena- that the competitive cost of renewable energies is called upon to play in terms of achieving the planet’s energy and climate objectives. According to Irena, renewable energies are essential to accelerate the energy transition towards the horizon set by the Paris Agreement, an agreement whose ultimate objective is to prevent the temperature of the planet from increasing by more than a degree and a half (1.5 ºC) above the average global temperature. recorded on Earth in pre-industrial times (before 1850). The International Renewable Energy Agency considers that solar and wind energy, with their relatively short installation times, must become the main beams on which all countries (1) must base their efforts to reduce the use of fossil energies, reduction towards total disconnection end, and (2) they must limit the macroeconomic damage that can occur in the transition to net zero CO2. Irena calculates that in non-OECD countries, the 109,000 megawatts of new renewable energy installed in 2021 whose production cost is lower than that of the cheapest fossil power plant will lead to savings of at least 5 700 million euros per year over the next 25-30 years.

The Agency considers that the high coal and gas prices recorded in 2021 and 2022 will significantly deteriorate, and are already doing so, the competitiveness of fossil fuels and will make the two wind and solar options increasingly attractive. In her report, Irena finally warns against the possibility that the unprecedented increase in gas prices in Europe will end up transforming gas-fired electricity production on the Old Continent into something completely uneconomic, which could lead to the stranding of assets, that they thereby be rendered useless. In addition: according to the International Renewable Energy Agency, the European case shows that both the costs of the fuel itself (natural gas) and those of CO2 could be, in the case of currently existing gas-fired power plants, between four and six times higher in 2022 than the lifetime costs of new onshore wind and solar power plants installed in 2021. Between January and May 2022, wind and solar electricity production – estimates Irena – could have saved Europe imports of fossil fuels, all gases combined, worth no less than 50,000 million dollars.

With regard to supply chains, data collected by the Agency suggests that not all increases in the cost of materials have already been passed on to equipment prices and/or project costs. If the costs of materials remain high – warns the Agency in any case – the pressure on prices in 2022 will be more pronounced. However, specifies the report, this possible increase could be eclipsed by the binomial increase in the cost of fossil energies – continuous improvement of the competitiveness of the production costs of renewable energies.

Irena defines itself as “the leading intergovernmental agency for the global energy transformation that accompanies countries in their transition to a sustainable energy future and acts as the main platform for international cooperation, center of excellence and repository of knowledge on policies, renewable energy technologies, resources and financing”. With 168 members (167 states and the European Union) and 16 other adhering countries actively participating, Irena promotes the widespread adoption and sustainable use of all forms of renewable energy to achieve sustainable development, energy access, energy security and reduced carbon emissions. growth and prosperity.

Report Renewable energy production costs in 2021

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