The remarkable fall in the cost of renewables
In recent years, the speed at which renewable energy has become cost competitive is staggering. Since 2010, the cost of generating power from solar photovoltaic energy has fallen by nearly 75 per cent, and from offshore wind by a quarter.
As a result of this spectacular progress, the cost of generating new power from most renewable energy sources is now competitive with any other source of energy in many parts of the world.
It is a milestone moment, one that marks a new age of renewable energy growth, defined not just by environmental objectives, but by economic opportunity. Today, renewable energy fuels economic growth, provides millions of skilled jobs, enhances energy security and is driving a paradigm shift in the way the world generates, distributes and consumes energy.
It also brings widespread socioeconomic benefits, such as better health prospects, and breakthrough energy access for hundreds of millions living off the grid, and has the potential to significantly improve water security, providing, lower-cost, low-carbon desalination solutions.
In few regions have these cost reductions been more visible than in the Gulf
– a part of the world now emerging as a frontrunner of the new energy age. Several Gulf leaders have recognised that an opportunity exists to compete for a share of the new energy economy and extend long-held positions of energy leadership.
The foresight is noteworthy, but it is the actions they have taken that is truly remarkable.
Take the UAE, where the International Renewable Energy Agency (Irena) is headquartered. In a clear signal of the importance of renewable energy to its low-carbon economic agenda, it announced plans to cut carbon dioxide emissions by 70 per cent, improve energy efficiency by 40 per cent and generate 44 per cent of its power from renewable energy by 2050.
Enabling policies and an attractive investment climate have delivered certainty and sent costs tumbling.
Both Dubai and Abu Dhabi have held global solar PV cost records, and more recently Dubai’s Mohammed bin Rashid Solar Park established a new global cost benchmark for concentrated solar power, a key technology that offers solar energy storage for use in our homes and buildings at night, or whenever demand for power peaks.
It is an important technology that in almost every way competes head to head with gas, oil or coal on a like for like basis but it has never been able to compete on cost. The USD 7.3 cents per KWh, secured at the Dubai Solar Park last year, changed that and paves the way for a broader mix of low-carbon technologies in the energy system.
In Saudi Arabia, renewable energy is a central component of its economic diversification strategy, Vision 2030. Its recently launched national renewable energy programme targets nearly 10 gigawatts of renewable energy by 2023.
For the kingdom, renewables will become a new engine of economic growth, creating thousands of domestic jobs across the value chain, and securing billions of dollars of private sector investment.
At its launch, the energy minister, Khalid Al Falih, declared that the programme sought to position the Kingdom as a developer, manufacturer and exporter of clean technology and knowledge.
There can be no stronger endorsement for the disruptive economic potential of renewable energy, nor of the changing global energy landscape, than when an oil superpower makes such commitments.
In its very first competitive tender under the programme, two of the eight submissions represented the lowest costs seen anywhere in the world at the time.
Behind them were Abu Dhabi’s Masdar and Saudi
Enabling policies and an attractive investment climate have delivered certainty and sent costs tumbling
Arabia’s ACWA Power – both as part of consortiums – with bids of USD 1.79 and 2.34 cents per kilowatt hour respectively for 300 megawatts of solar. Put into perspective, that is less than half of the cost of the cheapest form of fossil-fuel-generated power.
Indeed, these two nations have much in common, but it is their implementation of competitive tendering, together with excellent renewable energy resources and long-term commitments, that have facilitated this benchmark pricing.
Furthermore, these costs are still falling.
Our analysis shows that power from solar PV could half again by 2020 – making it by far the lowest-cost source of new power generation available.
And while it is not clear where these new prices will be set, it would be no surprise if this region’s ambition to diversify economically through energy transformation brought more renewable energy records right here to the Gulf.