## IRENA report finds renewable power costs at parity or below fossil fuels in many parts of world

##### 17 January 2015

The cost of generating power from renewable energy sources has reached parity or dropped below the cost of fossil fuels for many technologies in many parts of the world, according to a new report released by the International Renewable Energy Agency (IRENA).

The report, “Renewable Power Generation Costs in 2014”, concludes that biomass, hydropower, geothermal and onshore wind are all competitive with or cheaper than coal, oil and gas-fired power stations, even without financial support and despite falling oil prices. Solar photovoltaic (PV) is leading the cost decline, with solar PV module costs falling 75% since the end of 2009 and the cost of electricity from utility-scale solar PV falling 50% since 2010.

 Levelized cost of electricity (LCOE) from utility-scale renewable technologies, 2010 and 2014. Size of the diameter of the circle represents the size of the project. The centre of each circle is the value for the cost of each project on the Y axis. Real weighted average cost of capital is 7.5% in OECD countries and China; 10% in the rest of the world. The LCOE of a given technology is the ratio of lifetime costs to lifetime electricity generation, both of which are discounted back to a common year using a discount rate that reflects the average cost of capital. In the IRENA report, all LCOE results are calculated using a fixed assumption of a cost of capital of 7.5% real in OECD countries and China, and 10% in the rest of the world unless explicitly mentioned. Source: IRENA. Click to enlarge.

However, the report notes, renewable energy price improvements are not universal, and costs range widely according to resources and the availability of financing. Offshore wind and concentrated solar power (CSP) technologies are in earlier stages and deployment costs remain higher than those of fossil fuels. These technologies will become more cost-competitive in future, especially where low-cost financing is available.

Renewable energy projects across the globe are now matching or outperforming fossil fuels, particularly when accounting for externalities like local pollution, environmental damage and ill health.

—Adnan Z. Amin, Director-General of IRENA

 Weighted average cost of electricity by region for utility-scale renewable technologies,compared with fossil fuel power generation costs, 2013/2014. Source: IRENA. Click to enlarge.

Report highlights include:

Cape Wind’s troubles
Cape Wind, first proposed more than a decade ago, was to have been the US’ first major off-shore wind farm. The 130 wind turbines in Nantucket Sound had a rated maximum capacity of 468 MW, with maximum expected production of 454 MW. Average expected production was to be 174 MW.
On 6 January, the two power companies—Northeast Utilities and National Grid—that had agreed to buy energy from Cape Wind terminated their contracts, saying Cape Wind had missed the 31 December deadline to obtain financing and begin construction. Northeast Utilities and its subsidiary NStar had agreed to buy 27.5% of Cape Wind output; National Grid had agreed to buy 50%.
Although Cape Wind developer Jim Gordon is challenging the terminations, the Boston Globe notes that “due to both controversy and mismanagement, Cape Wind appears all but dead.
State officials should take this opportunity to regroup and consider a deep water wind farm that will allow the Commonwealth to remain a national leader in renewable energy — and keep its competitive edge. … Cape Wind will not lead the US energy revolution. But its misfortunes should not block an industry that the nation and particularly Massachusetts — with few other sources of energy — needs for a truly renewable future.
—Boston Globe editorial
• In many countries, including Europe, onshore wind power is one of the most competitive sources of new electricity capacity available. Individual wind projects are consistently delivering electricity for US$0.05 per kilowatt-hour (kWh) without financial support, compared to a range of US$0.045 to 0.14/kWh for fossil-fuel power plants.

• The average cost of wind energy ranges from US$0.06/kWh in China and Asia to US$0.09/kWh in Africa. North America also has competitive wind projects, with an average cost of US$0.07/kWh. • Solar PV module prices have dropped 75% since 2009 and continue to decrease. • Residential solar PV systems are now as much as 70% cheaper than in 2008. • Between 2010 and 2014 the total installed costs of utility-scale solar PV systems fell by as much as 65%. The most competitive utility-scale solar PV projects are delivering electricity for US$0.08/kWh without financial support, and lower prices are possible with low financing costs. Their cost range in China, North America and South America has fallen within the range of fossil fuel-fired electricity.

• CSP and offshore wind are still typically more expensive than fossil fuel-fired power generation options, with the exception of offshore wind in tidal flats. The weighted average LCOE of CSP by region varied from a low of US$0.20/kWh in Asia to a high of US$0.25/kWh in Europe. However, as costs fall further, projects are being built with LCOEs of US$0.17/kWh. The regional weighted average LCOE for offshore wind varied from a low of US$0.10/kWh for near-shore projects in Asia, where development costs are lower, to US$0.17/kWh for projects in Europe. • Solar power prices are dropping rapidly in the Middle East, with a recent tender in Dubai, UAE, falling to US$0.06/kWh.

