Arguments about fossil fuels versus renewables often come down to price: supporters of coal say it’s the cheapest form of electricity. Year after year, the authoritative International Energy Agency (IEA) has confirmed this view.
That’s now changed. Each year, the agency publishes an energy outlook that’s used by governments around the world to set policy. 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.
That’s good news for renewable energy, and bad for the future of coal.
Solar currently offers some of the cheapest power “ever seen”, the report said.
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” US$20 per megawatt hour (MWh), which is considerably less than coal or gas. (This is solar with “revenue support mechanisms” such as guaranteed prices.)
On top of 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.
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.
“It’s all about the economics, it’s all about the capital flows, and global capital is flowing into renewables and running for the door on fossil fuels.”
‘The new king of the world’s electricity markets’
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 report paints a picture of the world at a crossroads of energy policy – decisions made now could see the world achieve net zero emissions by 2050, or result in most countries largely missing their Paris Agreement targets.
The researchers outline four potential pathways for the future: under one scenario COVID is brought under control by 2021 and the world continues on much as before, with demand for energy bouncing back.
Under this scenario, renewables will meet 80 per cent of the growth in global electricity demand to 2030. This means that eight out of every 10 megawatts of new power generation brought online will be renewables. And that’s a conservative scenario where governments don’t push for more sustainable energy than before.
Commenting on the report, IEA chief Dr Fatih Birol the next few years will see a massive growth in solar and wind.
“I see solar becoming the new king of the world’s electricity markets,” Dr Birol said.
What does this look like? Vast fields of solar panels, for one. Also expect to see the spinning blades of wind farms on the horizon.
The state of Gujarat in India, for example, recently announced a world-record solar facility that would cover 60,000 hectares of non-arable land in photovoltaic panels (equivalent to a mind-boggling 55,000 soccer fields).
The IEA researchers predict that hydropower will remain the largest renewable source of electricity to 2030 under the first scenario, but only because there’s so much of it already. Most of the growth in renewables will come from solar.
“[Solar will] set new records for deployment each year after 2022, followed by onshore and offshore wind,” the report said.
Under another scenario, the pandemic is not brought under control until 2025, and demand for energy stays low. Coal would be left even further behind.
By 2040, its share of the global energy mix would have fallen below 20 per cent for the first time since the Industrial Revolution.
Global coal consumption could drop 50 per cent in next decade
These two scenarios are based on current policy settings. The other two scenarios predict what would happen if governments passed clean energy policies and pursued what the agency calls a “sustainable recovery” to meet emissions targets.
This would require “unwavering efforts from all” … “at a time when the world is trying to recover from COVID-19”, the report said.
It would also mean a sharp fall in demand for coal.
Under the business-as-usual scenario, global coal consumption for energy would fall by 10 per cent by 2030. With a sustainable recovery, it’d drop 50 per cent.
“Either way, it’s still massive,” Mr Buckley said.
“The irony is we’re trying to approve new coal mines in Australia, for export, while consumption globally is dropping 10-50 per cent.”
“Why are we flooding the market with more supply at a time when the market is contracting?”