The Asia Pacific (APAC) region is witnessing a remarkable decline in the cost of electricity generated from renewable sources, reaching an unprecedented low in 2023, according to the latest analysis by Wood Mackenzie.
This significant reduction in the levelised cost of electricity (LCOE) for renewables is making them increasingly competitive against conventional low-cost coal power. The analysis attributes this decline primarily to a substantial reduction in capital costs for renewable power installations.
As per the reports by Wood Mackenzie renewable energy costs in 2023 were reported to be 13% cheaper than conventional coal, and they are projected to be 32% cheaper by 2030. The Vice President and Head of Asia Pacific Power Research at Wood Mackenzie, Alex Whitworth, noted that utility PV solar emerged in 2023 as the cheapest power source in the region, with onshore wind expected to surpass coal in terms of cost-effectiveness after 2025.
China is leading the charge in reducing the costs of renewables, with utility PV, onshore wind, and offshore wind being 40%-70% cheaper compared to other markets in the Asia Pacific region, according to the analysis. This cost advantage is expected to be maintained at 50% out to 2050, enabling China to continue leading in renewable energy deployments.
Sooraj Narayan, Senior Research Analyst for APAC Power & Renewables at Wood Mackenzie said, ” The significant decline in solar photovoltaic (PV) power costs in 2023 is driven by factors like falling module prices and oversupply from China. ” He further pointed out that distributed solar has become increasingly attractive in many markets due to its lower costs compared to residential power prices.
While onshore wind costs were initially higher than solar in 2023, Wood Mackenzie forecasts a 30% drop by 2030, with markets like Australia and Southeast Asia benefitting from low-cost imports of wind power equipment from China.
Moreover, offshore wind is becoming increasingly competitive with fossil fuel power in the region, with costs falling by 11% in 2023. Offshore wind costs are projected to become cheaper than gas power in Japan and the Taiwan region by 2027 and 2028, respectively, opening up new markets for offshore wind in India, Southeast Asia, and Australia over the next decade.
