Energize Weekly, January 24, 2018
Renewable energy projects are becoming cost-competitive with fossil fuel generation around the world, according to the International Renewable Energy Agency (IRENA).
“Bioenergy-for-power, hydropower, geothermal and onshore wind projects commissioned in 2017 largely fell within the range of generation costs for fossil-based electricity . . . Some projects undercut fossil fuels,” the agency said in its study, Renewable Power Generation Costs 2017.
The IRENA analysis is based on data from 15,000 utility-scale projects and 7,000 energy auctions.
“In many parts of the world, renewable power technologies now offer the lowest cost source of new power generation,” according to the report.
By 2020 the trend will be worldwide. “This new dynamic signals a significant shift in the energy paradigm,” said Adnan Amin, IRENA’s director-general, in a statement.
The global weighted average cost of electricity from new hydropower projects in 2017 was 5 cents a kilowatt-hour, in U.S. dollars. It was 6 cents a kilowatt-hour for onshore wind and 7 cents a kilowatt-hour for bioenergy and geothermal projects.
While electricity from utility-scale solar photovoltaic (PV) projects had the highest cost at 10 cents a kilowatt-hour, IRENA noted that reflects a 73 percent decline from 2010. The drop was driven by an 83 percent decrease in PV module prices since 2009, along with reductions in permitting and installation expenses or so-called balance of system costs.
Among the factors lowering costs across all generation are technology improvements, competitive procurement and a large base of experienced, international developers, IRENA said.
Based on the latest auction and project-level cost data, global average costs could decline to about 5 cents a kilowatt-hour for onshore wind and 6 cents a kilowatt-hour solar PV by 2020, the agency said.
There were record low auction prices for solar PV in Dubai, Mexico, Peru, Chile, Abu Dhabi and Saudi Arabia in 2016 and 2017, showing that give the right conditions, the levelized cost of energy (LCOE) can be reduced to 3 cents a kilowatt-hour from 2018 onward.
Recent auctions in Brazil, Canada, Germany, India, Mexico and Morocco have resulted in onshore wind power LCOEs as low as 3 cents a kilowatt-hour.
Reasons for these low prices include a regulatory framework and taxation regimes favorable to renewables; a strong, local civil engineering base; low offtake and country risk; and excellent wind or solar resources.
“By 2020, all the renewable power generation technologies that are now in commercial use are expected to fall within the fossil fuel-fired cost range, with most at the lower end or undercutting fossil fuel,” the agency’s study said.
Offshore wind power and concentrated solar power (CSP), “though still in their infancy in terms of deployment,” both saw their costs fall between 2010 and 2017, according to the study.
Auction results for offshore wind from 2016 and 2017 in Belgium, Denmark, the Netherlands, Germany and the United Kingdom suggest that for projects that will be commissioned in 2020 and beyond, costs could fall in the 6 to 10 cents a kilowatt-hour range. CSP costs are expected to be in the same range.
Technological improvements are one of the keys to these cost declines. “Bigger wind turbines with larger swept areas harvest more electricity from the same resource. New solar PV cell architectures offer greater efficiency. Real-time data and ‘big data’ have enhanced predictive maintenance and reduced operation and maintenance costs,” IRENA said.
The agency, however, also sounded a note of caution, saying that the innovations and improvements in renewable generation have to be “balanced against the increased costs of integrating variable renewables and the increased flexibility required to manage systems with very high levels of variable renewable energy (VRE).
“To date, these integration costs have remained modest, but they could rise as very high VRE shares are reached especially without complementary policies across the power sector. For instance, if transmission expansions fail to keep pace with deployment, renewable power sources could face curtailment,” IRENA said.
