New renewables now cheaper than old power

It is now cheaper to build and run new large-scale wind or solar plants in nearly half of the world than it would be to operate an existing coal or gas-fired power plant.

That is the latest analysis from Bloomberg New Energy Finance, which shows that even with the risk of rising commodity prices, a new solar park or wind farm is still competitive with existing coal or gas plants in countries that represent 46% of the world’s population.

So far, bigger and more efficient solar panels and wind turbines have helped prevent the higher prices of materials from adding to the overall cost of projects. But it is not clear how long that trend can last.

“The rise in commodity prices has not resulted in an increase in our global levelised cost of energy benchmarks for solar and wind just yet,” said Seb Henbest, chief economist at Bloomberg New Energy Finance. “But if sustained through the second half of 2021, this rise could mean that new-build renewable power gets temporarily more expensive, for almost the first time in decades.”

The price of polysilicon, one of the raw materials for solar panels, is up threefold in the past year. That is set to contribute to average solar module prices increasing at least 5% globally this year from 2020, according to Bloomberg New Energy Finance. The surging cost of steel is set to boost wind turbine prices by as much as 17% this year.

Still, the overall trend for renewable power prices makes them competitive with fossil fuels. The cost of power from solar panels that track the sun fell 4% from the second half of 2020 to $38MW/h. The cheapest solar projects in Chile, India, the UAE, China, Brazil and Spain can produce power for as little as $22/MWh, Bloomberg New Energy Finance found.

The steel-dependent wind industry has so far seen prices remain flat this year compared with the second half of 2020, with Bloomberg New Energy Finance’s global benchmark cost for wind farms on land steady at $41/MWh. The rising input costs have been partially offset by large and powerful turbines, which grew about 10% on average compared with 2020.

EVEN WITH RISING COMMODITY PRICE RISKS, A NEW SOLAR PARK OR WIND FARM IS STILL COMPETITIVE WITH EXISTING COAL OR GAS PLANTS

In countries including China, India and Germany, it is now cheaper to build a new largescale solar farm than it would be to run an existing coal or gasfired plant, Bloomberg New Energy Finance said. Similarly, in countries such as Brazil, the UK, Poland and Morocco, a new wind farm would be cheaper than running an existing fossilfuel plant.