In many cases, clean energy technologies are already more cost competitive over their lifespans than those reliant on conventional fuels like coal, natural gas and oil.

A faster clean energy transition will make energy cheaper, not more costly: IEA

Policy shifts to achieve net-zero emissions by 2050 reduces the operating costs of the global energy system by more than half over the next decade, says the report

A new report by the International Energy Agency (IEA) has said that speeding up the move to clean energy technologies improves the affordability of energy and can relieve pressures on the cost of living more broadly.

Putting the world on track to meet net-zero emissions by 2050 requires additional investment but, the report said, it 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.The net result is a more affordable and fairer energy system for consumers, the report added. 

The report estimated that global consumers spent around $10 trillion on energy in 2022, or more than $1,200 per person. Over 2 billion people lack access to clean cooking methods and fuels, whereas 750 million people worldwide have access to electricity. Consequently, there’s a bigger need to step up the deployment of renewable energy alternatives.  

Cost competitiveness in clean energy

In many cases, clean energy technologies are already more cost competitive over their lifespans than those reliant on conventional fuels like coal, natural gas and oil. Solar PV and wind are the cheapest options for the new generation. Even in cases where electric vehicles—including two- and three-wheelers—have greater initial prices—which isn’t always the case—they usually save money because of lower ongoing expenditures. 

The primary drivers of cost reductions have been a cycle of invention, expedited deployment, economies of scale, and legislative backing. The report did point out that unlocking larger levels of initial investment is necessary to realise the benefits of clean energy transitions. This is particularly true in emerging and developing nations, where investments in clean energy are falling behind because of perceived or actual risks that obstruct funding opportunities and new project development.

Skewed investments

The current global energy system is biassed in favour of incumbent fuels through fossil fuel subsidies, which makes investments in clean energy transitions more difficult.Governments worldwide collectively spent around $620 billion in 2023 subsidising the use of fossil fuels – far more than the $70 billion that was spent on support for consumer-facing clean energy investments, according to the report.

Consumers would profit from a quicker energy transition and rising renewable energy shares, such as solar and wind, which have cheaper operational costs than fossil fuel substitutes. However, around half of all consumer energy spending goes towards oil products, with electricity accounting for the other third.

Need for a clean energy transition

“The data makes it clear that the quicker you move on clean energy transitions, the more cost effective it is for governments, businesses and households,” said IEA Executive Director Fatih Birol. “If policy makers and industry leaders put off action and spending today, we will all end up paying more tomorrow. The report shows that the way to make energy more affordable for more people is to speed up transitions, not slow them down. But much  more needs to be done to help poorer households, communities and countries to get a foothold in the new clean energy economy.”

The report found that incentives and greater support, particularly targeted at poorer households, can improve the uptake of clean energy technologies. This would allow all consumers, especially those who are less well-off, to fully reap the benefits of these technologies and the cost savings.

A shift in policy

The report recommended a series of measures, drawing on proven policies from countries around the world, that governments can deploy to make clean technologies more accessible to all people. 

These include delivering energy efficiency retrofit programmes to low-income households; obliging utilities to fund more efficient heating and cooling packages; making highly efficient appliances more readily available; providing affordable clean transport options, including more support for public transport and second-hand EV markets; replacing fossil fuel subsidies with targeted cash transfers for the most vulnerable; and using carbon price revenues to tackle potential social inequities that may arise during energy transitions.  

The report warned that the risk of price shocks has not disappeared in clean energy transitions and that governments must continue to show vigilance on new risks that could affect energy security and affordability. Geopolitical tensions and upheavals remain significant potential drivers of volatility, both in traditional fuels and, more indirectly, in clean energy supply chains. The shift to a more electrified energy system also brings a new set of hazards into play that are more local and regional, especially if investments in grids, flexibility and demand response fall behind. 

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