No. 2023-20 - Increasing inequality between countries in key renewable energy costs

Abstract:

There is growing optimism that the energy transition will be strongly aided by the reduction in global renewable technology costs. We use trends in solar PV and onshore wind costs and related factors to explore differences between countries and consider how cost inequalities might affect the energy transition. We show that, despite average costs falling, technology cost inequality between countries is increasing over time. The impacts of this could be severe as certain countries and investors face higher costs to implement green technologies. Countries with historic developmental disadvantages, and lower emissions, face higher costs, reinforcing potential injustices in the energy transition. We also show that demand pull factors (e.g., income, ease of doing business), renewable industry competitiveness, and policy portfolios are significant explanatory factors for cost differences.