Renewable electricity costs could fall more than half by 2025

The cost of electricity from solar and wind energy sources could be reduced by up to 59 percent by 2025, according to a report by the International Renewable Energy Agency on Wednesday. The findings are a sign that renewables are entering a new phase of their development.

Solar panels in in São Nicolau, Cape Verde. RFI

The International Renewable Energy Agency (Irena) says that if the right policies and regulations are in place, the cost of electricity from various renewable sources will continue its downward trend in the period between 2015 and 2025.

It estimates average global costs could decrease 59 percent for solar photovoltaic (PV) sources, 43 percent for concentrated solar power, and 35 percent for offshore and 26 percent for onshore wind sources.

The group notes that how much a certain country or region would benefit depends on available technology and how it is implemented, and that some countries have already made the most of their particular profile.

“For solar PV, Germany has led the way in not only supporting the deployment but also very efficient cost structures,” says the report’s lead author Michael Taylor, senior analyst for renewable cost outlook and status with Irena. “For onshore wind, the massive deployment in China means they have lowered costs more than in other parts of the world except India, who also benefit from low labour and commodity prices.

“So there are many cost differentials,” he continues. “But in many cases there are opportunity to lower those cost differentials by a wider application of best practices.”

In terms of what those best practices are, Irena recommends that governments to implement favourable regulations and policies, arguing there are some points that apply across the board.

Solar PV in Germany, says Taylor, has the advantage of “significant competition, a lot of customer understanding and very simple permitting and installation processes”, while in the United States, “federal and state incentives and rules and regulations” can make it “more difficult to achieve lower cost structures, so looking through the red tape can unlock many cost reduction opportunities”.

Irena is the second organisation to come to similar conclusions about projected costs this week.

Bloomberg New Energy Finance (BNEF) reported on Monday that renewable costs are falling sharply even as fossil fuel prices remain low, and that investment into renewables is more than three times higher than it is for fossil fuels.

“The particular example that really kicked things off was the European move into renewables, the German move in particular, creating demand that Chinese supply side responded to,” says Seb Henbest, author of the BNEF report.

“A combination of policy-led demand and industrial-policy-led supply led supply development, and the oversupply that resulted from that has really been the driver of these costs.”

Both reports acknowledge that even if renewables are growing in their market share, things have to move much faster if the world is to reach the less-than-2-degree rise in global temperatures agreed at the UN climate conference in Paris last year.

Irena says its projections of lowering costs make a compelling case for speeding up the transition to switch from fossil fuels to renewables, while campaigners draw out the conclusion that governments and public officials have to keep up pressure on carbon-emitting industries.

“Renewables are big enough to take over, and if we want them to take over, the polluting energies must close,” says Raphael Claustre, director the French Energy Transition Network,

“The old stakeholders involved in fossil fuels and nuclear electricity are not happy with it, because it’s time for them either to change or to go away. So we’re entering a much more exciting time in which we are succeeding, and we have people opposed to what we’re doing because of that.”