• Renewables are competitive, even when integrating high shares of variable renewables into the electricity. When damage to human health from fossil fuels in power generation is considered in economic terms, along with the cost of CO2 emissions, the price of fossil fuel-fired power generation rises to between US\$0.07 and 0.19/kWh.

There are no technical barriers to the increased integration of variable renewable resources, such as solar and wind energy. At low levels of penetration, the grid integration costs will be negative or modest, but can rise as penetration increases. Even so, when the local and global environmental costs of fossil fuels are taken into account, grid integration costs look considerably less daunting, even with variable renewable sources providing 40% of the power supply. In other words, with a level playing field and all externalities considered, renewables remain fundamentally competitive.

—“Renewable Power Generation Costs in 2014”

 The LCOE of variable renewables and fossil fuels, including grid integration costs (at 40% variable renewable penetration) and external health and CO2 costs. Fossil fuel power costs for 26 REmap (Renewable Energy Roadmap) countries. Real weighted average cost of capital of 7.5% in OECD countries and China; 10% in the rest of the world. Source: IRENA. Click to enlarge.

For 1.3 billion people worldwide without electricity, renewables are the cheapest source of energy. Renewables also offer massive gains in cost and security for islands and other isolated areas reliant on diesel, according to the report.

Thanks in large part to the clear business case for renewables, a record high of 120 gigawatts of renewable energy was added to the global energy mix in 2013, with similar additions forecast for 2014. Renewable energy accounted for 22% of global electricity generation and 19% of total final energy consumption in 2013.

This may shock many pro-fossil fuel posters but it is good news for humanity.

Wind and solar could eventually produce most of the new e-energy required.

More REs will be needed with the arrival of more and more electrified vehicles.

I will be interested to see an unbiased analysis of this report. Wind and solar require 100% backup, meaning that computing their capital costs has to include the cost of backup generation and/or energy storage, both of which are very expensive both in capital and additional resources.

I find the following sentence from the above non-credible:

For 1.3 billion people worldwide without electricity, renewables are the cheapest source of energy. Renewables also offer massive gains in cost and security for islands and other isolated areas reliant on diesel, according to the report.

Unfortunately, the developing world is on a coal-plant building spree, because it is currently the cheapest way to electrification. Installing wind/solar means you have to build the coal plant as well, for the periods when the wind is not blowing and the sun is not shining.

Harvey:
Certainly agree; but, it's going to take a long time for power companies to make the transition to RE. In California the power companies are trying to make the change by installing battery storage and huge PV farms. And, there's somewhat of a race between homeowner installed grid-tied PV and the company-owned PV generators. As fast as it's moving here, it will still take a lot of time to displace the gas plants because energy demand is so huge and expected to grow.

Nick Lyons:
The number of proposed coal plants is declining in the U.S. except around the coal regions as you would expect. However, even a number of those are proposed coal to liquids plants; but, still coal polluters nevertheless.

http://www.sourcewatch.org/index.php/Category:Proposed_coal_plants_in_the_United_States

http://www.worldwatch.org/node/5422

Nick - Every power plant on the grid needs “backup” power in case something happens to prevent it from generating as much electricity as planned. PJM, in charge of most of the grid from New Jersey to Illinois, currently holds 3,350 MW of expensive, fast-acting contingency reserves 24/7 to ensure that it can keep the lights on in case a large fossil or nuclear power plant unexpectedly breaks down. In contrast, MISO – the grid operator for the middle part of the country with the most wind power in the nation – needs almost no additional fast-acting power reserves to back up its 10,000-plus MW of wind power on the system.

Why is so little backup power needed for wind and solar? In contrast to the large, abrupt, and often unpredictable changes in electricity output from coal and nuclear power plants, wind output changes tend to be gradual and predictable, especially when wind turbines are spread over larger areas. The fact that a wind farm is a collection of many smaller turbines also helps, since the failure of one has little impact on the farm’s total output.

Always thought Oklahoma and west Texas had lots of wind, no idea that most of the wind capacity lies much farther was than I thought. Blew my mind that that region wasn't in the mix. I know Illinois has a lot of installed capacity because of Clair's nephew and many others like him had tons of subsidies but I never imagined it accounted for that much generation. Never really saw them spinning much.

