The lower cost of renewable energy sources is undercutting new and some existing coal-fired power generation plants, according to an annual report by the International Renewable Energy Agency (IRENA). The report showed that around 800 GW of existing coal-fired capacity could be replaced with cheaper renewables capacity, which would result in up to $32 billion in annual savings and 3 gigatons of CO2 emissions reduction.
IRENA said in the report that the cost of onshore wind and photovoltaic is not only increasingly cheaper than new fossil fuel‑fired capacity but also undercutting the operational costs of some existing coal‑fired power plants. Phasing out coal plants could accelerate the world’s efforts in meeting the climate goal under the Paris Accord. The International Energy Agency (IEA) said global coal demand fell about 8% in 2020.
According to IRENA’s reports, the global weighted-average levelized cost of electricity (LCOE) from new onshore wind fell 13% in 2020 from 2019, while the LCOE of offshore wind and solar photovoltaic dropped 9% and 7%, respectively. Between 2010 and 2020, the LCOE for solar photovoltaic, onshore, and offshore winds fell by 85%, 56%, and 48%, respectively. The LCOE includes the cost of generating a megawatt-hour of electricity, the upfront capital, development cost, financing costs, as well as operating and maintenance fees.
In Europe, the operating costs of new coal-fired power plants are significantly higher than the costs of new renewable facilities due to high carbon prices. Operating costs for new coal plants in India and the US are lower than renewables because there are no significant carbon prices. However, between 77% and 91% of existing coal‑fired capacity in the US has estimated operating costs of above the cost of new renewable power capacity, while in India, the figure is between 87% and 91%, IRENA report said.
