'Never greater' | Ukraine war has made renewables more competitive, Irena says

The huge uplift in oil and gas prices caused by the war in Ukraine ultimately boosted the competitiveness of renewable power, the International Renewable Energy Agency (Irena) showed in a new report.

The report described how supply chain challenges stemming from the Covid-19 pandemic converged with the drastic reductions in Russia's gas supplies to Europe following its invasion of Ukraine to create what Irena describes as a "fully-fledged, fossil fuel price crisis, the impact of which was felt around the world.”

Among the outcomes of this, Irena found that roughly 86% (187GW) of all the newly commissioned renewable capacity in 2022 had lower costs than fossil fuel-fired electricity, describing this as “one of the largest improvements in the competitiveness of renewable power in the last two decades.”

“It was also despite the fact that many markets experienced overall solar wind power cost inflation,” Irena added.

Much of this growth was in solar PV capacity, with 191GW added in 2022, following on from a 141GW boost in 2021.

Costs felt

Installed capacity continued to rise strongly in the wind sector, although the impact of rising costs was more in evidence there.

After a record 105GW of onshore wind capacity was added in 2020, driven by what Irena described as "a remarkable surge in new additions in China", a more modest 66GW of new onshore wind capacity was added in 2022, which was also 10% less than 2021 additions.

"The main driver in the decline in 2022 relative to the additions in 2021 was the United States market, where new capacity additions almost halved compared to 2021, dropping from 14.3GW added in 2021 to 7.8GW in 2022," Irena stated.

Offshore wind capacity additions in 2022 were 9GW, some 55% lower than the record 20GW added in 2021.

But without the deployment of renewables over the last two decades, Irena said the economic fallout from the fossil fuel price shock last year “would have been much worse and possibly beyond many governments’ ability to soften with public funding.”

'Turning point'

Irena director general Francesco La Camera said last year was a “turning point” for renewables, whose “cost-competitiveness has never been greater despite the lingering commodity and equipment cost inflation around the world.”

At a global level, the weighted-average cost of electricity fell by 3% for utility-scale solar PV, by 5% for onshore wind.

In 2022, eight of the 20 countries for which IRENA has detailed data saw the competitiveness of their utility scale solar PV improve by more than the global weighted-average levelised cost of electricity (LCOE), only slightly less than the nine recorded in 2021.

For onshore wind in 2021-22, three quarters of the countries examined saw the largest absolute improvement in competitiveness since detailed data became available, Irena found.

While China has recorded falling costs, Irena said this data included markets "which saw total installed costs increase, with fossil fuel prices rising far more than the prices of their renewable alternatives."

Arguing that there is "no time for a new energy system to evolve gradually as was the case for fossil fuels, La Camera said Irena's latest report showed that renewables offer countries "the best climate solution to raise ambition and take actions in a cost-competitive way”.

Irena calculated that new capacity added since 2000 reduced the electricity sector fuel bill in 2022 by at least $520 billion. In non-OECD countries, it said just the saving over the lifetime of new capacity additions in 2022 will reduce costs by up to $580 billion.

Countries felt “markedly different trends” in costs last year due to inflation, Irena noted.