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29 January 2024

Are renewable energies as expensive as those produced by fossil fuels?

In an era marked by sustainability, renewable energies are presented as the clean alternative to replace fossil fuels. However, are they more cost-effective than fossil fuels?

Coste energías renovables y fósiles

The global economy has relied on fossil fuels for a very long time. Oil, natural gas, and coal, when used as an energy source, emit carbon dioxide, which is responsible for the planet's temperature rise. 

Therefore, we must now find alternatives that are cleaner and, while we are at it, also cheaper. And this is where renewable energies and the energy transition come in. However, are renewables cheaper than fossil fuels?

The fossil fuel crisis has boosted the sourcing of energy from renewable sources. In this context, according to the report "Renewable Power Generation Costs in 2022", published by the International Renewable Energy Agency (IRENA), between 2010 and 2022 electricity generated from solar and wind energy was cheaper than that generated from fossil fuels, since the cost of producing renewable energy has experienced a clear downward trend over this period.

Coste de producción de las energías renovables
Coste de producción de las energías renovables por IRENA.

Cost of production of renewable energies

Solar photovoltaic

  • 2010: 0,46€
  • 2011: 0,37€
  • 2012: 0,28€
  • 2013: 0,20€
  • 2014: 0,18€
  • 2015: 0,15€
  • 2016: 0,13€
  • 2017: 0,11€
  • 2018: 0.10€
  • 2019: 0,092€
  • 2020: 0,091€
  • 2021: 0,90€
  • 2022: 0,90€

Offshore wind energy

  • 2010: 0,21€
  • 2011: 0,22€
  • 2012: 0,19€
  • 2013: 0,16€
  • 2014: 0,20€
  • 2015: 0,17€
  • 2016: 0,16 €
  • 2017: 0,15€
  • 2018: 0,14€
  • 2019: 0,13€
  • 2020: 0,14€
  • 2021: 0,12€
  • 2022: 0,09€

Onshore wind energy

  • 2010: 0,13€
  • 2011: 0,12€
  • 2012: 0,12€
  • 2013: 0,12€
  • 2014: 0,10€
  • 2015: 0,09€
  • 2016: 0,08€
  • 2017: 0,08€
  • 2018: 0,07€
  • 2019: 0,06€
  • 2020: 0,07€
  • 2021: 0,06€
  • 2022: 0,06€

Concentrated solar power

  • 2010:0,39 €
  • 2011: 0,38€
  • 2012: 0,37€
  • 2013:0,29 €
  • 2014: 0,26€
  • 2015: 0,26€
  • 2016: 0,29€
  • 2017: 0,28€
  • 2018: 0,18€
  • 2019: 0,24€
  • 2020: 0,13€
  • 2021: 0,14€
  • 2022: 0,14€

Photovoltaic and wind power technologies are the ones that have achieved a higher degree of development in recent years. The final cost, including the necessary investments, is lower in these technologies than in a combined cycle power plant that consumes natural gas, which is the benchmark fossil fuel technology. 

However, renewable energy is only produced when the sun is shining or the wind is blowing. That is why, when we talk about the cost of producing energy from renewable sources, the key factor is the time it is produced.

Can a photovoltaic plant produce at night? Yes, but it needs battery storage systems to be installed, which increases the cost of production over that of fossil fuel generation. And the same goes for wind power. Storage technologies are not yet mature and the cost of using them is high.

The development of large-scale energy storage will provide the necessary support for renewables to provide stability at times of lower production. 

 

Cost of renewable energy

When a technology starts to become popular and more cost-effective, the interest of scientists and engineers to perfect it and reduce its production costs grows, which is what has happened with renewable energy. 

According to the figures of the IRENA, the cost of producing renewable energy has dropped by much between 2010 and 2022. Solar photovoltaic technology has led this cost decrease with an 89% drop. They are followed by onshore and offshore wind power technologies, which now cost 69% and 59% less, respectively.

At the same time, new companies are emerging, which aim to make the most out of this opportunity to reduce costs, boosting competition and resulting in lower prices in the market. 

Several factors have played their part on the huge reduction in the cost of solar energy, such as technological advances, increased production and government support for the development of cleaner and more cost-effective energy. As a result of these three circumstances, there has also been a noteworthy increase in demand, since individuals and companies have been positively influenced and seek to reduce their expenses through solar self-consumption. 

However, there is still much to be developed and commercial viability is yet to be achieved. It is not only renewable, but it can be stored in multiple forms (hydrogen, biofuels, etc.), even in terms of the way we use energy. 

We must think about all the electrification pathways required to replace fossil fuels with electricity from renewable sources: electric vehicle or heavy transport with hydrogen vehicles, heat pumps, many different industrial processes, etc. Moreover, the development of better weather forecasting tools is also necessary, since we are increasingly dependent on the weather. There is still a lot of R+D+i work to do.

 

Advantages of renewable energy over fossil fuel energy

Technological advances have led to a lower cost of manufacturing of renewable energy production equipment and systems. Therefore, such a drop in costs in the production chain means that energy from fossil fuels is now more expensive that energy from renewable sources.

Another disadvantage of fossil fuels compared to renewables is that they are obtained from limited resources, such as oil or gas. Moreover, renewable energy is more accessible in the long term, as it relies on unlimited natural resources, like sunlight or wind. 

On the other hand, fossil fuels are subject to geopolitical factors: They depend on the geographical availability of resources or the exchange that takes place between countries. Solar panels and wind turbines rely solely on atmospheric factors to operate, which promotes energy independence and security.

In addition, there are multiple benefits of clean energy:

  • Reduction of emissions.
  • Industry development and job creation.
  • Less dependence on foreign energy.
  • Improved health and well-being.

 

What is the cheapest source of energy in Spain?

The cheapest energy in Spain is solar energy. According to the Spanish Photovoltaic Union (UNEF), gathered from the data sources of different European energy operators, Spain is consolidated as the country with the cheapest energy in Europe. 

Among other factors, this is due to the fact that large investments have been made in Spain with the aim of complying with the requirements of different government sustainability plans and with the CO₂ emission reduction goals. This effort has had a very positive effect on the development of renewable energies, boosting their competitiveness. 

 

Planta solar Endesa
Self-consumption solar plant in Mayoral.

Moreover, the self-consumption of solar energy in Spain is on the rise, and we can now find more and more solar panels on roofs, terraces and private property. This is due to several factors:

  1. Number of hours of sunshine: Spain's geographical location is perfect for harnessing solar energy. Even in the northern regions, the solar radiation received is abundant enough to harness this energy source effectively.
  2. Ease of installing solar panels: installing solar self-consumption systems in homes or businesses is becoming more and more accessible, both from an administrative and economic standpoint. 

While fossil fuels are presented as responsible for the increase in the planet's temperature, renewable energies offer an alternative, which is not only clean, but also promotes energy security and is more economical in the long term. 

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