The global energy system is in crisis. Supplies of gas, oil and coal have been disrupted by international sanctions imposed on Russia in response to its invasion of Ukraine, generating shortages and spikes in energy prices around the world. The ensuing geopolitical and economic turmoil highlights the extraordinary fragility and vulnerability of the global energy system.
But, as the saying goes, in crisis lies opportunity. According to the International Energy Agency’s World Energy Outlook 2022, the war-triggered crisis has the potential to accelerate a historical transition from fossil fuels to a more sustainable and secure energy system. Under its Stated Policies scenario, the WEO projects that, for the first time since the dawn of industrialization, the global demand for fossil fuels will peak or plateau by 2030 and then slowly decline.
The projections are based on two trends. The first is a rapid, market-driven drop in the cost of renewable technologies. Over the past decade, the global average levelized cost—or the break-even price over the lifetime of a system—for electricity generated by solar photovoltaics fell by 88 percent. The cost of onshore wind power fell by 68 percent, while that of offshore wind dropped by 60 percent. That means renewables are now not just competitive with fossil fuels, but significantly cheaper. In 2021, even before the war on Ukraine caused global fossil fuel prices to spike, Bloomberg New Energy Finance calculated that electricity produced from a new wind farm would cost $80 per megawatt-hour, or MWh, compared to $116 per MWh from a new gas-fueled power plant and $143 per MWh from a coal-fired power station.