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Fast-tracking clean technologies lowers energy prices — International Energy Agency

Fast-tracking clean technologies lowers energy prices — International Energy Agency
A new analysis by the International Energy Agency has dispelled the misconception that an accelerated energy transition will make energy more expensive. (Image: iStock)

A new analysis by the International Energy Agency has dispelled as a misconception that an accelerated energy transition will make energy more expensive. It has found affordable energy is an outcome of clean energy transitions, not a hindrance to it.

While debate around the world continues on the fairness and affordability of the global energy transition, a new analysis by the International Energy Agency (IEA) has made the picture clearer. 

The IEA, in its report Strategies for Affordable and Fair Clean Energy Transitions, dispelled the misconception that an accelerated energy transition will make energy more expensive. It has found the opposite to be true.

The report found that fast-tracking the shift to renewable energy technologies makes energy more affordable and helps reduce overall living expenses which disproportionately affect low-income countries and households. 

Consumers worldwide spent nearly $10-trillion on energy in 2022 — an average of more than $1,200 per person — even after considering the subsidies and emergency support mobilised by governments. This was nearly 20% more than the average over the previous five years, the IEA noted. 

It resolutely dispelled the notion that clean energy technologies are always more expensive than fossil fuel-based ones, “which is not supported by the data”.

The report continued, “Clean, efficient choices are often now the most affordable ones, especially in terms of lifetime costs. Cost reductions have mainly been driven by a virtuous circle of innovation, accelerated deployment, economies of scale and policy support. 

“In 2023, more than 95% of new utility-scale solar photovoltaic (PV) installations and new onshore wind capacity had lower generation costs than new coal and natural gas plants.” 

Importantly, one of the report’s findings was that a “more electrified, renewables-rich and efficient system” brings important gains for affordability, “alongside the clear environmental benefits”.

“When all costs of delivering energy are considered (eg operating expenses, the need to pay back previous investments, financing costs), the Net Zero Emissions by 2050 (NZE) Scenario’s 1.5 °C pathway is less costly on a global basis than the Stated Policies Scenario (Steps), which is based on today’s policy settings. This is because the running costs of a rapidly decarbonising energy system are much lower as the need to buy fuels reduces.”

Read more in Daily Maverick: Climate finance key to just energy transition in developing countries — IEA chief

Despite this, the “need to keep energy affordable” is why many governments intervene to keep regulated fuel and electricity prices low, the IEA said.

This also had the effect of “introducing barriers to change, especially when the intervention keeps fossil fuel prices below their market value. Governments spent $620-billion in 2023 subsidising the use of fossil fuels, mostly in emerging and developing economies; many of these subsidies are poorly targeted and disproportionately benefit higher-income groups that use more of the subsidised fuel.” 

Accordingly, the agency’s projections highlighted that “rapid clean energy transitions result in lower consumer bills compared with a trajectory based on today’s policy settings”.

In the foreword of the report, IEA’s executive director, Dr Fatih Birol, wrote, “When people misleadingly blame clean energy and climate policies for the recent spikes in energy prices, they are, intentionally or not, moving the spotlight away from the main cause — the major cuts that Russia made to natural gas supply.  

“That said, there is still an important debate to be had about affordability and fairness in clean energy transitions — notably in terms of how the costs and benefits will be shared. 

“A key risk is that poorer households, communities and countries are excluded from the new clean energy economy that is emerging around the world because they cannot pay the upfront costs of the switch to a safer and more sustainable energy system. As a result, they remain vulnerable to swings in fuel prices, which already disproportionately affect their budgets and wellbeing compared with their wealthier counterparts,” Birol wrote. 

“Putting the world on track to reach net zero emissions by 2050 requires additional investment but also reduces the operating costs of the global energy system by more than half over the next decade compared with a trajectory based on today’s policy settings, this special report shows.” DM

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