Around 90% of renewables cheaper than fossil fuels worldwide, IRENA says

A recent IRENA report indicates that approximately 91% of newly commissioned utility-scale renewable energy projects are now more cost-effective than fossil fuel alternatives globally, with solar PV and onshore wind being significantly cheaper. This cost advantage, alongside a 93% reduction in battery storage costs since 2010, drove a nearly 20% increase in new renewable capacity last year to 582 GW, avoiding up to $467 billion in fossil fuel costs in 2024. While this accelerates global energy transition goals and supports COP28 targets, the report cautions that geopolitical tensions, trade tariffs, and supply chain bottlenecks could temporarily impede momentum and increase costs.

Analysis

A new report from the International Renewable Energy Agency (IRENA) provides strong quantitative evidence of a fundamental shift in global energy economics. Approximately 91% of new utility-scale renewable projects commissioned last year were more cost-effective than fossil fuel alternatives, driven by significant cost advantages in key technologies; solar photovoltaic (PV) and onshore wind were, on average, 41% and 53% cheaper, respectively, than the lowest-cost fossil fuel options. This economic superiority is fueling accelerated deployment, with 582 gigawatts of new renewable capacity added in the past year, a nearly 20% increase over the previous period. The financial implications are substantial, with IRENA estimating that renewables in operation could avert up to $467 billion in fossil fuel costs in 2024, a trend supported by a 93% decline in battery storage costs since 2010. However, IRENA cautions that this positive trajectory faces near-term headwinds from geopolitical tensions, trade tariffs, and raw material supply bottlenecks, which could temporarily elevate costs and slow the pace of expansion.

Key Decisions for Investors

• Given the structural cost advantage and accelerating deployment, investors should consider increasing exposure to renewable energy developers and key technology providers, particularly in solar and wind.
• It is crucial to scrutinize the supply chain resilience and geopolitical risk exposure of potential investments, as identified tariffs and material constraints could create near-term volatility and margin pressure.
• The report reinforces the long-term structural headwinds for fossil fuel-based power generation, suggesting a re-evaluation of positions in utilities heavily reliant on coal and gas that lack a clear transition strategy.
• The sharp cost reduction in battery systems highlights a compelling adjacent opportunity, warranting evaluation of investments in energy storage and grid modernization companies essential for integrating intermittent renewables.