Utility PV Solar Leads Renewable Revolution: Costs Hit Record Low, Surpassing Coal in Asia

In a groundbreaking development, renewable energy costs in the Asia Pacific (APAC) region have plummeted to an all-time low in 2023, signaling a new era of affordability and sustainability in power generation. According to a comprehensive analysis by Wood Mackenzie, the levelized cost of electricity (LCOE) from renewables has become increasingly competitive, undercutting traditional coal power and setting the stage for a cleaner energy future.

The decline in renewable energy costs, which were 13% cheaper than coal in 2023 and are projected to be 32% cheaper by 2030, is attributed to significant reductions in capital costs for renewable power. Utility photovoltaic (PV) solar, in particular, has emerged as the cheapest power source in the region, with onshore wind expected to follow suit after 2025. However, renewables combined with battery storage are beginning to rival gas power but may face challenges competing with coal before 2030.

China is at the forefront of this cost-reduction drive, with its utility PV, onshore wind, and offshore wind projects being 40-70% cheaper than those in other APAC markets. The country’s continued investment in renewables is expected to maintain a 50% cost advantage through 2050, reinforcing its leadership in renewable deployments.

The report underscores the significant cost declines in solar power, with a 23% reduction in 2023 alone, driven by falling module prices and an oversupply from China. This trend has made solar power not only the most economical option in 11 out of 15 APAC countries but also positioned distributed solar as a viable alternative for residential power, with costs now 12% cheaper on average than residential power prices.

Despite slower cost reductions in wind power compared to solar, onshore wind is anticipated to experience a 30% cost drop by 2030, thanks to more affordable Chinese turbines. Offshore wind is also gaining competitive ground against fossil fuels, particularly in coastal China, Japan, and the Taiwan region, where it’s expected to become cheaper than gas power in the coming years.

Conversely, fossil fuel power costs, including coal and gas, have risen by 12% since 2020 and are forecasted to continue increasing, partly due to carbon pricing mechanisms. This trend highlights the growing economic viability of renewable energy sources over traditional fossil fuels.

However, the report also points to challenges in the deployment of green hydrogen and ammonia, with costs significantly exceeding those of coal and gas power. The high cost of green hydrogen, in particular, poses a barrier to its adoption as a mainstream energy source by 2030.

The shift towards renewable energy in the APAC region, driven by declining costs and policy support, marks a significant step towards sustainable power generation. Yet, concerns remain regarding the integration of renewables into the grid, underscoring the importance of government policies in promoting grid reliability and energy storage solutions.