For decades, fossil fuels like coal and oil dominated the global energy market, leading to the perception that "coal is king." As technology, data gathering, and analysis continue to advance, the landscape is shifting, renewable energy sources are gaining momentum, supported by government policies, subsidies, and ongoing fossil fuel crises.
Falling Renewable Energy Costs and Their Market Impact
Over the past decade, the cost of renewable energy has steadily declined worldwide. From 2010 to 2022, renewable energy sources like wind and photovoltaic (PV) power have become cost-competitive with fossil fuels. This shift occurred without financial support or grants, as electricity from PV dropped by 89%—about one-third less than the cheapest fossil fuel—while wind energy costs fell by 69%, nearly half the price of the lowest-priced fossil fuel. The global production of renewable energy is estimated to have saved the energy sector up to EUR 466 billion in fuel costs over the last 25 years.
Policy Drivers, Subsidies, and Tariffs: Shaping Energy Costs
Government policies play a crucial role in the development and competitiveness of renewable energy against fossil fuels. Supportive policies and subsidies, combined with data-driven decision-making, have contributed to the reduction of renewable energy costs.
Policies and Subsidies
Data-driven policymaking is key to supporting renewable energy. Policies that streamline the application process for permits or grid connections can reduce costs, while subsidies help offset the initial expenses of renewable energy projects. For example, government support for wind energy in 2022 led to significant cost reductions, particularly in offshore wind, where lower-risk support schemes have encouraged investment. Conversely, concentrated solar power (CSP) has lagged in growth, highlighting the need for stronger policy and subsidy support.
Tariffs and the Fossil Fuel Price Crisis
The 2022 fossil fuel price crisis, driven by market conditions and geopolitical tensions like the Russia-Ukraine war, underscored the vulnerability of relying on fossil fuels. As fossil fuel prices soared, governments introduced tariffs favouring renewable energy, showcasing the financial benefits and energy security offered by renewables.
The Long-Term Outlook for Energy Prices and Green Energy Trends
As renewable energy technology continues to advance, costs are expected to fall further, making renewables increasingly competitive with fossil fuels. Impending carbon reduction targets will also incentivise businesses to shift toward renewable energy, further driving down costs and decreasing reliance on fossil fuels.
The Role of Data in Renewable Energy Growth
Data has been a critical factor in the growth of renewable energy. Between 2021 and 2022, the competitiveness of onshore wind in 20 countries improved significantly due to the availability of detailed data. As digital technology and the Internet of Things (IoT) continue to evolve, more data will become available, enhancing the efficiency and cost-effectiveness of renewable energy systems.
Renewables Outpacing Fossil Fuels in Affordability
A report by the International Renewable Energy Agency (IREA) highlighted the growing competitiveness of renewable energy. In 2022, renewable energy became more cost-effective than fossil fuels in 8 out of 9 regions studied. This trend is expected to continue as high fossil fuel prices push renewables to the forefront, protecting consumers from price spikes and enhancing energy security.
Case Study: China's Impact on Global PV Prices
China has been a leader in reducing the cost of utility-scale photovoltaic (PV) energy. From 2010 to 2022, the Levelised Cost of Electricity (LCOE) for PV in China dropped by 89%, making it nearly one-third cheaper than the lowest-priced fossil fuel. Key drivers of this cost reduction include advancements in polysilicon production, diamond wafering methods, larger wafer sizes, and overall decreases in hardware costs, particularly for modules and converters. These factors have positioned PV as a competitive alternative to fossil fuels, a trend expected to continue globally.
The Future of Energy Markets
The rise of renewable energy is reshaping global energy markets, challenging the dominance of fossil fuels. With continued advancements in technology and supportive policies, renewables are poised to become even more cost-effective, offering a sustainable and secure energy future.
Browse our short and long-term energy prices from multiple energy markets. All prices streamed in real-time.
