The rising problem of the price of fossil fuels has increased the competitiveness of renewable energy. Around 86% (187 gigawatts) of all newly installed renewable capacity in 2022 was less expensive than energy generated from fossil fuels.
According to a report from IRENA, the renewable power added in 2022 decreased the global electrical sector’s fuel costs. The fuel costs for the electrical sector decreased by new capacity since 2000 by at least USD 520 billion in 2022. In addition, costs in non-OECD nations will be cut by up to USD 580 billion solely from the savings during the lifetime of new capacity expansions in 2022. In non-OECD countries, only the savings from new capacity expansions in 2022 will save up to USD 580 billion.
The Economic Imperative of Reducing CO2 Emissions and Embracing Renewable Energy
Reducing CO2 emissions and regional air pollution would have major financial benefits in addition to these immediate cost reductions. The economic impact of the rise in fossil fuel prices in 2022 would have been substantially higher without the deployment of sustainable energy over the previous two decades, and many governments may not have been able to offset it with public funding.
By speeding the transition in line with the 1.5°C warming limit, IRENA’s new analysis confirms the crucial role that cost-competitive renewables play in resolving today’s energy and climate issues. In order to achieve net-zero emissions, countries must quickly phase out fossil fuels and reduce the macroeconomic harm they cause while maximizing the use of sustainable sources.
Francesco La Camera, the director-general of IRENA, commented that IRENA believes that reports from 2022 are a critical turning point in the deployment of renewable energy because of their enhanced cost-competitiveness despite continuous commodity and equipment rising costs globally. He observed that areas that had been severely affected by the historical price shock had displayed exceptional resilience, which was largely related to the rapid expansion of solar and wind energy during the previous ten years.
He stressed how strong the business case for sustainable energy was today. However, he emphasized that in order to stay on pace for the 1.5°C objective, the world would need to add 1,000 GW of renewable energy per year until 2030, which was more than three times the 2022 levels. He highlighted that, unlike the evolution of the energy system with the use of fossil fuels, there was no time for such an evolution. He added that the report underlined that renewables offered countries a cost-competitive climate option to raise their aspirations and take action.
According to IRENA’s analysis, the structural shift that has made sustainable energy generation the least expensive source of new generation and even undercut existing fossil fuel generators will be cemented by the anticipated high prices for fossil fuels. Renewables can improve energy security, prevent physical supply shortages, and shield consumers from sudden increases in the price of fossil fuels.