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.
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.