A Decade of Change: How Renewables Became Competitive with Fossil Fuels

(27 July 2021) A decade ago, when renewable technologies were not widespread and were less efficient, the cost of energy from renewable sources, especially solar, was too high to be competitive with fossil fuels. After ten years of development, though, renewable power generation costs have fallen dramatically, driven by steadily improving technologies, economies of scale, and other factors. The cost reduction has been the highest for wind and solar technologies, which are nearing the lower bound of the fossil fuels price range and becoming competitive with traditional fuels.

• The global weighted-average levelized cost of electricity (LCOE) of solar photovoltaic (PV) power fell by a dramatic 85% between 2010 and 2020, from a value of 0.381 USD/kWh in 2010 to 0.057 USD/kWh in 2020. The LCOE of concentrating solar power (CSP) has decreased by 68% since 2010,  reaching 0.108 USD/kWh — a tremendous 49% year-over-year drop — in 2020. However, despite the sharp reduction, CSP remains the most expensive renewable technology and can't currently compete with fossil fuels.
• Onshore and offshore wind projects have experienced global weighted-average LCOE declines of 55% and 48%, respectively, since 2010. The cost of onshore wind power decreased from 0.089 USD/kWh to 0.040 USD/kWh, dropping below the lower end of the fossil-fuel cost range, 0.060 USD/kWh. This makes it the cheapest world renewable power technology in 2020, even cheaper than hydropower (LCOE of 0.044 USD/kWh). Onshore and offshore wind experienced a moderate 11% and 9% year-over-year cost reduction, respectively, from 2019 to 2020.
• The capacity factor of solar, wind, and hydro technologies has also improved during the past decade. The growth in capacity factor since 2010 ranges from 4% for hydropower to 40% for CSP technologies.