Renewable Energy Costs Will Continue To Come Down, Says IEA

In its latest report, Renewables 2017, the IEA has predicted that renewable energy would increasingly claim market shares from natural gas and coal. It had cited 2016 as a defining moment, a year in which about 164 gigawatts of new renewable energy capacity was added globally. This figure represents more than three times the amount of new gas-powered plants, and more than twice the amount of new coal-fired plants.

The phenomenal growth is attributed to the fact that PV became the major source of electricity supply, accounting for 74 GW of additional energy in 2016, a whopping 50% increase from the previous year. China alone accounted for half of these additions.

The current decline in solar prices has facilitated this fast-paced growth. Shocking low price auctions for solar is a global trend and India is not left out. In some countries, solar was auctioning at $0.30 per kilowatt hour, a price that is far more competitive than any other source, including cheap natural sources like coal and natural gas.

Energy watchers like IEA and the US-based EIA, have often been criticised for not fully appreciating the potentials of low-cost renewable energy. Long-term forecasts by these agencies have consistently underestimated the rate of growth of renewable energy sources such as solar and wind in favour of natural gas and oil, in a bid to maintain the status quo.

But in the latest IEA report, they have finally agreed that the era of renewable energy has arrived. “Solar PV is entering a new era,” the IEA wrote. Its five-year forecast for renewable electricity which states that growth will be a 920 GW through 2022, which represents an increase of 43%, has since been dramatically changed. The new forecast is 12% higher than the previous year, a fact which is due to a higher growth rate in China and India.

While subsidies and policies might have played a role, the cost has been drastically reduced such that solar is knocking out every other competition based on price. IEA wrote that   “Solar PV and wind together represent 90 percent of India’s capacity growth as auctions yielded some of the world’s lowest prices for both technologies. In some Indian states, recent contract prices are comparable to coal tariffs.”  And according to Paolo Frankl head of the renewable energy division at the IEA, “Renewables may well become even cheaper than fossil fuel alternatives over the next five years.”

Critics of low-cost renewable energy say that solar is merely growing from a small base and that it represents an insignificant fraction of global energy consumption, the fact that is noteworthy is what is happening afterwards, and 2016 offered a real clue. Last year, the greatest source of new additions was from solar, and in combination with wind sector, the renewable simply blew all competitions away. That trend is expected to continue with continued fall in prices.

Also, the pace at which renewable will come online is amazing. "We see renewables growing by about 1,000 GW (gigawatts) by 2022, which equals about half of the current global capacity in coal power, which took 80 years to build," Birol said in a statement.
The Trump led US administration is doing all it can to trip up the rise of solar and trade tariffs on imported solar panels is in the offing.  This could hamper the growth of solar in the US. The US DOE is trying to prop up the comatose coal industry. It remains to be the seen if this would be implemented.

Despite all that, the global outlook remains: natural energy sources will continuously lose market share to low-cost renewable energy.