And to be fair Ai vin, geography, population density, and location has plenty to do with how much reserve capacity they have on hand, I'm fairly certain most of MO's power plants are not in MISMO's area from looking at the map. Other things like being in the middle of the country, connected to several other grid systems has a lot to do with stability as well.

I'm going to stare at that map a bit, its just mind boggling to me. Apparently I live in that power corridor. Never would have thought of it as a wind region.

Nick,

I would suggest an alternative reason 'developing countries are settling for the tried and proven (since Neanderthal times) combustion energy is just that. It is easy to order such equipment from a mature industry especially one at deaths door.

It takes no imagination to reflect on the 'extras' built into many handshake deals. That is not a reflection only on the developing country politicians but clearly applies to many global industries.

Countries lacking mature e grids are much the same as have found mobile phone and wireless internet acceptable solutions to providing wide penetration at lowest cost. While fast internet is becoming mandatory in the advanced economies not every country or person meets this profile so perceived needs can and do differ markedly.

Remember there is a large difference between none and some, not so much between lots and more as we have in industrialised western countries.

While there may be a large pool of experienced facilitators, that has not been a problem for uptake as the leading edge is always a bit pointy or thinly populated and finds ways to support new uptakers enthusiastically.

We should expect that localised stand alone electricity also to have very favorable economics. No requirement for the big capital intensive centralised power and delivery systems.

In .au those poles and wires are fully half the average domestic power bills cost.
My rough maths would suggest that could pay for extra capacity and even much of the storage cost.

With R.E.'s, scaling and adhoc growth is self regulating. After the same fashion as the internet
The supply can grow as need or finances allow.

Relocated hardware is another possibility if projected demand is exceeded.

There are simply too many advantages to find the reports claims unreasonable.

Nick, it's possible that when the report references "For 1.3 billion people worldwide without electricity renewables are the cheapest source of energy" they are referencing tiny household systems like Schneider's Solar powered LED lamp, which comes with battery. It can charge small devices like phones as well as light a small house.

If you are living off the grid, this probably is the cheapest way to get electricity.

It's not a lot of power, but with LEDs and cell phones, you don't need a lot.

There are other systems out there, Schneider's is the only one I've used personally. It works remarkably well.

Typo

While there may be a large pool of experienced facilitators to
While there may not be a large pool of experienced facilitators

Contrary to CPPS, NGPPs and NPPS' REs can be very small and own by end users or smaller groups of users.

For a single user, the storage unit (for essential e-energy) does not have to be so large nor very expensive. Ele Electrified vehicles will eventually supply part of the storage required.

However, large power grids with thoses ugly poles will be around for a long time unless we decide to bury power and communication cables.

Also large scale RE may not need backup for the reasons often quoted by critics: "The wind don't always blow and the sun don't always shine."

In actuality the wind is always blowing - somewhere. As I've already pointed out if wind turbines are spread over a larger enough area they will always catch some wind, and on the large scale solar thermal power plants will most likely be used instead of PV. Concentrated solar power (CSP) can store energy as heat in molten salts to be able to operate 24/7.

'International' Renewable Energy Agency? With powers from whom?
There are only two alternate energy sources worth exploring - H2 and Fusion. Solar and wind take up too much territory, unless you want solar collectors on the moon. A simple extraction technique from water cannot be that far off. Solar would be OK if it was limited to the surface area of buildings, but these huge arrays out in the desert are a disasterfor many reasons. Wind turbines have so many disadvantages that it is even unnecessary to elaborate. You know them. Geothermal is interesting, but I hear little about it these days. It does a pretty good job in Iceland, why not in Hawaii?

Larsen, H2 is not an energy source. H2 is only an energy carrier.

See the work of Stanford's Tony Sabo for more on wind and solar. Rejecting them out of hand ignores all recent IEA reports.

If you wish to dismiss IEA reports, what authority are you relying on for your insights into global energy markets?

As long as H2 enters my stack, which then carries energy to my electric motor, I think that will work out just fine, don't you?

I don't think we are talking about the same agency. It's IRENA, isn't it?

Toshiba claims that their h2/FC scalable storage system cost less than pumped and half as much as battery based storage system. secondly, the efficiency is as good at 80% and it can store energy for much longer periods of time without lost.

Such systems could be easily used to transform intermittent energy sources like wind and solar into 27/7 clean power sources to replace CPPs, NGPPs and NPPs in Japan and other countries.

The Toshiba system could be co-located with H2 stations for FCVs to run on clean wind and solar power.

Solar and wind take up too much territory, unless you want solar collectors on the moon.

