The cost of renewables will continue to fall, this is why

A combination of demand and supply shocks—turmoil in commodity markets; crisis in shipping and logistics; raw material shortages; a serious polysilicon bottleneck, triggered by disparate post-pandemic economic recoveries; economic consequences of mainland China's "zero-COVID" policy; Russia's war in Ukraine, compounded by policy shocks such as RePowerEU and IRA—have led to predictions that the spectacular fall renewables cost over the past few decades could now finally be coming to an end.

Blended average selling prices for photovoltaic (PV) modules were in the fourth quarter of 2023 as high as they were toward the end of 2018, up nearly 30% compared with the same period two years ago. Major western wind turbine manufacturers have raised prices for wind turbines by nearly 30% in 2022 to compensate for skyrocketing costs of raw materials. Prices for lithium, nickel, and cobalt all rose sharply during the past two years, resulting in battery cell prices increasing by 20-30%.

Yet, the recent increases are almost anecdotal compared with historical cost declines for these technologies. Capex for PV projects was nearly 300% higher 10 years ago, and that for onshore wind at least 150%. The cost of batteries has dropped by 95% since 2012.Today, solar and wind are among the cheapest options to generate power, both for new and existing plants.

Over the coming decades, renewables will represent more than 90% of capacity additions in the power sector, implying that electricity generated from these technologies will surpass that from fossil fuels by the early 2030s. Annual installations of energy storage, mainly in the form of Li-ion batteries, are expected to grow by 280% by 2030. Policy and shifting attitudes toward climate change are an important driver of this transformation, but the underlying enabler is cost: solar and wind technologies keep getting cheaper on a per MWh basis, driven by scale and marginal technological improvements.

To read the details, and understand the long-term cost drivers for solar PV, wind and energy storage markets, please click the link below to download the report: The cost of renewables will continue to fall, this is why.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.