Rapid rollout of clean technologies makes energy cheaper, not more costly, IEA says

Speeding up the move to clean energy technologies improves the affordability of energy and can relieve pressures on the cost of living more broadly, according to a new IEA special report released today.

The report, Strategies for Affordable and Fair Clean Energy Transitions, shows how putting the world on track to meet 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. The net result is a more affordable and fairer energy system for consumers.

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 new generation. Even when electric vehicles, including two-and three-wheelers, have higher upfront costs, which is not always the case, they typically result in savings due to lower operating expenses. Energy efficient appliances such as air conditioners provide similar cost benefits over their lifetimes.

Barriers to entry

Realising the gains of clean energy transitions, however, hinges on unlocking higher levels of upfront investment. This is especially the case in emerging and developing economies where clean energy investments are lagging due to real or perceived risks that hinder new projects and access to finance.

Moreover, distortions in the present global energy system in the form of fossil fuel subsidies favour incumbent fuels, making investments in clean energy transitions more challenging.

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 IEA report.

Benefits of scaling up

The benefits of a faster energy transition and growing shares of renewables – such as solar and wind, which have lower operating costs than fossil fuel alternatives – would filter down to consumers.

Retail electricity prices are typically less volatile than oil product prices, providing more predictable costs. Yet, around half of total consumer energy expenditure today is on oil products, and another third on electricity.

“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, adding that, “If policy makers and industry leaders put off action and spending today, we will all end up paying more tomorrow.”

In rapid transitions, electricity prices become the main benchmark for consumers and households. Oil products are largely replaced by electricity as EVs, heat pumps and electric motors take a larger share of transport, buildings and industry demand. By 2035, electricity overtakes oil as the leading fuel source in final consumption.