The average costs for electricity generated by solar and wind technologies could decrease by between 26% and 59% by 2025.
This is according to a report released today by the International Renewable Energy Agency (IRENA).
The report, "The Power to Change: Solar and Wind Cost Reduction Potential to 2025", finds that with the right regulatory and policy frameworks in place, solar and wind technologies can continue to realise cost reductions to 2025 and beyond.
The report comes amid news there are many misconceptions about the value of wind and solar power, including that it is expensive and unreliable in SA.
The agency estimates that by 2025, average electricity costs could decrease 59% for solar photovoltaics (PV), 35% for offshore wind, and 26% for onshore wind compared to 2015. Electricity prices for concentrated solar power could also decrease as much as 43%, depending on the technology used. By 2025, the global average cost of electricity from solar PV and onshore wind will be roughly five to six US cents per kilowatt hour, says IRENA.
"We have already seen dramatic cost decreases in solar and wind in recent years and this report shows prices will continue to drop, thanks to different technology and market drivers," says IRENA director-general Adnan Z Amin.
"Given that solar and wind are already the cheapest source of new generation capacity in many markets around the world, this further cost reduction will broaden that trend and strengthen the compelling business case to switch from fossil fuels to renewables."
IRENA points out that since 2009, prices for solar PV modules and wind turbines have fallen roughly 80% and 30% to 40% respectively.
With every doubling of cumulative installed capacity, solar PV module prices drop 20% and the cost of electricity from wind farms drops 12%, due to economies of scale and technology improvements, the agency says.
Importantly for policy-makers, it notes, cost reductions to 2025 will depend increasingly on balance of system costs, such as inverters, racking and mounting systems, civil works, etc, technology innovations, operations and maintenance costs and quality project management. The focus in many countries must therefore shift to adopting policies that can reduce costs in these areas, IRENA says.
"Historically, cost has been cited as one of the primary barriers to switching from fossil-based energy sources to renewable energy sources, but the narrative has now changed," says Amin.
"To continue driving the energy transition, we must now shift policy focus to support areas that will result in even greater cost declines and thus maximise the tremendous economic opportunity at hand."
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