Solar power now generates the cheapest electricity in history, IEA says

Electricity from solar energy is the cheapest it’s ever been, thanks largely to technological improvements and policies that reduce the risk of investing in renewable energy.

That’s one of the key takeaways from the World Energy Outlook 2020 report, which is published annually by the International Energy Agency (IEA), an intergovernmental organization that advises member nations on energy security, economic development and environmental protection.

“I see solar becoming the new king of the world’s electricity markets,” Dr. Fatih Birol, the IEA Executive Director, said in a statement. “Based on today’s policy settings, it is on track to set new records for deployment every year after 2022.”

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The IEA’s 2020 report notes that the COVID-19 pandemic has made it hard to predict the future of global energy demand, but it laid out several scenarios of what may happen over the next few years. In the main scenario, the international community is projected to generate 43 percent more solar power than the IEA had predicted in 2018.

That increase, as Carbon Brief first reported, is partly due to new analyses showing the cost of solar power to be 20 to 50 percent cheaper than the IEA thought in 2018.

Globally, the average cost of electricity from large-scale solar photovoltaic projects has dropped by magnitudes over the past decade, from 38 cents per kilowatt-hour in 2010 to 6.8 cents per kilowatt-hour in 2019, according to the International Renewable Energy Agency.

“Solar PV is now consistently cheaper than new coal- or gas-fired power plants in most countries, and solar projects now offer some of the lowest cost electricity ever seen,” the IEA wrote in a press release. “In the [main scenario], renewables meet 80% of global electricity demand growth over the next decade. Hydropower remains the largest renewable source, but solar is the main source of growth, followed by onshore and offshore wind.”

Solar energy and other renewables also pose a major threat to coal. The IEA report notes that the COVID-19 pandemic has catalyzed a “structural fall in global coal demand,” and that renewables and “cheap natural gas and coal phase-out policies, means that coal demand in advanced economies drops by almost half to 2030.”

What’s more, India, the world’s second-largest coal producer, is projected to build 86 percent less new coal power capacity than the IEA predicted in 2019.

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While it’s relatively easy to predict the near-term rise of solar and fall of coal, the future of oil remains more uncertain. The report notes that, without additional policy pushes, it’s too soon to predict a rapid decline in oil demand and production. Yet, some industry experts do expect to see oil demand level out, if not rapidly decline, over the next decade.

“The era of global oil demand growth will come to an end in the next decade,” Dr Birol said in a press release. “Based on today’s policy settings, a global economic rebound would soon push oil demand back to pre-crisis levels.”

One scenario in the report describes a pathway that would see the global community achieve net-zero CO2 emissions by 2050 and limit global warming to 1.5 degrees Celsius, which is the target of the United Nations Framework Convention on Climate Change.

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To hit that ambitious goal, renewables would have to meet roughly 75 percent of global electricity demand in 2030, compared to 40 percent today, and electric vehicles would have to account for 50 percent of all passenger cars sold worldwide by 2030.

On the individual level, behavioral changes would also play a key role in this scenario. The report notes that up one-third of cuts to CO2 emissions would come from individuals doing things like:

• Working from home more often
• Line-drying laundry
• Driving more slowly
• Reducing use of air conditioning
• Flying less