New Delhi (NVI): The International Energy Agency (IEA) has said that solar power is now the cheapest form of electricity for utility companies to build.
This extraordinary admission was included in the 2020 version of IEA’s annual reference tome, the World Energy Outlook (WEO). The 464-page outlook, also outlines the “extraordinarily turbulent” impact of coronavirus and the “highly uncertain” future of global energy use over the next two decades.
This year, the agency has announced for the first time that, in most nations, electricity produced by solar photovoltaics (i.e. solar panels) is cheaper than the kind from plants fired by coal or natural gas.
In the best locations and with access to the most favourable policy support and finance, the IEA says that solar can now generate electricity “at or below” USD 20 per megawatt hour (MWh), which is considerably less than coal or gas.
In addition to this, the cost of solar is set to fall further still. The IEA expects the cost could drop 65 per cent in the next two decades in India.
Even on the IEA’s modified “value adjusted levellised cost of electricity” (VALCOE), which includes the simulated value of three system services: energy, flexibility and capacity, solar still beats coal and gas in all continents, and is beaten only by onshore wind in Europe.
Tim Buckley, from the Institute for Energy Economics and Financial Analysis, said solar this cheap would be a “gamechanger”.
“Within half the lifespan of a new coal-fired power plant, solar will be essentially free in one of the largest electricity markets in the world,” he said.
But how rapidly solar is taken up will be largely shaped by when COVID is brought under control, and whether governments pursue clean energy policies during the recovery, or stick with what they did before the pandemic.
The WEO2020 includes, for the first time, a scenario that is broadly consistent with what might be needed to try and cap average global warming to a maximum 1.5°C, rather than the second prize of 2.0°C previously modelled under its Sustainable Development Scenarios.
This requires reaching net zero emissions by 2050, rather than 2070, and includes significant emissions reductions over the next decade, driven mostly by a vast increase in wind and solar production, a shift to electric vehicles, and “behavioural changes” that could reduce demand.
Furthermore, this year’s version of the highly influential annual outlook offers four “pathways” to 2040, all of which see a major rise in renewables. The IEA’s main scenario has 43 per cent more solar output by 2040 than it expected in 2018, partly due to detailed new analysis showing that solar power is 20-50 per cent cheaper than thought.
Despite a more rapid rise for renewables and a “structural” decline for coal, the IEA says it is too soon to declare a peak in global oil use, unless there is stronger climate action. Similarly, it says demand for gas could rise 30 per cent by 2040, unless the policy response to global warming steps up.
This means that, while global CO2 emissions have effectively peaked, they are “far from the immediate peak and decline” needed to stabilise the climate. The IEA says achieving net-zero emissions will require “unprecedented” efforts from every part of the global economy, not just the power sector.