Most new renewable energy capacity was cheaper than newly-installed fossil fuel-based alternatives in 2024, according to the International Renewable Energy Agency (Irena).
New renewable electricity generation capacity was the most cost-competitive on a levelised cost of electricity basis (LCOE) last year, with 91pc of newly commissioned utility-scale capacity delivering electricity cheaper than even the lowest-cost new fossil fuel capacity, Irena said in its report, Renewable Power Generation Costs in 2024, published on 22 July.
The global weighted average LCOE for utility-scale solar photovoltaic (PV) power in 2024 was $0.043/kWh, cheaper by 41pc than the lowest-cost fossil fuel-fired alternatives, according to the report. The global LCOE for onshore wind in 2024 was even lower, at $0.034/kWh, 53pc cheaper than fossil fuel-based electricity.
Total installed costs are forecast to decline further, albeit at a reduced pace, as learning rates and economies of scale continue to boost efficiency, Irena said. Asia will likely retain a cost advantage but higher costs could persist in Europe and North America because of structural factors like delays in permits and higher balance-of-system costs.
Higher renewable energy integration is "shifting fossil fuel generation to peak or residual demand, reducing thermal plant use and exposure to volatile fuel markets," Irena said. Solar and wind comprised 46.4pc of installed power generation capacity globally in 2024, displacing coal and gas in major markets like China, the EU and the US.
Battery storage
But the integration of variable renewables such as solar PV and wind hinges significantly on the expansion of battery storage systems, because storage technologies are expected to provide the majority of short-duration flexibility requirements, Irena said.
China currently dominates battery supply, producing over 75pc of global batteries at costs that are lower by 20-30pc compared with European and North American markets, according to the IEA. This is because of the country's vertically integrated supply chain, according to Irena's report, which has structural cost advantages across solar PV components, wind turbines and batteries, because the integration helps to reduce procurement delays and supports the efficient scaling up of gigawatt-scale projects.
The total cost of utility-scale battery energy systems (BESS) has dropped by 93pc over 2010-24, according to the report. China and the US led global BESS growth in 2024, thanks to national policy incentives and grid integration mandates.
But emerging geopolitical risks,especially trade tariffs on renewable components and materials, as well as Chinese manufacturing sector dynamics could lead to higher costs in the short term, Irena said.
