IRENA: global solar LCOE fell 3% between 2021 and 2022

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The IRENA headquarters in Masdar City, the UAE. Credit: IRENA

The International Renewable Energy Agency (IRENA) has published a report into the cost of producing power in 2022, finding that the levelised cost of electricity (LCOE) in the solar PV sector fell by 3% in 2022, and 89% between 2010 and 2022.

The report, Renewable Power Generation Costs in 2022, found that individual countries saw their LCOE in the PV sector fall by between 76-89%. The global weighted average LCOE for solar PV fell from US$0.445/kWh in 2020 to US$0.049/kWh in 2022, around half of the LCOE associated with offshore wind.

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Falling solar costs

Much of this fall stems from the declining costs of solar module manufacturing and solar panel installation. The report notes that the cost of crystalline solar PV modules sold in Europe fell by 91% between 2009 and 2022, while the average cost of installing projects in 2022 was 4% lower than in 2021 and 83% lower than in 2010.

Indeed, this latest figure reversed a slight increase in the price of crystalline modules in the previous year, with the average price increasing by 4-6% between 2020 and 2021, suggesting that prices across the sector are returning to the established trend of decreasing over time.

The price of “high-efficiency” modules, meanwhile, increased, but at a much lower rate than in previous years. The cost of these modules increased by 6% between 2020 and 2021, but increased by just 1% in the following year, as many aspects of the sector are becoming more affordable.

This trend is also present in the cost of operating and maintaining solar modules. The report highlights that, in the US, the operation and maintenance costs of a 3.9GW facility fell by 58% between 2011 and 2021, to a low of US$13/kW per year. This is comparable to operation and maintenance costs of US$10/kW per year in Europe, which have been reported to be as low as US$9/kW per year in Germany in 2017.

The potential long-term benefits of this trend are obvious, with the decline in operating costs making more solar projects financially viable, potentially encouraging more investment in the sector. Using the example of Germany, the report’s authors note that each time the country’s PV capacity doubled, the cost of maintaining a solar project fell between 15.7-18.2%, suggesting that the more projects are in operation, the cheaper it will be to manage each one, which could also encourage more investment in the future.

Regional variation

Despite the general trend for the solar sector demonstrates that solar generation is becoming more financially viable, there is considerable regional variation within this trend. Most notably, much of the fall in cost installation has taken place in the Americas and the Middle East, while Asian and European companies have seen the cost of solar installations increase.

The UAE saw the greatest percentage fall in the cost of solar installation, with spending on new solar capacity per kW falling by 62% between 2021 and 2022. This was followed by a 35% fall in Saudi Arabia and a 22% decline in Chile. Asian and European countries, meanwhile, saw average installation prices increase, led by a 51% increase in Greece over the same time period, a 36% increase in Denmark and a 34% increase in both France and Germany.

Perhaps of greatest concern is the slight increase in the cost of solar installation in China, which saw the price of adding new utility-scale PV increase by 6% between 2021 and 2022. Considering China’s dominance of all aspects of the solar supply chain, a continuation of this trend could make much of the global solar sector less financially attractive to potential investors.

However, over a longer period, the trend remains largely encouraging. Between 2010 and 2022, China saw the cost of installing new solar capacity fall by 83%, with India and Australia reporting price collapses of 89% and 88%, respectively, over the same period.

The only country noted to have not experienced such a decline is the Netherlands, which saw the price of installation decline 5% between 2010 and 2022. This is unlikely to make a significant impact on the global solar sector in the short-term, as the Netherlands currently has jut 18GW of capacity installed, but it added 4.1GW of new capacity in 2022, entering the world’s top ten countries by installed capacity. Should the Netherlands continue to expand its solar capacity, but not experience the fall in prices that has affected many other countries, the relative cost of developing Dutch solar projects could become prohibitive.

Solar in the renewables mix

“Today, the business case for renewables is compelling, but the world must add 1,000 GW of renewable power annually on average every year until 2030 to keep 1.5°C within reach, more than three times 2022 levels,” said IRENA director-general Francesco La Camera, highlighting how falling installation and operation costs could help the world meet its long-term climate goals more broadly.

“There is no time for a new energy system to evolve gradually as was the case for fossil fuels,” La Camera added. “In preparation of the COP28 in Dubai later this year, today’s report shows once again that with renewables, countries have the best climate solution at hand to raise ambition and take actions in a cost-competitive way.”

Many forms of renewable energy have become dramatically more cost-effective in recent years. The IRENA report notes that between 2010 and 2022, the cost of generating electricity from natural gas increased by three times, compared to the 89% decrease in the LCOE of solar. This compares to a 69% decline in the cost of producing electricity from onshore wind, and a 59% decline in the LCOE of offshore wind.

While the cost of installing new solar capacity fell by 83% between 2010 and 2022, the fall in cost of installing other forms of renewable power generation was also striking. The price of installing onshore and offshore wind fell by 42% and 34%, respectively, and only geothermal and hydropower facilities saw an increase in their costs of installation.

As a result, the global renewables industry is shown to have done considerable work in optimising the finances of the power sector. The IRENA report notes that a combination of falling costs of installing renewable capacity, and the growth of renewable power generation capacity around the world, has saved the global power sector US$520 billion since the year 2000.

This report will be welcome news for those in the solar sector, following the news last week that global panel-grade polysilicon prices had increased.

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