Innovations in Energy

How much do wind and solar energy cost, and why haven’t we fully transitioned to RES yet?

faq | June 19, 2024

Innovations play a significant role in renewable energy. While this can be said for any industry, renewable energy is unique because it initially had to fight for its place against traditional energy sources. How much do wind and solar energy cost, and why have we not yet fully transitioned to renewable energy sources (RES)?

Efficiency

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The efficiency of the first solar panels was only a few per cent, meaning that only a few per cent of the energy hitting a solar panel was converted into electricity. This was the situation several decades ago. Solar panels were first used in space, but as technology advanced, their efficiency improved, and they began to be used on Earth to generate electricity. Wind energy followed a similar development path.
The U.S. National Renewable Energy Laboratory reviews many scientific publications annually to understand how much solar panels’ efficiency has increased. This organization tracks efficiency changes on a special graph illustrating the past few decades. It’s important to note that this analysis is based on scientific research. These are developments that cannot yet be applied on a commercial scale. For such developments, efficiency reaches almost 50%. The efficiency of commercially usable solar panels is around 20%, but we do see a growth potential.

Cost of Electricity

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The economics of renewable energy is evaluated using the concept of the levelized cost of energy (LCOE) — the total cost of electricity, including capital and operating costs, fuel costs, and the amount of electricity produced. It accounts for the capital required to build a power plant. This metric can be used for various energy sources as it provides a clear cost per kilowatt-hour. Using this concept, we can compare different energy sources by their costs — for example, coal versus wind energy. This comparison helps us understand which energy source is currently cheaper.

Technological advancements are rapid. Initially, solar panels were used in space, and their prices were sky-high. Solar and wind energy costs are comparable to traditional fossil fuel-based energy. According to Lazard’s 2023 report, the cost of 1 kilowatt-hour from solar energy is about 2.4–9.6 cents, and for wind energy, it is about 2.4–7.5 cents. This is comparable to the cost of gas. Coal is significantly more expensive. Comparing these costs to retail electricity prices in Europe (20–30 cents per kilowatt-hour) shows that renewable energy remains competitive in Europe and the USA, thanks to ongoing scientific and technological advancements.

Lazard also publishes an interesting graph showing the decline in solar and wind energy costs. Over the past 10 years, wind energy has decreased by 70% and solar energy by nearly 90%. Beyond innovations and scientific developments that increased the efficiency of renewable energy sources and reduced their costs, the scale effect and various political innovations in energy played crucial roles. Political innovations are also important, especially the efforts of many countries to develop new support schemes for renewable energy.

Energy Storage


One of the main questions is how to make renewable energy and related technologies more accessible. This includes energy storage technologies, like hydrogen energy, and technologies for transporting energy over long distances. When electricity from solar and wind is in excess, it can be used to produce hydrogen, which can then be transported.

Additionally, the development of energy storage is very promising. Lazard publishes annual reports on this sector and tracks how the costs of energy storage technologies are decreasing. A significant reduction in the cost of storage technologies will greatly impact the entire energy sector.

Policy Innovations


Political will is crucial in developing renewable energy, making innovations in this area equally important. However, many countries are often slow and inert for various reasons. The energy sector is special for most countries, with investments planned for decades. If a coal power plant is built today, it will still be operational in 40 years. An atomic power plant will be operational even in 60 years. Quickly shutting down recently built power plants is not beneficial, making a rapid transition to renewable energy challenging.

However, it will happen in a few years if we start planning a serious transition to renewable energy. All the necessary technologies are available, and renewable energy will become cheaper and more accessible. Looking at traditional and renewable energy trends, we see that renewable energy is more dynamic. Solar and wind energy have grown by tens of percent annually, while traditional energy sees only a few percent growth at best. All the innovations, new developments, jobs, and exciting initiatives are in the renewable energy sector.

Corporate Movements

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A few years ago, the RE100 initiative emerged — a corporate movement for 100% renewable energy. Large corporations, such as BMW, India’s Tata, and many well-known banks from Europe and the USA, plan to transition to renewable energy by a specific year. Many consumer goods companies, from food to hygiene products, and furniture manufacturers like IKEA, are also involved. RE100 members plan to fully transition to renewable energy within a few decades, but they must do so no later than 2050. Currently, 220 corporations are part of RE100, many of which operate in Russia, meaning they will also seek ways to transition to renewable energy in Russia.

These initiatives are very interesting. There is a large movement among cities to transition to renewable energy. Cities, regions, and companies are often the most active stakeholders in this transition, while governments tend to have fewer ambitions and are often tied to the traditional energy sector. Cities are different; dozens of cities have either transitioned to renewable energy or plan to do so. These include large cities with hundreds of thousands of residents. Such innovations can be even more important than technological ones because they drive the process around us.

Public Perception of Energy Innovations

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Public perception of innovations is a complex issue. There is a growing understanding in Europe and the US that we need to transition to more environmentally friendly solutions for better health. These ideas promote a positive message, but the energy sector faces challenges. If everyone could buy clean air by purchasing a solar panel for their roof, many would have switched to renewable energy. However, environmental pollution and global warming are public bads, making it impossible to solve these problems individually. The transition is slower, and public perception of renewable energy innovations often differs from what it should be.

For instance, when we buy a car, we don’t necessarily choose the cheapest one. We select a car that meets our needs. If we frequently drive off-road, we need a larger vehicle with high ground clearance. If we drive mainly in the city, we need a smaller car. We are unlikely to buy the cheapest option available.

In energy, however, discussions often focus on economics, claiming renewable energy is still expensive, so people continue using traditional energy sources. But this reasoning is flawed. Firstly, the cheapest option is not always the best. Secondly, many myths still surround the cost of renewable energy, but it is no longer expensive. According to recent reports, wind and solar are the cheapest energy sources. The future belongs to renewable energy.

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