In a wind farm the turbines themselves take up less than 1% of the land area. Existing activities like farming and tourism can take place around them and animals like cows and sheep are not disturbed. The National Renewable Energy Laboratory has calculated that with current tech a PV plant capable of powering 1,000 homes needs 32 acres. According to the U.S. Census Bureau, there are around 115 million occupied and fully used homes in the country. If we just scale up linearly (which is not, of course, how this would actually work), that means 3.68 million acres to power all of them. That's equivalent to 5,750 square miles, or around 0.1 percent of all the land the US has to offer.

BTW, how much land do you think a coal powered plant needs - once you include the mountain tops that are removed to get at the coal and the valleys that are filled in with the waste?

http://grist.org/article/2010-11-17-which-has-bigger-footprint-coal-plant-or-solar-farm/

Land use in America:
Department of Defense installations - 13 million acres
rural roads - 22 million acres
lawns - 31 million acres

According to US Census data, the rooftops of the United States alone offer over 200 billion square feet (4.6 million acres) of potential surface area for the installation of PV systems. Assuming only 25% of this area is suitable for unobstructed and continuous PV operation, the total energy‐generating potential exceeds 50,000 megawatts, or the equivalent of over 10 Grand Coulee Dams.

ai_vin,
If we can find 1/3 the required household energy requirement by utilising the best 25% of the roof area, not to mention future architecture designed for PV oriented roofing (and energy efficient housing generally) that prime real estate should exceed 50%, or double the e output to 2/3rd.
Then add the expected 30% improvement in solar cell efficiency that we can reasonably expect?

Forget the thin film window and vertical surface developments and it is quite feasable to see domestic and probably much building's power requirement supplied by rooftop solar.

Remembering that U.S. electricity consumption would be above the international average.

There seems to be a shortfall for domestic related personal transport and a more concerning shortfall for heavy industrial use.

There are good reason to believe that industry will by the combination of incentivisation (carbon pricing) and technological advances find lower energy intensive methods of manufacture.

There is also a significant end use energy efficiency bonus expectation across all areas of consumption.

Then there is wind, tidal and various hydro micro hydro as well as the biofuel, geothermal, ( I am not personally suggesting nuclear but it exists so..)

All suggest that national and global decarbonising is quite doable.

Indeed.

But my main point of that last post was that anybody worried about how much "territory" solar and wind takes up needs to put the amount into context.

We already use far more land for other purposes and if we're smart we could use some of that for RE without conflict with current uses. Wind turbines can be placed in farmers fields and pastures and the military is already putting solar arrays on their extra land.

Solar panels keep the weather out as well as asphalt shingles; http://www.dowpowerhouse.com/ but that is a relatively unimaginative combined use: You've heard of putting solar arrays over parking lots to generate energy while keeping the cars from over heating in the sun? Well howabout turning our roads into solar collectors? http://www.solarroadways.com/intro.shtml Or putting floating solar arrays in the lakes behind our dams? That could cut down on water loss through evaporation.

Here's another creative idea; http://plant-e.com/technology.html

There are 31 million acres of lawns in America....
And let's not forget all those golf courses, football & soccer fields, constructed wetlands for waste water treatment[http://en.wikipedia.org/wiki/Constructed_wetland], etc.

ai_vin writes:

PJM, in charge of most of the grid from New Jersey to Illinois, currently holds 3,350 MW of expensive, fast-acting contingency reserves 24/7 to ensure that it can keep the lights on in case a large fossil or nuclear power plant unexpectedly breaks down.

That's compared to how much average and peak generation?

Wind is often totally off-line over large areas (BPA had a near-complete outage in early 2014 lasting almost 2 weeks, and BPA's wind appears to take week-long vacations with regularity).  PV is off-line all night every night.  These "resources" require 100% backup from other generators, and can only be counted upon to save fuel.

In actuality the wind is always blowing - somewhere.

Which is useful IF and ONLY IF "somewhere" is generating enough for themselves, enough extra for you, and there are enough transmission lines in between.  If that's not the case then that little sound-bite is a half-truth (and a half-truth is a whole lie).

Concentrated solar power (CSP) can store energy as heat in molten salts to be able to operate 24/7.

The vast majority of the USA, including the heavily-populated coasts, is too cloudy for CSP.  Power that arrives over thousands of miles of transmission lines is anything but "local and distributed".

USA has enough wind and solar to generate 10 to 100 times the e-energy used in the 50 States.

Up to very recently, the average total cost of other (new) e-energy sources such as NPPs, CPPs and NGPPs was lower but this is no longer true in many countries.

When REs become cheaper than other conventional sources, there are not good reasons not to use REs.

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