For the world to transition to low-carbon electricity, energy from these sources needs to be cheaper than electricity from fossil fuels. Fossil fuels dominate the global power supply because until very recently electricity from fossil fuels was far cheaper than electricity from renewables. This has dramatically changed within the last decade. In most places in the world power from new renewables is now cheaper than power from new fossil fuels.
The fundamental driver of this change is that renewable energy technologies follow learning curves, which means that with each doubling of the cumulative installed capacity their price declines by the same fraction. The price of electricity from fossil fuel sources however does not follow learning curves so that we should expect that the price difference between expensive fossil fuels and cheap renewables will become even larger in the future.
This is an argument for large investments into scaling up renewable technologies now. Increasing installed capacity has the extremely important positive consequence that it drives down the price and thereby makes renewable energy sources more attractive, earlier. In the coming years most of the additional demand for new electricity will come from low- and middle-income countries; we have the opportunity now to ensure that much of the new power supply will be provided by low-carbon sources.
Falling energy prices also mean that the real income of people rises. Investments to scale up energy production with cheap electric power from renewable sources are therefore not only an opportunity to reduce emissions, but also to achieve more economic growth – particularly for the poorest places in the world.