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Global renewable energy capacity is growing year-on-year - increasing by 9.1% in 2021 alone, according to the International Renewable Energy Agency (IRENA).
Fossil fuel consumption growth, on the other hand, is beginning to slow down. The share of fossil fuels in the global energy mix was roughly 80% in 2021, which is slightly lower than 80.3% in 2009 (Environmental and Energy Study Institute, 2021).
There are a number of reasons why renewable energy is booming in popularity around the world, but one of the key factors is its affordability - with some sources becoming even cheaper than fossil fuels in recent years.
But which renewable energy source is the cheapest, and how does it compare to fossil fuels? Let's find out.
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What is the cheapest source of renewable energy?
Solar was crowned as the cheapest source of energy in history in 2021 - closely followed by onshore and offshore wind - after it became more affordable than gas.
This is a dramatic improvement compared to the cost of solar energy a decade ago. In fact, the price of solar reduced by 88% between 2010 and 2021 - with the cost decreasing by 13% in 2021 alone.
These solar energy rates are much cheaper than experts in the industry ever anticipated. In fact, solar electricity is around 20-50% cheaper today than the International Energy Agency (IEA) had projected just one year ago (with the range depending on the region).
The panels themselves have also become more affordable over time, with research by IRENA suggesting that the cost of crystalline solar PV modules sold in Europe declined by around 91% between 2009 and 2021.
And as solar energy continues to decrease in cost, more people will invest in it. It's no wonder solar PV capacity grew about 21-fold between 2010 and 2021.
Check out the chart below to get an idea of how the cost of solar compares to other sources of energy.
Data from Our World in Data, 2020Renewable energy costs vs fossil fuel costs
As renewable energy costs continue to fall to record lows, fossil fuels are gradually becoming more expensive. European gas prices are now about 10 times higher than their average level over the past decade - a rate that has been wildly increased by the shortage of gas from Russia.
When it comes to the cheapest fuel on the planet, gas and solar have been neck and neck for some time. But in 2021, solar finally took over gas as the cheapest energy source in the world.
Data from IRENA, 2022This dramatic decrease in cost is something we can see across a number of renewable energy sources. The table below outlines how much the cost of solar and wind have changed over time.
Energy source Cost of electricity over timeSolar PV
-88%
Onshore wind
-68%
Concentrating solar power
-68%
Offshore wind
-60%
Generally, this is a trend that we can see happening in most countries - but the cost of renewable energy and fossil fuels will fluctuate, depending on which country you're located in.
For example, IRENA suggests that the low-cost era of fossil gas in Europe ended in 2004, which means the continent "has seen the benefits of cheap renewable energy more".
Why are energy prices rising if renewable energy is getting cheaper?
The cost of energy is rising across the world. Although prices were creeping up towards the end of 2020, things escalated in 2021, which was primarily triggered by the war in Ukraine. And as Russia continues to withhold gas resources from the rest of the world, we can expect this turbulence to carry on for a few years.
Check out the table below to see just how much the cost of electricity per kilowatt-hour (KWh) has increased over the past decade.
Although we can partly blame the gas shortage for rising energy prices, gas generates less than half of the UK's electricity and only about 20% across the EU.
So why are we dealing with pricy energy bills, despite consuming more renewable energy than ever before? It mostly comes down to an outdated energy market.
Professor Michael Grubb, from UCL Bartlett School of Environment, Energy & Resources, claims that "the design of electricity systems has failed to catch up with the revolution in renewable energy".
Grubb explains that competitive electricity markets are experiencing the largest price rises because these systems rely on the most expensive generator setting the price - and the majority of the time, fossil fuels are the most expensive generator. This is because some gas plants need to run almost constantly, which they won't do unless the electricity price is high enough to cover their operating cost.
Grubb compares this to having to pay the peak-period price for every train journey you take.
So despite almost half of its energy mix coming from renewables, the UK is experiencing some of the most expensive energy bills in the world because its energy market is determined by gas.
Summary
There are so many benefits to renewable energy - it's better for the environment, safe for local communities, reduces air pollution, and it's much cheaper than fossil fuels.
This is something that every country can benefit from - especially since the cost of renewable energy is decreasing across the world. Countries with a lot of sunshine hours can harness solar energy, famously windy nations can utilise wind energy, and regions with lots of rivers can invest in hydropower.
And as renewable energy continues to get cheaper in the coming years, it's only a matter of time before more countries adopt more of these green sources of energy into their energy mix.
