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For years, economists have said that switching to cleaner power — such as wind or solar — would be very costly. Now, we can do a green-energy transition that replaces fossil fuels with renewables like solar and wind. And it’s cheaper. 

This might sound surprising. But it shouldn’t be.

Last year, renewable energy was a cheaper source of electricity than fossil fuels, according to a report by the International Renewable Energy Agency (IRENA.

In 2022, 86% of newly commissioned renewable energy capacity was cheaper than fossil fuel-generated power.

The additional renewable energy capacity installed since 2000 helped save the electricity sector $520 billion in fuel costs last year. In non-OECD countries, the new renewable energy capacity added in 2022 is expected to save up to $580 billion over its lifetime.

“IRENA sees 2022 as a veritable turning point in the deployment for renewables as its cost-competitiveness has never been greater despite the lingering commodity and equipment cost inflation around the world,” said Francesco La Camera, the agency’s director general.

“The most affected regions by the historic price shock were remarkably resilient, largely thanks to the massive increase of solar and wind in the last decade,” he added.

The report also found that the average cost of electricity from newly commissioned onshore wind projects fell by 5% from 2021 to 2022, from \$0.035/kWh to \$0.033/kWh. The average cost of electricity from newly commissioned utility-scale solar PV projects decreased by 3% in 2022 to $0.049/kWh.

In contrast, the average cost of electricity from newly commissioned offshore wind projects increased by 2% in 2022, from \$0.079/kWh to \$0.081/kWh.

The last decade has shown incredible improvements in the competitiveness of renewable power. In 2010, onshore wind was 95% more expensive than fossil fuels, but in 2022 it was 52% cheaper. Solar PV was even more affordable, going from 710% more expensive to 29% cheaper.

“[The] expected high fossil fuel prices will cement the structural shift that has seen renewable power generation become the least cost source of new generation, even undercutting existing fossil fuel generators,” Irena said.

According to the agency’s report in June, to meet the Paris Agreement goals, the world must add an average of 1,000 GW of renewable energy capacity each year until 2030. It also needs to quadruple its investments in energy transition technology to $35 trillion.

IRENA’s director general also warned that “the world is not on track to meet its shared commitments under the Paris Agreement to avoid dangerous climate change.”

He explained that increased global ambition in renewables deployment, enabled by physical infrastructure, policy, and regulations, and strengthened institutional and workforce capabilities are necessary for a 1.5°C future.