A new report from the International Renewable Energy Agency (IRENA) highlights the recent cost reductions in solar and wind energy technologies and reveals the potential to further cut costs by between a quarter and two-thirds by 2025.
Public debate around renewable energy has suffered from the perception that renewables are not cost-effective. Yet as renewable energy technology equipment costs continue to fall and the technologies themselves become more efficient, the cost of renewable energy solutions is declining. The IRENA report, entitled The Power to Change: Solar and Wind Cost Reduction Potential to 2025, examines trends in the deployment and evolution of renewable energy technologies and looks at their cost reduction potential over the coming years. It predicts that the cost of electricity from solar and wind energy technologies could decrease by at least 26% and as much as 59% between 2015 and 2025.
Global weighted average solar and wind power investment costs, capacity factors and LCOEs, 2015 and 2025:
Several factors have contributed to the cost reductions seen in recent years. Support policies for wind and solar energy have led to a steady increase in deployment which has helped to set favourable market conditions. The continuous evolution of technologies has increased capacities and efficiency. Meanwhile, as solar and wind energy markets grow, both regionally and globally, renewable energy manufacturers benefit from economies of scale and new opportunities to make supply chains more efficient. Competitive pressures are also driving down costs as project developers focus on applying best practices.
With the decline in equipment costs set to continue, there will be a new focus on best practice balance of system (BoS), operations and maintenance (O&M) and capital costs as drivers of further reductions. As these cost structures vary greatly across different markets, the right regulatory and policy frameworks will be key to unlocking their cost-saving potential.
In 2015, COP21 underlined the critical role of renewable energy in combatting climate change. This report confirms that renewables are now an increasingly economical way to achieve the objectives of the Paris agreement. It shows clearly that the costs of a global transition to a sustainable energy future are manageable and are continuing to decline.